A state presence in most areas has drawn the attention of many international corporations now seeking a place in and a share of the growing Colombian market and economy. This is precisely what President Juan Manuel Santos ? the former minister of defence ? has highlighted in his government strategy, where economic locomotives for progress are based on mining and oil and gas development. This refers not only to traditionally explored and exploited minerals ? such as coal, gold, nickel or copper ? but also to the new mineral columbite-tantalite, otherwise known as coltan.
The mining sector has undergone a very significant adjustment with the creation of the National Mining Agency (ANM). The agency specialises in management of mineral resources, where its main objective is to organise the mineral areas in blocks, in order to bid them out.
Currently, the ANM is looking into previous titles in order to remedy each, working in accordance with the law and international standards. With these two main objectives, the state is seeking to increase the participation of sustainable mining activities with the best mining companies in the world.
Conflicting prosperity
Taking into consideration the valued lessons learned from the oil and gas sector in the approach to its development, National Hydrocarbons (ANH) carried out a bidding process to award oil exploration firms with enough financial, technical, environmental and social responsibility standards, in order to perform its contractual obligations.
Unlike previous exercises, it?s clear that on this occasion it is of paramount importance to fulfil harsher requirements established by government agencies with regard to legal, financial and technical aspects of the bidding. What?s more, there are environmental and social rules that need to be taken into account in order to bid successfully.
The results of the Ronda 2012 ? the last oil and gas bidding process ? were very satisfactory, as the ANH received proposals for 43 percent of the blocks auctioned, including new blocks for non-conventional petroleum. It is expected this figure will increase, since there will be more offers for blocks that were not proposed. The major oil companies will then go to the offshore and non-conventional blocks, known as ?cordilleras?.
These call upon foreign entrepreneurs to come into the country, locate new fields and remote lands ? where not long ago it was both risky and dangerous to invest large amounts of money ? to find evidence of the advances achieved with inland security. This is of great interest to the government putting forward its policy, turning mining into one of its foundations for economic and social welfare.
Exploring the unknown
As offshore oil and gas exploration is now prolific ? with very important worldwide companies competing against each other in tariffs ? there are additional levels of investment and production. It is quite remarkable that these projects are carried out in what was regarded as ?no man?s land?, especially those in the coastal areas. This type of development is somewhat unusual for Colombia: however, for countries like the UK and Russia, it is innovative business.
The nonconventional oil and gas exploration initiates with the offer for some of the blocks. This revolutionary activity in the world will change the current way oil business is done in Colombia, since it requires intensive manpower and sound management of the communities and the land-holders that will be affected with these new petroleum developments.
The increase in energy demand thanks to countries like China and India, and other countries of the Asia basin, has significant ramifications, which accounts to a 36 percent global energy increase. Other elements of the new energy market include the internal US increase in production, which was down at 28 percent in 2008, but has since increased; now, shale gas and tied oil are vastly exploited.
These policies changed alongside the opening of new markets in Colombia, increasing its exportation to other South American countries, evidencing the country?s undeniable improvement in energy and mineral matters.
Abiding by the law
Affirming the enactment of legislative measures, the new policy includes the ?restitution to victims in the conflict? law, which gives land back to its legal holders. The measures also recently inaugurated peace talks with FARC (Revolutionary Armed Forces of Colombia), where land issues and international corporations are in negotiations. The former poses a certain degree of uncertainty to the mining sector, for its range is yet to be defined by authorities.
At the close of 2012, new rural development acts were presented to congress. Victims and current owners, farmers and international corporations, public interest and private entrepreneurs, environmental protected areas and ethnic minorities: all must be taken into account in this scenario.
Reconciling ownership and rights with oil and mining projects has always been of great importance. Projects can only be developed where property and other rights are clearly studied and defined. For the past 15 years, we have been present at all major endeavours all over the country, taking part in most oil developments. But now, as new policies regarding mining and oil business, as well as environmental and social responsibility are in effect, we are ready to take on these new challenges, making sure that our clients can duly perform contractual obligations and invest money with complete confidence that projects are on the right course.
Superficiary rights
Mining, oil, gas, transport and infrastructure projects must acquire social and environmental licences, which are known as ?soft issues?, or ?licences to operate?. Within these projects, one stakeholder with two roles is applied: the landholders, who are at once owners of the superficiary rights, and at the same time are a part of the community.
Investors in the right host country with a licence to operate and a contract to explore and exploit natural resources are regarded as a key players in Colombia?s economy. This is because natural resources, including minerals, oil and gas, will help the country satisfy the requirements of the communities. The mining, oil and gas industry is also very competitive, and the tax regime is rational, modern and predictable.
Investors? with a licence to operate and a contract to explore and exploit natural resources are regarded as key players in Colombia?s economy
Colombia has been converted into a preferable destination for foreign investment.
However, any new investment must be sure that it has the requisite licence to operate, and complies with the rules and laws regardless of its nature, be understanding of the community?s customs, and be respectful of them.
With the recent Colombian policies related to the restitution of the land, the new law of the registration of the land titles and the process of peace, investors must put together a legal diagnosis of the premises on which the project will be developed. Without land, of course, there are no projects. Colombia has been identified as a preferential location for fresh financial resources, but all investors in the country must comply with local regulations before they can operate.
SOURCE: IMF. Notes: Figures post-2012 are IMF estimates
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