Colombia's Energy Crossroads: Geopolitical Risks and the Push for Diversification

The geopolitical and economic landscape of Colombia is undergoing a seismic shift as its oil production declines and its relationship with the United States deteriorates. For investors, the interplay between these trends and the government's ambitious energy transition plans presents both risks and opportunities. The country's oil output, which averaged 746,872 barrels per day in early 2025, has fallen to its lowest level in four years, driven by policy shifts under President Gustavo Petro and a sharp drop in exploration spending Colombia’s Oil Output Keeps Falling as U.S. Relations Sour^[1]. Meanwhile, the U.S. decision to strip Colombia of its drug certification in 2025 has compounded uncertainties, raising questions about access to critical technology and military support Colombia on the brink of oil decline due to Petro's policies^[2].

The Decline of Hydrocarbons and U.S. Tensions

Colombia's oil sector has been battered by Petro's regulatory overhauls, including a ban on fracking and a moratorium on new exploration contracts. These measures, while aligned with the administration's climate goals, have deterred foreign investment. Exploration spending in 2024 fell to $900 million, a 14% decline from the prior year Colombia’s Oil Industry Plummets Under Petro^[3]. Compounding the issue, social unrest and infrastructure attacks—such as pipeline suspensions—have disrupted operations, accelerating the sector's decline Colombia’s Oil and Gas Production Hits Historic Lows^[4].

The deterioration of U.S.-Colombia relations adds another layer of complexity. The U.S. certification revocation, citing concerns over coca cultivation and cocaine production, has not only strained diplomatic ties but also exposed vulnerabilities in Colombia's energy security. Natural gas imports surged by 166.4% in the second half of 2024 as domestic production waned, highlighting the country's growing reliance on external energy sources Colombia to Unveil US$40 Billion Plan for Clean Energy …^[5]. For investors, this underscores a critical risk: a sudden shift in U.S. policy could further isolate Colombia from global energy markets and reduce access to financing.

Diversification Strategies: A New Energy Paradigm

In response, Colombia is pivoting toward a $40 billion energy transition plan, anchored by renewable energy and international partnerships. The government aims to increase wind and solar power to 26% of the energy mix by 2027, supported by projects like Zelestra's 100MW solar farm Colombia battles to diversify economy away from oil …^[6]. Green hydrogen is another focal point, with Ecopetrol launching a pilot project at its Cartagena refinery to position Colombia as a future exporter of low-carbon energy Colombia Could Lead Latin America Through The Energy Transition^[7].

International collaboration is central to this strategy. Colombia has negotiated a debt-for-nature swap with Germany to fund its climate transition, while the OPEC Fund and Inter-American Development Bank (IDB) have committed over $150 million to renewable projects Colombia and Germany Explore Debt-for-Nature Swap to Fund $40 ...^[8]. These efforts align with global frameworks like the Just Energy Transition Partnerships (JETP), which South Africa and Vietnam have successfully leveraged to balance decarbonization with economic stability Policies and sustainable energy transition in the global^[9].

However, challenges persist. Permitting delays and community resistance to renewable projects—such as wind farms in La Guajira—have slowed progress Executive summary – Colombia 2023 – Analysis - IEA^[10]. Moreover, oil and coal exports still account for half of Colombia's export revenues, creating a fiscal gap that the transition plan must bridge The dynamics of oil in Colombia in 2025^[11].

Geopolitical Alliances and Regional Implications

Colombia's energy diversification is not occurring in isolation. By positioning itself as a leader in Latin America's energy transition, the country is forging alliances beyond the U.S. Its strategic location, with access to both the Atlantic and Pacific, supports ambitions to export renewable energy and green hydrogen to Europe and Asia Colombia can lead the energy transition in Latin America^[12]. The government's Energy Transition Law No. 2099 provides fiscal incentives for renewables, while the IDB's rural electrification programs aim to reduce energy poverty in non-interconnected zones Facilitating the energy transition in Colombia and Latin America^[13].

Yet, geopolitical risks remain. The U.S. certification status could affect Colombia's ability to attract private capital, particularly for infrastructure projects requiring advanced technology. Additionally, regional competitors like Chile and Australia are also vying for leadership in green hydrogen, intensifying competition for international markets Climate commitments and energy transition pledges in Latin …^[14].

Investment Implications and the Path Forward

For investors, Colombia's energy transition represents a high-stakes bet. The country's renewable resources and strategic partnerships offer long-term potential, particularly in green hydrogen and critical minerals. However, short-term risks—including political volatility, social unrest, and the fiscal burden of replacing hydrocarbon revenues—demand careful consideration.

The success of Colombia's plan hinges on its ability to secure international financing, streamline permitting processes, and address community concerns. If executed effectively, the transition could transform the country into a regional energy hub. But if delays persist or U.S. relations worsen further, the economic and geopolitical costs could outweigh the benefits of decarbonization.

As Colombia navigates this crossroads, investors must weigh the promise of a green future against the realities of a sector in flux. The coming years will test whether the country can balance its climate ambitions with the hard realities of energy security and economic stability.