CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
1
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME September report 2018 Project coordination: Yessica Prieto Ramos Author: Sergio Córdoba Rojas
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
2
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME Director: Álvaro Jiménez Millán Projects and reserach coordinator: Yessica Prieto Ramos Communications coordinator: Andrés Vargas Ferro Researcher: Sergio Córdoba Rojas Research assistant: Sebastián Triviño Roldán Asociación CT Crudo Transparente
Carrera 5 No. 25 a - 50 Tel: (571) 704 93 76 Bogotá, Colombia Twitter: @CTColombia Facebook: /Crudotransparente
With the technical and financial support of the Natural Resource Governance Institute
September 2018
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
Summary Executive Summary…………………………………………………………………………………………………………………………………..4 Introduction………………………………………………………………………………………………………………………………………….…….6 Context…………………………………………………………………………………………………………………………………………………...…..8 The Colombian tax regime for the oil sector…………………...………………………………………………………...…..14 Access to information on the Cubarral Block and its main figures……………………………………….…..19 Findings from the FARI model…………………………………………………………………………………………………….……...25 Local impacts in the area of influence……………………………………………………………………………………………… 36 Conclusions and recommendations…………………………………………………………………………………………………….47
3
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
4
Report 2018
Executive Summary Oil
production
in
Colombia
plays
a
the
fundamental role in the country’s economy,
nation’s
national
economy’s
high
dependence on oil extraction.
and the Cubarral bloc (in the Meta region) has
In order to understand the importance and the
the largest share of Colombia’s production,
contribution of Cubarral block’s fiscal regime,
and its fields are in among the top 3 producers
the FARI model was used. FARI is a tool
in the country. The block’s extraction potential
devised by International Monetary Fund that
has attracted oil companies, such as Shell and
analyzes tax structure for oil projects and
Chevron. These international companies have
studies the revenue that the State receives
been present in this region since 1945. In
through royalties and taxes. For this purpose,
2003, the bloc was given back to the state, and
it was required to find financial information on
its operation was managed by Ecopetrol.
the
production
of
the Cubarral block,
Colombia’s fiscal regime for the oil sector is
particularly, data that would provide specific
characterized by its instability, reflected in a
numbers of production costs, tax payments,
high amount of tax reforms that have altered
and data necessary for FARI to produce
the rules of the game through new taxes. This
consistent results.
has discouraged foreign investment which,
Data was collected from different State entities
according to experts, can be seen in recent drops
in
the
associated to the oil sector. However, the
national GDP. However,
information provided in some reports was
Colombia’s oil tax regime and royalties from
contradictory to that provided by different
oil production have generated important
entities, generating confusion and suspicion
revenues. In the year 2013, this revenue
when interpreting data. We questioned the
accounted for 20% of Colombia’s total tax
reasons why these contradictions exist, despite
collection, demonstrating
the existence of the Law of Transparency and
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
5
the Law of Access to National Public
Colombia’s oil reserves issues, will leave the
Information. One of the results given by the
country in a delicate situation towards the
FARI model shows that the State could collect
future, taking into account the economy’s
around 62% of the total profits generated by
dependence on the extraction of raw materials
the Cubarral block during the period of
and its consequent extractive income.
2003-2025. This is approximately 84.3 billion
Finally, the economic income distributed to
pesos. 41% of the total tax revenue collected
the municipalities in the area of influence of
by the State comes from royalties, while 33%
the block has generated important social
comes from income tax and the rest
advances; however, these are not precisely
corresponds to different taxes. If we take into
significant if socioeconomic indicators are
account that the company that operates the
compared with those of non-oil municipalities
block is the state oil company Ecopetrol, the
of the same department.
State's income, including dividend, will be 96% of the total profits, equivalent to almost
This is why strengthening civil society’s
130 billion pesos (Approximately 70 billion
capacity to oversee government profits from
dollars).
oil extraction is very important. Revenue generated by Cubarral fields would could
Additionally, according to projections made
provide
with the FARI model, the block has already reached
its
production
peak
in
hospital
and
school
infrastructure to all municipalities in the
2013.
country. In this way, the effective management
Correspondingly, the block’s production has
of income will allow public finances to be
begun to decline, and projections show that the
managed in a more transparent manner and
block will not produce past 2025. Cubarral’s
have a positive impact throughout the national
revenue is linked to the international oil barrel
territory.
price. Therefore, the State’s income will be subject to the volatility of oil prices. If these increase, tax collection will increase as well. The decline of the Cubarral fields and
adequate
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
6
Introduction Colombia’s estimated daily oil production for
From this perspective, our aim is to analyse
2016 was 837,000 barrels, and revenue from
the Cubarral block contract. This block is
this production represents a significant share
located in the department of Meta and is
of national Gross Domestic Product (GDP),
composed of the following fields: Castilla,
approximately 4.43% of the GDP for the
Castilla North, Castilla East, Chichimene and
period of 2010-2016[1]. In 2016, investments
Chichimene SW. This block is one of the most
in production were calculated between 9 and
important in the country because of its volume
10 trillion pesos (4.1 billion dollars)[2] Taxes
of production, which translates into sizable
and royalties generated by this activity
revenues for the State. To this end, the FARI
contributed revenues equivalent to 23 trillion
model designed by the International Monetary
pesos to the nation in 2013[3] (Approximately
Fund was implemented in order to carry out an
12.3 billion dollars).
ample analysis of production, costs and income generation and tax collection. This
The importance of the oil industry in
tool is widely used to analyse tax collection
Colombia becomes essential for the economic
revenues by the States and to examine the
growth of the country. In 2017, 41 exploratory
composition of the fiscal regime, in order to
wells were drilled, with a success rate of
make estimates of the contribution of the oil
31.7%[4], marking an encouraging trend for
sector to the macroeconomic framework of
the oil industry in Colombia looking towards
each country.
2018, since these new drillings will represent higher revenues via fiscal collection and
Therefore, solidifying the monitoring capacity
export of crude oil. In the 2010-2016 period,
of civil society is essential to exercise control
the average income from oil exports was US
and scrutiny over the revenue collected by the
$20 billion per year[5], which makes the
State from the production of this block.
industry vital to the national economy.
Additionally, it is important to influence the State towards better governance of national
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
natural
resources
through
7
proactive
information disclosure and understanding the impact of tax revenues for the country and communities.
1. 2. 3. 4. 5.
Producción de petróleo en Colombia cayó en 12% en 2016 http://www.elcolombiano.com/negocios/economia/produccion-de-petroleo-en-colombia-cayo-12-en-2016-YF5777054 Base de datos Banco Mundial https://datos.bancomundial.org/indicador/NY.GDP.PETR.RT.ZS?locations=CO Autosuficiencia petrolera en Colombia https://www.contraloria.gov.co/documents/463406/484 Presagio de nueva bonanza petrolera https://www.elespectador.com/noticias/investigacion/presagio-de-nueva-bonanza-petrolera-articulo-721890 Boletín Macro Sectorial, Contraloría General de la República https://www.contraloria.gov.co/documents/463406/484739/Bolet%C3%ADn+Macrosectorial+No.+06+%28pdf%29/f01dfce0-4 93c-423a-9148-244fce46edc1?version=1
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
8
Context Located under the jurisdiction of 4 Meta
150 wells, which currently produce 60
municipalities (Acacías, Castilla La Nueva,
thousand barrels per day. The Chichimene
Guamal and San Martín), 45 km south of
field produces the third largest number of
Villavicencio, the Cubarral block[6] is one of
barrels per day, and the first extra-heavy crude
the most important oil sources in Colombia. Its
source in the country.
production contributes around 190 KBPD
(thousands of barrels a day average) to the
country[7]. By 2015, the Castilla field[8] was comprised of 500 active and inactive wells[9]. Additionally, the Chichimene field has around
Figure 1. Cubarral Block and Castilla/Chichimene fields
Source: Contagio Radio
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
9
The history of the block begins with the arrival
recorded. Additionally, in 1988 Ecopetrol
of the Dutch-American oil company Shell,
drilled the 'Pozo Castilla-Norte l' which
which in 1945 settled in the department of
extended the field further towards the
Meta to begin hydrocarbon exploration and
northeast. During the 27 years of exploitation
exploitation projects. It was in this year that
of the block (Castilla and Chichimene fields),
the company drilled the San Martín 1 well in
Chevron drilled more than 100 wells that
the municipality of Castilla La Nueva [11]. In
together produced an average of 28 KBPD,
1969, with the help of improvements in
around 80 million barrels in total [13].
