A Changing Colombia
Colombia is considered one of the most politically stable countries in Latin America with economic growth that is moving the country towards first world status. There is growing confidence in the economy and a climate of greater security within the country, both of which are opening the door to foreign investment and new economic ties. It is important to note that the sanctity of contracts has always been well entrenched in Colombia.
The turning point for Colombia came in 2002 when the government took a hard-line stance against pockets of narco-terrorists by pressuring the groups to lay down arms or disband. Since then, security has improved greatly and foreign investment continues to grow, particularly in the country’s petroleum industry.
THE ROLE OF OIL
Oil plays an important role in Colombia’s economy, contributing about 10 percent of the government’s revenues and nearly 30 percent of exports. Colombia has a well developed infrastructure of refineries, pipelines and export terminals. Its refineries are operating at capacity, but there are plans for significant expansion in the future. Over 6,000 kilometres of pipelines connect major producing fields, centres of high consumption and the export terminals on two coastlines, the Caribbean Sea and the Pacific Ocean. Colombia is the fourth largest oil producer in South America, however, of the country’s 18 sedimentary basins, only nine currently have commercial production. Production had fallen from a peak of 800,000 bopd in the 1990s to 526,000 in 2005. Earlier this decade, faced with the prospect of becoming a net oil importer by 2012, the government took steps to rejuvenate its oil industry with significant success. Production had increased to over 800,000 bopd in 2011.
Opening the door to foreign investment even wider in 2004, a new petroleum fiscal and land tenure regime was introduced, which has become one of the most attractive in the world. The Agencia Nacionale Hidrocarburos (ANH) was created to act as the regulatory authority to administer new exploration lands, and to encourage foreign investment.
The government also committed to a more dynamic oil industry with a move to privatize 20 percent of Ecopetrol. In 2007 the first 10 percent stake was sold on the Bogotá Stock Exchange, and in the latter part of 2008, Ecopetrol listed shares on the New York Stock Exchange providing more flexibility and autonomy for the state-owned oil company.
RECORD OIL INVESTMENT
A growing number of international companies are pursuing hydrocarbon exploration in Colombia. More than 150 oil and gas companies are now operating in Colombia. Total foreign investment in the oil and gas industry now stands at over $3 billion in 2010, up from $1.8 billion in 2006. Production in the country has increased close to 300,000 bopd since 2005 to more than 800,000 bopd in early 2011.
SIGNIFICANT POTENTIAL
Colombia has an abundance of light, sweet oil in under-explored basins. In Colombia, a large heavy oil fairway extends across southern and eastern portions of the Llanos Basin which is believed to be from the same La Luna source rock as the massive Faja del Orinoco field in Venezuela where four projects are currently producing 600,000 bopd. Colombia also has a well developed infrastructure of refineries, pipelines and export terminals.