What is the ANH doing to promote investment in the offshore segment?
Article 28 of the PND and Agreement 2 of 2015 allowed equal time conditions for offshore contracts awarded by 2014. That means the period of exploration and production for all offshore contracts became nine and 30 years, respectively, while before it was six and 24. On the other hand, in a joint effort with the Ministry of Mines and Energy we are preparing to draft technical regulations for offshore activities, which we hope will be adopted by the Ministry in early 2016. Finally, the government issued new rules allowing the declaration of tax-free zones for offshore exploration and production activities, which significantly reduces the rate of income tax and provides benefits for sales tax and tariffs.
How important is the development of unconventionals for Colombia's oil industry?
We have to find a way to increase production and make room for unconventionals. We need help in four main areas: unconventionals, offshore activities, enhanced oil recovery (EOR), and coal bed methane (CBM). There are only a few individuals in Colombia lucky enough to have had exposure to these areas in previous roles. We need help from countries that have extensive experience in these areas, so we went to Australia, which was the first country to introduce CBM, and we have just signed an MoU for CBM regulation development. To gain more knowledge about offshore activities we have signed agreements with the governments of both Australia and the UK. For unconventionals we are in the process of signing an MoU with Canada, and we have had close cooperation with the US in this area. For EOR we are learning from Canada and the US. Finally, we have requested that the government of Norway integrate Colombia into the Oil Development Program, which seeks to reduce poverty with resources from the sector.
What were the results of the Baker & McKenzie study for the ANH to boost competitiveness?
We identified four major areas that could definitely be improved. These include improving prospectivity, strengthening the ANH, making economically attractive projects, and encouraging time conscious and efficient processes. The first on the list was the quality of our geological and geophysical (G&G) information. In the past this information would only be provided when an operator or other party expressed interest in acquiring a specific block. We realized that we needed to increase our prospecting efforts by providing more G&G data on a permanent basis. At the same time we will provide investors with four additional ingredients: an environmental baseline, infrastructure information, a social baseline—as there are some communities that are opposed to the oil business and other communities that are far more supportive of it—and security information. As for the strengthening of the ANH, our market strategy will be based on two central elements: a custom service approach in accordance with our customer segmentation model, and a mixed and permanent licensing model. Regarding economically attractive projects, our advisors recommend us to make adjustments to exploratory programs for onshore frontier areas and increase competitiveness through potential adjustments to fiscal measures in order to reduce government take for frontier areas. Finally, the time-conscious and efficient processes refer to the optimized licensing times.
What are your expectations for the near future?
We have been able to promote more than $1.2 billion in investment. In the short term I am satisfied with what we have done to ensure that operators will carry out their operations correctly. Our team has been recognized by the industry. The President of the World Bank claimed that Colombia is the most-prepared country for the drop in oil prices. The country has adjusted well to the current situation.