technology,
especially
seismic,
oil
is
In 2000, the Chevron operation contract
discovered in Castilla La Nueva. However, it
ended. Then, Ecopetrol signed a 6-month
is not Shell, which carried out the first drilling
contract with Chevron to have the American
in the Meta, who discovered it. This
company provide administration services in
breakthrough was made by the multinational
order to facilitate the transition. This contract
Chevron while drilling the "Pozo Castilla 1".
conceded
Thanks to these discoveries, on July 1, 1973,
of the extracted oil to
Chevron[14]. After this date, the block was
the "Chevron - Cubarral Association Contract"
conceded in its entirety to the Colombian
was signed between Chevron and Ecopetrol,
State. Subsequently, Ecopetrol signed a
which consisted in granting the multinational
contract in 2005 with the ANH (National
the possibility of developing the Cubarral
Hydrocarbon Agency) for the extraction of
project with a 50/50 percentage share with the
crude oil in the fields associated with the
state oil company [12].The contract legally
Cubarral contract. It is not clear under what
ended on January 30, 2000.
legal figure the block was operated between
Production in the Castilla well began in 1976,
the period of 2000-2005.
averaging a daily production of 10 and 20
From the beginning of Ecopetrol’s total
KBPD (thousands of barrels per day average)
takeover of the block, the production went
during the 1980s, and 25 KBPD during the
from 18,000 barrels per day in 2000, to 32,000
1990s. At the same time, oil extraction in the
barrels in 2003. This increase was fueled by a
Chichimene well began in 1985. During the 15
912-million-dollar
years that this field belonged to Chevron, a
investment
for
the
treatment of heavy oil in 2001[15]. In 2002 the
monthly average production of 6.5 KBPD was
7%
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
10
Incremental Production Project was approved,
Graph 1 shows the importance of oil
increasing
the
exploitation to the region. In Castilla La
Chichimene and Castilla (Castilla, Castilla
Nueva, Guamal and Acacías, no other
North, Castilla East) fields from 4% to 12%
economic
[16].
municipal added value. This means that these
the
recovery
factor
of
activity
exceeds
5%
of
the
three municipalities are mostly dependent on
The production averages since Ecopetrol
the oil industry, according to the National
started managing the whole project have
Planning Department. San Martín’s case is
increased progressively until today, making
different, since data shows that the economy is
Castilla and Chichimene the second and third
sustained mainly by agriculture, construction,
largest producers of oil in the country,
social
surpassed only by the Rubiales field [17].
and
personal
service
activities.According to data from Ecopetrol,
By 2008, Meta had become the country's
the Cubarral block generated 3,239 jobs
largest oil producer, ahead of Arauca and
through contractors in 2017 and 84% of these
Casanare. Meta supplied 28% of the national
jobs are performed by locals of Meta. To date,
production and Casanare 21%. These two
direct and indirect jobs generated by the
departments registered almost 50% of the
extraction of oil in the Cubarral block are the
crude production in Colombia[18]. According
most important source of income for the
to the Ministry of Mining and Energy, the
communities where the block is located [20].
daily production of Meta went from 122,435 BPD in 2007, to 168,263 BDP in 2008, with most of this production coming from fields in
Puerto Gaitán (with 68% of the total produced by the department), Acacias (with 15%) and Castilla La Nueva (with 11%) [19].
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
11
Graph 1. Municipal added value percentage by economic activity
Source: Departamento Nacional de Planeación (2018)
Throughout Colombia’s history of armed
located. On different occasions in recent
conflict, Meta has been one of the departments
decades, the project’s work area has been
that has suffered the most violence, especially
affected by attacks, explosions, and employee
in the areas of Maripipán and Vistahermosa
intimidation by armed actors involved in the
[21].
conflict.
Although armed violence is mainly
concentrated in the east of the department, this
Oil companies’ contractors and employees
has clearly affected inhabitants of these
have been victims of acts of violence by
municipalities where the Cubarral block is
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
12
paramilitary groups such as the United
year, another 10 similar cases were reported in
Self-Defense Forces of Colombia (AUC by its
the
initials in Spanish). Since the end of the
systematic pattern of violence against social
nineties, the AUC, the Peasant Self-Defense
leaders.
Groups of Meta and Vichada, as well as the
department,
which
demonstrates
a
Oil activity has been a source of social conflict
Revolutionary Armed Forces of Colombia -
in the region. The oil crisis of 2014 and 2015
People's Army (FARC-EP by its initials in
led Ecopetrol to hire a smaller number of local
Spanish) were enriched thanks to the oil
workers, creating tension among the residents
activity through the collection of extortions
who were laid off [25]. This led to protests
and the illegal appropriation of royalties.
that peaceful initially, but ended in acts of
In 2003, Meta was one of the departments
violence.
prioritized by the Colombian State to attack
discontent has been channelled by community
the main criminal and guerrilla structures.
organizations such as the Corporation of Local
Later, in 2012, it was one of the ten regions
Boards of the Area of Direct Influence of
where the 'Sword of Honor' military plan was
Chichimene (CJAID) [26].
developed, for the purpose of striking against implement
the
Macarena
that
sought
to
generate
occasions,
the
generated strong controversies due to the
Integral
environmental
Consolidation Plan, a comprehensive action doctrine
different
The oil exploitation and its investments have
FARC[22]. It was also one of the areas chosen to
On
impact
on
neighboring
populations and ecosystems. Problems caused
an
on communities and citizens have placed the
environment of security and peace in a
block’s sustainability in the national scope.
sustainable manner.
For example, in 2009, a toxic substance
In 2014, Edith Santos, president of the
affected 20 of the 54 km of the Orotoy River,
Community Action Board of the district of
which runs through the municipalities where
Chichimene, Acacías, was murdered for her
Cubarral is located. On that occasion,
union activism in this municipality [23].
