After a tumultuous few years with protests, tax hikes, soaring violence, and bans on exploration weighing on Colombia’s economically vital oil industry, the inevitable has occurred: Big Oil is abandoning the strife-torn country. Colombia’s first-ever leftist President, Gustavo Petro, himself a former guerrilla, on taking office in August 2022, implemented policies that created considerable uncertainty and risk for the economically crucial hydrocarbon sector. This sparked fears that Colombia’s energy patch would be crippled, leading to drillers slashing investment and even exiting the country. Among the first to leave was Houston headquartered supermajor ExxonMobil in 2023 after hydraulic fracturing was banned and higher taxes levied on oil sales. In recent months, a raft of global energy supermajors chose to exit Colombia rather than expose their capital to further risk and uncertainty.
Exxon’s exit was driven primarily by Petro’s decision to ban hydraulic fracturing, a long-time controversial topic in Colombia, although rising taxes, greater insecurity, and volatile energy prices also influenced that decision. The contentious unconventional hydrocarbon extraction technique known as fracking was officially banned by Congress in mid-2023. This spelled the end of the Kale and Platero fracking pilots, the permitting of which had been under review since 2022, where Exxon had partnered with Colombia’s national oil company Ecopetrol. By April 2023, the U.S. supermajor chose to abandon, suspend, or liquidate its eight exploration and production contracts in Colombia. This was a blow for the Andean country’s economically crucial oil industry, which was suffering a crisis of trust since President Petro took office.
While the fracking ban was the main consideration in Exxon’s decision, tax hikes and growing uncertainty surrounding the regulation of Colombia’s oil patch further added to the decision to leave the country. During November 2022, a scalable surcharge was imposed on petroleum sales, which kicked in at 5% when the international Brent price hit $67.30 per barrel. This increased to 10% when prices were between $75 and $82.20 per barrel, rising to 15% if the Brent price climbed any higher. Bogota also attempted to end the tax deductibility of royalty payments by oil companies, although this was overturned by Colombia’s Constitutional Court, which ruled the prohibition was unconstitutional. Then, in another blow for an already heavily taxed hydrocarbon sector, the Petro administration, earlier this year, imposed a 1% levy on oil production.
Colombia’s sovereign debt was recently downgraded by ratings agencies S&P and Moody’s by a notch to the lowest investment grade level of BB and Baa3, respectively. This is weighing on a government already facing significant fiscal headwinds, including a growing budget shortfall that saw Bogota impose a temporary 1% levy on crude oil sales earlier this year. Colombia’s finance ministry predicts the 2025 fiscal deficit will be 7.1% of gross domestic product (GDP) compared to an earlier target of 5.1%, while for 2026 it will hit 6.2%. Those are particularly worrying numbers for a scandal-prone government facing substantial pressure not only from political enemies in Congress but also due to a sharp uptick in lawlessness, notably in rural regions after Petro’s policy of total peace collapsed.
In response, Petro’s administration is considering further tax hikes during 2026 to cover a widening budget shortfall currently estimated to be around $6.5 billion or $26 trillion Colombian pesos. It is oil companies that will be among the hardest hit. There is the risk that the 1% temporary levy on oil sales will not be rescinded as promised, with it now in place until the end of 2025 instead of the original 90 days, but likely extended indefinitely. Those additional financial impacts, along with Petro’s government ceasing to award hydrocarbon exploration contracts and rising security risk, are all weighing heavily on the profitability of petroleum companies operating in Colombia.
There are also the impacts associated with growing lawlessness and violence, notably in the remote regions where the oil industry operates, especially now that Petro’s policy of total peace has disintegrated. A combination of rising conflict between state forces and illegal armed groups, which have surged in strength since 2022, and rising cocaine production, notably in petroleum-rich regions, is threatening industry operations. Renewed fighting between security forces and leftist guerrillas aligned with the FARC-EMC, a dissident group of the Revolutionary Armed Forces of Colombia (FARC), which refused the 2016 peace deal, is disrupting operations in southern Colombia. There are frequent violent clashes in the department of Cauca and incidents in the oil-rich departments of Putumayo, Caquetá, and Arauca.
The leftist National Liberation Army (ELN), Colombia’s second largest armed group, is ramping up its presence in many regions, particularly in the oil-rich departments of Arauca and Norte de Santander. This began after peace talks with the government broke down in September 2024. Consequently, there are regular clashes with Colombia’s military, along with a growing number of displaced civilians. Meanwhile, the Gaitanist Self-Defense Forces (AGC), a former paramilitary band that didn’t accept the 2006 disarmament agreement and is Colombia’s most powerful illegal armed group, is taking advantage of the conflict to expand. This includes assuming control of rural communities where the AGC provides services in exchange for protection payments and cementing control of the cocaine trade.
A sharp increase in cocaine production is fueling much of the violence afflicting rural Colombia, with illegal armed bands vying for control of the extremely lucrative illicit industry. For 2023, Colombia’s cocaine output hit an all-time high of 2,664 metric tons with a record 253,000 hectares or 625,000 acres under coca cultivation. This is responsible for an explosion in violence in the major coca growing departments of Putumayo, Caquetá, and Nariño, which contain significant petroleum operations and infrastructure. The conflict’s rising intensity is impacting the hydrocarbon sector with pipelines, wellheads, and crude oil transports targeted, causing production outages and adding additional costs to increasingly unprofitable operations.
It is for these reasons that supermajor Chevron no longer holds any upstream assets in Colombia, with the Colombia-3 and Guaira-3 offshore blocks no longer listed as active by the petroleum regulator, the National Hydrocarbon Agency (ANH). This comes on the back of Chevron, in 2020, divesting its interest in the aging Chuchupa and Ballena natural gas fields, which are nearing the end of their productive life. The U.S.-based supermajor has effectively eliminated all upstream operations from its Colombian business, leaving only a sizable downstream presence primarily comprised of retail fuel assets and supporting facilities.
Anglo-Dutch supermajor Shell, during April 2025, chose to exit three offshore natural gas blocks where it was partnered with Colombia’s national oil company Ecopetrol. In response to the news, Ecopetrol said it will push on with developing the blocks as it seeks to boost domestic natural gas reserves and production in response to dwindling local supply, which threatens to spark an energy crisis. Indeed, Shell’s decision comes as a blow for a country desperately seeking to expand offshore hydrocarbon output, notably natural gas production. Spanish integrated energy major Repsol is in the process of bailing out of Colombia. During February 2025, Repsol sold its 45% working interest in onshore Block CPO-09, located in the Llanos Orientales basin, to Ecopetrol for $452 million. This occurred after GeoPark backed out of a deal to acquire Block CPO-09 and Repsol’s 25% interest in SierraCol Energy, the 2020 buyer of Occidental Petroleum’s Colombian assets.
These events bode poorly for Colombia’s beaten-down oil industry, which has struggled to recover from the 2020 COVID-19 pandemic and is sharply impacted by President Petro’s anti-fossil fuel policies. This is occurring at a time when Bogota is facing a potential fiscal disaster due to declining income, which will only worsen as hydrocarbon production declines, investment inflows fall, and energy imports grow. There is the risk of an energy crisis because of waning natural gas production with Colombia’s thermal power plants, homes, and businesses highly dependent on that fossil fuel. If such a crisis emerges, it will batter Colombia’s already fragile economy while exacerbating poverty and a volatile internal security situation.
By Matthew Smith for Oilprice.com