Why Colombia?
To start with, Colombia is one of the few countries with significant untapped oil resources capable of supporting growth in oil production and exports.
Colombia is considered one of the most politically stable countries in Latin America with economic growth and a vastly improved security environment both of which are opening the door to foreign investment and renewed economic growth.
The Colombian government recently enacted a number of progressive fiscal changes aimed at increasing international oil company investment similar to those in the UK which spurred renewed interest in the North Sea.
Foreign oil companies now can own 100% stakes in oil ventures. Also, the sliding scale royalty rates have been lowered on oil projects depending on field size, with an 8% royalty rate for most oil fields. In addition, longer exploration licenses are now being granted to foreign oil companies.
With these changes in place, Colombia has seen a resurgence of interest in the oil and gas industry as foreign investment now exceeds over $3.5 billion a year. A growing number of international companies are pursuing hydrocarbon exploration in Colombia as oil production is forecast to rise to 700M barrels per day by the end of the year and potential reserves will increase to more than 3.0 billion barrels.
Major players such as Royal Dutch Shell, Exxon Mobil, Chevron, BP and Total to name a few are now taking advantage of the investor friendly policies and are operating in Colombia.
As the majors struggle to replace dwindling reserves through success in Colombia, clearly the opportunity lies in the junior, mid and small cap entrants where the impact is much greater on their share value.