Ecopetrol was held responsible by the
Police investigations have established a link
Ministry of the Environment for the use of
between oil contractors and criminal gangs
chemical
that sought to exercise control over local
contingency plan; affecting water sources and
contracts in the area [24]. During the same
local communities [27]; The operation in the
substances
without
having
a
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
block
had
several
accidents
13
between
September 2010 and January 2014. Four spills affected the Alfije, Lejía and San Luis pipes; with Caño La Berraquera being the most serious, with a spill of 1,698 barrels of oil in 2011 [28]. Different oil-related activities, such as seismic exploration, dumping, as well as the overflow and filtration of sludge and storage pools that do not meet technical specifications have caused distress among environmental agencies and communities in the area. The latter has been reported several times since 2008, when Cormacarena pointed out that "liquids with hydrocarbons
are
still
stored
in pools
excavated on land and in the open, which pollutes rainwater that falls directly [...] on the ground, underground and surface water "[29]. [6] Block: Extension of land granted by the State for exploration and / or exploitation of oil through a tender to interested oil companies. [7] https://www.elespectador.com/economia/la-violencia-seca-la-produccion-petrolera-en-el-meta-articulo-738754. [8] Field: Zone where there is accumulation of crude oil in the subsoil and which is located within an oil block. [9] Well: Perforation made in the subsoil in order to obtain the oil located in the deposits. The wells are located in the oil fields. [10] Personería de Villavicencio www.personeriavillavicencio.gov.co [11] Memorias hidrocarburos 2012 http://www.minminas.gov.co/minminas/downloads/Userfiles/file/Memorias/Memorias2010/02-hidrocarburos%20(2).pdf [12] Archivo El Tiempo: Campo Castilla. http://www.eltiempo.com/archivo/documento/MAM-1265300tm [13]Corporación Universitaria del Meta. http://revistas.unimeta.edu.co/index.php/rc_es_guarracuco/article/view/93 [14] Castilla y Chichimene pasarán a Ecopetrol http://www.eltiempo.com/archivo/documento/MAM-1240507 [15] Ecopetrol Empresa. https://www.ecopetrol.com.co/especiales/carta_petrolera/empresa.htm
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
14
[16] Castilla, Recargado. https://www.ecopetrol.com.co/especiales/carta_petrolera/empresa.htm [17] Los 20 campos con mayor producción petrolera en Colombia: http://www.eltiempo.com/economia/sectores/los-20-campos-petroleros-de-colombia-con-mayor-produccion-84750: http://inteligenciapetrolera.com.co/inicio/ultimo-ano-ecopetrol-genero-mas-5-mil-empleos-meta/ [18]Gobernación del Meta (2009). Meta, situación socioeconómica del departamento 2008 (julio) [19]Meta: Análisis de Conflictividad. https://info.undp.org/docs/pdc/Documents/COL/00058220_Analisis%20conflictividad%20Meta%20PDF.pdf [20]En el último año Ecopetrol generó más de 5.000 empleos en el Meta: http://inteligenciapetrolera.com.co/inicio/ultimo-ano-ecopetrol-genero-mas-5-mil-empleos-meta/ [21] Conflicto Armado en el Meta. http://www.ideaspaz.org/publications/posts/511 [22] Conflicto Armado en el Meta. http://www.ideaspaz.org/publications/posts/511 [23] Cómo las Bacrim ‘vacunan’ a contratistas de petroleras. https://www.semana.com/nacion/articulo/como-las-bacrim-vacunan-contratistas-de-petroleras/426680-3 [24] Ocupan bienes a empresario por crimen de líder en Acacías (Meta). http://www.eltiempo.com/archivo/documento/CMS-16435545 [25] https://www.elespectador.com/noticias/economia/se-agrava-situacion-acacias-y-castilla-nueva-protestas-articulo-635343 [26] Se agrava situación en Acacías y Castilla la Nueva por protestas contra Ecopetrol https://www.elespectador.com/noticias/economia/se-agrava-situacion-acacias-y-castilla-nueva-protestas-articulo-635343 [27] Archivo El TIempo. http://www.eltiempo.com/archivo/documento/MAM-3408725 [28] Petróleo en en Meta. http://sostenibilidad.semana.com/medio-ambiente/articulo/explotacion-de-petroleo-en-meta-causa-desconfianza-en-las-comuni dades/38693 [29] https://conflictos-ambientales.net/oca_bd/env_problems/map/21
Colombia’s fiscal regime for the oil sector Colombia’s constitution, in its article 332
tools to manage the underground resources in
affirms that non-renewable natural resources
order to maximize profits for the country.
are the State’s property. From this perspective,
Fiscal regime should be understood as the set
the tax regime is one of the most important
of rules, laws, taxes and types of contract between
the
State
and
the
extractive
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
15
companies to carry out the exploitation of
to attract more investment[34]. In the specific
hydrocarbons
analysis for the Cubarral block, the tax
and
minerals
in
each
country[30]. A well-designed fiscal regime is
collection
the most effective instrument that States have
royalties, while the remaining 73.33% are
to manage and optimize the value of the
other taxes such as income tax, Value-Added
exploitation of hydrocarbons. Even though
Tax, industry tax and trade, among others.
Colombia does not have the oil potential of its
With regard to tax legislation, as of the year
neighbors, an attractive fiscal regime must be designed
to
attract
investments
is composed of 26.67% for
2000, 11 tax reforms have been carried out.
from
They have focused on favoring direct foreign
companies, while also giving government an
investment, which means that the country has
important role in the extraction of crude oil.
had a modification every year and a half. This
In Colombia’s case, the “government take”,
portrays
understood as the percentage of profits of an
discourages investment in the country and is
oil project given to the State through royalties,
reflected in a 0.5% decrease in the national
taxes and other taxes charged to companies,
GDP[35]. Throughout these changes, several
ranges between 40% and 59%. Additionally,
temporary levies were established that became
the “state take”, the state’s profit through
permanent over time, as is the case of the
royalties, taxes and dividends generated by the
wealth tax or the surcharge on wealth[36]. It is
state oil company, is approximately 96%[31].
likely that these taxes were created by
With the current tax regime, for the year 2013,
short-term issues, but later they served to deal
the
taxes
with the deficit. Table 1 gives an account of
represented 20% of the total[32], showing the
the taxes that are charged to the oil sector, as
country’s high dependence of on oil revenues,
well as the current amounts and their
which makes it difficult to introduce changes
antecedents.
collection
for
royalties
and
or make the tax regime more flexible. However, Colombia’s tax collection behaves similar to the Latin American average during the period 2003-2014[33]. This is due to a strategy promoted in the region’s countries focused on more flexible tax regimes in order
tax
instability
that
actually
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
16
Table 1. Taxes paid by the oil sector Tax
Amount
Observations
Income
33%
35%(2003-2006) 34%(2007) 33%(2008-20129 25%(2013-2016) 34%(2017)
CREE
-
9%(2013-2016)
Royalties
Escalonada
See Graph 2
VAT
-
16% (2003-2011)
Gasoline
COP$1050 (US₵46) per
Its real name is National Gasolina
galon
Tax. COP$215 (US₵9) per galon
Wealth surcharge
4%
5% (2015) 6% (2016-2017)
Wealth
2,4%-4,8%
0,3% (2003-2006) 1,2% (2007-2011)
Source: Crudo Transparente Although on particulars such as royalties,
change in the same period of time, the other
where there have been no changes in the last
taxes charged to the oil sector have been
15 years, or VAT, which has only had one
modified several times in the last years. The
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
17
Income Tax has undergone changes in the
depending on the production of barrels per
years 2003, 2007, 2008, 2013 and 2017. For
day. In years past, a fixed rate of 20% was
2013, it was reduced by 8 percentage points,
charged
but the Income Tax for Equity was created -
production. Currently, with a production of 5
CREE, for the same amount, so, in real terms,
KBPD, an 8% royatly rate will be charged to
the tax was maintained but with different
the production. If the production is greater
names.
than 5 KBPD but lower than 125 KBPD, the
is increased in the same
19.99%. If the production is greater than 125
Gasoline National Tax and its percentage was this
tax
of
percentage that ranges between 8.01 and
Gasoline changed its name to be called Additionally,
volume
The result of this operation will be a
proportion. Similarly, the Global Tax on
modified.
the
% = 8+(Production-KBPD)*0,1
2017, the CREE tax is eliminated and the tax
of
following formula will be applied:
In the last tax reform, which came into force in
income
regardless
KBPD and less than 400 KBPD, 20% of
reform
royalties will be charged. If it is greater than
increased the VAT from 16 to 19%, arguably
400 KBPD but less than 600 KBPD, the
because the fall in oil prices was affecting the
following formula will be applied:
fiscal collection of the State.
% = 20+(Production-400 KBPD)*0,025
Colombian economy and its high dependence on extractive income had to modify its tax
The result of this calculation will be a
structure after the fall of oil prices through an
percentage
increase in Value-Added Tax to cover the
Finally, if the production is greater than 600
fiscal gap. Despite this panorama, the oil
KBPD, ra royalty rate of 25% will be charged.
industry was exempt from paying VAT, which
Figure
allows us to infer that it was Colombian
according to volume in production.
tax-payers that ended up covering the fiscal deficit and not the oil sector. Regarding the topic of royalties, since 2002 they are charged in a staggered manner,
between
20.01 and 24.99%.
