LOOKING BACK

Colombia 2013 | ENERGY & MINING | INTERVIEW

TBY talks to Orlando Cabrales Segovia, Former President of Agencia Nacional de Hidrocarburos (ANH), on the opportunities present in the country's oil industry.

Orlando Cabrales Segovia
BIOGRAPHY
Orlando Cabrales Segovia has a Law degree from the Pontifica Universidad Javeriana, as well as a Master’s in Philosophy from Boston College. He served as an Assistant Director at Ecopetrol SA between 1988 and 1990. He worked for 16 years in BP, and was Vice-President of Legal Affairs for Latin America for six years of that period. Between 2001 and 2005 he was the Director of Legal Affairs for the company. He has participated on the Boards of Malt de Colombia SA, Reynolds Aluminum SA, Vikings Shipyards SA, BP Gas Colombia ESP, and Central Pipeline (Ocensa). He also served on the boards of the Corporación Excelencia a la Justicia and El Tiempo.

How has Agencia Nacional de Hidrocarburos (ANH) evolved since it was established in 2003, and how has it made an impact on the oil and gas sector in Colombia?

Before 2003, Ecopetrol was the state oil company and the upstream regulator. Since the creation of ANH as the regulator in 2003, Colombia has been able to incorporate more than 3 billion barrels of oil equivalent. ANH has, through aggressive promotional campaigns, attracted high levels of investment in the oil and gas sector. That is a good indicator of the amount of research we have incorporated over the last eight years. In addition to that, Colombia has almost doubled its production levels in the last seven years. In 2005, Colombia produced around 500,000 barrels of oil per day (bbl/d). Today, we are producing 940,000 bbl/d, which is a very significant increase over the last seven years. Only a few countries in the world can tell the same story.

How would you describe the investment climate in the oil and gas sector?

FDI in the oil and gas sector in 2012 totaled $5 billion. The investment climate in the country is very strong. We believe that foreign business is not just a matter of capital flows from one country into Colombia, but that it is a way to gain know-how and new ideas and technology. That is the value of foreign businesses for us. Colombia provides very clear rules for foreign investment. It is a country with a long tradition of legal stability that respects the sanctity of contracts. Colombia has never intervened in an oil and gas contract, and that gives a lot of comfort to companies investing here. In addition, we provide attractive fiscal and contractual terms.

What is ANH doing to further develop the oil and gas sector?

The bidding rounds that we are implementing over 2012 are a very aggressive promotion. That is something that we believe in. We are now going to continue on this path, as that is the way to attract foreign investment. In 2012, we reached $5 billion in FDI for the oil and gas sector, and $13 billion for the whole economy. According to estimates we have for 2012, foreign investment for the whole country is going to amount to $17 billion, so you can expect that the oil and gas sector will provide a very significant part of that increase.

As the fourth largest oil producer in Latin America, what is your outlook for Colombia's oil and gas sector in the medium to long term?

We believe that Colombia will achieve production levels above 1 million bbl/d. We are confident that we can be above that number. I think we can continue growing that production up to 1.15 million barrels per day (bbl/d), which is the goal that we have in this government for 2014. We are going to continue increasing the reserves of the country, which are not huge compared with Venezuela or Mexico. The forecast that we have for the next 20 years is that we can incorporate 9 billion additional barrels of oil.

What role is technology playing in this increase in output?

Technology definitely plays an important role. The recovery factor in the fields is still averaging 16%-17%, and so the incorporation of the reserves is coming mainly from the ability of the companies to increase that recovery factor in the existing fields. We still have a lot of things to do going forward. We need more discoveries in new fields, and we have to develop the unconventional sector, both of which depend on technology. The development of unconventional oil here will require a lot of participation from service companies, which provide some of the technology that the sector needs to develop these resources. Offshore technology plays a very important role. This is an industry where everything is dependent on technology.

What has been the impact of the new contract policy you implemented in May 2012?

The new policy we implemented is that the general rule for granting contracts to companies will be through competitive bid rounds. However, we have incorporated an exception to that rule. In some cases, we will allow direct negotiations with companies in particular areas. We apply it when the area requires a very significant exploration program, or when we believe that the offer that the companies make is greater for ANH than what we obtained in the last two years through competitive procedures. Knowing that only a certain type of company can develop activities in certain areas, we do leave some exceptions to the rule.