Executive Summary
Current Market Needs
Competitive Landscape
Best Prospects for U.S. Exporters
Market Entry
Regulations / Registration Process
Technical Barriers & Tariffs
Getting Paid / Trade Finance
Upcoming Trade Events
Local Industry ResourcesÂ
U.S. Commercial Service Information
Tab Options
Executive Summary
Current Market Needs
Competitive Landscape
Best Prospects for U.S. Exporters
Market Entry
Regulations / Registration Process
Technical Barriers & Tariffs
Getting Paid / Trade Finance
Upcoming Trade Events
Local Industry ResourcesÂ
U.S. Commercial Service Information
Executive Summary:
The Colombia oil and gas equipment and services market continues to represent and important opportunity for U.S. companies as the Colombian government continues to place this sector with a top priority as a key generator of central government income. The country has difficult geologic conditions that have hindered the discovery of new oil and gas reserves, and operating companies have high production costs.
In addition, companies experience lengthy delays in processing environmental licenses and selected community popular consultations have resulted in strong opposition in the development of mining and oil & gas projects in some areas. Other industry concerns include tough tax and fiscal environment conditions which negatively impact profits (government take of 70 percent); and the continuous terrorist attacks to pipelines, electric transmission lines and general infrastructure.
However, the Duque administration has listened to industry’s concerns and is developing means to alleviate them to reactivate this industry and increase hydrocarbon findings to reduce crude oil imports in less than six years. After a century of oil exploration in Colombia, only four giant fields with reserves of more than 900 million barrels of oil have been found: La Cira-Infantas, Chuchupa-Ballena (natural gas), Caño Limón, Cusiana, and Cupiagua.
Traditionally, most discoveries have been less significant, yielding less than 40 million barrels, but Colombia usually performs well internationally as it is attractive because most blocks are not well explored. Colombia ranks among the twenty most attractive countries in the world for exploration.
The National Hydrocarbons Agency (ANH) has mandated all exploration and production (E&P) companies operating in Colombia to provide the agency with information on hydrocarbons resource and reserves following approved methodologies by the Society of Petroleum Engineers (SPE), World Petroleum Council (WPC), and American Association of Petroleum Geologists (AAPG). The agency has received resource studies that estimate total reserves of 2-10 billion barrels of conventional hydrocarbons and unconventional hydrocarbons could reach up to 20 billion barrels and preliminary conventional natural gas reserves could yield up to 11.4 TCF of probable andpotential reserves in the Colombian onshore basins and offshore basins, including Tayrona, Sinu,
Unconventional gas sources from coalbed methane with preliminary reserves that could reach some 7.5 TCF of potentially recoverable reserves, mostly in the Guajira and Cesar basins. Other potential reserves point to tight shale gas (mostly in the Magdalena Medio basins), and methane hydrates could also be found in the Caribbean and Pacific Ocean basins.
Current Market Needs:
In 2014, Colombia had upstream investments of $8.3 billion per year, mostly aimed at increasing production. After the lowest investment points of 2017 ($2.0 billion), and $4.3 billion in 2018. The plan was to invest some $4.9 billion in 2019 mainly in production investments in the Llanos, Casanare, Middle Magdalena and Casanare basins. Over 2020, the annual production average reached 781 kbpd and in 2021 (up to October) the annual production average reached 734 kbpd, far from the million barrels produced in 2013, but companies are increasingly more efficient and producing larger amounts of crude oil. The government has made their own projected income based on these projected production figures with conservative market prices. Industry sources also point to decreasing production due to the natural declination in mature blocks, and the need for better geophysical and geological modeling, better enhanced oil recovery technologies, a revival of offshore
On February 14, 2019, government officials received the report from the unconventional
Competitive Landscape:
After more than five years of inactivity, in 2019 the ANH announced their approval of a permanent onshore and offshore block award tenders (PPAA) and updated Exploration and Production contracts to attract the interest of world-class companies. Companies interested in Colombia include Occidental Petroleum, ExxonMobil, Shell Oil, Repsol, ConocoPhillips, Chevron, among others, and have pursued technical evaluation contracts to gain a better understanding of the country’s traditional and unconventional hydrocarbons (coalbed methane and shale gas).
With regards to offshore exploration, the ANH is working with operating companies to continue their activities after their initial discoveries in the Tayrona, Purple Angel blocks. Efforts continue to determine reserves, and other technical and economic information from previous discoveries from Orca (Tayrona), Gorgon, and Kronos (Fuerte Sur) wells, and newly signed contracts will allow for seismic and other prospecting activities in the Guajira Offshore, and COL 3 deep water blocks with Shell, Petrobras, Repsol, Ecopetrol, and Chevron.
