Subscription and demo access


 
About Interfax
Press Releases
Products & Services
Contact us
Customer Login
 


Headlines
 

06/18 13:13   Russian State Duma passes bill suspending INF Treaty's implementation (Part 2)
 
06/18 13:10   RUSSIA WILL MAKE EFFORTS TO HELP AVERT MILITARY CONFLICT BETWEEN U.S. AND IRAN - KOSACHYOV
 
06/18 13:08   Planned deployment of 1,000 U.S. troops to Middle East to have destabilizing consequences - Russian SVR chief
 
06/18 13:07   Russian State Duma passes bill suspending INF Treaty's implementation
 
06/18 13:07   U.S. pressuring Iran provocation of war - Ryabkov
 
06/18 13:07   Kremlin following situation on Chechnya-Dagestan border, but not stepping in - Peskov
 
06/18 13:00   MICEX and RTS Indexes at 13:00 MSK
 
06/18 12:57   No date yet for JCPOA Joint Commission meeting - Russian Deputy FM Ryabkov
 
06/18 12:57   Kremlin believes Zelensky's stance similar to Poroshenko's ideas
 
06/18 12:57   Putin, Trump might discuss cyberattacks if they meet in Osaka - Kremlin
 





 Subscription
You can access a demo version of, recieve more information about or subscribe to Interfax publications by filling in and sending the form below.

First name:


Last name:


Company:


Division:


E-mail:


Phone:


Country:


City:


Please enter the digits in the box below:

 

Interfax.com  |  Interviews  |  Padilla: Colombian energy sector at a crossroads



Interviews


August 22, 2014

Padilla: Colombian energy sector at a crossroads


John Padilla, managing director of consultants IPD Latin America, talks to Interfax about Colombias investment climate.

Pacific Rubiales, Colombias largest private oil and gas producer, has run into political difficulties. The Rubiales oilfield for Ecopetrol Alliance - a group of around 30 organisations including trade unions and political parties - is calling for its Rubiales heavy oilfield in the Llanos Basin to be transferred to state-owned oil company Ecopetrol, local media reported in late July. Interfax asked John Padilla, managing director of IPD Latin America, if the situation is a symptom of a deteriorating investment climate.

Interfax: Could you explain what is happening at the Rubiales field?

John Padilla: The issue is extremely complex. As background, the Rubiales field contract between Ecopetrol and Pacific Rubiales will expire in mid-2016. Ecopetrol has the option to renegotiate and/or extend the contract at its sole discretion. On one hand, taking the field back has to be attractive for Ecopetrol given the increased production it would secure, particularly in light of its continued aggressive production and reserve goals.

However, taking back the field would represent an important operational commitment and require significant investment to maintain smooth operations and optimal production. Secondary recovery techniques or enhanced oil recovery will likely need to be employed at Rubiales, which will raise costs. Thus, despite political and certain organised social pressure on Ecopetrol to take the field back, all aspects and potential implications will need to be fully analysed and assessed by the state-controlled company.

The increasingly vocal pressure against a possible contract extension has principally come from Ecopetrol‘s [unions] and other unions supported by left-wing politicians. This new alliance has its own vested interests and the actions being taken are indicative of the shifting dynamics in various hydrocarbon regions throughout Colombia.

What we‘re definitely seeing is the re-emergence of Colombia‘s major oil sector-related unions, USO and CUT. Union power was squashed quite significantly during the previous administration, but has re-emerged under [current President Juan Manuel] Santos.

Some of the claims being made by the unions have made reference to the controversy surrounding the potential use of Pacific Rubiales‘s Synchronised Thermal Additional Recovery (STAR) technology in the Quifa field, just next to the Rubiales field.

There are political forces in Quifa that are also against the extension of the Rubiales field [contract] with Pacific Rubiales that have suggested the STAR technology is causing irreparable damage to the field‘s reserves. They state that Pacific Rubiales is intent on extracting as much crude as possible in the event the contract is not extended.

The fact of the matter is that similar levels of production are not going to be possible in the near future in Rubiales - and eventually in Quifa - simply by continuing to use identical techniques to those in place today. Whether STAR technology is the most appropriate technique to use and/or Ecopetrol wants to use something different is an entirely different discussion. But the decision on whether to use the technology or not will depend on Ecopetrol‘s assessment of the test results from the pilot project, which is currently under evaluation. There‘s a good deal of misinformation over the issue. Many have stated that STAR‘s adoption at Quifa has been killed, but it‘s my understanding any decision will be strictly dependent on the test results, which as I noted are still pending.

Q.: Is there more risk in Colombia‘s oil and gas industry?

A.: Surface risks in Colombia are becoming increasingly complicated and multi-faceted. Much of this stems from the government‘s inability to broadly demonstrate the benefits of oil and gas investment in local communities. Monies from oil activities (royalties) are not getting where they need (and are supposed) to go, and local communities aren‘t seeing the tangible benefits of extractive activities. Santos‘s administration has been unable to rectify this issue. With high regional unemployment and routine misuse of funds at a departmental and municipal level, local communities frequently look straight to the companies operating in their communities. Oil and gas companies frequently get caught in the middle.

Licensing issues have not helped. Many oil and gas companies are well-informed and well-prepped in their community engagement efforts, but find themselves unable to fulfil their obligations because they haven‘t received permits to drill.

