A Special Report From Oil and Gas Investor and Global ... - Equión

COLOMBIA
A Special Report From Oil and Gas Investor
and Global Business Reports

COLOMBIA’S OIL & GAS INDUSTRY, 2012
Introduction
An E&P investment hotspot is fast turning into a hydrocarbon production hub for South America.
Colombia’s new slogan, aimed at encouraging tourism, is “The
only risk is wanting to stay.” The country’s policymakers are
hoping that the boom in investment in Colombian E&P is
also here to stay. With production now at record levels, the new
challenge is to ensure that Colombia maintains and builds upon an
oil industry that has helped turn the country around.
The nation has undergone a renaissance over the past 10 years
in political stability, safety and economic growth. Among the economic
sectors that have driven this revolution, oil and gas has been
a leader. Colombia is now the third-largest crude producer in South
America, after Venezuela and Brazil.
Colombia has become well known among oil investment circles
as one of the most exciting E&P investment markets. While the geological
potential has been a foundation for interest, the real catalyst
for the increased activity has been reforms in the institutions
that control the industry and the contract terms available to explorers.
Although discoveries to date have not been on a sufficient scale
to attract the world’s largest oil companies to invest heavily, it has
become a market of choice for small to medium-size players that appreciate
the competitive government conditions and see great value
in the unexplored potential for modest, but profitable, discoveries.
According to figures from the Ministry of Mines and Energy, foreign
direct investment (FDI) in Colombian natural resources has
increased from $500 million in 2001 to over $9 billion in 2011.
This increase in investment has translated into strong results for the
country’s industry. According to the Ministry, the country is now
on the brink of achieving a 1-million-barrel-per-day production
landmark.
However, the next great challenge is to build upon this success.
The stated target from the Ministry of Mines and Energy is to
achieve an average production of 1.5 million barrels per day by
2020. Yet, with only 2 billion barrels in reserves, policymakers hope
to maintain an annual level of FDI investment in the sector of
US$5 billion.
Other challenges that the industry is facing include an infrastructure
network that has been stretched to the point that bottlenecks
have developed in the key production areas. Also,
maintaining a good reputation and relationship with communities
neighbouring operations and the populace at large is vital in a
country that has Colombia’s violent civil past.
In addition, the recent and rapid growth of the industry means
service providers for the oil and gas sector were unprepared for the
new demand. For international companies and investors, this has
created another interesting opportunity; increasing numbers of entrepreneurs
are filling those gaps and larger international player are
establishing or growing their presence.
Many observers hope that the past five years can be seen as
merely the first chapter in Colombian oil development. Further opportunities
are being encouraged in offshore and unconventional
exploration. A success story in either of these developments could
open an entirely new front for Colombian energy.
Security as a basis for prosperity
The greatest issue for Colombian investment has been concerns
over security. Colombia gained infamy as a nation torn apart by the
violence of leftist guerrillas, far right paramilitaries and the drug
Colombia’s president, Juan Manuel Santos, is hoping to take the country
into its next phase of development.
lords that profited from the associated chaos.
During former president Álvaro Uribe’s time in office, and continuing
with his successor President Juan Manuel Santos, the country
made enormous improvements. The government, through the
army, has been keen to collaborate with the private sector and has
prioritized the protection of the resource industry in the hope that
this activity, and the local jobs and wealth it brings, can help them
maintain security in rural areas.
Over the past three years, a number of the leaders of FARC,
Colombia’s largest and oldest insurgency, have been killed and, in
February, the group announced it would cease kidnapping civilians,
a practice that has been a key concern for any oil executive operating
in the country.
However, Colombian security is an incredibly complex issue
that remains a key consideration for any E&P operation. Worryingly,
attacks on Colombia’s oil sector were on the rise in 2011,
with 84 oil pipeline bombings, up from the record low of 31 in
2010. However, the hope is that this year’s spike in figures may be
eventually considered an anomaly caused by the death throes of
these groups.
Investing in Colombia
Colombia is now the fourth-largest economy in South America,
with a GDP of $240 billion, and the central bank expects the
Colombian economy to expand around 4.5% this year after growing
an estimated 5.8% in 2011.
Within South America, a trend towards protectionism has concerned
investors as more left-leaning governments have pursued
Editorial researched and written by Thomas Willatt,
Patricia Matey García, Liliana Ávila Sánchez and Lorenzo
Piras of Global Business Reports. For further information,
contact info@gbreports.com or follow us on twitter:
@GBReports (Cover photo courtesy of SAExploration)
C-2 OilandGasInvestor.com ▪ June 2012

economic policies that hope to insulate
local industries from international competitors.
Colombia, however, was recently described
by the Financial Times as a
“free-market cheerleader” for the region.
In October 2011, the U.S. Senate approved
the free-trade agreement with
Colombia that was proposed in 2006. The
oil sector is expected to be the key beneficiary
from the new free-trade agreement;
oil-related exports represented 45.7% of
Colombia’s total exports in September
2011.
The American multinational conglomerate
General Electric (GE) has been in
Colombia for more than 80 years in different
lines of business, but by the end of the
1990s, the company decided to cease operations
in Colombia. In 2006, offices were reopened,
focused mainly on the capital
business and also on oil and gas.
Fabiola Sojet, CEO of Northern South
America for GE, describes the company’s
experience upon returning to Colombia:
“We found when we arrived a very open and
friendly environment. Uribe’s government
was really kind of unique; they persuaded us
to come back to Colombia in the first place.
Mr. Uribe met with our worldwide CEO and
was very open and supportive. The Santos
government now is doing the right things to
improve the investment atmosphere.”
Colombian capital
Domestic capital is also increasingly
flowing into the energy sector. Despite
Colombia’s relatively small local stock market,
the Bolsa de Valores de Colombia
(BVC), the number of energy companies
that list shares in the country is growing.
After Colombian investors had their first
taste with Ecopetrol’s listing in 2007, other
local producers such as Pacific Rubiales and
Fabiola Sojet, CEO of Northern South America,
GE
Bogota, a rapidly growing modern metropolis, is emerging as the the main hub for Colombian oil
and gas. (Photo courtesy of Patricia Matey García)
Canacol have added to the bourse’s energy
offering. Over the past year the BVC has
seen a record $7 billion worth of IPOs or
secondary offerings of equity in the Colombian
marketplace.
“The oil and gas industry is of tremendous
importance to the BVC and to the
Colombian economy overall,” says Juan
Pablo Córdoba, president of the BVC. “Five
years ago, oil and gas were not present on
the exchange, and today it represents more
than 40% of the index. We are seeing more
and more interest from local and foreign resource
companies to come and list in
Colombia because there is good access to
capital.”
Colombian regulators are in the process
of integrating the country’s stock exchange
with those of Peru and Chile, which would
increase investment in those markets and
stimulate trading among the countries. “The
objective is to become a more international
exchange and to make the Colombian exchange
a part of the global capital markets.
By offering our investors a more diversified
pool of potential investments, we will attract
more attention locally and from overseas,”
says Córdoba.
A listing in Colombia is not right for
every E&P company. Listed companies are
required to have some cash flow and, given
that the minimum raise is around $75 million,
it is advisable to have a sizable pipeline
of projects in which to invest the capital. “If
you have that, I think that having local investors
is a big advantage. Canada is a great
place to raise risk equity, but once you strike
oil Colombia definitely offers benefits,” says
Lorenzo Garavito, president of Helm Banco
de Inversion (HBI), the investment-banking
arm of the fifth-largest Colombian bank,
Helm.
Other observers also see growth potential
in the debt market and opportunities for
local banks to participate: “I am sure we are
going to see huge debt requirements for oil
and gas companies, and I would dare to say
that in rough times, when equities prices
change all the time, we will see more moves
in the debt market than the equities market,”
believes Juan Manuel Garcés Alvarez,
vice-president of investment banking at
Colombian bank Correval. Correval was recently
acquired by Banco de Crédito de
Perú (BCP), a move seen by many as a sign
of increased regional integration.
Domestic pension funds represent some
of the largest investors in Colombia’s oil
and gas sector. Pension funds hold about
$40 billion of capital for investment and are
growing at around 15% annually. Such
funds, for example, hold equity in Ecopetrol
and Pacific Rubiales and have stakes in
large infrastructure investment funds.
However, the relative youth of Colombia’s
oil and gas sector has meant that local
investors are not as familiar with oil and gas
investment and the risk profile that E&P
companies present. “They are different risks
than traditional companies. Investors, analysts
and portfolio managers definitely now
understand better the risks the sector poses,
and it seems that it has gained the interest
of the Colombian economy and capital markets,”
said Alejandro Correa, the head investment
strategist at Bolsa y Renta, a
Colombian exchange commission with over
50 years in the market.
One of the largest pension funds in
Colombia, and one that has been an early
mover in oil and gas, is world leader Skandia.
David Buenfil, president of Skandia
Colombia, has seen the rest of the Colombian
pension investment market start to take
notice: “Recently, many voluntary pensions
funds have increased their oil and gas assets.
After seeing the dynamics of the industry,
however, we started fairly early, so investors
in our fund have seen tremendous returns
and have outperformed the market. We are
very proud to have been one of the first investors
when Pacific Rubiales listed.” ▪
June 2012 ▪ OilandGasInvestor.com C-3