2 shows royaltie rates charged
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
18
Figure 2. Percentage of royalties for wells discovered after Law 508
[30] Evaluación de los regímenes fiscales de petróleo en Colombia http://www.cid.unal.edu.co/files/publications/cid200510maatin [31] La Economía Petrolera en Colombia http://www.banrep.gov.co/sites/default/files/publicaciones/archivos/borra692.pdf [32] El impacto de la crisis petrolera en los ingresos del Gobierno Nacional Central – GNC https://www.contraloria.gov.co/documents/20194/520989/Bolet%2525C3%2525ADn+Macro+Fiscal+16.pdf/0310f5b9-e027-40b 3-8502-fa46973fd4b5 [33] Impacto fiscal de la volatilidad del precio del petróleo en América Latina y el Caribe https://repositorio.cepal.org/bitstream/handle/11362/39706/S1501020_es.pdf [34] La agenda de la sociedad civil frente a las industrias extractivas en América Latina https://resourcegovernance.org/sites/default/files/documents/reporte-regional.pdf [35] Inestabilidad tributaria y crecimiento económico en Colombia https://www.gerencie.com/inestabilidad-tributaria-y-crecimiento-economico-en-colombia.html [36] Complejidad del sistema tributario en Colombia fundamentado en leyes imprecisas e inestables http://expeditiorepositorio.utadeo.edu.co/bitstream/handle/20.500.12010/1492/T131.pdf?sequence=1&isAllowed=y
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
19
Access to information on the Cubarral Block and its main figures Law 1712 of 2014 on Transparency and the
expression of cause and motivation for their
Right
request.
of
Access
to
National
Public
Information [37] is the norm that regulates the
To collect the information required for this
rights of citizens to access public documents
project, Crudo Transparente requested the
and data in Colombia. Its main objective is to
National Hydrocarbons Agency and Ecopetrol
make available any information that is
for a copy of the Cubarral Contract, with its
controlled or managed by any entity or
annexes and other related documents. Despite
institution of the Colombian State, persons
the commitment of these entities to the
that exercise public function, that administer
disclosure of all contracts within the process
resources or provide a public service, for any
of the Extractive Industries Transparency
citizen interested in accessing it, quickly and
Initiative, as well as the previously mentioned
completely.
Law on Transparency and Access to Public
According to this law, every person has the
Information, the published documents were
right to request and obtain information of any
not found and the request was denied. Reason
kind or subject, provided that the conditions
for which, it was decided to file a protection
established by law and the Constitution are
sue so that the state oil company would
met. It must be emphasized that Law 1712 of
disclose the information requested.
2014 states that all information held or
Likewise, approximately 35 rights of petition
controlled by a state entity is public and may
were sent to Ecopetrol, the ANH, the Ministry
not be reserved or limited except by
of Mines and Energy, the National Tax and
constitutional or legal provision. Likewise,
Customs Directorate (DIAN), the Ministry of
said entities are obliged to deliver what is requested
without
making
Finance and Public Credit, and the town halls
arbitrary
of Acacías, Guamal, San Martín and Castilla
distinctions and without requiring an
La Nueva. The information provided by these
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
20
entities was related to the production of crude
entities to show the effectiveness in the control
oil from the five fields assigned to the block
of tax collection.
from 2003 to 2017, as well as the exemption
Additionally, when requesting information
from the production bonus to oil companies. In
from Ecopetrol on the criteria for the division
the same way, information was provided on
of the five fields located in the Cubarral block,
gasoline consumption inside the block and the
said entity transferred the petition to the ANH,
API grades of the extracted oil.
arguing
that
the
national
authority
is
However, the information referring to tax and
responsible for handling those topics. For its
cost issues of the block was denied by
part, the ANH responds to the petition
Ecopetrol, ANH and DIAN, arguing that the
mentioning that the division of the fields is the
requested information was subject to legal
responsibility of the institution responsible for
reserve, due to the treatment of business
the blocks, Ecopetrol. The company, in a brief
secrecy and confidentiality that it has received.
statement of four lines, mentions that the
the same. Similarly, the municipalities of
division ratio was geographical. However, the
Guamal, San Martin de los Llanos and
question remains about the technical and
Acacías,
economic criteria used to divide the block into
from
whom
information
was
requested regarding the territorial taxes paid
five fields.
by the oil company, argue that, due to the
The controlled production provided by the
reserved nature of the information, it is not
ANH contains data on the extraction of base
possible to supply it. However, both the
oil, heavy oil, as well as incremental
mayor's office of Castilla La Nueva and Meta’s
governor
office
did
production [38]. The sum of the three types of
provide
oil is equal to the aggregate production of the
information, but this data is not very rigorous,
Cubarral contract supplied by Ecopetrol;
since it provides specific data on some vehicle
however, it is not clear where the incremental
taxes but not the block in general. There
production of the contract delivered by
remains the concern of whether the legal
Ecopetrol comes from. Even though the
reserve of the data is a concrete impediment to
information provided by the ANH contains the
be able to supply the information or if indeed
incremental production from 2013 to 2017, it
there is no real will on the part of the State
does not fit with the incremental production audited and provided by Ecopetrol. Although
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
21
both Ecopetrol and the ANH were asked to
difference
clarify
incremental
exceeds 15 million barrels in two years and 6
production, the response of these entities was
million in another. Taking into account the oil
to re-send the same information of the fields
price per barrel and the exchange rate, the
assigned to the block and that explain the
difference exceeds 8 billion pesos (3.5 billion
aggregate production of the Cubarral contract,
dollars), which raises concerns about the
but not that of the Incremental Cubarral.
discrepancy of data.
the
information
on
in
the
controlled
production
Table 1 shows the inspected production provided
by
Ecopetrol
in
the
period
2005-2017, as well as by the ANH in the period 2013-2017. It can be observed that, except for the years 2015 and 2016, the
Table 1. Audited production by Ecopetrol and the ANH (Barrels) Year
Ecopetrol
2005
18.907.648
2006
23.270.810
2007
23.637.005
2008
27.193.200
2009
32.429.741
ANH
42.592.343 2010
Difference
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
22
2011
51.855.509
2012
56.944.575
2013
60.589.006
42.680.058
17.908.948
2014
58.622.050
42.917.952
15.704.098
2015
73.211.947
73.211.941
6
2016
71.507.170
71.507.168
2
2017
67.730.468
61.657.433
6.073.035
Source: Crudo Transparente, based on data from Ecopetrol and ANH (2018)
In order to have more clarity regarding the
On the other hand, the ANH has published
incremental production in the Cubarral block,
information
Ecopetrol and the ANH were asked for
production in the period 2013-2017 on its
information on the criteria used for this
website. This information contains data on the
project, as well as the Incremental Cubarral
different oil contracts in the country, the fields
contract mentioned in the public records. The
assigned to these contracts and their average
response provided by both entities is that said
daily production. We found that in some years,
contract does not exist. Also, they annexed the resolution
mentioning
that
not
mentioned
in
national
audited
not part of the Cubarral block, but were given to other blocks. In the year 2013, said fields
economic criteria that boosted the incremental are
the
the Castilla East and North Castilla fields were
incremental
production is approved, but the technical and production
about
are assigned to the Castilla block, which does
the
not appear in the audited production of the
resolutions or in the answers issued by said
following years and is not registered by the
entities.
ANH. In 2014, the Castilla Este field appears ascribed to the Apiay contract, while the
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
23
Castilla Norte is registered under the Apiay
2013, taking into account that this agency was
Incremental. Finally, for the year 2015, both
created in 2003? Additionally, the information
fields appear attached to the Cubarral,
provided by the two entities does not match,
Cubarral Incremental, Apiay and Apiay
raising concerns about the possible causes of
incremental contracts. Given the confusion of
this disparity. If one takes into account that the
the information provided, the ANH was asked
phase difference is more than 65 million
for more clarity on the subject, the response
barrels in five years, it is important to
from the agency was a statement where it was
investigate in greater depth the reasons for
stated that the fields in question are associated
such incongruity. Table 2 gives an account of
with the Cubarral contract but they do not
the figures provided by the state oil company
explain why the ANH website offers other
and the ANH, showing that, although the
information.
information is similar in the years 2013 and 2014, there is a disagreement of more than one
It is worth noting that the incremental
million barrels per year in the following years
production audited by the ANH only covers
until reaching a difference of more than 31
the period of 2013-2017, while that of
million barrels in the year 2017.
Ecopetrol covers 2005-2017. The following question arises: Why does the ANH not have production figures audited in years prior to
Table 2. Incremental production audited by Ecopetrol and the ANH (Barrels)
Year
Ecopetrol
2005
4.765.800
2006
4.269.080
2007
4.697.597
2008
9.034.043
2009
12.088.877
ANH
Difference
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
24
2010
20.053.898
2011
23.559.385
2012
22.003.987
2013
22.273.668
23.848.980
1.575.668
2014
21.567.543
22.667.023
1.099.480
2015
27.062.266
45.135.465
18.073.199
2016
28.481.996
45.057.068
16.575.072
2017
25.731.240
57.515.476
31.784.286
Source: Ecopetrol and ANH (2018) It is contradictory that even though the Law of
oversight and control by civil society, and
Transparency and the Right of Access to
promoting the empowerment of citizens on the
Public
governance of natural resources.