And security continues to be a challenge in many parts of the country. As one example, some companies that won blocks in the Putumayo have had no ability to even shoot seismic yet because they haven‘t been able to secure the protection of the military, which is increasingly spread too thin with the increased level of activity throughout the country.

You can‘t say there‘s a wholesale deterioration of the investment climate in Colombia, but what we frequently encounter is that companies active in the country have become increasingly frustrated. They‘re making progress, but very slowly - too slowly. Some are reporting that the local environments are becoming more toxic, and Colombia is running the risk of having these issues become long-term problems. The government needs to decide if it wants to invest more political capital to try to fix these problems and bottlenecks - environmental, social, security-related - or if it is happy with the slow and steady status quo efforts being undertaken.

Q.: Some experts have said that Colombia‘s Ronda 2014 auction was disappointing. Do you agree?

A.: The bid round was pretty indicative of the state of play right now in Colombia. The bright spot was offshore, with Anadarko saving the day by surprising everybody and moving into ultra-deepwater blocks. Onshore interest, on the other hand, was generally disappointing. ANH President Javier Betancourt and Vice Minister Orlando Cabrales have put a brave face on it. They‘ve said they were happy with offshore results, but receiving successful bids for less than 30% of all blocks on offer sets the bar at an all new low level.

Q.: What should Colombia do differently for its future bid rounds?

A.: This is the big question - there‘s limited ability to continue with the same strategy for future bid rounds. Colombia has seen some incredibly successful bid rounds since 2007. But now the country needs companies with staying power, especially in light of the imminent opening of Mexico‘s energy sector. First, Colombia would do well to guarantee that companies which are sitting on existing blocks receive the support required to get their projects moving forward. That will go a long way in helping maintain investors‘ confidence.

Secondly, it is critical to understand that government officials are under significant pressure to boost the country‘s oil and gas reserves. This was actually a key objective of Ronda 2014. But apart from the offshore block potential, the government made little progress on this front. Only one unconventional block received bids in the Ronda 2014. The release of final regulations for the sector so close to the bid date didn‘t help. Much work remains to be done on the unconventionals front for it to make the meaningful contribution to production and reserves the government is seeking.

If future bids are continued as the government has insisted, the promotion strategy will have to change. Interested companies are looking for clear commitment and tangible results of efforts underway by the government, as well as clear strategies as to how these mutual objectives are going to be achieved. It‘s back to the drawing board if you ask me.

The country has attained output of 1 million barrels of oil per day, but can this be sustained, and if so, how?

Overall, you could argue that Colombia has been lucky in recent years. The economy seems to be doing well, and it‘s projected to be Latin America‘s best-performing economy over the next couple of years. But there‘s a sense of ‘what now?‘ The government has yet to show that‘s it ready to tackle big issues such as wealth inequality, and how industry can coexist with Colombia‘s communities. The country is at a crossroads.



Interviews
 

.
U.S. Special Representative for Afghanistan Reconciliation Zalmay Khalilzad has given an interview to Interfax in which he speaks about results of the trilateral meeting on Afghanistan settlement that took place in Moscow on April 25, prospects of the intra-Afghan meeting in Doha, and Russia‘s role in the Afghan issue.

more
.
.
NATO Secretary General Jens Stoltenberg has given an interview to Interfax ahead of the Alliances 70th anniversary that is to be celebrated on April 4. He speaks in the interview about the NATOs vision of future relations with Russia, its attitude to the situation surrounding the Intermediate-range Nuclear Forces Treaty (INF) Treaty and the New START Treaty, as well as further plans of expanding the Alliance.

more
.
.
British Ambassador to Russia Laurie Bristow has given an interview to Interfax in which he speaks about the current situation in the relationship between the United Kingdom and Russia, the impact of the Skripal case on it, the restoration of the numbers of diplomatic staff, exchange of information on counter-terrorism, possible introduction of sanctions over the Kerch Strait incident, the INF Treaty, and British-Russian economic relations.

more
.
.
Chairman of the German Committee on East European Economic Relations Wolfgang Büchele has given an interview to Interfax in which he speaks about the activity of German companies in Russia.

more
.
.
German Foreign Minister Heiko Maas has given an interview to Interfax ahead of his visit to Moscow in which he speaks about Germany‘s position on the INF Treaty and the Ukrainian settlement.

more
.
.
Russian lawyer Natalia Veselnitskaya has given an interview to Interfax in which she speaks about the charges brought against her in the United States.

more
.
.
Qatari Ambassador to Russia Fahad bin Mohamed Al-Attiyah has given an interview to Interfax in which he speaks about the consequences of sanctions against Qatar, the normalization of relations between Qatar and Saudi Arabia, the Syrian crisis, and gas relations with Russia.

more

 
  
 ©   1991—2019   "Interfax News Agency" JSC. All rights reserved.
Contact information   |   Privacy Policy   |   Interfax offices   |   made by web.finmarket

News and other data on this site are provided for information purposes only, and are not intended for republication or redistribution. Republication or redistribution of Interfax content, including by framing or similar means, is expressly prohibited without the prior written consent of Interfax.

Browse other Interfax sites:  Interfax.ru   |   IFX.RU   |   Interfax Group   Rambler's Top100