Analysis of the Impact of Escalating Armed Conflict in Colombia on South American Energy Supply and Oil & Gas Asset Investment Risks

Now, based on the collected information, I will provide you with a systematic and comprehensive analysis report.

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According to the latest data, the National Liberation Army (ELN) of Colombia launched a large-scale offensive on January 16, 2025 against the dissident faction of the Revolutionary Armed Forces of Colombia (FARC) that rejected the 2016 Peace Agreement. To date, the clashes have resulted in over 100 deaths [1][2]. The severity of this conflict far exceeds previous expectations, mainly reflected in the following aspects:

• At least 103 deaths, including 16 signatories of the Peace Agreement, FARC dissidents (including women and child soldiers), and ELN fighters
• Approximately 24 injured
• Over 20 kidnapped, including 3 individuals involved in peace negotiations
• Approximately 100,000 displaced persons, accounting for 53% of the region’s total population (377,000) [2]

The conflict is mainly concentrated in the Catatumbo region of Norte de Santander Department, Colombia, covering 11 municipalities, including key areas such as El Tarra and Tibú [1]. The region borders Venezuela, and the conflict has spilled over into Zulia State, Venezuela, where approximately 812 Colombian refugees have received assistance [1].

The root causes of the armed conflict in Colombia involve multiple complex factors:

1. Poor Implementation of the Peace Agreement:
   The 2016 Peace Agreement has not been fully implemented, with some FARC factions refusing to disarm
2. Driven by the Drug Economy:
   Colombia’s cocaine production has hit an all-time high, with armed groups securing funding through drug trafficking
3. Policy Divides:
   There is a huge gap between the Petro administration’s “Total Peace” plan and the actual security situation
4. Deteriorating Regional Security:
   Armed groups are active in oil-rich provinces such as Putumayo [3]

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Colombia is the fourth-largest crude oil producer in Latin America, following Brazil, Venezuela, and Argentina [4]. According to data from the U.S. Energy Information Administration (EIA):

Indicator	Value
Daily Crude Oil Production (September 2025)	752,000 barrels/day
Historical Peak Production (2013)	1,035,000 barrels/day
Proven Reserves (2024)	Approximately 2 billion barrels
Reserve-to-Production Ratio	Approximately 8 years (calculated based on current production)

Colombia’s crude oil production has continued to decline since reaching its peak in 2013, with 2025 production dropping by approximately 27% from the peak. Ecopetrol announced that its 2026 investment plan will remain in the range of USD 5.9-7.2 billion, targeting a daily production of 730,000-740,000 barrels of oil equivalent [5]. This investment plan indicates that the Colombian government is attempting to stabilize production, but faces multiple challenges.

Colombia’s crude oil is mainly exported to the United States, India, China, and Spain, with Panama serving as the main transit hub for the Pacific Basin [4]. Crude oil exports in the first half of 2025 reached approximately 78 million barrels, a decrease of approximately 5% compared to the first half of 2024 [4].

Colombia is a major global exporter of thermal coal, with its main coal mines operated by Drummond and Glencore (through its Cerrejón mine), accounting for approximately 4-5% of global trade volume annually. According to the International Energy Agency (IEA) forecast, Colombia’s coal exports will reach 53 million tons in 2025, but its long-term export share will gradually decline due to government policies [6].

• Turkey: Approximately 23%
• Other European countries: Approximately 19%
• Chile, Israel, Mexico, South Korea, Brazil, the United States, etc.

Notably, Colombia became a net importer of natural gas in 2024 [4]. This shift is of great strategic significance, indicating that the country’s energy self-sufficiency capacity is declining, and its dependence on external supply is increasing. Ecopetrol plans to increase natural gas production to 105,000-110,000 barrels of oil equivalent per day by 2026, mainly through the development of the Llanos foothills and offshore Caribbean gas fields [5].

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The Catatumbo clashes have directly impacted Colombia’s energy infrastructure:

1. Shutdown Risk for Tibú Oil Field:
   Ecopetrol, Colombia’s state-owned oil company, has restricted work and personnel movement at the Tibú Oil Field [1][2]. As an important crude oil production base in eastern Colombia, the field’s daily production accounts for a significant proportion of the country’s total output.

2. Suspension of Sardinata Natural Gas Plant:
   Ecopetrol has also restricted operations at the Sardinata Natural Gas Plant, which is critical for natural gas supply in eastern Colombia.

3. Infrastructure Damage:
   ELN fighters have planted a large number of improvised explosive devices (IEDs) on roads and schools; as of January 30, the Colombian military has destroyed over 2,645 IEDs [1]. These devices severely hinder the transportation of energy supplies and the safe movement of personnel.

4. Attacks on Military Facilities:
   On February 5, ELN fighters attacked the 30th Combat Engineer Battalion in Tibú, destroying some equipment [1].

