Developments in Colombia's oil indsutry

Earlier this week, Colombian state-owned oil company Ecopetrol announced that it had established a new company called Ecopetrol Costa Afuera Colombia S.A.S. to carry out its offshore oil exploration and production activities. This legal reorganization allows Ecopetrol to take advantage of recent tax break opportunities added to Colombian law.

El Espectador noted that this announcement comes in the wake of the discovery of an “important” gas field in the Caribbean. Although no one knows yet exactly how large the gas field is, this announcement demonstrates that Ecopetrol is extremely bullish about its prospects.

In other oil-related news, the Colombian National Hydrocarbons Agency (ANH) announced that oil blocks in Colombia would no longer be auctioned off periodically in large “rounds.” The ANH explained that oil companies had been frustrated by having to wait for scheduled rounds in order to acquire oil fields in the country. El Espectador explained that another change is the introduction of Direct Assignments with Counteroffer. In this system, the ANH can receive a proposal from an oil company for a specific area, and then open up that area publicly for counteroffers. The report also noted that Ecopetrol solicited extensive feedback on the new rule changes.

Lastly, the Colombian chamber of commerce for the oil industry, Campetrol, spoke with El Heraldo about how Colombia is one of the most expensive countries in the world for extracting oil. According to Campetrol, Norwegian consulting company Rystad Energy dig a studied of more than 65,000 oil fields, and listed Colombia’s oil as the seventh-most expensive in the world.

Legal and illegal mining in Peru

On Wednesday, Peruvian business journal El Comercio reported on the expansion of illegal mining in Peru to at least five protected national parks in the country: Sierra del Divisor, Cordillera del Cóndor, Huascarán, Tambopata, and San Fernando. El Comercio stressed that the government is aware of the illegal mining activities and is actively taking steps to counteract them. Just in the last week, the Peruvian carried out operations against illegal miners in San Fernando and Tambopata, dealing a financial blow to the illegal miners through the destruction of equipment and heavy machinery.

In the case of the province of Cajabamba, regional energy and mining director Victor Fernández told the press that the region is free of illegal mining. According to Fernández, 15 mining companies in the region have completed the formalization process, thanks to the timely intervention of the Peruvian authorities.

He also clarified the difference between legal, informal, and illegal miners. According to the regional mining director, a legal miner is one who has all of the requisite permissions, an informal miner is one who is in the process of obtaining them, and an illegal miner is one who has no permissions, is unregistered, and is operating outside the law.

In other mining-related news, El Peruano spoke with Guillermo Shinno, Vice Minister for Mines about the entry into operation of large new Peruvian mining projects and the role of the mining industry in the Peruvian economy. Shinno claimed that the mining industry was responsible for 1% of Peru’s GDP growth this last year.

Colombia warns oil prices will hurt growth

In Davos Switzerland, Colombian Finance Minister Mauricio Cardenas told the international press that sustained low oil prices are jeopardizing Colombia’s forecasted 2016 economic growth rate of 3.2%. Minister Cardenas attributed Colombia’s strong economic performance to the country’s sound macroeconomic fundamentals, including its low inflation, low budget deficit, and low public debt. He also stressed that Colombia needs to work to lower its fiscal deficit.

Minister Cardenas also officially cut the Colombian government’s oil price forecast from an initial $50 per barrel to just $34.7 per barrel. He warned that this could mean that the Colombian government will need to implement additional austerity measures in order to bring down the country’s deficit. Cardenas also lowered Colombia’s oil production goal, to 944,000 bpd from 955,000 bpd.

El Espectador reported on Minister Cardenas’ comments regarding the much-anticipated tax reform bill. He did not predict when the bill will be given to the Colombian Congress, but the report noted that analysts believe it will happen during the beginning of the second half of the year, and that the bill will go into force a year later.

The Colombian daily also reported on Colombian state-owned oil company Ecopetrol’s decision to cease funding of its $23 million program that provided seed funding for entrepreneurs in oil-producing parts of Colombia. Ecopetrol explained that it had to cut the program because of the collapse in global oil prices.

Peru takes steps to protect its parks from illegal mining

Peruvian business journal La Republica reported on the Peruvian government’s ongoing fight against illegal mining. In particular, the Peruvian department of Madre de Dios has been one of the hotbeds of illegal mining activity in the country, and the government as a result has focused its operations in this department.

Over the weekend, La Republica reported that, come Monday, there would be almost 50% more forest rangers in the three national parks in the Madre de Dios region. The number of park rangers will increase from 50 to 73, and the new rangers previously worked as park volunteers in other parts of the country, so they should be able to hit the ground running. The new rangers will focus on carrying out additional patrols of the parks to catch illegal miners.

El Comercio provided another piece of good news in Peru’s fight against illegal mining, as the Peruvian armed forces carried out their first operation against illegal miners in a national park. The report noted that news of the interdiction came two months after the release of satellite imagery showing that illegal miners had started operating in the Tambopata national park. The Peruvian authorities were able to destroy equipment and machines used in illegal mining, but were not able to capture any illegal miners.

In oil-related news, Transportadora de Gas del Peru, the operator of Peru’s largest natural gas liquids pipeline, told the press that it had started repairs on a leak that had forced the shutdown of the pipeline last week. The report did not mention whether the leak resulted in any environmental damages.

Oil prices drop Colombian peso to record low

Bloomberg reported that the plummeting Colombian peso has worsened the prospects for Colombia’s current-account deficit. According to an unnamed central banker quoted by Bloomberg, the deficit is Colombia’s “Achilles heel.”  The Colombian peso fell as low as 3400 pesos to the U.S. dollar, and Colombian Finance Minister predicted that Colombia’s current-account deficit would continue to worsen if oil remains at $30 per barrel.

Daniel Escobar, the head analyst as Global Securities in Bogotá, warned to Bloomberg that, “Oil is as always the key driver. The tax reform is also starting to become a concern. Delaying it would not send a good signal to the market. Colombia needs a tax bill that will help balance its budget in the next few years.”

Bloomberg also spoke with Adolfo Meisel, co-director of Colombia’s central bank. Meisel stressed that, “Maintaining growth is the biggest challenge. You don’t achieve 3 percent just through will-power.” He explained that Colombia will continue to raise interest rates in an attempt to tamp down inflation, so long as Colombia can maintain its rate of economic growth.

In other Colombian macro-economic news, Finance Minister Mauricio Cárdenas told reporters during an interview in Davos, Switzerland, that Japanese banks have expressed interest in lending Colombia the $1.5 billion it plans on raising via a foreign bond sale later this year. Cárdenas added, “Here in Davos, we have been contacted by some Asian banks which have a lot of liquidity, particularly Japanese banks, which are interested in offering credit lines for these $1.5 billion dollars. This could be an opportunity for Colombia