The Colombian press and congress is stirred up about the lost hydrocarbons potential of the territory that disappeared in the redrawing of the Colombia-Nicaraguan maritime border (see map by Hydrocarbons Colombia). Nicaragua adds fuel to the fire by publicly rubbing its hands with glee over the prospect of auctioning the zones to deep pocketed oil companies. That may indeed happen – although we think PDVSA will end up with them – but we do not believe this represents lost reserves, production or money to Colombia.
Resolving a long standing dispute between Colombia and Nicaragua, the International Court in The Hague redrew the maritime boundaries between the two countries today. Colombia keeps the islands in the Caribbean that have been part of the country for a very long time but the court extended Nicaragua’s economic zone further east, surrounding some of this islands and nearly enclosing others. Some offshore blocks disappear from the National Hydrocarbons Agency’s (ANH’s) inventory completely and some have been reduced in size.
As reported by newspaper El Nuevo Siglo, according to the Central Bank (Banco de la República), US$11.411M of the US$13.988M invested by foreigner entrepreneurs in Colombia between January and October 2012, were directed to the mining and hydrocarbons industries. These two sectors offer the greatest growth of foreign investment in the country.
The Ministry of Agriculture and Rural Development reported that the government will allocate CoP$107B (US$59M) in royalties to fund projects in science, technology and innovation. These projects are aimed at foods like avocado, cocoa, milk, coffee, sugarcane, and fruits, and matters of farming, bioenergy, fisheries and promising species.
Congress approved the presentation of a project (004, 2012) which intends that the oil and gas sector pay the industry and commerce tax (ICA). The industry is currently exempt from this municipal tax because royalties are presumed to fulfill the same role.
On November 1, 2012, Colombian President Juan Manuel Santos addressed a summit of mayors of the departmental capitals. The president wanted to address the mayors’ main concerns so the whole speech touched on health, security and royalties. Below we translate the portion of the speech dealing with the latter topic. It is important for the hydrocarbons industry that royalties are well spent and give visibility to its contributions. From the President’s website. Extracted, translated and with commentary by Hydrocarbons Colombia.
The Colombian Congress has approved a CoP$17.7T (US$9.2B) royalty budget for the period 2013 – 2014. The Governing Committee (Comisión Rectora) approved this amount to be distributed to the various funds of the royalty system over the next two years. This was announced by MinHacienda, Mauricio Cárdenas, who highlighted the importance of the initiative for creating equity in Colombia. Cárdenas also said two efforts are being unified, the one of government through the Nation’s Budget and the one of regions through royalties, so as many projects can be done as possible, for the progress and prosperity the country seeks.
The current Finance Minister and former Mines and Energy Minister, Mauricio Cardenas gives his evaluation of the new royalty system. The system has been theoretically in place since January but it really only got going in 2Q12. From a MinHacienda press release. Translated and with commentary by Hydrocarbons Colombia.
The Colombian Petroleum Association (ACP) has published a press release on the negative impacts of a number of laws initiated by Congress – which are not backed by the government – that seek to increase government take and give back to local communities part of what they lost in royalties. Translated and with commentary by Hydrocarbons Colombia.
A panel discussion that was scheduled to feature the Ministers of Finance, Energy and Environment was well attended at a very senior level during the National Hydrocarbons Agency (ANH) conference held yesterday in Cartegena. However attendees came away disappointed. For one thing the MinAmbiente did not show up at all. For another there were a very limited number of new policy statements or clarifications of recent declarations.
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