The hydrocarbons sector plays a crucial role in energy transformation

In the world, as the energy transition gains more strength every day and as many countries, including Colombia, advance in the adoption of renewable energies from sources like the sun and wind, concerns constantly arise about the role that oil and gas will have in the short and long term.

[prefix_blockquote]The Minister of Mines and Energy, María Fernanda Suárez, argues that gas is the fuel of the transition and therefore the concern about increasing reserves. She assures that bottlenecks in competitiveness have been removed and that there is much work to be done in the relationship with the territory.[/prefix_blockquote]

For the Government, led by the Ministry of Mines and Energy, the answer is that hydrocarbons will continue to be the most reliable source of energy for many years, but recognizing those new realities and needs arising from climate change, the public policy actions being developed and structured aim to strengthen them so that they play a relevant role in the energy transformation.

[prefix_blockquote cite=»María Fernanda Suárez, Minister of Mines and Energy»]“The Financing Law is absolutely key not only in income issues but also in the discounts on capital investments, because this is a very capital-intensive sector.”[/prefix_blockquote]In this regard, Minister María Fernanda Suárez outlines the achievements, among which the decisions to strengthen the country's competitiveness in the eyes of investors stand out, and the challenges, among which the shift in the way the industry relates to communities and its environment takes center stage, an aspect in which transparency and trust will be decisive for all actors to fit and coexist in the territory, for the sake of economic and social development, and the common good.

What is your current assessment of the actions for the hydrocarbons sector?

We have fulfilled everything we told the sector we were going to do. When we arrived, one had to separate the problems into long-term structural and short-term issues.

In the long term, we have worked on the legislative act of royalties, where there will be a greater proportion for the producing territorial entities, increasing from 10 percent to 25 percent.

But we must not only focus on how to share the why, but on ensuring that it is well invested and that communities truly see the works. A more efficient system will remain because today there are about 15 trillion pesos in banks in unexecuted projects, and that does not align with the needs in the country.

Another structural issue was prior consultation, which we divided into two: the Government will present a bill that will ensure it is done and that all rights are guaranteed, but that there is a completely clear procedure, in which everyone knows when things are fulfilled and how they occur.

And in the short term, what we have is a congestion of a number of requests from all sectors, and an institutional capacity that cannot handle that.

To address this, we included an article in the National Development Plan, and a system will be created through which there will be a more effective mechanism with the current regulations.

After the clarity on popular consultations from the Constitutional Court, what is the strategy that follows?

The ruling recognizes that there is a tension since the 1991 Constitution between land use and subsoil use and asks us to bring forth the Law of Coordination and Concurrence, which we will present in the first semester of 2020.

What will be the philosophy of the bill?

We are still structuring the law, but philosophically something that has to change is that before assigning a block there must be a conversation in the territory, because today part of what happens is that blocks are assigned, the company will carry out its campaign and when the mayor sees the drill, he wonders: how come?

So when it is seen that there is potential, I have to inform them and, likewise, when municipalities carry out their land use planning, they must incorporate and know what the opportunities in the subsoil are, because what we have to ensure is that the general welfare is above the particular.

In fact, the new assignment of areas by the ANH already incorporates that…

[prefix_blockquote cite=»María Fernanda Suárez, Minister of Mines and Energy»]Gas is fundamental in the electricity generation matrix, along with renewable sources of wind and solar generation, which are variable. Gas is needed for reliability.[/prefix_blockquote] Of course. The ruling provided a series of elements and since the moment it was issued, they have been taken into account for the rounds that have been held. But in addition to that, the Court asks for a law to be advanced that regulates it. In addition to that, another thing we have also done is the issue of environmental licensing and archaeological matters. Today, when you go to the National Authority of Environmental Licenses, this entity has its environmental licenses up to date and there has been a significant change in the timing of the processes.

All of this has resulted in the largest investment we have had in the sector in 2019. We are looking for the number of exploratory wells to be the same as last year, but the current assignment of blocks should lead us to greater exploratory activity in 2020 and greater seismic activity, which although it is greater than in previous years, is still not at the level we would like to have to achieve many more discoveries.

We have worked on those bottlenecks and undoubtedly one of these was competitiveness, because all companies, including Ecopetrol, are saying that they are here or elsewhere.

And in this, the Financing Law is absolutely key, not only in income issues but in the discounts on capital investments because this is a very capital-intensive sector.

When will social conflictivity decrease more, since there are 700 million dollars stagnant and this is one of the factors?

The first thing is a strategy from the Ministry in supporting all social and environmental issues, called ‘We all fit’, a very close work with the communities, of pedagogy and genuine approach. It is about bringing the institutional offer of the State to the territory.