COLOMBIA’S OIL & GAS INDUSTRY, 2012
A Model Energy Policy
Colombia's regulatory framework has been the foundation of its recent success.
Colombia’s energy policy has been key to the sector’s recent
success in attracting investors and increasing production.
This policy has been designed and implemented by the Ministry
of Energy and Mining, currently led by minister Mauricio Cárdenas.
A 2010 America’s Council working paper said that in many
ways Colombia could be considered a model for energy development
in the region.
The government sought to revive investment by restructuring
the regulatory framework and revising the fiscal take to reflect
Colombia’s less competitive geology. Royalties were cut from a flat
20% to a sliding scale of 8% to 25%, depending on production levels.
Overall, the state’s share of revenue through royalties and taxes
was reduced to 50% to 55% from a previous 70%.
New ANH contracts are set under a tax royalty regime. Royalty
rates, which are based on production, start at 8% and steadily climb
to 25% as production increases. Corporate tax rates are set at 33%.
Uniting the industry
Colombia’s oil and gas sector is represented by three main bodies.
The Asociación Colombiana Petroleo (ACP) represents and
promotes the interests of the private companies that operate in the
oil sector in Colombia. “ACP is the major association of hydrocarbon-related
companies in Colombia. We currently count on 55
member companies, but the number is growing steadily,” explains
Alejandro Martinez, ACP’s president.
In addition to informing its members and acting as a platform
for communication, ACP acts as a combined voice for E&P players,
explained Martinez: “We make sure that the government comes to
know, and is receptive towards, the concerns of oil companies.”
The Colombian Chamber of Petroleum Services (Campetrol)
was created in 1986 to bring together local and international companies
in the oil and gas sector that have operations in Colombia.
“Our interest is to support the growth of local companies in this
industry, but we also need international investors to encourage the
Mauricio Cárdenas, Colombia’s Minister for Mines and Energy
development of oil and gas; these companies have stronger finance,
can bring new techniques or technologies and can lead local employment,”
says Margarita Villate, executive director at Campetrol.
Asociacion Colombiana de Ingenieros de Petroleos (ACIPET) is
an organization created in 1964 when a group of petroleum engineers
developed the idea to unite and strengthen professional ties
with their colleagues. ACIPET has also experienced rapid growth in
the past five years and now has 560 individual members.
Barrero sees the increased international interest in Colombian
oil as a great opportunity to increase the domestic experience: “It is
a really good opportunity for our engineers, because they are able to
know another culture and the way that international companies
work.”
C-4 OilandGasInvestor.com ▪ June 2012

“Our interest is to support the
growth of local companies in this
industry, but we also need international
investors to encourage development.”
—Margarita Villate,
executive director, Campetrol
Ronda 2012
As part of Uribe’s decision to overhaul the regulatory model
with an eye to attracting private investment, the National Hydrocarbons
Agency (Agencia Nacional de Hidrocarburos: ANH), an
independent oil and gas regulator, was created in 2003.
Since then, Colombia’s oil and gas industry has gone from
strength to strength. The exploration area has increased eightfold
since 2003, from 12.5 million hectares to over 100 million in 2011.
Orlando Cabrales, the National Hydrocarbons Agency (ANH)
general director, officially opened “Ronda 2012” in February 2012
in which 109 oil blocks were offered. Since then, the sale of the
packages with the technical information for the blocks has begun
and ANH, along with the Ministry of Mines and Energy, have
conducted an international road show to attract investors. The
auction is expected to be completed by the end of this year.
The reason that Ronda 2012 has caused more excitement than
usual is because Colombia’s ANH has, for the first time, included
unconventional oil and gas blocks. Of the 109 blocks that Ronda
2012 offers to investors, 31 are deemed to have shale, tight-gas or
coalbed methane (CBM) potential.
As a pioneer auction round, ANH has attempted to amend the
standard concession contract in order to catalyze interest. The expectation
is that these unconventional energy reserves will attract
an additional $500 million in investment.
A study presented by consultancy Arthur D. Little to ANH in
June 2011 estimated Colombia’s recoverable shale-gas reserves at
900 billion cubic meters (bcm). This includes a total of 33.3 trillion
cubic feet (Tcf) or 943 bcm of shale-gas reserves, 1 Tcf (28.3
bcm) of tight sands, 725.4 billion cubic feet (Bcf) or 20.5 bcm of
CBM, 3 billion barrels of
oil shale and 3.45 billion
barrels of oil sands.
It appears that this geological
potential and
government terms are
turning the heads of some
of the world’s biggest players.
In 2011, PetroLatina
Energy sold 85% of one its
Middle Magdalena blocks
to Shell, in order to explore
for an unconventional
reservoir. “Shell is
going to invest between
$100 million and $200
million in exploration.
We think they are looking
for something big there,
and we hope they will be
successful,” says Petro-
Latina CEO Juan Carlos
Rodríguez.
Margarita Villate, executive director,
Campetrol
In March 2012, Canacol
Energy announced a
June 2012 ▪ OilandGasInvestor.com C-5

Ecopetrol's Barrancabermeja refinery, the largest in Colombia, is undergoing an extensive
modernization process.
Orlando Cabrales, general director, ANH
farm-in deal with ExxonMobil. ExxonMobil
will spend up to $50 million drilling as
many as three wells on lands prospective for
shale oil. ”As the world’s largest publicly
owned integrated oil and gas company,
ExxonMobil brings significant experience,
technology, research and financial resources
to this shale-oil joint venture with Canacol,”
said Charle Gamba, Canacol’s president,
in a statement. ▪
C-6 OilandGasInvestor.com ▪ June 2012

