Colombia on Wednesday opened the process of awarding oil-exploration and production rights at 168 sites across the country, known as Open Round Colombia 2010.
The areas under auction include 74 sites of between 30,000 hectares and 40,000 hectares, close to zones where companies already extract oil and where geological information is good, the country’s oil licensing agency, ANH, said.
The auction also includes 31 larger sites of around 200,000 hectares about which the ANH has “basic” information.
The government is also offering preliminary contracts to carry out technical evaluation in 63 “frontier” zones about which geological information is scarce, areas in deep-sea and areas that were difficult to access in the past because of guerrilla presence.
The areas to be auctioned include zones on the Pacific Coast and off Providencia, an island off Nicaragua that belongs to Colombia.
The government doesn’t expect to hand over all the 168 blocks. “If we succeed in auctioning 80 we’ll be satisfied,” said Colombia’s mines and energy minister, Hernan Martinez.
ANH will publish a list of the companies qualified to bid in June, and the auction will be carried out in July.
The auction is part of the Alvaro Uribe‘s government’s strategy of trying to attract foreign and local oil and mining companies to Colombia by creating a favorable tax and regulatory environment.
The increase in foreign investment in the oil industry in recent years, combined with a rise in crude prices and a reduction of guerrilla attacks on oil infrastructure, allowed Colombia’s oil production to end its downward trend in 2005. Output started to rise significantly last year, and in October, it reached levels not seen since 2000.
Foreign investors attending the event in Bogota said Colombia’s government was more open to foreign capital than many other Latin American governments.
“If you compare Colombia and Mexico, Colombia’s policy is to attract money and intellectual capital, while Mexico treats their oil as a sacred commodity for their country only,” said Frank Holmes, chief executive and chief investment officer of US Global Investors (GROW), which has large investments in the Colombian oil industry.
Additionally, in the past few years, Colombia has let private companies thrive without interference – unlike oil-rich Venezuela and Ecuador, whose governments have seized assets without always paying fair compensation.
Colombia’s oil sector will attract about US$3.5 billion in 2009 from foreign investors, roughly the same amount as in 2008, Armando Zamora, the head of ANH said recently.