Roundtable Discussion: How Colombia is Confronting Challenges in Hydrocarbon Production

Finance Colombia: So, thank you all for coming. We are going to have a roundtable on hydrocarbon production. From myth to reality, you already know the challenges and difficulties we have here in Colombia, not only in the political environment but also in the economic one. My name is Loren Moss, and I am the executive editor of Finance Colombia. Finance Colombia is the only English-language publication focused on the Colombian sector. Here we have our speakers. I’ll let them introduce themselves. Gisela.

Gisela Cardozo: Good afternoon, I am Gisela Guijarro Cardozo. I am currently the coordinator of the Medio Magdalena group of the National Environmental Licensing Authority (ANLA). I am a chemist specializing in laboratory management, financial management, and organizational development. I have a master’s degree in leadership design and project management.

Finance Colombia: And Mr César.

César Zárate: Good afternoon. My name is César Zárate, and I am vice president of development for Wattle Petroleum. I thank you for the time you are giving me here. I am a business administrator with an emphasis in marketing management and a master’s degree in senior management from the University of Disney. I am a project structure for commodities. Whether it is oil, gas, or any mineral. We are now focused on natural gas in Colombia.

Finance Colombia: Thank you, and we must give thanks to the support of the Ministry of Mines and Energy, the National Agency for Hydrocarbons (ANH), as well as the gold sponsor in the event, OCP Ecuador. Well, then I think we have, if I am not wrong, in the presentations. No? Well, then let’s get started. Ah, yes, okay. Okay, to make it more interesting, we are going to make it more interactive, so with our speakers and also with you guys, with questions about the talks. So I want to start with César. And my question is, what do you think can be done in the short term to improve the charging factor in the gas fields here in Colombia?

César Zárate: Well, basically, it is to allow access to marginal fields or minor fields that companies like Ecopetrol have, which are not operating because they have them there without putting them into production. It is no secret that the operating cost of large companies can, not can, but it does impact the management of small fields. So, what the big companies do is simply: “Oh, it’s a small little field, leave it there.” For a small or medium-sized company, it may already be interesting. So, allowing access to those fields. But in the short term means the short term. What for? So that we can access and be able to manage any form of business that is interesting to the owner of the field too, to access and be able to start working those fields to generate not large quantities of natural gas, but it can impact production if there are plenty of them.

“We are talking about a very good quality crude. But in both places, something very important happens. The communities open the door to the companies.” – César Zárate

Finance Colombia: Gisela, is environmental management an investment or an expense for hydrocarbon projects?

Gisela Cardozo: That is a question where I have the ideal audience here to answer it, but well, I would like to give a general outline in this sense: How do we, as the National Environmental Licensing Authority, see the investment made in environmental management? Everyone here has talked about many very interesting lines, about clean production, about reducing CO2 emissions. All this is excellent for the environment. But why? Companies do it because it is beneficial for their accounting and financial balance, right? Of course, tax regulations benefit them, excellent, and then the company says, “Yes, we are going to make cleaner production”, but because it is profitable for the business. But they do not see environmental management that way. They see environmental management as “Oh, that’s what we have to do to comply with the authorities. That thing we have to do because it is an obligation.”

And it’s a nuisance. “Oh, they’re coming to follow up on us again this year. What a drag.” No. Environmental management has to be seen by the companies… and well, please help your CEO, your executives see it; it is an investment. An investment because every peso that you put into your environmental management, if you look at it carefully, is a peso that you are going to avoid spending on socio-environmental events that will bring you much more serious consequences in terms of investment. Every peso that you invest in knowing your environment and your context and managing it is a saving for the company in all its operations.

But sometimes it is not comprehensible to us why it is not seen that way within the companies. It is seen as if the operation is completely disconnected, environmental investment is something, and complying with environmental regulations is a nuisance. No. If you look at it, all your licenses and all your environmental control and monitoring tools give you the guidelines to be more and more operationally efficient. They give you the guidelines to avoid social conflicts and environmental conflicts. That can stop a project, and it can make you lose an investment.

It has happened with many projects. For example, you sometimes, when you are going to do a workover in your wells you say, you deceive yourselves, I think, you say, “Oh, no, this is going to be a very short-term thing. So we are not going to temporarily relocate a community that lives very close, or it is not necessary to have the equipment in case there is a spill. No, no, that’s all under control.” It should not be like that. You have some management and control measures that tell you that you have to follow them; however, you ignore them, sometimes because of costs, I think. But the worst saving that a company can make is the saving in its environmental management, that’s the wake-up call we make to you.

Finance Colombia: It’s true. It makes me think of Deepwater Horizon. Right? So if you do it, it’s cheaper to do it correctly. It’s cheaper to do it right, okay, and if not, you’ll pay.

Gisela Cardozo: Twice, thrice, and much more.

Finance Colombia: Yes, right, it’s true. Well, César, what medium-term policy do you think the government should implement?

César Zárate: The government could help the industry from a tax point of view and improve conditions, especially in the area of recovery. Why? Because that discovery has already been made, it has already been produced, it has already been paid for, right? And if an additional investment is made, more crude can be produced, more gas, without the need for having such high additional investments in exploration, in environmental licenses, in general, in the costs of an initial project. If there is a recovery, I, as a government, encourage the recovery of that crude and gas from the tax point of view or the point of view of return on investment. We are going to struggle with these years of natural gas shortage that we are experiencing. Because there is no shortage of crude oil, but with natural gas, the price is already showing a shortage.