COLOMBIA’S OIL & GAS INDUSTRY, 2012
The Main Players
The companies that dominate the Colombian market are leading the country's expansion plans.
Ecopetrol: An exemplary NOC
Ecopetrol, Colombia’s partly privatized national
oil company, accounted for 60% of Colombia’s national
oil production in January 2012. The company
controls 40% of the exploration land and 54% of the
proven energy reserves in Colombia. In addition,
Ecopetrol owns three-fourths of the country’s
pipeline capacity.
Led by its CEO, Javier Gutierrez, the company
has pursued a policy of increased transparency and
competitiveness with international peers over the
past five years. Ecopetrol was “democratized” in
2007, via a $2.8-billion initial public offering for
10.1% of the stock.
The company has quickly adapted to its new role
and has been incredibly aggressive in its exploration,
having increased capital spending the past three
years by nearly 400%, which has resulted in 15 oil
and gas discoveries during that time. Gutierrez an-
nounced a 27% increase in reserves of 400 million barrels in
March. It now has 1.86 billion barrels in reserves.
“Our goal for 2015 is 1 million barrels and 1.3 million by 2020.
This requires us to grow at 12% annually. So far, we have been
growing on average 16%. We wish to add approximately 5 billion
barrels in the next 10 years. This will include the addition of
around 500 million barrels of 1P reserves.”
Despite the growth in its home country, Ecopetrol has also expanded
its reach, now operating subsidiaries in the U.S., Peru and
Brazil. In addition, Ecopetrol agreed with its Venezuelan counterpart,
PDVSA, to form a joint venture to recover four mature oil
fields in the west of the country near the Colombian border, two of
them in Lake Maracaibo where Venezuela’s first wells were drilled a
century ago.
Ecopetrol has been termed a “quiet energy giant” due to its relative
lack of fame in the U.S. However, the company’s internal
Ecopetrol's Capiagua operations, previously one of the country's largest crude producing
fields, has now been converted to a natural gas processing plant. (Photo courtesy of
Ecopetrol)
shake-up and positive results are gradually turning heads internationally.
The privatization process of Ecopetrol is also far from over.
The former NOC has been acting in accordance with the approval
of congress in 2006 whereby they were approved to offer up
to 20% of new shares. “We still have the ability to offer the markets
a further 8.3%,” explains Gutierrez.
The two first rounds were restricted to Colombian citizens and
the solidarity sectors, such as pension funds and unions. It was not
open to international investors or institutional investors. For the
next rounds, Ecopetrol has the possibility of going to any kind of
investor, national or international. “In the future, there will definitely
be more opportunities for international investors to participate,”
Gutierrez enthuses.
Pacific Rubiales: An investor’s favorite
Pacific Rubiales is the largest independent oil and gas explo-
June 2012 ▪ OilandGasInvestor.com C-7

José Francisisco Arata, president of Pacific Rubiales
ration and production company in Colombia. The Toronto-listed
group was founded in 2008 after the merger of Pacific Stratus Energy
Corp. and Petro Rubiales Energy Corp. It operates Colombia’s
largest oil field and also has operations in Guatemala and Peru. The
company had the capacity to produce 251,000 barrels of oil equivalent
(BOE) per day in 2011.
“We have been leading the industry since we arrived in Colombia,
not only with our exploration success, but also in implementing
and ramping up the production of Colombia’s heavy oil,” says José
Fransisco Arata, president, Pacific Rubiales.
Over the past four years, the company has transformed Rubiales
Field, in the Eastern Llanos Basin, into the largest producing field
in Colombia, and one of the biggest onshore fields in all of Latin
America. Low levels of production began at Rubiales in the late
1980s, but increasing investment and the completion of a new
pipeline have allowed production rates to rise in recent years.
“We quickly realized that Rubiales Field was similar to many
fields that we have in Venezuela in the heavy Orinoco Belt. We applied
techniques that have been successfully used in Venezuela for
many years, such as the use of horizontal wells, which has allowed
us to significantly increase recovery,” says Arata.
Production at Rubiales exceeded 170,000 barrels per day in
2011, up from only 12,000 barrels daily in June 2007. “Our target is
to become a 500,000-barrels-per-day operator within the next five
years and also to double our existing 2P reserves to 700 million,”
says Arata. “We have a significant investment plan in place to
achieve that.”
Pacific Rubiales plans to invest $1.6 billion in exploration over
the next five years, which includes drilling over 200 exploratory
wells and shooting over 10,000 kilometers of 2-D and over 4,000
kilometers of 3-D. “We already have blocks in very prospective
basins and we think that we can maintain that very successful track
record in exploration, of over 80% drill success,” says Arata.
“The management team at Pacific Rubiales is a group of aggressive
entrepreneurs with extreme knowledge of how to deal with
heavy crude oil, which we have a lot of in Colombia. When Pacific
Rubiales came here, they were able to capitalize on investors in a
market that was looking for that kind of expertise,” says Boris Cura,
vice president for South America at one of the country’s leading
drilling companies, Saxon Energy Services.
“I have worked all over the world with many different operators,
and what you have at Pacific Rubiales is a group of executives who
are open to new ideas and who listen to our input. When you have
a customer that listens to you and allows you to combine your ex-
June 2012 ▪ OilandGasInvestor.com C-9

pertise with theirs, that is about as good as
it gets, and this is what we have seen with
Pacific Rubiales in Colombia,” continues
Cura.
Equión: Taking on big challenges
Equión Energia was formed in January
2011 as a joint-venture ownership between
Ecopetrol, with 51%, and Talisman, 49%.
The company was created on the basis of
BP Colombia assets, which were purchased
for $1.75 billion.
“We are fortunate to be partnered with
the leading companies in the country and
are in a position where Talisman can constructively
contribute and work with the
operator and bring the skills and resources
that Talisman has to bear,” says Talisman’s
Colombia manager, Chris Spaulding.
Due to the assets that it acquired,
Equión is now leading Colombia’s offshore
developments. “The offshore blocks, RC4
and RC5, hold an important part of
Equión’s future,” says María Victoria Riaño,
CEO of Equión.
At RC5, which is in shallow water, the
prospect is to find gas, while at RC4, which
is in deeper water, there is potential for
both liquids and gas. Equión plan to start
drilling two exploration wells in RC5 in
May 2012.
Equión is not the only company to pursue
offshore exploration in Colombia. International
players such as Repsol, Petrobras,
Shell and Reliance are all also undertaking
studies. “Essentially all the offshore companies
are working in synergy to import the
necessary equipment, and ensure that the
offshore opportunity is fully taken advantage
of. We know that everyone is looking
at us as it is a big event for Colombia,” says
Riaño.
In addition to its offshore assets, Equión
is continuing to develop its promising onshore
blocks. “Our onshore blocks are very
important as they will be our lifeline for the
next eight years as they provide reliable
cash flow for our ambitious expansion. Fortunately
we have an excellent team that
knows how to operate in that area. It is one
of the most geologically complicated areas
in Colombia,” says Riaño.
Equión has drilled the deepest wells in
Colombia, reaching 17,000 to 19,000 feet of
depth. “Our drilling operates are at the cutting
edge of technology and knowledge. We
now have three rigs working in the mountainous
Piedmont block, Casanare province,
which is a challenge not only in terms of
drilling but also in terms of building the
necessary facilities,” she explains.
“Equión is now known for being a good
María Victoria Riaño, CEO, Equión
operator in Colombia, in some of the most
challenging environments the country has
to offer. We are now looking to grow and
apply our knowledge to new challenges. We
have a good production base and we have
the foundation to do a lot more for Colombian
oil development,” says Riaño. ▪
Equión’s new offshore platform, Mischief, was towed to the Mapalé 1 well site location in the first days of May to begin 90 days of
exploratory drilling. (Photo courtesy of Equión)
C-10 OilandGasInvestor.com ▪ June 2012

