ANH Colombia was created in 2003 to address the critical issue of Colombia’s declining oil reserves. What has the agency achieved since then? How has it worked to resolve the problem of declining reserves and restore the sector’s competitiveness?

The year 2003 was one of transition for the Colombian oil and gas industry. The government made important changes in the energy policy in order to increase the prospectivity of the country and improve the attractiveness of the sector for foreign investors. These changes were mainly aimed to separate Ecopetrol’s dual role as an authority and operating company. Thus, in 2003 the National Hydrocarbons Agency (ANH) was created as a special administrative unit in order to manage the nation’s hydrocarbon resources and ensure that the Colombian people were the ones to benefit from this.


Since then, the exploratory activity has grown rapidly. Whereas in 2003 approximately 12.5 million hectares were under exploration and production, in September 2008 the area under exploration has extended to 60.6 million hectares.

This stems from the licensing of areas through the signing of contracts for exploration and production (E&P) and technical evaluation agreement (TEA). Annually, the ANH has surpassed its goal of signing 30 contracts per year. Up to October 31, 2008, 35 contracts were signed (both E&P and TEA), and the agency aims to close this year with the signing of more than 100 contracts, as a result of the different bidding processes and rounds developed throughout 2008.

Consequently the exploratory activity has also increased. Seismic acquisition has grown to its highest levels in recent years, exceeding annual targets. Moreover, 2006 was the year with the greatest seismic activity in the history of Colombia. Exploratory activity was also hitting record levels, particularly A-3. Up to October 2008, 76 wells were drilled, and the ANH expects to drill a total of 100 wells by the end of this year, therefore the exploratory success rate has improved by about 42%.

This situation has led to a significant reversal in the declining trend in the production of crude oil (in October it was 584,000 barrels per day on average) while at the same time maintaining the positive trend in the production of gas (878 million cubic feet at the same date).

Using the available geological information and its continuous analysis of the exploratory activity undertaken every year, the ANH determined as a strategic goal the incorporation of four billion barrels of oil equivalent until 2020, allowing the country to maintain self-sufficiency and the level of exports.

To achieve this strategic goal, the agency has set the minimum requirements in terms of investments in acquisition of geological information, E&P contracts to be signed and exploratory activity required. This is supported with an annual investment of about $100m, which means a cost of 50 cents per barrel discovered, as well as the signing of 30 E&P contracts, the drilling of 60 A-3 wells, and at least 10 discoveries of 20 million barrels per year on average.


In order to carry out technical studies, the ANH developed a model that defines the proper time to invest in each basin depending on the bid and time of year. The proposal also takes into account the need to balance investments; consequently the investment budget is about $100m per year.

What have been the biggest challenges facing the hydrocarbon sector in Colombia and how can they be overcome?

The main challenge the ANH has faced is the establishment of strategies to promote Colombia as a destination for oil and gas investments. Thereby, ensuring the exploratory activity and increasing the likelihood of finding both oil and gas.

In this sense, a new E&P contract model was created that is significantly more competitive than the previous association contract, which was in force with the institutional structure headed by Ecopetrol. This could be verified through the specialised publications that compare the fiscal terms in the different oil-producing countries.

In 2002, Colombia’s E&P contract was ranked number 56 according to PEPS (Petroleum Economics & Policy Solutions), an IHS Energy publication. In 2004, according to the same publication, the contract was ranked number 30. Since then it has reached an even higher ranking because of the stability in the region.

Without a doubt, the new E&P contract is currently the ANH’s main promotion strategy, along with the TEA. The TEA decreases the exploratory risk, allowing geological studies to be carried out in larger areas in order to determine their potential, and the subsequent selection of a smaller area to apply for a formal E&P contract, and conduct works of greater detail and depth, such as 3-D seismic and A-3 wells.

Furthermore, the ANH designed a promotion and marketing plan that seeks to promote the contractual models and the opportunities in the Colombian oil and gas sector among foreign investors. The plan includes the participation of the ANH in events held in the major oil capitals of the world, as well as the organisation of a similar event in Colombia, which gathers more than 2000 people from all over the world to show them the new business environment of the country.