In general, as a system, we have to recognize that in many of the municipalities where there has been oil and gas production for many years, the development of the territory does not reflect the development that the industry should bring. So, we need to do pedagogy, position the sector, and have a genuine relationship, not opportunistic or transactional. We have told the companies that their relationship needs to change.

The responsibility is not just to distribute the royalties. The true social responsibility is to ensure that the institutional framework of the place is strengthened and that this leads to better development and supports the structuring of projects.

We believe that royalties, coordination and concurrency, and raising operational standards in environmental issues, and that people see the responsibility that oil companies have regarding environmental issues is something that needs to improve.

Another key issue is transparency. Transparency in information, in data. That people can see what the seismic measurements are to determine if there are wells generating seismicity or not; how much water is being taken in each of the municipalities for oil activity, because many myths have been created around this. When you look at the percentage of consumption from the hydrocarbons sector, it is about 2 percent of the country's water consumption.

Another myth is that the sector is the largest contributor to carbon emissions, but this is deforestation, which accounts for 35 percent of emissions, followed by agriculture, then transportation, and then hydrocarbons, with 13 percent.

Should this transparency go beyond the research pilots of unconventional reservoirs?

When reading the report from the Commission of Experts, all the recommendations are not about unconventional reservoirs, but rather they gather recommendations regarding the sector, which they have embraced as an opportunity, because if there is something we need to change with the community, it is to generate a relationship of trust. When the debate is only centered on Twitter, it is because it is one vision against another and we do not go to the data.

And the only way to access this data is for it to be available. This transparency induces trust and this is part of the roadmap we are working on.

The closest tool in that is the reform of royalties. How will the pedagogy be carried out with the new regional and local leaders?

That is very important. The Government has been preparing the strategy to provide them with a toolbox that they have at their disposal, and the change in royalties is one of the most important.

This legislative act will be in 2019, it will be regulated in 2020, and it will probably be executed in 2021. So the projects of this Government will be with the current royalties, and one of the biggest weaknesses is the capacity for project structuring, and there the regional leaders are very important.

Part of what we are planning is how from their arrival they will have training to strengthen their institutional capacity to support them in better project structuring that translates into faster approvals and that execution occurs on time and within budget. The commitment with local leaders must be that we all fit in the territory.

How will offshore and unconventional resources be promoted, following the clarity provided by the Council of State regarding the latter?

[prefix_blockquote cite=»María Fernanda Suárez, Minister of Mines and Energy»]“The responsibility is not just to distribute the royalty. The true social responsibility is to ensure that the institutionality of the place is strengthened and that this leads to better development and supports project structuring.”[/prefix_blockquote]The first step was to reactivate offshore contracts, because the discoveries were made in 2017 and were stalled due to a contractual issue to resolve. The TEA contracts were moved to exploration and production, and the first new drillings should occur in 2020 and 2021. The delays are mainly due to the available drills and how long they take to arrive.

The importance of offshore is that by delimiting and understanding whether the gas there, in terms of quantity, quality, and depth, is commercial. And secondly, continue exploring because there is potential for liquids, and when liquids are found offshore, they are typically very rich.

The second aspect is all the issue of blocks and rounds that have been made, and especially the change in the dynamics of the area assignment process, because there is a map of lands available from which the sector is being continuously updated.

An area where there is an opportunity yet to be fully explored is Putumayo. Ecuador produces 200,000 barrels or more on the other side of the river, and at the geological border, we should have the same potential. Our job is to ensure energy security and opportunities for wealth generation, because Colombia is the least explored country on the continent, according to the president of Occidental.

And what about unconventional resources?

If there is something positive, it is the Commission of Experts and the transparency it brought to this entire process, plus the decision of the Council of State to continue advancing in the pilots.

We have been holding governmental working groups where we have been carefully reviewing all the recommendations to turn them into the protocols that need to be made.

[prefix_blockquote cite=»María Fernanda Suárez, Minister of Mines and Energy»]“We are discussing the fourth industrial revolution or electric cars, but we must think that there are still 500,000 families without access to energy, which is unacceptable.”[/prefix_blockquote]At this moment, we are in the phase of concluding what those protocols would be, to then outline the path to move forward with what the Council of State's ruling set for us.

Will the input of what is fundamentally demanded, that is, the technical regulations, be taken into account?

The Commission of Experts does not make any suggestion to change the technique, but rather concludes that no scientific evidence has been found that the technique poses a risk to the environment and communities.

However, since it has never been tested in Colombia, it was said that it should be tested to observe that the results seen in other places are also seen in Colombia.