Information
establishes
that
the
information that is available to the public is
The Cubarral block is located in the basin of
easily accessible to all interested citizens,
the Eastern Plains, one of the most important
there are so many difficulties in obtaining
oil basins in the country. This block has a
quality information from the State entities.
production of approximately 190 KBPD,
Given this panorama, there is still doubt about
which represents a significant source of
the reasons behind the difficult access to
resources for the nation and the territories that
information, an aspect that should be resolved
are in its area of influence. The block’s
in the future with a more exhaustive analysis.
production represented approximately 18.89%
Finally, there is evidence of a lack of synergy
of the national total between 2014 and 2017,
on the part of the entities in charge of carrying
according to data from the ANH [39]. In
out the inspection of oil production. The lack
March 2003, a resolution was passed,
of institutional dialogue translates into a lack
approving the incremental production of the
of clarity about the destination of resources.
Castilla,
These issues give even more importance to the
Chichimene and Chichimene SW fields,
Castilla
East,
Castilla
Norte,
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
25
proposed by Ecopetrol, due to the natural
international
markets
decline of the fields.
characteristics
of
The
crude
obtained
from
Cubarral
[42].
production
and
These price
differences make it important to monitor the
is
resources that come into the State.
characterized by its extra-heavy nature, and API grades that are less than 15° [40]. Heavy oil in Colombia went from representing 10% of the extracted oil at the beginning of the century, to 53% in 2015 [41], and 0.6% of the world's reserves of heavy crude worldwide. It is important to note that due to the extra-heavy characteristics of Colombian oil and the difficulty in processing it, it has lower price in
[37] Ley de Transparencia y del Derecho de Acceso a la Información Pública Nacional http://www.secretariasenado.gov.co/senado/basedoc/ley_1712_2014.htlm [38] Incremental production: volume of hydrocarbons expressed in barrels of oil per day that is obtained above the basic curve of production from the use of new technologies that allow an improved recovery in the deposits [39] Producción fiscalizada de petróleo, ANH http://www.anh.gov.co/Operaciones-Regalias-y-Participaciones/Sistema-Integrado-de-Operaciones/Paginas/Estadisticas-de-Produccion.asp x [40] Density unit adopted by the American Petroleum Institute (API). According to this scale, the lower the index, the denser the crude extracted. Most crude oils are between 27 and 40 degrees API. [41] Crudos pesados: la realidad del sector hidrocarburos de Colombia https://www.revistavirtualpro.com/editoriales/20170501-ed.pdf [42] Ibíd.
Findings from the FARI Model Up to date, a detailed economic study of oil
regime established for the oil and gas sector.
contracts by civil society has not been carried
This analysis makes it possible to strengthen
out Colombia. Therefore, monitoring the
the monitoring capacity of civil society, as
Cubarral contract allows us analyze the tax
well as raising the level of understanding of
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
26
the economic impact the Cubarral contract
For the Economic Monitoring of the Contract
revenues has on the country.
Cubarral Project, information was required that was not available to the public and that was collected in three ways: first, by means of rights of petition, and those results were presented previously. Secondly, a compilation and analysis of legislative, tax and financial information was carried out. This data came from sources such as: the tax statute, the oil code, the exchange statute, different tax reforms from 2001 to date, the EITI Colombia reports and the Ecopetrol annual reports. Thirdly, the UCube database of Rystad Energy was used, with the help of the Institute for the Governance of Natural Resources - NRGI.
To carry out this task, a tool used by the
Based on the information collected, an
International Monetary Fund was adopted to
adaptation of the model was made, in order to
evaluate the fiscal regimes of the countries for
account
the oil and mining industry, known as
tool
of
the
influence on the adaptations made to FARI or
fiscal regimes of the hydrocarbon and mining this
characteristics
the IMF is not responsible for or has any
The purpose of this model is to analyze the Additionally,
the
Colombian tax regime. It is worth noting that
Extractive Industries Fiscal Analysis - FARI.
sector.
for
on the results and / or interpretations thereof.
has the
possibility of adapting according to the
When reviewing Ecopetrol’s annual reports, it
availability of information of each country,
could be observed that the information found
including
allow
in the company's financial statements does not
complementing the missing data. In this way,
match its results from 2014 and 2015, in
the model seeks to find consistent results from
which the income recorded for the first one
the information collected.
varies by 3 billion pesos (1,2 billion dollars)
some
assumptions
that
with compared to the second.
There is a
discrepancy in the information given in the
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
27
reports, which should be investigated in
assumptions about the costs, taking into
greater depth if this is the result of the absence
account that the model is a simulation that
of effective control by the company.
allows an approximation of the economic framework of the project and the participation
To model the FARI, it was necessary to
of the State in the oil rent. The results are an
review the last ten tax reforms from 2001 to
approach to the financial situation of the
date, in which the different changes in the
contract and not a perfect image of it, nor of
national tax legislation were considered.
the company.
Likewise, for the period 2003-2017, economic indicators were taken into account, such as the
Oil prices have undergone drastic changes in
Market Representative Exchange Rate, the
recent years due to dynamics that in the supply
Brent prices, the nominal interest rate, as well
and in the global demand for crude oil. These
as the inflation rate, both nationally and in the
changes include a rise in prices in 2008 or the
U.S., because it is necessary to contemplate
collapse occurred in 2009 and in 2014.
the variations in the purchasing power of the
Ecopetrol (ranked 35th among the world's
dollar.
largest oil companies and fourth in Latin America) has suffered because of this price
To carry out the projection in the model until
volatility, affecting both investments and
2025, the last tax reform was taken into
profits from oil revenue. In the last decade,
account, as well as the dynamics of the fiscal
petroleum profits represented 15% of the
and macroeconomic legislation in Colombia.
national total [43]; therefore, the impact of the
The end year is 2025 because, according to the
oil industry on public finances is significant.
information obtained, this is when the block
Figure 3 shows the changes in the price of oil
will reach the end of its useful life. With this
in the period 2003-2017.
information, we proceeded to execute the FARI model for the Cubarral contract without losing sight of the fact that, in the absence of tax and financial information from the State institutions, the model had to be adapted to the data obtained, in order to produce consistent figures. Consequently, we had to make some
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
28
Figure 3. Oil prices per barrel in the last years (Brent)
Source: Banco de la República (2017). Barrel price / Year
Additionally, the importance of oil in the
crude exports are also reduced, generating a
country's exports (45% of the total since 2010
significant economic impact on the Colombian
[44]) has led to a high dependence on the
trade balance.
extraction of crude oil for the Colombian economy. A low diversified trade balance, focused on extractive activity, generates greater vulnerability because, in the face of a deterioration in the terms of trade, exports are reduced and pressure is generated in the trade balance,
which
through
exports.
implies Figure
lower 4
revenues
shows
the
importance of oil in the country's export structure. When the price of oil decreases,
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
29
Figure 4. Oil share of total exports
Source: DANE. Porcentage / year
However, if the production data are analyzed
It should be noted that, according to the
in light of the historical prices of the oil barrel,
analysis made, in 2015 the oil extraction in the
it can be seen that there is no relationship
block reached its peak and from that date
between the price of a barrel of oil and the
began its decline, which is projected until the
production of the block. The production of
year 2025. Figure 5 shows the close
Cubarral, despite the low prices of the barrel
relationship between national production and
between 2014 and 2016, remained constant
block production, which shows a growing
even in the most difficult years in terms of
trend that stabilizes as of 2013.
prices. Independent of the price of oil [45], Colombia maintained the production of crude oil, according to the goal established by the National Government of reaching a production close to one million barrels a day.
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
30
Figure 5. Cubarral block oil production
Source: Crudo Transparente, data from Ecopetrol, Ministerio de minas y energía, ANH (2018)
Cubarral is the most important block due to its
include
participation in the national production of
development costs. Bearing in mind that,
crude
the
according to the FARI model, production costs
estimations show that the block can be worth
amount to 28.87% of total income, projected
190 trillion pesos (82.5 billion dollars) valued
net income for the Cubarral block in the period
by the oil reserves calculated in the period
2003-2025 would be 135 trillion pesos (58.5
2003-2025.
billion dollars), a sufficient number to provide
oil.