COLOMBIA’S OIL & GAS INDUSTRY, 2012
Emerging Opportunities
Mid-tier and junior players have found an E&P haven in Colombia.
Oil and gas companies are conducting an aggressive exploration
campaign throughout Colombia. The ANH divides
the country into 23 potential hydrocarbon basins, of which
16 are located in areas onshore and seven offshore. Colombia’s geology
has been compared to western Canada: a mountain range,
foothills and plains that have the potential for significant hydrocarbon
deposits. Colombia’s violent past has meant that vast stretches
of the country were considered no-go areas until quite recently. The
operational hazards of the past have created significant opportunities
going forward as acreage is relatively unexplored.
Ecopetrol estimates Colombia’s potential reserves at 47 billion
barrels of oil equivalent. In 2011, Colombian exploration projects
were being conducted by 34 different operators and the country’s
production is contributed to by 51 different companies.
Some observers have spoken of a natural ceiling on Colombian
oil and gas production, at around its current 1 million barrels per
day of production. However, Tomás Correa, a geologist by training
who works as a petroleum and mineral analyst at exchange commission
Bolsa y Renta, disputes this theory: “The industry’s natural
ceiling will not be reached in the short term because of the huge geological
potential of the country. The only constraints on growth
and production have to do with the bottleneck in infrastructure,
but that will be solved with time.”
Llanos Basin: Leading production
The Llanos Basin is situated in east-central Colombia and is one
of the country’s most prospective areas for oil and gas E&P activities.
More than 1.5 billion barrels of recoverable oil has been officially
documented in this basin. It accounts for roughly 70% of the
nation’s oil production volumes.
One company with a significant Llanos portfolio is Canacol Energy.
Although young and relatively small, Canacol has turned a lot
of heads with its rise to strategic player in the Colombian E&P sector.
Since its establishment in 2008, Canacol has made two significant
conventional oil discoveries in Colombia to date: the Capella
heavy oil discovery in 2008, and the Rancho Hermoso new-pool
discovery in 2009. Rancho Hermoso is now the cornerstone production
asset for the company.
In November 2011, Canacol announced the acquisition of fellow
Colombian explorer, Carrao Energy. Rozo explained that the
acquisition of Carrao was a natural fit for Canacol, especially because
of Carrao’s blocks in the Llanos basin that are contiguous to
Rancho Hermoso. “We expect to apply to these new blocks our expertise
in developing fields, as can testify the case of Rancho Hermoso,
which we bought with a production of 3,000 barrels per day
and is now 35,000 barrels per day,” says Rafael Rozo, general manager
of Canacol.
June 2012 ▪ OilandGasInvestor.com C-11

Richard Walls, president, C&C Energy
Canacol now has most of its exploration
assets in the Caguan-Putumayo Basin, including
more than 1.2 million net acres in
the emerging Caguan heavy oil trend.
Caguan is believed to lie on the Orinoco
heavy oil belt, which also includes Rubiales
and Quifa fields.
Canacol is well placed, as this southern
extension of the belt comes under increasing
scrutiny. “Having such a significant resource
base gives us the chance to develop
the best projects in the best areas of
Colombia without having to suffer the initial
constraints that companies normally
have to cope with,” says Rozo.
In the Caguan-Putumayo Basin, Canacol
has been engaged in partnership with
Sinochem since 2008, and made the
biggest discovery in the country of the last
20 years at Cappella Field. Rozo sees a lot
more potential in that region: “Putumayo
presents the opportunity for new discoveries,
and we are willing to apply all our expertise
to such an attractive environment.”
Rozo thinks that the Canacol story still
has a long way to go: “Canacol is a company
that will definitely continue growing:
at the moment we are expecting to reach a
production rate of 45,000 barrels per day by
2018. With this newly renovated portfolio
of activities we will go through a process of
redefining the company’s priorities and
growth models.”
Another E&P player with important
Llanos assets is Interoil Exploration & Production,
an international independent
petroleum company headquartered in Oslo.
Interoil E&P serves as operator or active license
partner in several production and exploration
assets in Peru, Colombia, and
Ghana.
In the past two years, Interoil has increased
its focus on Latin America, and
Colombia is playing an increasingly important
role in that strategy. “The political stability
and government take in Colombia is
very attractive. Along with Peru, Colombia
really is one of the most attractive markets
C-12 OilandGasInvestor.com ▪ June 2012

in the world for a company like ours,” says
Mauricio de la Mora, general manager for
Interoil Colombia.
In the 2010 round, Interoil was granted
two of the most desired blocks: Llanos 47
and Cordillera 6. The company is now in
the early stages of exploration studies on
those blocks after waiting almost a year to
receive the necessary permits. At this time,
Interoil is also looking to spread the risk
and so is looking for partners on Llanos 47
and Cordillera 6. “There has been a lot of
interest and we are considering a lot of
farm-in opportunities,” says de la Mora.
Another gem within Interoil’s Colombian
portfolio is Altair, a small block that
was won in the 2008 bidding round. “Altair
has continued to be a great success. It has
been steadily producing 500 barrels per day
with a very nice water cut of close to 15%,”
enthuses de la Mora.
Petroamerica Oil is listed on the TSX
Ventures Exchange and has assembled a
large portfolio of prospective oil properties
in several prolific basins, but the Llanos
basin is the core focus of the company. The
company has made two discoveries since its
inception. Their first discovery was made
there, in the Balay-1 project, in which they
have a 15% share with Petrobras as operator.
The second discovery was drilled on the
Los Ocarros block, operated by Parex,
where it has 50% ownership.
Nelson Navarrete, the president and
CEO, sees a great deal of potential in the
basin: “It is still an unexplored area, where
new drilling and appraisal techniques will
enable more discoveries.”
Early production from the Las Maracas-2
well on the Los Ocarros block is anticipated
to be on stream in the second quarter of
2012. Navarrete has a clear plan in order to
develop Petroamerica’s lead prospects: “In
2012, we will focus on the reserve potential
of our most recent discovery on the Los
Ocarros Block, and in the development of
the Balay project. In addition, we are planning
to drill at least six exploratory wells in
six different blocks to delineate our other
assets. Our strategy is to thoroughly explore
our land position, particularly the blocks in
the Llanos Basin.”
In 2011, Petroamerica undertook a process
of portfolio optimization, whereby the
exposure has been reduced from 13 blocks
over three basins to eight blocks over two
basins. This has reduced the exploration
commitment of more than $80 million, to
an approximately $34-million exploration
budget.
As the company now moves forward on
its lead projects and other exploration targets,
it sees an opportunity to take on operation
of a project. However, Navarrete
thinks that the careful selection of experienced
partners and effective shared ownership
will continue to be the company’s
model.
C&C Energia is another TSX-listed,
pure Colombia E&P play that is also maintaining
a focus on the Llanos and Putumayo
basins. The company has achieved a daily
production of 10,600 barrels of mainly light
oil since beginning operations in 2005. Fifty
percent of that growth has been achieved in
the past 18 months, since going public in
May 2010. C&C Energia holds interests in
eight to nine blocks, seven as operator, in
Colombia, with a total acreage position of
approximately 626,000 acres.
“C&C is a technical company aiming at
our strengths, and put together blocks from
the ground upwards in areas that we prefer,”
explains Richard Walls, C&C’s president.
C&C’s success rate was assisted by the inventory
of projects the company managed
Nelson Navarrete, president and CEO,
Petroamerica Oil Corp. (Photo courtesy of
Petroamerica)
to secure when the country opened up bid
rounds in 2005.
The company’s cash-flow foundation is
based on Llanos Basin assets, where the
company has pursued a strategy of low- to
medium-risk exploration. Last year, C&C
concentrated on exploration in the Llanos
Basin, the origin of its production growth
and where half the company’s blocks are yet
to be tested.
Walls sees the company’s Putumayo assets
as having significant upside potential:
“The geology, structures, and style in the
Putumayo are different but with larger potential
accumulations than the Llanos. The
southern Putumayo is a northern extension
of the Oriente Basin, Ecuador, which has
some giant fields.”
C&C achieved a cash flow of approximately
$125 million for 2011, expects at
least $160 million for 2012 and currently
has $112 million in cash. Walls feels that,
with these financials, deal-making opportunities
may emerge for the company in the
June 2012 ▪ OilandGasInvestor.com C-13