We see that the Henry Hub in Alabama is at $2.15 USD, $2.20 USD, and has gone down to $1.80 USD. Here we have gas contracts of $8, $9, and $10 USD. That impacts the country’s finances and impacts the families because of the high costs. But if there are a series of tax benefits in the medium term by the government, many companies will be interested in working on recovery and production will increase.

Gisela Cardozo: Loren, if I may? César had said something in the previous question that I found very interesting, regarding the small fields, and that this could be an economy. And I was thinking about it from ANLA’s point of view; there are many of those small fields where we’ve asked the owners 5 years after they obtained the environmental license, and they have not started operations.

We ask them because the regulation says that the license may expire in a certain sense, right? And we ask the companies and we say to the owner, “Well, let us know if you want to continue if you are interested,” and most of them say, “Yes, but I am raising investment, I am doing something else.” Look, they are fields that already have an advanced process, an environmental knowledge of the territory, and they have already invested. It seems to me that the way to encourage, precisely, to increase this hydrocarbon production would be that. It would be very good. But bear in mind that after several years, the information must be updated, right?

Finance Colombia: Speaking of which, how to optimize. Or did you want to answer?

César Zárate: No, what Gisela says is something that would complement this process. We are wasting a lot of resources in the country, as you said yourself, there are many minor fields that the companies have abandoned. Now, are they economically viable for small companies? We have to evaluate it, but now is not the time to think, “Are they economically viable? Are they not economically viable?” No, we have to encourage that increment in production.

Finance Colombia: You talk about something very interesting. I’m from Ohio, and in the United States, the oil industry started in Pennsylvania, where the oil is very much like.

Gisela Cardozo: Shallow.

Finance Colombia: Yes, yes, and well, and also Ohio and Pennsylvania are neighbors. Standard Oil and the Rockefellers that was all in Ohio and Pennsylvania. And when they discovered oil in Oklahoma and Texas, which was like much better quality because we have a lot of sulfur, and it’s also a bit heavy. And when they had that light crude there, everybody left and left Ohio with corn and cows. But the industry almost died in its birthplace, where it was born, in Ohio and Pennsylvania. But something interesting happened, using technology and mostly small producers.

The structure is a little different here; the State owns the subsoil resources. In the United States, for example, it’s like Mom and Dad who have two avocados and two wells. Not avocados, but basically, you own the oil, and so then there are many producers, micro-producers. Like I have a friend who has an estate and they have four wells there, and every two weeks the tank truck comes, and it’s like it is here with the cows. I live in Antioquia, and there, those Colanta trucks always pass by.

Gisela Cardozo: Instead of milk, they take oil.

Finance Colombia: I understand that the legal structure is different here, but basically, I understand that in the short term, there is not going to be fracking here in Colombia. I understand that there is no desire from the government for that. But basically, what happened there? It was reborn by using that technology, and now that it has the technology that removes sulfur, the oil sector has been reborn in states such as Ohio, Pennsylvania, and West Virginia.

But not with Chevron, but with small producers. And so adapting to those things. Okay, if there is no fracking in the short term, there is no fracking, but there are many things that can be learned to make the small fields viable, not micro fields, but small fields here in Colombia. It is interesting and it’s worth looking into, not only the mega fields, right?

César Zárate: Correct. Because in the American case, and allow me to go a bit deeper, it’s the type of formations. The Utica Formation, which is the one in Pennsylvania, is a formation of heavy crude oil with sulfides, where not necessarily, but fracking kills, even if they are small producers.

The Eagle Ford formation in Texas is completely different. We are talking about a very good quality crude. But in both places, something very important happens. The communities open the door to the companies. What happens here in Colombia? No matter where you go, the community sees the operator as an enemy, right? Because they go, “Here come these guys, they take, and how does it benefit me?” Over there, it is the opposite, there it’s, “Come over, I welcome you because I am the owner of this farm and this subsoil is mine, and the money is for me, and the company is going to pay taxes.”

Here, the community sees the company as, “What are we going to get out of the company?” And so the company is strangled between, obviously, the taxes, between the royalties that have to be paid to the ANH for factories, that have to be paid to the ANH for the visits, right? All that economic burden is very heavy.

And the risk increases. Besides, when you drill and you make a mistake, 3 or 4 million are thrown away in the wells. Right? And if you hit a well, whatever it may be, a thousand, ten thousand barrels, whatever, then it’s, “Oh no, those bastards, of course they are taking it all.” So the issue is we have to change that paradigm, we have to look at how the communities can benefit more, but all this has to go hand in hand with a series of tax benefits for small companies, those that take the risk, and not all of them. For midstream and downstream, the risk is nothing. I already have something that I transport, or there is already something, so I set up the compression if it is natural gas. But upstream is: find, drill, have that frustration of if it was good, if it was bad, tell a story to the investors. That big factor, I would think that if we want to increase the production of both gas and crude oil, it is necessary to give more opportunities in terms of tax benefits, and opportunities in general, to small companies.

Finance Colombia: You talk about something important, it’s like the importance of safety for drilling technicians, and to do it, taking the environment into account, lowering the risks. And in that aspect, Gisela, how does uncertainty affect the knowledge of the physical, biotic, and social context for an environmental procedure, or in the productive stage of a project?

Gisela Cardozo: Very relevant to what we have been talking about, right? What is uncertainty? It is a lack of knowledge. When I do not know, the less knowledge I have, the more uncertainty I have, and uncertainty is a hidden cost. Uncertainty is error, so how do we remedy that? Uncertainty is always remedied with knowledge. What happens, and why do they fail? Many, or well, not many, fortunately, only some environmental procedures here, from the licenses, from the modifications requested by the sector, fail. Because even though there are some terms of reference that, as the authority we consider, are very clear, and are already well-known by the companies in the sector, they submit the minimum information possible.

