Colombia advances new E&P licensing proposal

Colombia needs to reach a consensus, via a national agreement, on a new fiscal, legal and royalty policy to reactivate the country's hydrocarbons industry.

That's according to Juan Carlos Rodríguez Esparza, executive director of local oil sector engineers association Acipet.

At a forum, he said the unemployment rate among oil engineers in Colombia was about 70% compared with 30% last year, citing muted exploration activity.

Acipet said foreign direct investment in the sector has been dropping since 2012.

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As part of efforts to add new impetus to the beleaguered industry, hydrocarbons regulator ANH in December released a draft agreement that establishes four types of processes: direct assignment, direct assignment with counteroffer, open competitive process and closed competitive process.

The changes aim to simplify and streamline selection and include amendments to financial and operational requirements.

The watchdog now has published a proposed regulation for the new E&P licensing procedures, and will accept comment through September 18.

In a bulletin, local oil association ACP reiterated its call for the need to implement "aggressive measures" which include the following:

1. Fiscal incentives such as tax breaks for investment, immediate return of value-added tax and accelerated depreciation;
2. Tax stability amid announced tax reform;
3. Review of pipeline rates methodology to improve competitiveness;
4. Legal security and clear rules related to operations;
5. Improved community relations through state accompaniment;
6. Improved environmental licensing and prior consultation processes.

"As the current oil fields that are in production have annual decline rates of close to 14%, achieving oil production to support fiscal goals requires large investment to incorporate and produce close to 2Bb of new reserves in the next 10 years," according to ACP.