Supply chain disruptions caused by the armed conflict have multiple impacts on the energy industry:

• Blocked Transportation Routes:
  Major highways and pipelines face security threats, leading to increased transportation costs
• Personnel Safety Risks:
  Employees of international oil companies face risks of kidnapping and violent attacks
• Equipment Supply Disruptions:
  Equipment and technical personnel required for oil field development struggle to access conflict areas
• Rising Insurance Costs:
  Energy companies face significant increases in premiums for war risk and terrorism insurance

Disruptions to Colombia’s energy production have the following impacts on regional energy security:

1. Tightened South American Energy Supply:
   As an important regional oil producer, Colombia’s production decline exacerbates uncertainty in South American energy supply
2. Price Volatility Risk:
   Local supply disruptions may push up international oil prices in the short term
3. Demand for Alternative Supplies:
   Major importing countries such as India and China may seek other supply sources

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Since taking office, the Petro administration has adopted a series of policies unfavorable to oil and gas investment [3][7]:

• Ban on Hydraulic Fracturing:
  Comprehensive ban on new hydraulic fracturing exploration and development permits
• Suspension of New Exploration Contracts:
  No new oil and gas exploration contracts have been issued since 2022
• Additional Taxation:
  A 1% temporary levy on oil sales (originally scheduled for 90 days, but may be extended indefinitely)
• Fiscal Deficit Pressure:
  The 2026 budget gap is expected to reach USD 6.5 billion, and the government is considering further tax increases

These policies have significantly eroded foreign oil and gas companies’ confidence in investing in Colombia [3].

• Since 2022, the strength of armed groups has increased significantly
• The 2024 armed conflict resulted in at least 100 deaths, and the conflict further escalated in January 2025
• Security conditions in rural areas continue to deteriorate, posing severe threats to oil and gas operation areas

According to industry analysis reports, major international oil companies are accelerating their withdrawal from Colombia [3]. The main reasons include:

• Rising operating costs (security costs, insurance costs, personnel and equipment protection costs)
• Declining investment returns (production decline, tax increases, policy uncertainty)
• Increasing alternative investment destinations (other Latin American countries, Africa, North America)

• Proven oil reserves have dropped by over 400 million barrels since 2013
• The reserve-to-production ratio has fallen to less than 8 years, facing issues with production succession
• Insufficient new reserve discoveries, leading to a worrying long-term production outlook

• Ecopetrol’s 2026 investment plan assumes a Brent crude oil price of USD 60 per barrel [5], which is lower than the break-even point of many projects
• Under capital discipline requirements, the investment efficiency of various business lines is being tested
• Long-term debt and profitability indicators are under pressure

• The government is promoting energy transition, requiring increased investment in non-traditional renewable energy
• Opposition from indigenous peoples and communities to oil and gas projects is growing
• Environmental regulatory requirements are becoming stricter, leading to longer project approval cycles

• Although Colombia itself is not on major sanction lists, border conflicts with Venezuela may bring associated sanction risks
• U.S. sanctions on Venezuela may affect regional energy trade

Risk Type	Risk Level	Trend Judgment
Political Risk	High	Worsening
Security Risk	High	Worsening
Policy Risk	High	Worsening
Economic Risk	Medium-High	Stable
Regulatory Risk	Medium	Stable
Market Risk	Medium	Stable

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Although Colombia is an important oil producer, its production accounts for less than 1% of global supply (approximately 752,000 barrels/day vs. global demand of approximately 102 million barrels/day). According to EIA forecasts, the global oil market will face oversupply in 2026, with an average Brent crude oil price expected to be USD 56 per barrel, a decrease of approximately 19% compared to 2025’s USD 69 per barrel [8][9].

However, the following factors may lead to short-term price fluctuations:

1. Supply Disruption Expectations:
   If the conflict expands and causes more oil fields to shut down, it may trigger short-term buying
2. Geopolitical Risk Premium:
   The combination of the situation in Colombia and tensions in Venezuela may push up the geopolitical risk premium
3. Impact on Market Sentiment:
   Changes in investor sentiment may cause prices to deviate from fundamentals

The impact of disruptions to Colombia’s coal exports on the global coal market is relatively limited:

• Colombia accounts for approximately 4-5% of the global thermal coal export market
• Major buyers include Turkey, European countries, and Latin American countries
• Indonesia and Australia can provide alternative supplies

• Border conflicts between Colombia and Venezuela may affect regional energy pipelines and power interconnection projects
• The Colombia-Central America transmission line faces security threats
• The regional natural gas integration process may be hindered

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In view of Colombia’s current security and political situation, it is recommended that investors adopt the following strategies:

1. Avoid Direct Investment:
   Exercise caution regarding upstream oil and gas assets in Colombia, and avoid new major investments
2. Monitor Ecopetrol’s Developments:
   As the state-owned oil company, Ecopetrol’s investment plan can serve as an industry benchmark
3. Diversify Investment Portfolio:
   Increase allocation to oil and gas assets in other Latin American countries such as Brazil and Mexico
4. Focus on Short-Term Transactions:
   If participation is necessary, use tools such as options to hedge downside risks