Alastair Hill, president and CEO, Suroco
near future: “With the aggressive bid rounds
over the last few years, many blocks are still
tied up in commitments with companies;
C&C feel that there will be a turnover of
those blocks which would be of interest to
us provided they fit into our portfolio and
do not dilute our shareholders by taking on
a poor asset.”
Walls now wants to achieve a stepchange
in the company size and production;
either from within the existing assets or
through acquisition. “C&C has a technical
bias and would want to see hard data to support
before we make any forward movement
on a prospect or acquisition. In 2012, we
will be more of an exploratory company
than last year with higher risk and much
larger profile projects, including our first serious
exploration in the Putumayo Basin,”
he explains.
Another Toronto-listed junior that has
attracted a lot of attention from its Colombian
activities is PetroNova. The company
was established by Inepetrol, a Swedish
company related to E&P with operations in
Venezuela. “We brought our expertise to
Colombia in order to participate in oil opportunities
because we felt that the risks of
exploration had been mitigated,” says Antonio
Vincentelli, president and CEO,
PetroNova.
The company has almost 200 million
acres of property spread over five blocks that
have not been fully explored. In 2008, the
company participated in three Eastern
Llanos Basin blocks, where it has a 20% interest,
in partnership with Tecpetrol as the
operator. In the Caguan-Putumayo area,
PetroNova has two blocks where it is operator,
one 90% interest and one 100% interest.
All of the company’s assets are located
nearby or on-trend to existing major oil
fields or discoveries. For example, the Eastern
Llanos asset, CPO 6, CPO 7 and CPO
13 blocks, are surrounded by areas that have
had recent oil discoveries. Vincentelli
points out that a modest discovery in any of
these assets could rapidly catalyze the company’s
worth: “With the 20% interest that
we have in CPO13 alone, and the estimated
production that could arise from that, the
value of the company could quickly double.”
Mid-Magdalena
The Mid-Magdalena Valley is another
region of Colombia that is attracting a lot of
attention among oil and gas investors. It is
located in the Eastern Cordilleras of the
Colombian Andes and the ANH estimates
that exploration activity to date has led to
the discovery of 1.9 billion barrels of oil and
2.5 trillion cubic feet of gas.
The biggest operator in the Mid-Magdalena
is currently PetroLatina Energy, an
E&P company that started in Guatemala,
but aimed to expand its business in Latin
America and specifically in Colombia. In
June 2006 PetroLatina completed the acquisition
of Petroleos del Norte, a local
Colombian company.
“We are lucky to operate in the Middle
Magdalena: it is one of the safest areas in
the country to work in and its facilities are
excellent. We deliver all of our oil to the
Ecopetrol Ayacucho facility, which is a
major pumping station where all the main
pipelines pass through,” says Juan Carlos
Rodríguez, CEO of PetroLatina.
C-14 OilandGasInvestor.com ▪ June 2012

"Colombia really is one of the most attractive markets in the world for a
company like ours,” says Mauricio de la Mora, general manager for
Interoil Colombia. (Photo courtesy of Interoil)
The company made a discovery two years ago in one of the
blocks that came with the acquisition, La Paloma. A drilling campaign
was begun in January 2012 in order to develop and continue
exploring this block.
CleanEnergy is an exploration and production company that was
founded on 2004 by Colombian shareholders with years of experience
in the petroleum industry. The company obtained its first two
exploration fields in the Mid-Magdalena, Toque and Quebrada
Roja, when Ecopetrol was still in charge of concessions.
“With these fields we had an advantage, because these were
blocks with pre-existing discoveries and we were able to quickly
achieve production,” says William Blackburn, general manager of
CleanEnergy. After this, and thanks to its producer status,
CleanEnergy obtained two additional blocks in later ANH bidding
rounds where it has conducted extensive exploration activities, including
2-D and 3-D seismic acquisition.
“We are an example of what Colombian small companies can do
to become strategic players in the oil and gas business,” says Blackburn.
He feels that companies like CleanEnergy play a vital role as
an intermediary, firming up resources for larger player to take over:
“Small companies are a ‘bridge’ for the international companies to
have an easier way to come to Colombia.”
He uses the example of Pacific Rubiales to indicate the potential
that CleanEnergy has: “Five years ago, Pacific Rubiales was a small
company like us. Thanks to the high objectives and goals its shareholders
had, it had become one of the best case studies of success
and an example of how small firms can become big players in the oil
and gas industry.”
Catatumbo
Sitting on the Colombian and Venezuelan border, the Catatumbo
Basin is a southwest extension of the Maracaibo Basin in
Venezuela, a petroleum supergiant basin that accounts for about 2%
of the hydrocarbon reserves of the world. It is one of the most prolific
basins in Colombia and, although only moderately explored,
the basin has produced more than 450 million barrels of oil and 500
gcf of gas since 1920.
PetroMagdalena is a Canadian-based oil and gas exploration and
production company with working interests in 19 properties in
Colombia, including the Catatumbo Basin; namely the Santa Cruz
and Catguas blocks. The company is excited about these assets as
the surrounding blocks have produced over 190 million barrels.
“Our main block is Cubiro, in the Llanos Basin, from which we are
currently drawing 90% of our production and see the potential for
substantial increase in production,” explains CEO Luciano Biondi.
Seismic work has been carried out and exploration drilling will
June 2012 ▪ OilandGasInvestor.com C-15