The shortest. Careful, if it says scale 1 to 100,000, and we, and I mean, you, have information, you must have much more information at smaller scales, but you are not going to present it. It only says 1 to 100,000, and we are not going to have it ready either. So, what happens? They present insufficient information if we value the impacts of the zones. Understand that the contexts, due to anthropic interventions, especially now, have changed a lot and change very easily.

You may have done an environmental impact study two years ago, and now you submit it, and that context is already changing. We go to the field, we encounter different things, and as a rule, there is a time for the gathering of additional information, you are asked for that additional information, and you do not have time to present it. Why? Because you had planned that it would be easier to spare that environmental cost. For what? So always think about that, that the investment you are making in information in the context of your projects is not only environmental, it is operational, because it is information on geology, hydrogeology, geochemistry, animal habitat context, forestry, etc., where you are going to have to intervene.

A real-life case, as we call it, right? What happens? Well, a company has its environmental license, has its environmental management zoning, and says, “Done, the authority told me that I could put my platform on this site, it is within my permitted zoning.” And they go there and start building it, when the obligation, as you know, is to have a specific EMP when the platform’s intervention is going to be made. What is the objective of that specific EMP? To land on the current context and to a much greater level of detail. It is not a scale of 1 to 100,000 or 1 to 50,000. You already have it, because you should have gone to see where to build, what the land is like, “Is it geotechnically stable? What do I have nearby?” And you didn’t identify that some of the rivers that we have are very meandering.

Especially in the plains, in the valleys, the river moved its course, from when it was assessed, to the time when they were going to build the platform. And before they were outside the river’s course, when they started to build the rails, the platform, they were already drilling the well, with how much it cost to move the drills. All of us understand the high costs of the sector. And we get complaints, environmental complaints, we go to the area, no, the river changed its course, and now they were already in the area, in the protected zone. How can such a crass investment error be possible? All the lost investment, why? Because it cannot be allowed in our environmental regulations, they are resources.

It means continuously exposing yourselves to flooding on that platform, to contamination of a river, of an environment, and to social conflict. So, notice why I told you at the beginning, look at it as an investment. Environmental management is an investment. It saves costs, and all that waste of resources just because someone did not pay attention to something that, well, you could say was obvious, right? But no, look, and we miss it.

Finance Colombia: Right. And César, in the case of security in the areas, what could be improved?

César Zárate: Well. A few years ago, specifically three years ago, in our case and the case of the majority, the operators had agreements with the army for the protection of course of the workers’, of the infrastructure in general. Two years ago, we tried, not tried, it was time to renew that agreement with the army, and the army said, “No, the agreements are over.”

And they put us in a pretty difficult position. Especially the operators that are in areas that. Almost 99% of the operators are in difficult areas, in complex areas such as Catatumbo, it is pretty special because of the type of social conflict as all the outlaw groups are in that area. Having this type of contract with the army is key to being able to protect the investment, protect the workers, and protect the communities themselves.

We had a very sui generis case, where the army was passing through our lot, and there was fighting with the outlaw groups. And these groups decided to put dynamite where the army was going to pass. They did not care. Next to a gas pipeline.

You can imagine the kind of catastrophe that would have occurred if those fights had exploded at any moment. Think of a house, in your house, those who cook with natural gas, I think most of you here, right? You open the natural gas a little bit, and if you take too long to put a match… if it is automatic, well, it’s on, but if you take a little too long to put the match, it goes boom, and it explodes. And we are only at 120 PSI pressure. Do you know what a truck at 3600 PSI is like? Or a gas pipeline at 1200 PSI if you put something in it? So this type of protection in the case of hydrocarbons is key.

The government has to understand that this private investment must be protected, but more so that it is an investment in the life of the communities as well as of the workers. So, in my opinion, these types of agreements have to return; the government must understand that this is a key part of developing the industry. Added to the fact that nobody wants to put their money at risk in an area where the outlaw groups are putting pressure.

Finance Colombia: Wow. I imagine that risk, what that explosion would be like, about 3600 from here to Bogotá.

César Zárate: Exactly. The gas pipeline goes at more or less 1200 PSI. But let’s say, let’s put it at 800, 1000, but in the time the valve closes, that is a catastrophe. We have to solve the issue here in Colombia ourselves as a country, right? Solve this problem. But until that happens, the protection of the state, especially the military forces, is important.

Finance Colombia: Right. Well, another little story. In the same estate of my friend that I told you about, once a friend of mine came, she was Dominican, but well she was born in Manhattan, in New York. Many of you who have visited New York know that there is not a single tree.

César Zárate: Rich girls.

Finance Colombia: Exactly, basically Washington and all that. And there isn’t a single tree in New York. I couldn’t live there because there’s no green, nobody has a garden, or anything like that. So what happened? She won a scholarship or something to study at Ohio State, in my state. And then we went to southern Ohio, where the farms and all that are. And that was all exotic for her, because there like you have to go to a park to see a tree, like going to a zoo for us. And I was showing her, “Look, here that tree is a walnut tree and that’s a maple tree, and so on.” But she was like somebody super-very much an activist, very anti-oil, those people who are always doing shows in front of the bombs and stuff. And she’s like, “No, you have to do away with oil because look, it’s going to damage all of that.” And I set a trap. We are walking on the trail, on the estate, okay? It’s all forest because my friend didn’t plant anything; he only earned it through the oil, and they used the farm to escape from the city. So we are walking. She was telling me all about how if there is oil, we are not going to have any of the forest that we have. And I set up a trap very well.

