OBG talks to Germán Arce Zapata, President, National Hydrocarbons Agency (ANH)

Interview: Germán Arce Zapata

What is the significance to the oil industry in reaching the 1m barrels per day (bpd) production mark?

GERMAN ARCE ZAPATA: The milestone of exceeding 1m bpd places Colombia among the world’s top- oil producers. Investment levels in Colombia have significantly increased, to the extent that hydrocarbons represented 35% of incoming foreign direct investment by 2012. This is the result of events over the past decade, including Ecopetrol’s initial public offering and the strengthening of the ANH, which are bearing fruit now. The big challenge is to keep, if not raise, these investment rates. Our priorities include an increase in exploration and production contracts and the promotion of exploration in shale gas, shale oil and offshore. We are focusing on exploration, as we know the key to the sector’s success will be expanding proven reserves. As such, it is essential to raise and consolidate all levels of information, particularly our knowledge of the subsoil.

What was the outcome of the 2012 Oil Round?

ARCE: The 2012 Oil Round was a milestone as it showed our ability to attract the kind of companies we want leading the sector’s development. Companies like Anadarko (offshore) and ExxonMobil (shale oil and shale gas) bid to explore Colombian fields. We closed 50 new contracts for exploration development, from which we expect to see results within the next decade.

To what extent is shale exploration progressing?

ARCE: Both shale oil and shale gas were a priority in the 2012 Oil Round and will be indispensable in the 2014 round. So far, we have focused on explaining to all shareholders the impact of leveraging these resources. Entry into this domain requires a higher level of knowledge, and this forces us to incorporate the most comprehensive and accurate information possible, to enable industry players to assess the potential of shale oil and shale gas. As such we are working on boosting and better coordinating information. We are evaluating the areas with greater potential, including the Middle Magdalena and the Tumaco area in the Pacific, which we will auction in 2014. Our commitment to these types of hydrocarbons involves overcoming challenges at the environmental and social levels. We are working with the National Authority for Environmental Licences (Autoridad Nacional Licensias Ambientales, ANLA) and consulting with academia, the industry and particularly with communities, helping them understanding how shale oil and shale gas projects can be sustainable and bring benefits to them.

How are environmental licences being streamlined?

ARCE: The government is implementing various strategies wherein the ANH plays a decisive role in coordinating industry players and environmental bodies. Interest in the sector grew rapidly, and the country did not have adequate institutions to address it in a timely manner. In early 2012 institutions like ANLA were new and were missing important resources, which led to a lag in the response time to requests. However, by May 2012 the government had made a significant effort to strengthen ANLA both financially and physically. As a result, there has been a considerable advance on the resolution of applications, although delays are about 12 months on average, still far from the six months stipulated in the regulation. The progressive increase in exploration that will come following the recent Oil Round will see a steady increase in required efforts.

How was the ANH prepared to welcome more participants and an expanded oil industry?

ARCE: In 2011 ANH created five specialised areas for different processes – the vice-presidencies for technical affairs; promotion and area assignments; contracts; operations, royalties and participations; and administrative and financial affairs. We are now working to strengthen our support of environmental and social processes to contribute to a responsible and sustainable exploitation of resources, and the twin priorities of increasing reserves and production levels.