Colombia is keen to protect its dramatic natural beauty that ranges from
Carribean coastline, Andean mountains and deep Amazonian rainforest.
(Photo courtesy of Patricia Matey García)
restart in fourth-quarter 2012. “If successful, these areas could create
a positive transformation of the company, as there is an estimated
$400 million in resources in the new exploration sites. Our current
reserves, including gas, are 30 million boe, and just in Santa Cruz
there is an additional estimated 70 million barrels of oil,” enthuses
Biondi.
PetroMagdalena has strategically decided that, to develop their
core assets, such as Santa Cruz and Catguas, it will farm out or sell
other assets. However, this has not dampened Biondi’s ambition to
make PetroMagdalena a significant player: “I hope that within five
years, PetroMagdalena will be producing at least 15,000 barrels per
day. This would require a tenfold increase on our current produc-
tion but I think that with our team, our assets and the clear strategy
that we have in place that this target is very realistic.”
Caguan-Putumayo
The Caguan-Putumayo basin is in the southwest of the country,
bordering Ecuador and Peru. Covering approximately 104,000
square kilometres, more than 365 million barrels have been found
to date, in 19 oil fields.
Suroco Energy Inc. is a Colombia-focused, international oil and
gas exploration company based in Calgary, which trades on the
TSX Venture Exchange. Suroco has five blocks in Colombia, three
of which are in the Putumayo region.
Suroco’s president and CEO, Alastair Hill, sees the Putumayo
Basin as the northern extension of the Oriente Basin, which has
been so well exploited across the border in Ecuador. “There are a
number of large fields, up to a billion barrels, in the Oriente Basin
and a median field size of 5 million to 8 million barrels. To compare,
the Llanos Basin has a median field size of 2 million to 3 million barrels.
That makes us feel that the Putumayo is still very prospective
and holds significant potential for large field discoveries.”
Hill says that Putumayo is of vital importance to the company.
“The majority of our asset base is in Putumayo; it is an area where
we have the most knowledge. Based on our past activity and investment,
we really understand the geology and the resource potential
and it will continue to be our principal focus area.”
Suroco has been very successful since late 2009. The company
has drilled nine wells in this area, enjoyed a high success rate and
significantly grown its production from the region.
Suroco has three blocks in Putumayo and has a single partner in
each of them. Its production block is operated through a consortium
agreement that provides Suroco the control it needs to execute its
program, as was shown in 2011 and the good results that followed.
“There is sometimes a misperception in the market in that, because
we have a relatively small working interest in our block, we
may get dragged along by the major partner. Actually that is not the
case, because to make decisions and execute a program, consensus is
required among all partners. Therefore, we have effective co-operation
of that block,” says Hill.
Heavy oil
A significant portion of the recent production growth has been
driven by access to abundant heavy oil resources. According to geological
surveys, a large heavy oil belt runs from Venezuela, through
C-16 OilandGasInvestor.com ▪ June 2012

Martha Rocío Durán, general manager, MR
Soluciones
Colombia into Ecuador.
Colombia’s heavy oil plays are primarily
located in the southeastern part of the
country, where a heavy oil belt exists in
the Llanos Basin. The two largest Colombian
heavy oil discoveries to date are Rubiales
Field in the Llanos Basin, with 4.38
billion barrels of oil in place, and Capella
Field in the Putumayo Basin, with 2.2 billion
barrels of oil in place.
“I think the future for Colombia is the
heavy oil, moving from the west to the
east, close to the frontier with Brazil. This
oil is really similar to the one in the
Orinoco Petroleum Belt. I am very sure
that there are going to be a lot of medium
and heavy oil discoveries in the Llanos region,”
says Humberto Calderón, president
of Vetra Energy and former Energy Minister
for Venezuela.
Given Venezuela’s expertise in heavy
oil and the incredible success enjoyed by
fellow Venezuelans at Pacific Rubiales,
Calderón is well placed to assess this potential.
Vetra is a company that offered a
range of services and technical support to
the Colombian oil and gas industry since
2003. However, the company has now
transitioned to focus on exploration and
discovery.
The company’s exploration activities
are currently focused in Putumayo, where
it has its main activities, but it is also starting
to increase work in the Llanos.
Calderón plans to be listed in mid-2012
on the TSX. “The objective of going on
public is to build reputation and finance
for our plans in Colombia. We will make a
small listing, but we expect to grow
strongly as investors become familiar with
our group,” says Calderón.
Environment and community
The expansion of acreage available for
oil exploration has also extended drilling
activity into more remote areas, often populated
by indigenous communities or lo-
June 2012 ▪ OilandGasInvestor.com C-17

cated in environmentally sensitive ecosystems.
“Oil fields create expectations. Communities want to improve
their standards of living, have better schools, health services, water
and roads. The growth of the energy sector has outpaced the delivery
of those benefits, and so communities demand more attention,”
says Colombia’s Mining and Energy Minister, Mauricio Cárdenas.
“We are seeing now that firms are starting to realize that social
responsibility and community relations are one of the keys to success
for E&P companies,” said Martha Rocío Durán. Rocío is an environmental
and sanitary engineer who, after working on social
responsibility programs for Pacific Rubiales, founded MR Soluciones
in order to offer consultancy on the design and implementation of
environmental or social responsibility issues.
MR Soluciones work on projects that can help communities to
develop economic activities that can work alongside and indepen-
COLOMBIA’S OIL & GAS INDUSTRY, 2012
Services Sector
Colombia's oil and gas service sector is expanding rapidly as local experience grows.
According to Campetrol, the Colombian Chamber of
Petroleum Services, the oil goods and services sector in
Colombia is a growing industry whose operational revenues
reached $2.5 billion in 2008. Over the past five years, more than
200 companies were established that provide goods and services related
to oil and gas industry.
Margarita Villate, executive director at Campetrol, notes this
growth and the development of the different drilling, seismic or
transport services to support the development of operators, but believes
this industry needs to be encouraged. “It cannot grow on its
own; it needs the support of the government because without services
companies sustaining the operations of E&P firms, the oil and
gas sector wouldn’t be where it is now.”
Humberto Calderón, president of Vetra Energy and former Energy
Minister for Venezuela, finds that, as an operator, the lack of
service companies can be a frustration. “The prices are really high,
sometimes three times higher than in U.S. I think that to solve this
dent from E&P activity. In this way, the company aims to create oil
industry benefits that are sustainable and will be maintained even
after an oil and gas operation has left an area.
“Colombia is a country with an impressive cultural diversity
that can be difficult to understand,” acknowledges Rocío. “But,
once you overcome that barrier and show the community the benefits
that a hydrocarbon project can bring to the region, most communities
not only start to cooperate but also try to work with E&P
companies and participate in the development.”
William Blackburn, president of E&P company CleanEnergy,
says that the first priority on a project is to get the “social license”
of the community in proximity to its fields. “Ours is a new activity
in rural areas, where agriculture and livestock are the main economic
activities. Without this approval, the growth of a project is
not possible.” ▪
problem local companies should be encouraged to expand their
work here and more international firms should evaluate the possibility
of establishing operations here.”
One such multinational that has taken up this opportunity is
German air compressor producer Kaeser Compressors. Its growth in
sales in Colombia, particularly in oil and gas, has been phenomenal.
The company sold just three units to the energy sector in 2008,
but in 2010 it sold over 100 units to oil and gas customers. “The demand
is doubling every year and by the end of 2011 we expect to
have sold 400 units. The size of units is also increasing as larger
companies want bigger equipment and machines, which provides us
with more revenue,” says Juan Carlos Isaza, sales manager of
Kaeser’s Colombian operations.
“When we first came to Colombia, the oil and gas industry was
small and under developed and there had been little investment
made into the sector. Over the last three years our business has
grown rapidly as we have developed a specific offering for our
C-18 OilandGasInvestor.com ▪ June 2012