So, walking and walking, we get to the first well. And that well the problem was that it was flooded by all the like, plants and bushes, and almost nobody came, because the forest was assaulting the well, not vice versa, and there were rabbits, raccoons, and things there. And I said, “Such as this one?” And, if she hadn’t seen a tree, it was her first time seeing an oil well. Okay, so I was like, “Tell me what you were saying?” and well, obviously she went quiet.

But my point is that there is a deficit, that there is a failure in education. You are from the industry, you understand the good and also the bad, the good and also the challenges. But I think, and I have noticed here, well, everywhere, when there is an emotional reaction about oil issues. And very few of the people have any direct experience or understanding of how the industry works. They only see it like once every 10 years, when there’s a big tragedy like Deepwater Horizon, or yesterday, a ship went down in a cyclone that’s happening now in the Philippines. So my question, Gisela, is, talking about education, okay, how to optimize the generation of environmental knowledge in the development of the projects? That doesn’t mean being “Oh, you have to be 100% pro-oil in all cases,” but having a balance and not letting fear and ignorance manage everything. What is the role, the part that education plays in this aspect?

Gisela Cardozo: Very much about this part you were mentioning, knowledge, and I say that the sector has the responsibility not only to consolidate that knowledge in the three basic components that, well, at least from the authority we handle: the abiotic, biotic, and social components, which are the main identified ones. They have to be reinforced. How can this knowledge also be strengthened? Look, when we talk about science, technology, and innovation, we have always identified three basic pillars to support it, which are the state, the companies, and the academy.

I mean, the academy, well, here it’s you, Loren, let’s say, right? Here are the three pillars that support this knowledge, and the three pillars that can help you reach the communities. Look, if there is a good environmental management group in a company, I insist again that it is an investment; it should not work as that accessory group that they have there, because the norm requires it, and then we must have it. No, it must be a group that must interact permanently with the operational part.

The operational part has to be nourished by what the environmental parts gather from monitoring and making decisions as well. Because investment decisions, as we were saying, if it is not viable environmentally, they stop them in time. But if nobody tells the environmental group, the environmental group is isolated, and so on. If you do not interact with the academy, the academy is an independent actor that the communities believe in.

We see many conflicts in the territory, and we see very responsible companies in the hydrocarbon sector. I would say that it is one of the sectors. Well, ANLA changed it to regions. And we had to take on in each region all the other sectors: infrastructure, energy, and we even manage zoo-breeding. So, if you compare the sectors, the hydrocarbon sector is one of the most organized in mining in general. There are some black sheep, right? But in general, they do a good job, they are responsible for the environment, and with the communities.

But I don’t know, it is as if they aren’t preoccupied with taking this knowledge to the communities. What we talk about, man, partner with the academy, reach out to them, explain to them. The communities, well, we go with you, and they say, “Oh no, right, you are from X company, you are going to defend your company.” Whereas if you take someone from the academy who is independent and objective, and most of them can be environmentalists, let them be objective and reasonable, and convey the reality, the truth. Do that exercise.

I was listening here to some of the previous speakers talking about their corporate social responsibility programs, environmental issues, and so on. But it seems that these communities never speak out. When does one hear this positive news? I don’t know if the sector is lacking, I don’t know if it needs more unity to, well, make a better use of joint resources and tell the communities the reality. Loren is right, someone who is here in Bogota, I remember because we also have a small farm, and once we took the children from my son’s kindergarten. Many years ago, right? And they arrived and saw a cow and those children: “Ah!” They had seen them in photos, but you don’t believe it. I was like, but what? The chickens ran away, scared of seeing the chickens, the chickens were chasing the little boy, and they were all like this.

They had never seen it; they are very much city kids. That’s what happens to us. And where is the public opinion, which carries more weight? Also in the cities. In the rural communities, anyone who comes along gives them false news. Or they think it is true that because you have an oil well next to you, you are going to get sick, you are going to contaminate everything you grow around you. Disprove that. With what? With knowledge, with science, with education. Invest in that, it will be more profitable.

It is something that, many years ago, I visited Panaca for the first time, there in the Coffee Axis, with my daughter, who is now 22 years old, but at that time she was 14 years old, and she spent 2 years here in Colombia. And I loved the purpose that Panaca has, and that is to teach people from the city about the importance of the countryside. And I don’t know if it’s very feasible to put an oil amusement park, that would be something. But that was something. Because it was entertainment, but also didactic.

Finance Colombia: Like okay, families who go to the coffee parks come and also visit Panaca, and people, like your son’s classmate, know nothing about the countryside. I am also from a big city, but I was lucky enough to spend summers working on a farm in the countryside, so it is so important to start with young people.

Gisela Cardozo: Exactly.

Finance Colombia: Okay? To have… my point isn’t one side or the other. I think of myself as an environmentalist, but I am not an extremist. I understand the importance of Colombia having self-sufficiency in its resources. Ok? Yes, we need to preserve, we need to advance, to evolve, but that doesn’t mean that tomorrow we cut everything.

And who is going to suffer the most? The people with fewer resources, if we do that. Yesterday I took a picture and sent it to my wife and about 20 of my best friends here. Because the EPM guy came over, and I am an EPM customer, he told me that the price of natural gas is going up by 100%, okay? And I already pay for EPM, I pay for gas, and I thought, wow. I said to my wife, “Look, we are going to complain and be angry, but either way, we are going to pay the bill.” But there are people in Comuna 13, in Tricentenario, in Santo Domingo, there in Medellín or in Soacha or Usme or here, where it is a struggle, where if they raise the prices 100% because of shortages, okay, for an idea up in the clouds, they are the ones that are going to suffer the most. And what is going to happen? What happened in the Dominican Republic and Haiti? In Haiti, where they do not have natural gas distribution in the tanks like here in the Caribbean, people continue burning firewood, ok? Talking about deforestation, talking about the loss of the Amazon and the forests here, if people don’t have access to natural gas, they are going to go back to burning.