From
this
perspective,
operational
and
the 1,122 municipalities of Colombia with a
However, to calculate the net income that both
first level hospital [46] and a school that
the contractor, in this case Ecopetrol, and the
provides quality education for more than 1,000
State take, the costs generated during the
students [47].
project must be subtracted. These costs
exploration,
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
31
From the resulting net income, royalties must be deducted, which constitute an economic consideration generated by the exploitation of a mineral [48] and taxes, which are the economic rent for the extraction of a non-renewable natural resource such as oil. Figure 6 shows the fiscal tools that represent the government’s vehicles for collecting revenues from the extraction project. As mentioned above, the State retains a higher percentage of revenues than the oil company through various taxes such as royalties, income tax, industry and commerce, and gasoline, in addition to local taxes such as street lighting, billboards and banners, among others.
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
32
Figure 6. Revenue flows in a tax and royalty system
Source: Natural Resources Governance Institute (NRGI) To make a more in-depth analysis of
It should be taken into account that in 2012,
Cubarral’s share in Colombia’s finances,
the distribution of royalties changed with the
calculations were made in two different
creation of the General System of Royalties
periods. First from 2003 to 2016, time in
(SGR). In this new system, participation of the
which the audited production of all years is
municipalities where non-renewable natural
available and was collected by the Crudo
resources are extracted is 20% of direct
Transparente team. The production cost data
allocations, going from 80% of the previous
was provided by Rystad Energy, through the
regime. The remaining 80% goes to various
support of the NRGI. The second period runs
Funds such as the Regional Compensation
from 2017 to 2025. During this period,
Fund, the Regional Development Fund and the
projections were made by the same company.
Savings and Stabilization Fund. These funds finance regional or local impact projects in the
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
poorest
territories
of
the
country,
33
in
7 shows how revenues varied according to the
accordance with criteria such as unsatisfied
volatility of international prices of the barrel
basic needs, unemployment, etc [49]. From
of oil. It can be observed that the falls in the
2003 to 2016, the block generated a net
price of the barrel (2008 and 2015) coincide
income of 74 billion pesos. From this revenue,
with the decrease in net income, as well as the
the State collected 53.9 billion pesos (23.5
net profit of the State and vice versa.
billion dollars) from taxes and royalties. This
Finally, it is worth noting that, of the total
amounts to the construction of approximately
estimated net income, the government take is
190 soccer stadiums like Barranquilla’s “Metropolitan”,
where
the
62.32%
Colombian
during
the
period
2003-2025,
generating a net profit of 84 billion pesos
National Soccer Team plays. From this
(36.5 billion dollars) in the same period.
perspective, the importance of Cubarral to
However, the 2013 peak of profits, shown in
Colombia’s economy should be highlighted, as
Graph 7, does not coincide with the production
well as the impact generated by the social
peak of the block, which, as mentioned above,
investment made with these resources.
was in 2015. This is mainly due to the high oil
From 2017 to 2025, the projections show an
prices in 2013 which represented higher
expected net income of approximately 61.2
income for the project, while the high
billion pesos (21.4 billion dollars from which
production in 2015, at lower prices, generates
the State, through taxes and royalties, will
lower income. We can conclude that utilities
keep 33 billion pesos (11 billion dollars). This
are determined by the price of the barrel.
profit would be enough to build the metro line proposed for Bogotá, twice [50]. Although most of the utility was already obtained in the period 2003-2016, there is still a considerable amount of resources left that would satisfy the needs of many communities in the country. Figure 7 shows the estimated net income of the Cubarral block from 2003 to 2025, as well as the net income collected by the State through taxes and royalties. Similarly, Figure
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
34
Graph 7. Cubarral’s Cash flow and net government income
Source: FARI model
On the other hand, when analyzing the tax
on gasoline and the rest includes industry and
structure for the Cubarral block, it can be
trade taxes, VAT, surcharge on wealth and
deduced that, of the net profit obtained by the
property tax.
State during the period 2003-2016, 18.5
For the period 2017-2025, royalties collected
billion pesos (8 billion dollars), that is, 36,3%
by the State from Cubarral will be around 16.5
of the profit, were obtained through royalties.
trillion
Additionally, 16 billion pesos (7 billion
pesos
(6,100
billion
dollars),
equivalent to 49.9%. Likewise, approximately
dollars), 31.2% of the total, were collected via
12 billion pesos (5,2 billion dollars) or 36.2%,
income tax and 5.8 billion pesos (2 billion
will be collected as income tax. Lastly, 2.2
dollars). The last share,11.3%, through the tax
billion pesos (1 billion dollars), 6.7% of the total, will correspond to the gasoline tax.
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
35
Figure 8 shows how the fiscal collection for
entire useful life in the period 2003-2025 is
the Cubarral block was configured, which is
estimated at 38.5 billion pesos (16.7 billion
mainly composed of royalties and income tax,
dollars), while the income tax will be
with the gasoline tax owning a secondary
approximately 26 billion pesos (11.3 billion
share. Cubarral’s contribution, during its
dollars).
Graph 8. Cubarral fiscal tool structure
Source: FARI Model
It should be highlighted that, for the same
approximately one sixth of the total national
period, the General Royalty System has
royalties.
recorded a total of 28.6 billion pesos (12.5 billion dollars) throughout the country and Cubarral's royalties represent 16.78% of that total. This shows the economic importance of Cubarral, since its production and consequent fiscal contribution to the nation represents
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
36
[43] El impacto de la crisis petrolera en los ingresos del Gobierno Nacional Central - GNC https://www.contraloria.gov.co/documents/20194/520989/Bolet%2525C3%2525ADn+Macro+Fiscal+16.pdf/0310f5b9-e027-40b3-8502-fa 46973fd4b5 [44] Colombia, exportaciones de café, carbón, petróleo y sus derivados, ferroníquel y no tradicionales https://www.dane.gov.co/index.php/estadisticas-por-tema/comercio-internacional/exportaciones [45] Histórico producción mensual de petróleo http://www.upme.gov.co/generadorconsultas/Consulta_Series.aspx?idModulo=3&tipoSerie=138 [46] Inversión para nuevo Hospital General será de $57.000 millones https://www.elheraldo.co/barranquilla/inversion-para-nuevo-hospital-general-sera-de-57000-millones-372871 [47] $20.000 millones se invierten en la construcción de dos Megacolegios en Valledupar https://www.mineducacion.gov.co/cvn/1665/w3-article-349968.html [48] Las regalías http://www.anh.gov.co/portalregionalizacion/Paginas/Las-regalias.aspx [49] Guía de validación jurídica de la distribución del Sistema General de Regalías - SGR - entre fondos y beneficiarios https://colaboracion.dnp.gov.co/CDT/DNP/SR-G01%20Guia%20de%20validaci%C3%B3n%20juridica%20de%20la%20distribuci%C3%B 3n%20del%20SGR%20entre%20fondos%20y%20beneficiarios.Pu.pdf [50] Peñalosa reveló costo aproximado del metro y explicó integración con TM https://www.noticiasrcn.com/nacional-bogota/penalosa-revelo-costo-aproximado-del-metro-y-explico-integracion-tm
Local impacts in areas of influence Since 2012, year in which the General System
SGR aims to redistribute royalties in a way
of
the
that benefits of the entire country, they should
municipalities where the Cubarral block is
be more equitable in the distribution of income
located have received 295 billion pesos (164
and seek to compensate the communities
billion dollars). Acacias and Castilla La Nueva
affected by extractive projects.
Royalties
came
into
force,
were given more than 270 billion pesos (150
Graph 9 shows the royalty income received by
billion dollars) [51] from this revenue.
the municipalities of Acacías, Castilla La
However, for a block that has produced almost
Nueva, Guamal and San Martín, highlighting
five billion pesos in royalties since 2012, what
the difference in the income of Acacías and
said municipalities actually keep is not
Castilla La Nueva with that of Guamal and
remarkable.
San Martín. It should be noted, as mentioned
Leaders in the region have expressed their
above, that the royalties received by these
support for a change in the General Royalty
municipalities come from the SGR, which
System (SRG) to give a bigger cut to the
come from the payment of all the extractive
producing municipalities. Even though the
projects that are carried out in the national
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
37
territory, including those of the Cubarral block.