Narciso Chiquillo, president, Geoespectro
clients’ operations in Colombia,” says Nelson
López, general manager for Kaeser
Colombia.
The U.S. has been Colombia’s top trading
partner; however, competition is increasing
as other countries aggressively
pursue trade opportunities in Colombia’s
growing market. Upon the approval and
implementation of the U.S.–Colombia
Trade Promotion Agreement, from 2012,
U.S. equipment exporters will be more
competitive as products will receive immediate
duty-free treatment.
“There has always existed an excellent
trade relationship between North and
South America and so North American investors
need to take advantage of that reputation
in order to take maximum benefit
from the great opportunities available,” said
Juan Pablo Jimeno, country manager for
Colombia at CB&I, the multinational EPC
conglomerate.
Bogota is the undeniable hub for
Colombia’s oil and gas industry. Although
operations are spread across the country, almost
every company involved in oil and gas
has its headquarters in the capital. It is unquestionably
the first port of call for any oil
and gas investor looking to meet the country’s
key energy players.
“Foreign companies who want to do
business in Colombia will need to establish
an office in Bogota. This is the city where
the vast majority of the industry is concentrated
and there is a lot of talent available
here,” says Robert Peterson, CFO of Pacific
Process Systems Engineering (PPSE).
PPSE provides engineering services to
E&P and service companies and is focused
on early production facilities for newly discovered
fields and field extensions. The
company was incorporated in California,
where there is a lot of heavy oil experience,
and its aim is to bring this heavy oil and gas
processing expertise to new markets.
Peterson found the process of establishing
a Colombian operation to be a relatively
painless experience: “It is a learning
process. Every country has its own regulations
and own accounting regime and requirements.
We have found support
available and have successfully established
our business here in a relatively short period
of time.”
Seismic sector grows
As a hugely underexplored market, one
of the service sectors that has enjoyed particular
success has been seismic acquisition.
One example of the size of this market has
been the incredible growth of Geoespectro,
a company that was founded in 2009.
“Right now is the time that Colombia is
going to shine,” said Narciso Chiquillo, the
company’s president. “There are a lot of
good Colombian seismic companies and a
very high standard is maintained by the
whole industry here in Colombia. Thankfully,
there has been such a huge growth in
demand that there has been plenty of business
for everyone.”
“The greatest opportunities are in
Colombia,” believes Felipe Lizarralde, general
manager of fellow seismic acquisition
provider G2 Seismic. “We are going to
focus all our efforts in this market because
we are sure the demand for seismic acquisition
is going to keep increasing and that we
will have many opportunities here.”
“I also believe that there are more opportunities
in other services besides seismic,
services which will be required in following
stages of projects such as drilling, transport,
etc. As the sector develops and more companies
move into production, a whole range
of new opportunities could open for us in
this market,” says Lizarralde.
SAExploration is another seismic acquisition
provider that has been operating very
successfully in Peru, commanding 90% of
that market. However, the company saw a
lot of potential in Colombia and opened a
Colombian office in 2008. Since then, the
company has enjoyed ever-increasing demand
for its services.
Arturo Mendez, vice president of marketing
and business development, Latin
America, for SAExploration, believes that
although the Colombian seismic market
could look crowded, in reality very few serious
players exist: “Out of 23 seismic companies
in Colombia, 18 of them are not really
companies, but just a couple of guys getting
together and renting equipment. There are
not many at all that can provide a complete
service and can guarantee the job will be
finished safely, on time, and on budget,” he
says.
Douglas Reichenbach, vice president of
operations, Latin America, for the company
June 2012 ▪ OilandGasInvestor.com C-19

Arturo Mendez, vice president, marketing and
business development Latin America,
SAExploration
believes that Colombia holds great longterm
potential and that the opportunities
are often preferable to those in its original
Peruvian market. “In Colombia the oil deposits
tend to be in areas that are reasonably
accessible. The time between signing and
seeing oil in Peru is at least triple what it is
here,” he says.
SAExploration’s international expansion
is still gaining pace. Presently, the
company also has offices in Bolivia, Alaska,
Canada, Papua New Guinea and Australia.
“Our gross revenue in 2010 was $49 million,
and our goal for 2015 is $91 million. In
order to achieve that we need to continue
our current growth rate of 10% to 15%
every year. We really believe in the potential
of the country and will continue to
focus our work here,” says Mendez.
Drilling opportunities
Drilling activity has also increased at an
average annual rate of 36% since 2004, according
to ANH. A peak of 112 exploratory
wells were drilled in 2010. That demand has
so far been met by an unconsolidated range
of small and large drilling contractors. However,
like in seismic acquisition, a few companies
are now looking to apply scale to
their operations and increase efficiencies.
Saxon has operated in Colombia for
nearly six years since entering the market
through the acquisition of some of the assets
that used to belong to Parker, another
drilling contractor. “At that time, the idea
was to enter Colombia with some of those
older assets and consolidate the market,”
says Saxon’s vice president for Latin America,
Boris Cura.
Colombia is now the biggest operation
that Saxon has in Latin America. “Bogota
has become our headquarters for South
America because it is extremely well located,
and the investment in this country
when it comes to oil and gas is very significant.
Geographically, it is also the best location
to oversee the continent,” says Cura.
Until very recently, Saxon’s core business
was in the 750- to 1,000-horsepower
range. Based on client demands, in late
2010, the company acquired a division of
Schlumberger, RMG, which expanded the
company’s scope to 3,000 horsepower.
Saxon’s growth in Colombia has been
largely built on the foundation of a growing
relationship with Pacific Rubiales. “We saw
that Pacific Rubiales could benefit from
skidding rigs, as they needed to drill a num-
ber of wells in close proximity to one another.
We brought a number of mediumsized
skidding rigs from our operations in
Mexico, where demand was declining. We
built a base on our technology and the efficiency
of our rigs, and we have grown from
there,” says Cura.
Founded in 2008, Tuscany International
Drilling Inc. is a Canadian international
drilling, completion, workover, and equipment
rental oilfield services company.
Colombia has been a primary focus for the
company, where it employs over 800 people
through a recent acquisition of Colombian
drilling player, Caroil. “It is the backbone of
our company,” says Reg Greenslade, company
president.
“The market gives Tuscany the opportunity
to grow,” agrees Walter Dawson, Tuscany’s
founder and current executive
chairman. “We see the market has a growing
demand for drilling rigs so we see opportunities
for growth in terms of replacing old
equipment and delivering extra rigs for the
growth of the area. Our customers have had
a lot of success in finding hydrocarbons,
which only encourages more drilling and
more opportunity for growth.”
Tuscany is hoping to compete in Colombia
through newly built rigs that are designed
for deeper drilling and ease of
transport. “The newer equipment moves in
less loads, most of it has top drives, iron
roughnecks, and pipe handling equipment.
These rigs have smaller footprints, which
contributes to their safety and environmental
impact,” explains Dawson.
Greenslade is not deterred in his enthusiasm
for the Colombia story by the number
of other drilling companies operating in
Colombia. “There are always other drilling
companies, there is always competition.
Our edge comes from the founding vision of
C-20 OilandGasInvestor.com ▪ June 2012