César Zárate: The forests.

Finance Colombia: Exactly, something we are fighting against. So, you have to think about the effects and the consequences beyond the next step. That is one reason why I think education is so key. I understand if, in Colombia, you as a country say, “We don’t want fracking.” Super, that’s fine. But what I don’t agree with is, like, about 3 years ago, this was in the news, in the last administration, and there were protests and such. And I said I’m going to do a survey. I asked five people, my wife and a few others, “Okay, are you for or against fracking?”, “Against.”, “Okay. What is it?”, “Something gringo.” “Well, I’m something gringo, but.” But really, they had no idea what it was. But we’re against that because they heard, I don’t know, over protests, that it’s something bad. And, well, I don’t take a position like should have it or shouldn’t have it. But when you are making decisions from a point of ignorance, from a point of fear of not knowing, at least. Make your decision, be against fracking, but be against fracking because you know what it is. You already know what it is. But with the people who vote, people like the public, it’s important to have democracy; it doesn’t work like that. The people are ignorant. So, talking about the processes, on the environmental aspect, how do those processes influence the development that you do?

César Zárate: Well, the environmental issue it’s as far as it is wide. But usually, the people who are involved in making the environmental laws are well prepared, while others we consider lack a little bit of knowledge to be able to make this regulation.
The topic of fracking, for example, is something that the country needs. And the decision is very simple. How do we want the gallon of gasoline? Do we want it at 40 or 50 thousand pesos? And I don’t know any environmentalist who doesn’t love to fly in an airplane. They all love to fly in an airplane. Everybody loves to travel, don’t they? From what the price of JP54 is, 80 or 90 dollars a barrel, to how we want it? Do we want it at 200 a barrel? So that the ticket to Medellin costs (unintelligible) pesos? The decision is in our hands.

The issue that Loren and Gisela brought up, we just have to teach them. You have to take the children and show them the reality. Of course. Hydrocarbons produce CO2, the molecule. well, I have the best solution of all. Nature itself invented the most beautiful machine to capture CO2. They are called trees. It is simple. We are going to compensate for the emissions with trees until a definitive solution comes out.

Everyone has their own opinion, but on my part, if you are in an electric car, you pollute more. Hydrogen is the way. I think that the countries that are as advanced as Japan and Germany, with the hydrogen issue, will reach a solution very quickly; the United States, too, and that is the final solution. Because hydrogen is the most abundant element in the universe. So, I know that there will come a point when hydrogen will replace hydrocarbons, little by little. Because hydrogen cannot make plastics. The hydrocarbon part is the plastics and many industrial processes. But yes, with hydrogen in 20, 30 years, we are going to get to the point where we’ll say, “Okay, no more exploitation.” In the meantime, we have to be realistic. For one, we have to control climate change, and governments have to commit to a minimum amount of tree planting. We are wiping out our rainforests. What is the biggest polluter? The Chocó mafias take all the trees.

Let me tell you about a specific case. In the Andoas base, in Peru, where one of the largest oil fields in Peru is, the most shocking ecological crimes imaginable were committed. The first one: the operating company at that time would take the contaminated water and dump it into the jungle. We have 500,000 hectares; if we dump 2000, 3000, nobody notices. After a solution was found and the Peruvian government noticed and stopped this type of thing, the communities appeared. It is the communities themselves that pollute. When they were told the same thing, “We are not going to give you a contract,” The contract for the oil pipeline that goes from here, from the jungle to Talara. What happened? They put a pump on the pipeline every two months, every month, why? Because it was the communities who went, cleaned, fixed up, whose business it was. They would put it in a pump.

Then, when the government figured it out, they took it away. But today, a field of 180,000 barrels from here could solve the energy issue in Peru. It produces 8000. The infrastructure is completely disarticulated, and the communities are destroying the jungle. If an operator comes and cuts down a tree, they all go, “You are destroying the jungle”. But they, the communities, cut down the trees, they sell them, they don’t reforest. The operator tells them, “Here I have plastic bricks; let’s use the plastic that has been collected to make houses.” No.

All this is the result of ignorance. I think it is the only way. Education with children from a young age, showing them that it is a resource, that we need the energy, we need to move the ships, so that the global supply chain doesn’t collapse. We saw it with COVID-19. It more or less stopped, and the world collapsed. We need the plastics, we need to live; we need the gasoline; we need the jet fuel; we need that energy. And that comes from oil and gas. The rest is lies. The rest is demagoguery.

Tell me, when have solar panels replaced power generation? They replace a part of it, but look at the problem in Chile, they are stuck with thousands of meters of unusable solar panels. What do they do with that? They pollute. How do you think the electric car works? It works with the worst stabilizer of all. You have to remember when these mobile phones came out in the ’90s, when everyone would say, “Ah, it explodes!” And it was true. You plugged in the phone, and it was a lottery whether it exploded or not. Because lithium vibrates at very high frequencies. Then they figured out, you know what, there are stabilizers, like cobalt. “Ah, cobalt is the solution, yes.” Who takes the cobalt ores? They are this small. I invite you; you can go to Africa and see the disaster the companies left there. Children between 5 and 11 years old take the copper ore.

Finance Colombia: In Congo, yes.