The Colombian oil and gas field equipment market is dominated by imported equipment, although there is a small local production of pipes and ancillary equipment (valves, spare parts, compressor pumps, and some parts and accessories for oil refining machinery and equipment). Besides the U.S., Colombia imports oil and gas field equipment from Brazil, China, Germany, Italy, among others. Import statistics also reflect imports that can be identified as transfers of drilling and exploration equipment from other countries in the region, and some Colombian exports include equipment moved into other countries. Most imported equipment includes sounding and drilling equipment, pumping equipment, casing and other pipes, filtration equipment, drill bits, weld-less drilling pipes, seismic and geophysical prospecting equipment, injection pumps, spare parts for drilling and
Best Prospects for U.S. Exporters:
Seismic activity services (two and three dimensional)
Improved analytical seismic computer codes
Drilling equipment (including directional drilling)
Wellhead equipment
Improved Production Stimulation and Artificial Lift Systems
Enhanced oil recovery for selected fields in which production is dwindling
Crude oil and natural gas pipeline design and construction services
Market Entry:
Colombian law does not require foreign firms to secure local representation for private sector sales. However, local companies prefer to deal with foreign firms that have a local representative to ensure access to after-sales services and spare parts availability. The one exception to this law is for sales to the government, which do require foreign bidders to have legal representation in Colombia. To secure an agent, representative, or distributor, the foreign company must execute a contract that meets the provisions of the Colombian Commercial Code. This contract must be registered with the Chamber of Commerce in the city where the agent/representative is located. Agency or representation agreements do not require government approval.
An agent or representative differs from an appointed distributor. The former is legally associated with the principal and may enter into legal agreements on the principal’s behalf, while the latter may act independently from the principal. Distributors may purchase items from a foreign supplier or wholesaler and then sell them locally at their own discretion and risk.
The U.S. Commercial Service recommends that U.S. companies consult a local attorney to execute an agency or distribution contract and to thoroughly vet the prospective partner by conducting a background check. Formality, personal relationships and trust are key ingredients for a long-lasting contract. Colombians want to know their supplier or business partner personally before deciding whether he or she is trustworthy. U.S. companies seeking agents, distributors, or representatives in Colombia should consider contacting the U.S. Commercial Service office to request assistance in entering the Colombian market.
Regulations / Registration Process:
Ecopetrol requires a previous registration process for all potential suppliers in the Supplier’s Information System (SIPROE), a free and public access system that allows ECOPETROL to consult online the information of reputable suppliers of goods and services required for its operation allowing interested companies to present free and thoroughly their offer of goods and services in the technical and procurement areas. It allows the company to connect with potential suppliers and provides traceability, ease of access, and transparency in the procurement cycle. It also provides a continuous data storage solution that feeds on supplier’s constant product information update, highlighting other successful project implementations that would be of interest to Ecopetrol.
For more information please review: https://www.ecopetrol.com.co/wps/portal/es/ecopetrol-web/contratistas/debe-saber/nuevo-modelo-de-Abastecimiento
Companies interested in exploring procurement opportunities with Ecopetrol can review the following link: http://contratos.ecopetrol.com.co/default.aspx
Technical Barriers and Tariffs
Traditionally, oil & gas companies develop engineering and equipment specifications based on technical standards developed by industry-recognized standards development organizations like the Society of Petroleum Engineers (SPE), American Society for Testing and Materials (ASTM), among other internationally-recognized standards development organizations. However, since early 2000, the Ministry of Mines and Energy have developed a series of mandatory technical regulations that apply to Electrical Installations (RETIE), Energy Efficiency (RETIQ), Lighting (RETILAP) and Thermal Installations and Systems (RETSIT). Equipment manufacturers or importers need to review these technical regulations to confirm if they need a Conformity Assessment Certificate from a recognized accredited entity by the Colombian National Accreditation Organization (ONAC).
For more information please review:
Getting Paid / Trade Finance:
U.S. companies can benefit from the support of several U.S. agencies including the U.S. Trade and Development Agency (USTDA). This agency provides an early determination of the viability of a potential project by sponsoring feasibility studies, promote reverse trade mission, assist in the promotion of advanced US technologies in foreign markets, among other activities. For more information please review: www.ustda.gov .
The U.S. Export-Import Bank (EximBank) is available to support private sector transactions with oil & gas companies. Ex-Im Bank is the official U.S. export credit agency that supports U.S. exports of goods and services with a variety of programs that take advantage of removing credit and country risks that other financial institutions are not willing to take and provide competitive financing solutions for US exporters and therefore facilitating the implementation of a transaction. The programs include solutions like Loan Guarantees, Direct Loans, and Export Credit Insurance. The agency validates the US content of the supplied goods and services via engineering and technical evaluations in order to authorize the disbursement of approved transactions and follow them up throughout the entire transaction life cycle. For more information you can check: www.exim.gov .
Another U.S. agency, International Development Finance Corporation (DFC), authorized in 2018, is America’s development bank. DFC partners with the private sector to finance solutions to the most critical challenges facing the developing world today. DFC has a total investment limit of $60 billion. For more information you can check: www.dfc.gov
Upcoming Trade Events
Offshore Technology Conference (OTC): www.otcnet.org www.cumbrepetroleoygas.com/en/
U.S. Commercial Service Information:
Ms. Norcia Ward, Commercial AssistantNorcia.WardMarin@trade.gov