Graph 9. Cubarral municipalities’ royalty income
Source: Crudo Transparente, data from DNP
With these royalties, aqueducts and sewers
Figure 10 shows the aqueduct and sewerage
have been built in the municipalities that have
coverage in the municipalities where the
allowed coverage of more than 80% in three of
Cubarral block is located. Likewise, the
the four municipalities, except for Guamal,
departmental and national coverage is shown,
which has a coverage of approximately 62%.
in order to establish parameters that allow
In front of the municipal coverage in sewage
comparing each municipality’s situation with
system, the municipalities of Acacías and San
the that of Meta department, as well as the
Martín have an index higher than 80%, while
country. Except for Guamal, the municipalities
that of Castilla La Nueva is approximately
in question surpass the departmental and
70% and that of Guamal is only 47%.
national average in coverage of aqueduct and sewerage.
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
38
In Guamal’s case, it should be noted that the
However, although the municipality of San
aqueduct coverage is slightly higher than the
Martín receives a smaller amount of money,
departmental
its indicators in aqueduct and sewerage
average.
Nevertheless,
the
sewerage coverage is significantly lower than
coverage
are
the
best
of
the
four
the Meta average. One of the factors that could
municipalities. From this perspective, the
explain this phenomenon is the lower amount
reasons for Guamal's low coverage should be
of resources collected from royalties.
studied in greater depth.
Graph 10. Aqueduct and sewerage coverage
Source: Crudo Transparente. Data from DNP, Superintendencia de Servicios Públicos Domiciliarios (2016)
On the other hand, the municipalities that are
In terms of infant mortality rate, the four
part of this analysis show mortality rates
municipalities have rates lower than the
slightly
and
departmental one, but higher than the national
departmental average, except for Castilla. Its
rate. Although both Acacías and Castilla,
mortality rate is slightly lower than the
Guamal and San Martín have a first-rate
average.
hospital, the mortality and infant mortality
higher
than
the
national
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
39
rates are higher than the national average,
effectiveness
of
pregnancy
prevention
which means that, although there is a
programs leads to high fertility rates that
significant investment in health infrastructure,
stagnate opportunities and social equality in
there’s no real progress in terms of preventing
the country, especially in the communities.
deaths per 100,000 inhabitants.
Table 2 gives an account of the mortality, infant mortality and fertility rates in the
Finally, fertility rates in the municipalities are
block‘s municipalities, compared with the
significantly higher than the national and
national and departmental average. It is
departmental average, with the exception of
striking that Guamal has the highest indicators
San Martín, where the fertility rate is lower
in these three areas.
than the national one, as well as the departmental one. It is evident that the low
Table 2. Health index per 1000 inhabitants Acacías
Castilla
Guamal
San Martín
Meta
Nacional
5,01
4,24
6,91
5,04
4,74
4,39
17,9
18,80
22,2
22
24,1
17,10
65,69
65,94
70,41
49,26
56,72
50,68
Mortality Rate
Infant mortality rate
Fertility rate
Source: Crudo Transparente. Data from DNP, DANE (2016)
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
40
Furthermore, qualitative housing deficit in the
welfare scores reviewed so far, has such high
four
the
quantitative and qualitative deficit, exceeding
departmental and national average, meaning
even the national and departmental average.
that
the
This could be explained by a low royalty
municipalities in question is greater than those
income that allows municipal investment to
of the department of Meta, as well as the rest
focus on health and basic sanitation program
of the country.
development, but not on housing development.
municipalities the
quality
is of
lower housing
than in
However, to arrive at an accurate conclusion it
The quantitative housing deficit is greater than
will be necessary to explore which programs
the departmental and national average in
have been promoted by the local government
Acacías, Castilla La Nueva and San Martín but
with profit from royalties.
not Guamal. These three municipalities have a smaller number of houses than those needed to meet the housing needs of all its inhabitants. Figure 11 shows that Castilla La Nueva has a qualitative housing deficit of 9.7%, the lowest of the four municipalities. Meanwhile, San Martin has the highest deficit, with 18.6%. In terms of quantitative deficit, the lowest is the municipality of Guamal, with 5.7% and San Martin is again, the municipality with a higher quantitative deficit. It is noteworthy that San Martin, one of the municipalities with the best wealth and
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
41
Graph 11. Quantitative and qualitative housing deficit
Source: Crudo Transparente. Data from Dane (2005)
If the data is analyzed in the light of
Figure 12 shows the index of unsatisfied basic
socioeconomic indicators, it can be understood
needs (NBI) and misery by municipality, in
that the Unsatisfied Basic Needs Index (NBI)
comparison with the departmental and national
in the municipalities where the Cubarral block
average. It should be noted that Guamal,
is located is similar to the departmental index,
where the indicators in health and basic
except Guamal, where the index is lower. This
services were the most lagging, has the lowest
would allow us to conclude that the extraction
NBI percentage, as well as the lowest poverty
of hydrocarbons does not represent a real
rate in the four municipalities in question.
benefit for the communities of the areas of
Therefore, the effectiveness and impact of
influence. On the other hand, the percentage of
social investment programs promoted by the
misery in the municipalities of Acacías,
local governments with money received for
Castilla and Guamal is significantly lower than
royalties, must be analyzed, in order to be able
the departmental and national average.
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
42
to conclude assertively about the magnitude of the impact of the programs.
Graph 12. Unsatisfied Basic Needs (NBI) and Misery Rates
Source: Crudo Transparente. Data from DANE (2011)
From this perspective, these socioeconomic
If the socioeconomic indicators are compared
dynamics illustrate an important improvement
with those of Cumaral, a municipality that
in social matters, surpassing the departmental
opposes any extractive project to be carried
and national averages in most of the indicators
out in their territory, it could be seen that their
presented
is
wealth and welfare rates are very similar to
troublesome that 20 to 25% of the population
Guamal, one of the municipalities where the
lacks certain basic needs, particularly when
block is located.
so
far.
Nonetheless,
it
Cubarral is the block with the highest
As for the NBI and poverty rates, it should be
production in the country and, therefore, the
mentioned that the percentages of Cumaral are
one that generates the most wealth to country.
very similar to those of the municipalities in question. This allows us to infer that, despite
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
43
the profit allocated to the municipalities from
model, there is a concern about why this
royalties, there are no significant advances in
progress is so insignificant compared to
social matters with respect to a non-extractive
non-oil municipalities. Figure 13 shows the
territory such as Cumaral.
evolution of NBI in these five municipalities.
When comparing the evolution of the NBI of oil-extracting towns with Cumaral during the 2005-2011 period, it can be observed that the five municipalities have had similar patterns, both at the beginning of the period in question and at the end of it. This allows us to infer that the impact of royalties on the municipalities was not reflected in significant social progress, and can be matched with the progress made by non-oil municipalities such as Cumaral. It is worth mentioning that the period under analysis is prior to the entry into force of the new General Royalty System. We can conclude that, although the oil municipalities received 80% of the royalties with the old
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
44
Graph 13. NBI evolution from 2005 to 2011
Source: Crudo Transparente, data from DANE
Beyond royalties, additional income received
In this way, civil society could effectively
by the State for other taxes and that are
supervise the revenue that the State receives
distributed by the General Participation
for the extraction of raw materials, while
System, has not translated into real reduction
strengthening
the
of NBI in the country. It is striking that the
non-renewable
natural
department
mechanisms
of
Chocó,
located
in
the
Colombian Pacific, has an NBI index of
of
governance
of
resources
with
transparency
and
accountability.