• Pre-salt oil and gas development in Brazil (more stable investment returns)
• Deepwater projects in the Gulf of Mexico (more predictable U.S. regulatory environment)
• U.S. shale oil and gas (high policy support)
• Renewable energy assets (stronger long-term growth certainty)

1. Diversify Supply Sources:
   Reduce dependence on Colombian crude oil and establish a multi-channel supply system
2. Increase Strategic Reserves:
   Replenish commercial inventories when prices are low
3. Long-Term Contracts:
   Sign long-term supply agreements with suppliers to lock in supply volume and price
4. Futures Hedging:
   Use oil futures and options to manage price risks

1. Regional Security Cooperation:
   Strengthen border security cooperation with neighboring countries to combat cross-border armed groups
2. Investment Incentive Policies:
   Reassess tax policies for oil and gas investment to attract foreign capital
3. Balance Energy Transition:
   Ensure energy security while promoting energy transition
4. International Cooperation:
   Seek support from international financial institutions to safeguard energy infrastructure security

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1. High Risk of Conflict Escalation:
   The armed conflict in Colombia is unlikely to subside in the short term and may further escalate
2. Limited but Sustained Supply Impact:
   The direct impact on global oil supply is limited, but the long-term production decline trend is definite
3. High Investment Risks:
   Overlapping political, security, and policy risks lead to a pessimistic outlook for investment returns
4. Regional Linkage Effects:
   The situation in Colombia, combined with tensions in Venezuela, may have a profound impact on the South American energy landscape

• Conflict continues but is controllable, production remains at current levels
• Policy environment gradually improves, and foreign capital returns
• Production stabilizes at 730,000-750,000 barrels/day in 2026

• Conflict expands, more oil fields shut down
• Production drops to below 650,000 barrels/day
• International oil companies accelerate withdrawal, and investment decreases significantly

• Breakthroughs in peace negotiations, conflict eases
• New exploration policies are introduced, and investment increases
• Production stabilizes and rebounds

In the long term, Colombia’s energy industry faces structural challenges:

• Production Decline Pressure:
  Natural decline of production in old oil fields, insufficient new reserves
• Policy Uncertainty:
  The policy orientation of the next government is uncertain (a right-wing government may reverse current policies)
• Energy Transition Pressure:
  Under the global energy transition trend, the investment attractiveness of fossil energy declines
• Intensified Regional Competition:
  Oil and gas production in countries such as Brazil and Guyana is growing rapidly, and Colombia’s market share is facing squeeze

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[1] Wikipedia - 2025 Catatumbo Clashes (https://en.wikipedia.org/wiki/2025_Catatumbo_clashes)

[2] Reliefweb - Catatumbo, Colombia: 100,000 displaced after a year of brutal conflict (https://reliefweb.int/report/colombia/catatumbo-colombia-100000-displaced-after-year-brutal-conflict)

[3] OilPrice.com - Big Oil Abandons Colombia Amid Rising Chaos and Fiscal Crisis (https://oilprice.com/Energy/Energy-General/Big-Oil-Abandons-Colombia-Amid-Rising-Chaos-and-Fiscal-Crisis.html)

[4] IEA - An Energy Sector Roadmap to Net Zero Emissions in Colombia (https://iea.blob.core.windows.net/assets/e8df40ab-114a-4ef2-b344-ca0df0645683/AnEnergySectorRoadmaptoNetZeroEmissionsinColombia.pdf)

[5] Ecopetrol - Ecopetrol Group to Invest Between COP 22 and 27 Trillion in 2026 (https://files.ecopetrol.com.co/web/esp/informacion relevante/plan-financiero-2026-eng.pdf)

[6] Global Energy Monitor - Colombian Coal Mining at the Crossroads (https://globalenergymonitor.org/wp-content/uploads/2023/04/GEM-Colombian-Coal-Mining-Transparency-Briefing-2023_v2.pdf)

[7] OilPrice.com - Colombia’s Oil Industry Faces an Existential Crisis (https://oilprice.com/Energy/Crude-Oil/Colombias-Oil-Industry-Faces-an-Existential-Crisis.html)

[8] EIA - Short Term Energy Outlook: Global Liquid Fuels (https://www.eia.gov/outlooks/steo/report/global_oil.php)

[9] Reuters - Oil prices forecast to ease in 2026 under pressure from ample supply (https://www.reuters.com/business/energy/oil-prices-forecast-ease-2026-under-pressure-ample-supply-2026-01-05/)

[10] Trading Economics - Colombia Crude Oil Production (https://tradingeconomics.com/colombia/crude-oil-production)

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Report Generation Date: January 19, 2026
Data Source: Jinling AI Financial Analysis System integrated public market data