CEO of Canadian company Frontera Energy comments on Colombia’s oil tax and energy transition plans

Photo: Frontera Energy CEO Orlando Cabrales. Photo by Alexandra Ruiz/ Semana.

Orlando Cabrales Segovia, the Chief Executive Officer of the Canadian oil company Frontera Energy, has now publicly commented on the oil export tax, energy transition plans and fracking ban proposed by the Colombian government under newly-elected President Gustavo Petro and Vice-President Francia Márquez.

In August, The Guardian explained the government’s plan:

“If passed, the plan would raise taxes on the country’s highest earners – approximately 2% of Colombia’s population – cut tax benefits for the richest and fight tax evasion. The tax hikes would progressively increase as income increases. It would add an annual wealth tax on savings and property above $630,000, and would add a 10% tax on some of Colombia’s biggest exports – oil, coal and gold – after prices rise above a certain threshold.”

Reuters further notes:

“The reform would levy a 10% tax on oil exports once the price exceeds $48 per barrel. Oil prices are expected to average $104 per barrel this year, according to the Colombian Petroleum Association (ACP), which represents private producers, providing the state with an extra 24 trillion pesos [about USD $5.4 billion] in 2022.”

In another article, Reuters has also reported:

“Petro aims to reduce Colombia’s reliance on oil and coal exports through a gradual transition to solar and wind energy, while promoting agriculture, food production and tourism to boost the economy. …Petro has [also] pledged to stop all new oil exploration and construction of new large-scale open-pit mines, and to halt fracking pilot studies and the development of offshore oil and gas projects, saying it’s what ‘science tells us.'”

Cabrales comments on Petro’s policies

On oil policy, Cabrales has told El Colombiano: “We are convinced, after the dialogue that has been had with the Government, through the unions that represent us, of the strategic importance of this industry for the national economy.”

As for the energy transition to renewables, Cabrales adds: “It must be gradual and compatible with energy security, and with the country’s competitiveness. What is happening to Europe cannot happen to Colombia, which, due to having managed a disorderly and accelerated transition, today puts its energy security and economic competitiveness at risk. In addition, this must go hand in hand with a fiscal transition and an export transition.”

On the oil tax, he notes: “The sector has expressed its concern about the impact it would have on the level of future investments, to maintain the hydrocarbon production category that the country currently has.”

Cabrales also says: “This proposal as it is conceived would affect the level of investment for the sector. There is a direct relationship between what the tax reform proposes in this sense and the level of resources allocated by companies in the industry to maintain or grow their operations. This is fundamental to the Medium-Term Fiscal Framework. Regarding the issue of the tax on high prices, this already exists in the contracts, both with the National Hydrocarbons Agency and with Ecopetrol. Important resources are already entering the country for that income derived from the high prices in a barrel of crude oil.”

Cabrales has also spoken to Semana about fracking.

He tells Semana: “I think the Duque Government’s approach with scientific pilots to obtain supported information is the right one. One should not refuse this scientific approach, all the more so when the Council of State recently validated the legality of the 2014 technical standards that allow the activity of hydraulic fracturing. I don’t think it’s convenient to deny us that opportunity.”

Conflict in Casanare

Cabrales has been the CEO of Frontera since March 15, 2021.

On November 16 and 19, 2018, Frontera signed two agreements with the Ministry of Defence for USD $1.34 million to secure army protection for its Cubiro block operations in San Luis de Palenque, Casanare. Just days later, on November 27, 2018, a militarized operation involving a Black Hawk helicopter was launched that arrested the eight social leaders.

Video: A Black Hawk helicopter was used in the arrest of the social leaders.

A still from this video of the social leaders being taken into custody after their arrest.

Photo: PBI-Colombia accompanies a protest in San Luis de Palenque on December 14, 2018, demanding the release of the social leaders.

The eight social leaders had been protesting the impacts of Frontera on their community, roads and environment.

The UN Special Rapporteur on the situation of human rights defenders has raised concerns about “the apparent connection between Frontera Energy, the army’s 16th brigade and the Attorney General’s Support Office in this criminalization.”

The leaders were held in either prison or house arrest until 2020. On September 16, 2020, El Nuevo Oriente reported that a judge ordered their release, but that “the release decision was appealed by the Prosecutor’s Office and by the lawyers of Frontera Energy.”

On July 1 of this year, PBI-Canada and PBI-Colombia, along with the Committee of Solidarity with Political Prisoners (CSPP) and the Social Corporation for Community Advice and Training (COSPACC), travelled to the San Luis de Palenque to meet with the social leaders and take part in a community meeting at La Venturosa.

It is expected that they will be back in court this coming October 3-6.

We continue to follow this situation.

Photo: PBI visits San Luis de Palenque, July 1, 2022.