In Colombia, Understanding the New President’s ‘Pandora’s Box’

Colombia’s oil and gas sector has been nervous at the rapid green transition that Petro promised, according to industry experts and professionals CRI talked to. Ahead of his August 7 swearing-in ceremony, companies with investments in Colombia’s energy sector are scrambling to decipher the early signs of his presidency.

Dora Muñoz, the CEO of oil company TPG do Brasil which has operations in Colombia, told us, “the stakes of the transition are high”. In 2021, oil alone contributed COP 17 billion (~USD 4.1 billion) in revenues and 3.3 percent of Colombia’s GDP. Last month, the Colombian Association for Oil and Gas (ACP), which represents 39 companies in the industry, issued a statement in which it reminded the President-elect that the industry represents 95,000 jobs in 19 of the 32 departments of Colombia. Despite this, Professor Pardo Martínez, an energy industry expert at Del Rosario University, said that Petro has not yet presented a concrete plan to achieve his green transition. “He has only sketched possible ideas to implement,” she explained, which has left companies in dire need of information to prepare possible contingency plans.

Ecopetrol

One of Petro’s few proposals has been to change the board of directors of Ecopetrol SA, Colombia’s large state-owned oil company. He wants to turn the firm into a wind and solar energy producer. Ecopetrol currently has nine board members and, given the state owns 88.5 percent of company shares, there is little to prevent Petro from fulfilling his promise. Yet, the board’s technical expertise and political neutrality has been central to Ecopetrol’s success as one of the top oil companies in Latin America. 

Petro wants to “send a political message” by retaking control of Ecopetrol, Muñoz said. The intricacies of the board’s nomination have always involved prerogatives from the Ministry of Finance and from the Ministry of Mines and Energy. However, past governments chose not to politicise the company. Professor Pardo Martínez told us it’s rumoured that Petro wants to appoint people from his days as mayor of Bogotá. The names of Luis Fernando Velasco, a centrist Senator, and of Antonio Navarro Wolff, a former Governor and ex-guerilla member, have apparently been floated. A government-appointed board would mean Petro could nominate Ecopetrol’s next CEO. So far, this uncertainty has led Ecopetrol’s shares to lose 20 percent of their value since Petro’s victory. 

Reassuring Markets

Petro has been eager to reassure the business community. He pledged to honour existing oil exploration licences and appointed the former chairman of the Central Bank as Finance Minister. Despite this, Colombian industry professionals CRI talked to said that the industry remains “highly skeptical” of whether they can trust Petro, whose manifesto seems to contradict his promise of honouring existing contacts. After naming on July 5 a well-respected environmentalist as Minister of the Environment, Petro’s pick for Minister of Mines and Energy will be essential to signal which direction his government wants to take.

Until the new president presents a clear green roadmap, which according to experts interviewed could take between eight months to two years, companies will remain dependent on early intelligence to adjust their calculations and, as the CEO of TPG do Brasil put it, prepare for what comes out of Petro’s “Pandora’s box.”