César Zárate: In Congo. Digging out the little ores. At 11 years old, with leukemia. So, that whole tale about ethics and this and that, no. It is action. You have to overcome ignorance. We have to do research. We have to advance on hydrogen, but in fast steps, and we have to overcome ignorance. And children have to be educated so they understand we are in a world where electricity is not free. This is being transmitted by copper, isn’t it? We have to find the copper. Or we can bring a nuclear plant here to generate electricity. The decision is ours as a country, but we have to make it with knowledge, not assumptions. The road to hell is full of good intentions. The road to heaven is full of actions. It is to act. To overcome ignorance. That is what we have to do.

Finance Colombia: You’re right. Yesterday I was walking around the exhibitions, and we had some very, very interesting companies. I saw a company that does like geolocations, using the readers of where the oil pipelines are and things like that; there is one that has the high voltage cables that they need, that are resistant to high temperatures and such, like Distribution Plus, SIS MARCO, Promat, and Target Horizon. There’s another one there where they do like mapping, oh, I didn’t understand very well, I wanted to ask them because they do like very advanced things about what seems like mapping, or saying where we are going to map things. Talking to others like you guys, like my friend Slava, who does testing, non-destructive testing, he has to go over all that high-tech stuff. And the good thing about that is that it’s making the industry more efficient.

I think part of what we’re fighting for, of all this anti-oil sentiment, is because of history. In Cleveland, Ohio, where Standard Oil was for many years, in 1970, the river caught fire. Cuyahoga River, which runs through Cleveland, caught fire twice because of so much pollution. And at that time, when Rockefeller and those started, it was senseless, and all the factories, not just oil, but anything, dumped their stuff in whatever river was closest. We still have problems with PCBs. And they are still debating with General Electric about what happened in the Hudson River, which runs through New York. The debate was like, “Should we dredge and remove them, or should we just leave them alone?” General Electric wanted to leave it alone because they didn’t want to pay like 3 billion dollars. And it was for damages that they did, not now, but like 100 years ago in history, when it was a legacy. But even now, we’re still paying the price. We don’t want to, nor can we, eat oysters from the bay or anything like that. And my question then, Gisela, is what role does technology play? How can we take advantage of technology to enhance the environmental management of the sector?

Gisela Cardozo: We go back to this topic of the academy, innovation, science, and technology. We have to implement it. All of you have been talking here in this congress about having developed more clean technology, new systems for exploration, exploitation, refining, etcetera. But technology is also in the environmental part, please do not forget about us. The monitoring that you do is more effective when… Now the equipment, we have equipment that sends transmissions in real-time. They give you the alerts. The alerts, if they are having some kind of failure in the piezometric wells, tell you, “Hey, my concentration changed, I have hydrocarbons, or at least my conductivity changed.” And you go, “Oh, how come the conductivity changed?” Well, there must be some leakage, of what? Of deeper groundwater that is getting there, right?

But this transmission in real-time is fundamental. Look, ANLA is making a very big effort, it has been doing it for a while, 5, 6 years now, in generating a technological monitoring center that we have, where we are going to ask all of you to please go in. Now, report to us in a more, let’s say, standardized way, so we can feed from that data. That data is going to be available to all of you. Note that it’s going to be cost-saving in knowledge. Somebody has to submit an AI, somebody has to submit something from a region that has data. This tracking monitoring is more extensive than what you do for a license; it’s time data, and it’s multi-temporal. You can look at trends. You can get so much information from that in very large territories, all the ones that you report to us. And not only from the hydrocarbon industry, but we also ask that from the rails, well, the ones that we manage, 4G, hydroelectric plants, thermoelectric plants. We have information on air, emissions, and noise in the regions, and that data.

An institutional base is being consolidated, and it will be accessible – you know that all of ANLA’s data is public, and you will nourish from it. Please present us with the complete environmental compliance reports with good traceability. Not, “Yes, the information is in file X,” and file X never appears; it does not even have the name file X somewhere. You are going to be able to nourish yourselves from that. Knowledge is for everyone to reuse. But technology is very important; we all have to advance. The faster the data transmission, the more agile the media; artificial intelligence allows us to make projections, models, hydrogeological models, geological models, and geotechnical models.

We all nourish from that, and it will give us security, especially in an issue that is fundamental for this industry, to avoid events that give a negative impression of the sector. You can work very well, a single event occurs, and you know that’s when there will be national relevance. That single event already brings negative attention, doesn’t it, to the industry? So, be aware that a company speaks for the whole sector. So, please, let’s appropriately use technology, and it is excellent. Let’s apply it. ANLA is committed to that, we want you to learn that you can always go and see our monitoring center, and our databases, always.

You know that we have modernized a lot, we hold our meetings virtually to save you what? Costs. We no longer ask you to come to us from your headquarters. We do the oral meetings and the follow-up administrative acts virtually. But whenever you want any face-to-face meeting, you are welcome to come to our facilities. If we talk to each other, we understand each other. And I wanted to take a minute to come back to something that César said, which I thought was fundamental. And I agree, the best CO2 recycler factory and taster is the trees. That’s the reason for the environmental compensation; that is why it is logical that the compensation starts as it should.

From the moment the environmental license is issued, you are required to have a compensation plan. Look, we now have cases of companies that drilled, did not find oil, or for x or y reason at the time, public order or something like that, they decided to close operations. 10 years, 15 years, and 20 years later, they have not made the environmental compensation. They even closed their trading house and their Colombian branch, and they want to leave that environmental debt with the country. This speaks very badly of the sector. Look, the communities are asking for this.