79.19% and 32.34% misery. There remains the
Finally, it should be noted that a large part of
concern of why the socioeconomic indicators
Ecopetrol is public, since 88.49% its shares
of the country do not reflect the high tax
are state-owned, while the remaining 11.51%
collection received from the oil industry.
are own by private citizens. From this point of
In order to account for the destination of these
view, the Colombian State receives 88.49% of
resources, a more in-depth analysis should be
the dividends generated by the company.
carried out to clarify what has been invested,
Figures show that from 2003 to 2016, the total
what projects and programs have been
income received by the State through taxes,
implemented and what their impact has been.
royalties and dividends was 71 billion pesos
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
(30,8 billion dollars). The projected revenue to
45
The Natural Resources Governance Index,
be collected in the period 2017-2025 will be
created by the NRGI, provides an assessment
57.9 billion pesos (25 billion dollars) for a
of the state of transparency and governance in
total income of 129.3 billion pesos (56.2
81 countries where the role of extractive
billion dollars) for the period 2003-2025. This
industries is sizeable [54]. This index studies
is a little more than half of Colombia’s
the legal and regulatory framework, as well as
national budget for 2018 (235.6 billion pesos
its implementation for the extraction of
or 102 billion dollars). This means that the
minerals and hydrocarbons in a country,
state take for the entire period will be 95.66%
taking into account three components: the
of the total net income.
first, the extraction of value, which has to do
Considering that the Cubarral block represents
with
approximately 20% of the total production of
protection of the environment, collection of
the country, it should be deliberated that the
public revenues and existence of state
country's income from oil extraction would
enterprises in extractive activities. The second
significantly increase the quality of life of
is income management, mainly associated to
Colombians. However, in 2016 the Human
the efficient distribution of resources obtained
Development Index places Colombia in eighth
by the extraction of natural resources. Lastly,
place among the 10 South American countries,
general conditions of governance, which
surpassing only Bolivia and Paraguay [52].
evaluate the social, political and economic
Additionally, Colombia is the second most
context of the country, including issues such
unequal country in Latin America. Corruption
as corruption, defense of human rights,
has managed to keep 50 trillion pesos (22.000
availability
billion dollars) [53]. It can be inferred that a
violence, among others.
weighty part of the income received by the oil
NRGI,
the country. However, the destination given to to
accurately
pinpoint
information,
concessions,
absence
of
Colombia
ranks
seventh
in
resource in the world, and third Latin
the
American country after Chile and Brazil.
concentration of wealth generated by oil.
Colombia had the best grades in revenue management,
of
of
transparency and governance of the oil
resources must be investigated in greater depth order
management
According to the study carried out by the
activity goes to the most affluent population in
in
the
followed
by
the
general
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
governance
conditions,
calculated
46
as
signing of the peace agreements with the
satisfactory, while the extraction of value was
FARC in 2016, there are still armed actors in
reviewed as weak in aspects such as disclosure
Meta who seek territorial control through
of payments, beneficial owners, interests of
violence and intimidation of social leaders.
public officials and management of local
Additionally, the perception of corruption in
impacts.
the country remains high, which makes institutional transparency difficult. It should be
In light of the social, political and economic
emphasized that oil extraction has caused
context of the country, it is important to
significant environmental impacts, despite the
mention that Colombia, through the SGR,
rapid intervention by Ecopetrol. Likewise, it
created different funds in order to redistribute
should be mentioned that even though 80% of
income from mining and hydrocarbons, to
the extraction of crude oil in the country is
territorial governments of different levels,
carried out by Ecopetrol, the income from this
producers and not producers. According to the
activity has not translated into improvements
NRGI, Colombia’s Savings and Stabilization
in the socioeconomic indicators of the nation
Fund obtained a rating of 100%, due to the control
mechanisms
designed
for
and the region.
its
management and transparency, making it the highest-ranked governance program in the world. However, despite Colombia’s good grades in the index, it is perceived that, despite the
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
47
[51] Fichas territoriales municipales https://terridata.dnp.gov.co/#/perfiles [52] Human development report 2016 http://hdr.undp.org/sites/default/files/2016_human_development_report.pdf [53] Corruptos se embolsillan $50 billones de presupuestos regionales https://www.elespectador.com/economia/corruptos-se-embolsillan-50-billones-de-presupuestos-regionales-articulo-719783
[54] Índice de Gobernanza de los Recursos Naturales 2017 https://resourcegovernance.org/sites/default/files/documents/2017-resource-governance-index-spanish.pdf
Conclusions and Recommendations Despite the fact that the Transparency and
of mechanisms to carry out the auditing, or a
Access to Public Information Law was enacted
lack of political will that would encourage
in Colombia, the set of information provided
corrupt practices.
by State entities associated to the oil sector, mainly Ecopetrol and the ANH, was not clear
The oil industry in Colombia is one of the
and generated confusion. Ecopetrol’s data
sectors of the economy that pays the most
differed from the data provided by the ANH.
taxes. Extraction of non-renewable natural
These differences create skepticism on the
resources is heavily taxed due to the
ability of said entities to carry out an effective
characteristics of the resource and therefore,
control of crude production due to the absence
the shortage of it. In spite of the costs
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
48
(28.87%), the government take of the Cubarral
Cubarral block, during 2003 to 2016, a little
block is approximately 62%. Dividends left by
more than 51 billion pesos (22 billion dollars)
the extraction of crude oil amount to 50.9
were generated in royalties and taxes, this
billion pesos (22 billion dollars), which
revenue would be enough to boost health and
generates an essential economic stimulus to
education in throughout the national territory.
continue
oil.
Although it is true that royalties are assigned
Additionally, high prices since 2005, with the
to different purposes, it is worthwhile to
exception of 2014 and 2015, have resulted in
deepen the analysis of the destination that is
substantial fiscal contributions, as well as
given to the resources generated by the oil
greater dependence on oil exploitation.
industry.
with
the
extraction
of
Especially
since
Cubarral's
contribution will still be significant. In the same way, the fiscal regime for the oil sector represents an important part of public
The national context around the Cubarral
finances. In the period 2003-2025 the block
block should be highlighted. In the Orinoquía
will generate the State a net income for of 84.3
basin, located in the Colombian eastern plains,
billion pesos (36.5 billion dollars). The
oil production is a fundamental factor that has
international oil prices directly influence tax
allowed to promote economic and social
collection, since the higher the price, the
development in the region. However, in three
higher the public revenue. 2013, the year in
of the four municipalities where the Cubarral
which the price of a barrel of oil averaged 95
block is present, oil extraction covers more
dollars, brought significant revenue for the
than 80% of the total municipal economic
country and companies. Colombia-s fiscal
activity. This dependence is a dangerous factor
regime, despite its instability, is considered
if one takes into account that the Block has a
attractive for domestic and foreign investors.
few years of oil reserves and that, faced with the decline, the economy of the municipalities
It is striking that the indicators of poverty and
will suffer greatly due to the high dependence
misery in several departments such as Chocó,
on oil extraction.
in the Colombian Pacific, or Vichada, in the eastern plains are so high despite the amount
Additionally, oil extraction in this region has
of resources the State receives from oil
not been exempt from social protest or
extraction. If one takes into account that in the
violence. Underlying social issues in the
CUBARRAL BLOCK: HOW MUCH DOES IT PAY AND HOW MUCH WILL IT PAY? CONTRIBUTIONS OF THE LARGEST OIL BLOCK IN THE COUNTRY TO THE FISCAL REGIME
49
municipalities have spawned protests among
and oil revenues that show progress in
the inhabitants of the municipalities against
departments such as the Meta, but there are
Ecopetrol for the lack of social investment and
setbacks in the socioeconomic indicators of
job creation by the company. Likewise,
departments such as Chocó. In that sense,
paramilitary activity has been a negative
corruption, as well as the inefficiency of the
influence, with violence and intimidation
authorities in the local and national order, can
against communities that have spoken against
be important factors that encourage these
the negative impacts generated by oil activity
inequality, making it difficult to control due to
in the territories.
the disparity of information provided by the entities of the State.
It should be mentioned that despite the importance of oil income from the Cubarral
Therefore, it is essential that civil society
block, communities in the area of influence
strengthens the oversight of the management
have spoken against these extractive practices
of natural resources. Also, raising awareness
due to the non-compliance with labor and
for the social, economic and environmental
salary agreements by Ecopetrol. Similarly,
impact of extracting them in order to properly
armed conflict that has harassed the region,
use
not allowing it to effectively exercise civil
Likewise, demand a good use of the rent for
rights
the benefit of all the inhabitants. The
for
the
inhabitants
of
these
municipalities.
the
mechanisms
of
accountability.
governance of non-renewable resources by
If we analyze Ecopetrol’s participation in the
governments and, mainly, communities, will
national production of crude, approximately
allow effective control of the destination,
80%, a greater advance in the development of
quality and impact of the resources that enter
the nation would be expected. However, the
the State.
local impact in the municipalities where crude
is extracted translates into acceptable social indicators with respect to the national and departmental average. As mentioned above, the country has shown improvement in the distribution of royalties