So the technique will not change. Furthermore, they established that the technical specifications of Colombian regulations are very demanding. What it does is say that it is not only the technique, but that health issues, biodiversity, baseline studies, and transparency in data must also be considered. Therefore, part of what we need to do in the pilots is to ensure that information is available in real-time for all citizens.

I imagine it like a glass urn in which every Colombian can see what is happening with the drill, the measurements of seismicity, the distance from the aquifer, the fracturing fluid being used, and the status of the well.

In times of energy transformation, what will be the role of hydrocarbons, because there is a perception that they are not needed?

The transformation mission is very focused on the electricity sector. There is a chapter focused on gas as part of the electricity matrix. What the United Nations says is that 80 percent of our ability to reduce carbon emissions to lower global warming by 1.5 degrees depends on energy and that we do it correctly.

There the hydrocarbons sector plays a crucial role. We are the first sector that has the comprehensive climate change management plan. We have a roadmap that we built with the private sector, which includes hydrocarbon companies.

What are the lines that the sector should work on?

The first is its energy source. The energy demand of Ecopetrol is equivalent to that of Bucaramanga. So that the energy source is clean, for its production, has a very high impact.

Second, the issue of fugitive emissions, where we are going to raise the standards. These are emissions that cannot reach the environment when Colombia already has the technology to control them.

The issues of energy efficiency are very important. The hydrocarbons sector is betting on capturing carbon worldwide, to be carbon neutral. We depend on technological development occurring and ultimately being cost-efficient, to capture that carbon and be able to reinject it.

The other aspect is the role of gas, which reduces carbon emissions from a vehicle by 40 percent and in terms of air quality reduces particulate matter by 96 percent.

[prefix_blockquote cite=»María Fernanda Suárez, minister of Mines and Energy»]“The energy demand of Ecopetrol is equivalent to that of Bucaramanga. So that the energy source is clean, for its production, has a very high impact.”[/prefix_blockquote]If we still have challenges in the electric mobility of private vehicles, imagine those in dump trucks, mass transport systems, and cargo vehicles. And one of the bets is that gas will be that transition fuel, especially for heavy-duty vehicles and mass transport systems.

And gas is fundamental in the electricity generation matrix, along with renewable sources of wind and solar generation, which are variable. And for there to be reliability, something is needed to generate it, and gas is essential to sustain that reliability. Therefore, the emphasis on increasing gas reserves and offshore.

And in liquid fuels, what challenges remain?

We are already meeting the 2025 targets that were in the Conpes. In diesel, we are at less than 10 parts per million of sulfur, and in gasoline, we are at around 100. We know that the world will need them as its most reliable energy source for many years, and from regulation and companies, we must ensure that we use all available technology so that the effect of that production and consumption is minimal on the environment.

What actions are being taken to promote greater development of the liquid fuels market and avoid transient supply stress situations in some regions of the country?

We are strengthening the regulations related to supply chain infrastructure, the necessary requirements, and the conditions for service provision. Our goal is to have an increasingly secure supply at all fuel service stations.

In addition, we will continue working with local authorities, unions, and other stakeholders in the chain, in order to continue ensuring the proper provision of service and the competitiveness of the sector, in favor of the best quality standards and for the benefit of end consumers.

With all the energy

During your time as Minister, what has given you the most satisfaction and what has frustrated you the most?

What frustrates me is not being able to do things more quickly. I live with a lot of anxiety about the urgency with which problems need to be resolved, and in the public sector, speed is a challenge due to institutional capacities, because you have to limit yourself to what the law allows, and because the entire system is generally designed for things to move slowly.
And what makes me happy is bringing energy to people for the first time. We are discussing the fourth industrial revolution or electric cars, but we must think that there are still 500,000 families without access to energy, which is unacceptable.

What is your vision of the role of women in the sector?

It was one of the things that made me decide to come work for President Duque's government and his commitment to gender equity and a balanced government, because often those goals cannot be achieved because women are the ones who say no.

It is a topic that we are promoting a lot in the Ministry, through its gender policy. One of the things that generates the most urgency for me is the participation of women in job opportunities in communities. The hydrocarbons sector, where it is, is the best paid in the region, and since women's participation is so low, those are opportunities they do not have. So we must ensure that there is greater participation of female labor in the workforce in the regions where the sector operates.

There are paradigms that need to be broken. There are jobs for men purely based on physical strength, but it is necessary to ensure that in all those things that women can do, they participate, and that is where we need to start from training, or that there are dormitories for men and women in the fields. It needs to be worked on from companies and from communities.