They often do not know that if you cut down a tree, you have to pay 5 or 10, depending on the species. They don’t know the important biological corridors that are being generated because now we are looking for eco-connectivity, especially for mammals: tiger cats, leopards, jaguars, and pumas; pumas have been seen again in our areas. A video that was sent to us in the Topocoro reservoir, which is the one in Hidrosogamoso, really caught my attention. A puma swimming. So we are seeing fauna again that we hadn’t seen for many years. Why? Because the authority seeks that these compensations are located in the best sector. But please, environmental responsibility is also about that. It is not only about “Oh, I use clean technology, try to recycle.” No, it is a very important environmental commitment.

Finance Colombia: Of course. Here in Colombia, as you well know, you have something special. In this country, one thing that I love is that a person could spend their life here and still not see all the natural wonders. From the Amazon rainforest, to. I went to Nevado del Ruiz, there in Manizales, now it is rough, but before, when you could go up, it was like another planet. And so many things. Or you are in the Tatacoa desert, or I went to the Guajira one. And it is important to protect that. I don’t think there is anyone who doesn’t believe that. Well, yes, some criminals are destroying with mercury, like in illegal mining and those things. But there are also responsible companies.

One thing I have seen in the mining sector is that there are some companies, well, there are some bad ones, but some very responsible companies, not just on the environmental aspects, but also the social ones. When they arrive in a town and before starting anything, they look at what they need there, and they talk to the local NGOs there. And like they do social and educational programs and things like that. I hope we have time for a couple of questions. I don’t want just us to be talking. I hope this can be interactive. Does anybody have any questions for the panel? For them, they’re the experts, not me.

Well, I have a question for you guys, so I want to ask, well, the same issue, but how can the need to increase oil production be balanced with climate and environmental sustainability commitments? It’s broad, but what are some ideas for that balance?

Gisela Cardozo: You start, César.

César Zárate: I agree with Gisela. The environmental issue is critical for the country. It is simple to comply with the requirements. But that increase in production will only happen if a suitable environment is found. The communities, so that they don’t oppose, I don’t know, these are ideas that we all throw in the air, “Plant a seed.” Because the communities don’t like to be scolded. The royalties come from the central government, and we see where they are going. Just open the newspaper, and we know where our money is going. Why not let the communities manage a part of it, the municipalities? So that in the industry,y they see a friend, not an enemy. And that fact alone, that they open the doors for us, in compliance with environmental requirements, makes a much better climate flourish. The oil is there.

If you notice, all the formations from Colombia, from Ecuador, even, we are talking about Northeast 22 degrees. It is there. If we explore, we are going to find it all there. From Putumayo, passing Cali, Magdalena Medio, upwards, Catatumbo, and obviously Venezuela, and this part of Casanare, yes? Everything. Just past Venezuela, that imaginary division we have as a country, it is possible that the largest oil reserve in the world is there. But it passes the line to Colombia, and they disappear.

A little further, Northeast 22 degrees, are the reserves of Guyana. There, they are fighting and killing each other over it. We are talking about unimaginable reserves of crude oil and gas that bring a lot of progress to a country, money that we need to lift 20 million people out of poverty, right? But everythingis  in that balance. Exploration, production, communities, and environmental compliance.

That balance is very complex. Because speaking of NGOs, I’ll steal a minute, the American NGOs, the Norwegian NGOs, and the Nordic European ones come and tell the indigenous people of the area that the oil companies are taking away the blood of the Earth, of the Pachamama, etc.; the indigenous people oppose. But in northern Europe, those same NGOs say nothing about the production of crude oil in the North Sea. So we produce less oil, and they keep prices high. And who wins? That is why we are the ones who must provide the solution as a country. In that delicate balance that must be in place so that everyone in that chain is well off. The investor, the community, and the environmental side. And the money that must flow to continue investing in education and lift poverty.

I think it is that very delicate balance. And put a large part of that money into research of all kinds of alternative energies. That is the priority.

Gisela Cardozo: Yes, and I would also think that, if we consider what we have at the moment, of course, the sector can try to manage with the State this type of changes in taxation, in benefits. But that is something more in the long term, right? Let’s talk about what we have now and what they can do. You said it, Loren said it; at this moment, what is lowering the hydrocarbon production, simply? The social conflict, the social blockades, and all of this is what we have been talking about. I think the companies can manage it with good social relations. We, as an authority, experience it. Sometimes a company arrives and let’s say they are going to open a well that, yes, they already had it authorized, they have the license, they have the permit, it is within their zoning, but they had thought about it in their plans for three years from now. When they went to that community three years ago, they said, “Oh, done, here, such and such.” And the community, “Ah, well, yes, we know,” and so on. In three years, those people who live there will no longer be the same.

Or there are more already, but the company doesn’t put in the work. How hard is it to hire some professionals, please, who know how to manage communities? And before the community sees the drill coming, and sees all the people raising dust, making noise, putting out emissions. Environmental management is not a big investment, but please, the advances should always be on this level. We have seen that the communities are receptive, there are communities and communities, I agree. Some are also manipulated, but that should also be perceived by their relations group. From what side do we approach them?

There are some we can talk to, and there are some we cannot. Let’s reach out to the most reasonable people, have friends there, and listen to them. Sometimes it is simply a matter of having a post or giving them a channel where they can put their requests, petitions, complaints, requests, etcetera, etc., etcetera, etcetera. This social relationship, just from the social conflict in the country, a change in perspective towards the hydrocarbons sector? You are already going to improve production by at least 10%, I tell you.

The second point is that there is a law on science and technology in the country, on innovation, science, and technology, which allows you to be exempt from your taxes 100% of what you invest there. This gives you proximity with the academy and developments, developments that you can use in your operational part, and so on, and it gives you the proximity with the academy, so that the academy gets involved with the sector, feels more involved, and educates the generations it is already educating the way it should be. I don’t know if you know much about science and technology law, but it has some impressive tax benefits. Check them out and see that it is profitable, I would say, from what is available at the moment, right?