The results are conclusive. The current management has achieved a significant increase in exploratory activity, denoted by the kilometres of seismic acquired and the number of exploratory wells drilled, achieving unprecedented levels and exceeding the ANH’s own expectations. Each year the agency accomplishes the annual goals established by the government, demonstrating the commitment acquired by the ANH since its inception.

Finally, the bidding processes have resulted in high levels of investment, the arrival of new companies that have never invested in Colombia before, and in some cases the state’s participation in the production of oil derived from these new contracts.

To what extent can foreign investors play a role in boosting the sector? How is investment being encouraged?

Annually, the ANH establishes an investment plan which aims to increase the level of geological knowledge in Colombia. However, this is comparatively low contrasted with the investments made by the operating companies through the E&P and TEA contracts.

Each contract includes a programme with the scheduled activities for the exploration and production phases that are translated into volumes of investment as part of the fulfilment of the commitments. This offers the agency a system to quantify to some extent the share of the foreign investors in the national oil industry. However, this estimate corresponds only to the contracts signed with the ANH, because the national oil company, Ecopetrol, also invests in the sector, either directly or through the association contracts currently in force, which are signed with foreign companies in the majority of cases.

These investments have helped to increase the exploratory activity to its highest levels, specifically with regard to seismic acquisition and drilling of exploratory wells, in addition to the signing of contracts which are largely subscribed by foreign operators. On the other hand, most of the inflow of foreign investments comes from the oil and gas sector. In 2007 this sector offered the highest contribution to the Colombian economy.

The ANH has attracted investments thanks to its promotional strategy, supported by competitive contractual terms, as well as transparent legal and negotiation conditions.

From a foreign investor’s perspective, what are Colombia's competitive advantages with regards to the hydrocarbon sector? What are the country’s competitive advantages more broadly speaking?

A study by Arthur D’ Little, aimed to determine the perception of Colombia as a destination for investments in the hydrocarbon sector, makes a comparison with other oil-producing countries in the region, such as Argentina, Brazil, Ecuador, Peru and Trinidad & Tobago in terms of prospectivity, contractual terms and overall attractiveness of the country. The results state that Colombia is the second favourite destination for investors in the region after Brazil; nonetheless Colombia’s contractual terms ranked higher than Brazil’s.

A second evaluation assessed the expectations of the industry in respect to prospectivity, fiscal terms, political stability, economic stability, legal certainty and personal safety. In most cases the results coincided with what was expected, and in other cases the outcome was even better than what was initially expected.

This is the case of economic stability. Nonetheless, there is still work to do in the fields of personal safety and prospectivity, both the national government and the ANH have worked jointly to improve these two aspects substantially.

According to this study, investors find the region very attractive, especially Peru, Colombia and Brazil. Peru has very attractive trade, political, and economic terms, but there is still doubts about the potential of its resources and it has a limited market structure. In the case of Brazil, significant progress has been identified in facilitating investments, and there is an increasing expectation about the potential after the recent discoveries; but, there is uncertainty regarding the hegemony of Petrobras and the role of the ANP (the national oil & gas agency).

The rest of the region is perceived as unattractive due to factors such as political instability, unappealing trade conditions, government interventionism and low profitability of the business, among other reasons.

In conclusion, in spite of the uncertainty about the actual prospectivity of Colombia and the security level in certain areas, the country offers favourable conditions for investments and good expectations for new discoveries, and this, together with the new policy adopted since 2003, has positioned Colombia as an attractive country in the region among all kind of investors, even those new to South America.

What is the outlook for the Colombian hydrocarbon sector for 2009? How does this outlook compare with recent performance?

Next year will be a year of challenges. The ANH will work decisively in the expansion of the geological knowledge of the country through seismic surveys, stratigraphic wells and slim holes, among others technical studies. On the other hand, the ANH will lead the modernisation of its data repository, including the building of new headquarters, the expansion of the core library, and the implementation of a modern software.

The ANH will adopt a permanent monitoring system of the production that is derived from the existing E&P contracts, the strengthening of the institutional capacity of ANH and the launching of the 2009 - 2010 round.

From the standpoint of the promotion plan, the ANH will launch the Colombia Petroleum Show, a big event in Bogota, which will be held from December 1 to 4 2008, and will gather more than 3000 people among investors, exhibitors and participants. This event is a great scenario to promote the image of Colombia as destination for investments in the sector.

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