Colombia's Oil Industry Trapped in a Death Spiral

Over the past decade, Colombia's oil industry - the nation's economic lifeline - has been caught in a death spiral. The combination of plummeting oil prices, escalating geopolitical risks, and anti-oil industry reforms implemented by Colombia's first left-wing president, Gustavo Petro, has stifled investment and caused a decline in operational activity.

Oil and Gas Reserves Status

The primary challenge weighing on Colombia's oil industry outlook is the severe depletion of proven hydrocarbon resources. This results from insufficient spending on exploration drilling and low success rates in exploration activities.

After a period of anticipation, Colombia's regulatory authority, the National Hydrocarbon Agency (ANH), released its 2025 report on the country's oil reserves. Since the end of the COVID-19 pandemic, Colombia's proven oil and gas reserves have remained unchanged. This trend is evident in the 2025 reserves report, which shows that 1P (proven) oil reserves reached just over 2 billion barrels, a nearly 1% decrease from the previous year.

Despite this decline, the production life of Colombia's 1P reserves has increased from 7.2 years in 2024 to 7.6 years. This modest increase in the production life of 1P reserves occurs for a simple reason - Colombia's oil production is declining, falling to a multi-year low of 724,910 barrels per day in April 2026. In fact, that figure is the lowest since June 2021, when the Andean nation produced 694,151 barrels per day.

Geographic Distribution of Reserves

The majority of Colombia's 1P reserves, 74%, are located in the Llanos Basin, with 15.3% in the Central Magdalena Valley and 3.8% in the Upper Magdalena Valley. The aging Rubiales field in the Llanos Basin is the largest field based on proven reserves and remains Colombia's most productive oil exploration.

So far this year, ANH data shows that 11.3 million barrels of oil have been produced from the Rubiales field, nearly double that of the Castilla field, also located in the Llanos Basin.

Natural Gas Situation and Energy Crisis

Colombia's natural gas reserves have also declined sharply in 2025. The ANH report shows that 1P natural gas reserves plummeted by 17% from the previous year to 1.7 trillion cubic feet. Meanwhile, 2P reserves decreased by 11% to 2.38 trillion cubic feet, and 3P reserves fell by 8% to 3 trillion cubic feet.

Like oil production, Colombia's natural gas production continues to spiral downward. April 2026 production fell by 14% compared to the same period last year to 694 million cubic feet per day, the lowest level since January 2026. This is particularly alarming as it is 36% less than the same period a decade ago, when Colombia pumped 1.08 billion cubic feet of natural gas per day.

This is especially concerning as Colombia faces the risk of a severe energy crisis with the latest El Niño weather phenomenon potentially devastating hydroelectric power generation, which the country heavily relies upon. You see, hydroelectric plants generate about 65% of the electricity produced in Colombia. These facilities depend on high water levels to maintain production. When water levels drop sharply due to severe drought, expected in Colombia in the second half of 2026, electricity output will decline.

Economic Impact and Inflation

For these reasons, Bogotá has been forced to use thermal power plants, most of which use gas. This creates pressure on demand for fossil fuels, along with declining domestic production and reserves, driving increasingly high natural gas imports. This is amplified by Petro's efforts to reduce greenhouse gas emissions by phasing out Colombia's old coal-fired thermal power plants and replacing them with gas facilities.

As a result, expensive imported liquefied natural gas (LNG) imports continue to surge, accounting for 17% of fossil fuels consumed in Colombia. This figure is expected to rise to 25% in 2026, significantly impacting the economy as natural gas is an important industrial and residential fuel.

Colombia's growing dependence on gas imports is behind the surge in inflation, causing a cost-of-living crisis while putting structural pressure on the country's balance of payments at a time of financial weakness.

Causes and Future Outlook

The decline in Colombia's oil and natural gas reserves represents a serious threat to a fragile economy. This creates a stark contrast to a decade ago, when Colombia produced enough natural gas to be self-sufficient and was a net oil exporter.

The dire state of Colombia's oil industry, including hydrocarbon production trapped in a death spiral and declining proven reserves, has been exacerbated by Petro's energy policies. The combination of halting new exploration and production contracts, frequent tax increases, and efforts to ban shale oil extraction are all stifling investment.

The challenging regulatory environment and increasing violence in Colombia's remote oil regions are disrupting operations and deterring investment. Consequently, many mid-sized drilling companies and major oil firms have cut spending, with some, including Exxon, completely exiting the country.

Without regulatory reforms and lower taxes, a sustainable recovery in hydrocarbon reserves and production seems unlikely. Many are hoping that the elected president, Abelardo de la Espriella, who will take office on August 7, 2026, will bring the necessary changes and revive Colombia's oil industry.

The decline in Colombia's oil and natural gas reserves is not just an industrial issue but a strategic challenge to the country's energy security and economic stability. As the world transitions to cleaner energy, Colombia faces a critical juncture - continuing to pursue restrictive fossil fuel policies or finding a balanced path between economic development and environmental responsibility.

For a country that once prided itself as a net oil exporter, the growing dependence on energy imports is not just an economic retreat but a warning about the risks of lacking long-term vision in energy policy.