Finance Colombia: Yes, and I think, listening to the entire talk, it seems to me that the key is not to be, like, antagonists, like ‘The government versus the private sector.’

Gisela Cardozo: Let’s be synergistic.

Finance Colombia: That, that. And also, it’s very important to involve the town, the people. Like, everyone here is from within the industry, so you already understand what the sector is like and the importance of oil. But some people haven’t thought much about that, and public opinion is very easily swayed by a controversial article or something like that, or when a tragedy or an accident happens. However, it is like in the airlines, that 10,000 days can go by with nothing happening. But when there is a first accident, everybody is afraid to fly, okay? But when they go in their car, where there are crashes, they can’t even leave the house without seeing a crash in Rio Negro. But people are like, I don’t know, it’s fascinating how the mind works.

So, the important thing is that we need to work together. It’s not that we always agree, like there’s always going to be disagreement on issues like what should, I don’t know, the government policy should be, or fracking or no fracking, or more drilling or not… But to not be enemies, but working; “Look, we have the same goal, we work together even when we disagree, we are civil and think more in the long term.” So this has been very fascinating for me to listen to the opinions of you, the experts. And well, so now I invite you to take half an hour, a break, here with coffee and everything. Ah, we have a question. I don’t know if we have time for a few moments. I hope so.

Marielita Miga: Hello, good afternoon. This is Marielita Legardes Miga, an oil and gas lawyer from the Mompos Oil Company. I have a question for the panel. All three of you have an interesting view of the country and outside of it. And it is that, as a lawyer, well, what I notice, which I believe may affect production a lot, at least the investment in the country, is excessive regulation. Of course, it is necessary to regulate this sector, to avoid the tragedies of the past, to be more and more strict in what the best practices of the hydrocarbon sector are, and to bring them to the economy. However, I believe that many times we sin by wanting to replicate models from other places, where perhaps here we do not have sufficient technology, and we have not yet reached a level of progress that allows us to make radical decisions.

For example, in the case of the non-conventional, non-conventional resources. So I would like to ask you to tell us a little bit ab is your vision of this regulation. And I do not mean for you to tell it to us as lawyers, independent of your profession; what do you think can be done about regulating, and regulating with more and more restrictions, a sector that needs wings to fly in innovation? Because we are one of the sectors with the most innovation, with the most resources to be able to, with science, as the doctor said, overcome uncertainties.

So, what strategies do you think can be taken? I mean from a point of view, beyond the legal aspect, if those roundtables could not only be work roundtables with the communities but also with those who make the decisions in the country, with those who generate the regulations. And how willing are they? That is where government policies come in, right? Because the executive is the government. The one who generates the regulation is the government; the laws are from congress, but our regulation comes from the ministries. So I wanted to ask you about that. So sorry if I went on too long.

Gisela Cardozo: Well, yes, indeed, I am not as strong legally as you said, but perhaps from my point of view, it does not seem to me that the current environmental regulation is very complex, or very complicated to comply with. It is clear. It has been updated on some issues where the very knowledge from them has led us to it. Because, especially on the topic of emissions, the regulation has been evolving, and it is restrictive in certain aspects, but it is not so much about that. I don’t know, I insist that the sector should be underpinned much more by the academy.

Because you know that regulations always go out for public consultation. At this moment, Decree 10-76 is in a revision process. It is made available to all to receive feedback, and such. In the same way, the ANH and the ANM have also recently put forward different regulations for discussion. If you look, what do you see is of deep relevance in the country? The opinion is also of the scientific experts, of the experts from the universities. They move the thinking of our youth, of those who take to the streets to protest or support, they are the ones who convince them even. Their teachers, in the sense of the guru of an environmental issue, are the super-experts in something.

And they are the ones who give the most opinions when regulations are put out and such. Most of the comments come from experts from the universities because they are also the ones who provide the best basis for their comments. I would say that there should be more interaction between the sector and these academic groups. If they understand better… because it is very different to have a professor in the theoretical field at the university than for them to experience the reality with you, to go and get to know what it is, and apply their knowledge there.

I mean, science must be applied to become technology, to become innovation. But I see a lot of this distancing. The Academy is over there at their desks, in their laboratories, but not as a pilot plant, but very isolated. So, when they give their opinion on regulations, they are very theoretical. So we want to have Norwegian regulations, we want to have something that is not in our context, not our environment, and that is why we make mistakes that have been made in the environmental area. As you know, 30, 40 years ago, the very corporations and the nation said, “We are going to reforest with eucalyptus and pine.” Because they are the ones that successfully reproduce the fastest, right?

And what did we see, “Let’s harvest trout in our rivers,” and the intentions were very good, but it is this detachment, let’s say, in the regulations. We contribute from the authority, we have very competent people who have worked with you many times. Sometimes they move from one sector to another, and that is good because they get to know the sector, which lets us work as you said, in synergy. Let’s work together. When those norms go out for consultation, please also speak out, but in a well-founded manner, get your opinion, and give it. I do think that you are being listened to. I believe that society, the Colombian authorities, has usually been very democratic; they have listened. Let’s keep trusting that this will be so, let’s do our part.

Finance Colombia: Thank you. Well, that was very interesting, and thank you for the question. I felt bad, like “Ah, we’re boring people because nobody’s asking anything.” But that was very interesting. Thank you so much. If there’s anything else, we’ll be around to talk more about this. Thank you.

Gisela Cardozo: Thank you.