Warren Levy, chairman, Estrella International
Energy Services
the company, to provide the latest technology
to our clients to give them the competitive
edge in the market.”
Estrella International Energy Services is
another multinational drilling company
that has focused its operations on Latin
America. Founded in Argentina, Estrella
has expanded to over 500 employees in five
different countries.
Estrella’s chairman, Warren Levy, says
that the company has maintained a focus
on portability in their equipment. “One
common theme around South America is
that it is harder to move equipment around.
There is poor infrastructure, so we have a
lighter more portable rig that makes things
easier. If you can be more efficient at moving
your rigs then results in better profitability
for your customers,” he says.
Despite the company’s continent-wide
presence, Levy sees Colombia as a vital part
of Estrella’s immediate growth. “Even
though the reserve base here is not as good
as some of the other countries in South
America, right now is the time that Colombia
is going to shine. We have always liked
the market and its potential and it is great
to see things finally take off,” he says.
Chuck Southard, president and general
manager of drilling company Evertson International
sees enormous potential for this
market: “There are always going to be ups
and downs, but there is no ceiling for the
Colombian industry: a lot of areas are unexplored,
and there is a lot of new technology
to improve production in explored areas.”
Evertson International was formed in
1997 as a partnership between Southard
and Bruce Evertson, CEO of the Evertson
Companies. The company was originally focused
on drilling and servicing wells in
Venezuela’s Orinoco Belt. “We have been
working in this region for more than 12
years and strongly believe that our experience
from Venezuela leaves us well positioned
for working in the shallow fields, and
potentially in the heavy oil fields too,” says
Southard.
He believes that developing relationships
in the market is the key: “Colombia is
a very relationship-based society. Once you
gain that trust and build that reputation,
you can have clients forever. Due to our
track record, we have had some in
Venezuela for 12 years.”
Another player that is investing heavily
in Colombia is Drillmec, an Italian drilling
company, part of the Trevi group, with operations
worldwide. John Alvarez, general
manager for Colombia, explains how
Drillmec considers the country as a key
market in expansion, just like Mexico. The
company relies on its offering in high-end
technological equipment, and is working in
the Middle Magdalena Valley with
Ecopetrol.
Local expertise
Although Colombia does not have the
oil and gas history of countries like
Venezuela and Mexico, it has started to develop
in-country expertise in many of the
key service lines that E&P companies require.
Many local companies are now attaining
world-class standards and providing
cutting edge products and techniques.
“The service offering to oil and gas companies
has increased a lot recently. Ten
June 2012 ▪ OilandGasInvestor.com C-21

Colombia's seismic surveying has reached record levels and involves the
use of leading techniques.
years ago, for most products or services we had just two providers
and now we have a much larger offer with many more foreign players.
Many major service companies are interested in investing
here,” says Christian Duque, general manager at Trayectoria Oil &
Gas, an E&P company that was launched six years ago and is now
exploring a number of assets in Colombia and across Latin America.
However, the challenge for Colombia is to build a brand around
its domestic service providers. Jorge Cárdenas is president of Grupo
Atlas, a diversified Colombian oil and gas services company, and is
the former president of Campetrol. He feels that local companies
need encouragement through government policy in order to increase
participation from local players.
“We have seen that more than the 90% of the drilling contracts
and 80% in the production contracts awarded in Colombia are distributed
among four international companies: Halliburton, Weatherford,
Baker and Schlumberger,” points out Cárdenas. “In
Campetrol there is a project to develop a government policy that
supports the development of local services in oil and gas. Bringing
more international services providers is not a solution; we will only
have a real Colombian oil industry once when we encourage the
growth of our services industry to cover the demand and to be able
to finance the acquisition of new and efficient equipment.”
One example of the rapid uptake of experience in Colombia is
Antek, a laboratory services company that grew from being a small
company with only a dozen employees, to being the main private
laboratory in Colombia. The oil and gas industry represents its
largest, and most rapidly growing, line of business and so, through
working with its key oil and gas clients, the group has been able to
broaden its service offering to international standards.
“Antek is 100% Colombian, and I think this is an extremely important
factor. But Antek’s main advantage is our ability to deliver:
we can process high volumes of data in a short period of time, with
the highest quality standards,” says Henry Castro, general manager
of Antek.
Antek currently controls around 50% of the market, but with
many international lab companies like SGS and Bureau Veritas
growing their presence in Colombia, competition is expected to get
stiffer. However, Castro feels that the local knowledge will be a crucial
competitive edge. “We are aware of the threat posed by private
laboratories set up by big multinationals, but we are confident our
excellent reputation, our local expertise, and the relationships we
built with our clients, enable us to face those threats,” says Castro.
Another example is in power generation for E&P projects.
Power Group was founded in 2010, but the market was initially
tough for the local group, given that international players are already
well established. However, the company is now taking off,
with demand soaring and the group is opening new offices, a workshop
for equipment maintenance and enough space for significant
stock levels and other expansion options.
Power Group started by building its own machines with recycled
parts but now is able to buy assembly equipment from Peru and Argentina
that creates a much higher quality product. “Our aim is to
have the best product available in the market. We are developing
generators that utilize gas, turbines and wind energy. We want our
C-22 OilandGasInvestor.com ▪ June 2012

products to be known for being both environmentally
friendly and highly efficient,”
says José Enrique Garzón, manager at Power
Group.
Now that Power Group has established
itself in Colombia and developed its products
and services to a high standard, it
wants to expand operations across the region.
It hopes that in four years it will have
operations in Ecuador, Brazil and Argentina.
Oilfield management is another field
that was originally dominated by the large
international service providers. However,
local companies can often offer a better understanding
of the Colombian labour dynamics
and the security or logistical
considerations than those that are less familiar
with the country.
One example is Empressa Colombiana
de Operaciones Petroleras (Ecop SA), a
company that started operations in 2001,
and offers engineering services for explorations
projects and specialized supervision
in the field once projects go into operation.
“Our experience and knowledge in the
sector is our strength, because we see that
consulting services are a priority in this
market. However, sometimes it is a challenge
that companies do not understand the
impact that having an experienced, local
consultant can have on the success of a project,”
explains Omar Cortés, general manager
of Ecop.
It has taken time for Colombian operational
consultants to build a brand or reputation,
but now Ecop has demonstrated its
capabilities and had the chance to work
with companies such as Petrobras, Ecopetrol
and Pacific Rubiales. Cortés believes that
this perception is changing.
“International companies have an ad-
Jaime Durán (right), general manager, Adrialpetro
vantage over local consultants because their
brand is more recognized and because the
Colombian service sector is not yet internationally
known,” he says. “However, local
companies also have a big advantage over
internationals because Colombia is a unique
place to operate in. The security and infrastructure
considerations that need to be
made here are very different from other
markets.”
This view is shared by William Santos,
general manager of William Santos Ingeniería
y Construcción. The company designs
and constructs production facilities
and has built a close relationship with a
number of the main E&P companies operating
in Colombia, particularly Pacific Rubiales.
Santos feels that local service companies
are constrained by a lack of appetite from
local lenders: “There is no doubt finance
has been an obstacle for us because companies
in Colombia don’t have the proper support
from financial institutions in terms of
access to credit. We also have seen that
gain the confidence of the major operators
has been hard, since we are a small company
competing with firms with years of experience.”
Despite these challenges Santos’ firm
has been able to grow to 120 employees and
enjoyed an 80% increase in business in
2011. His aim is to continue that growth at
a sustainable rate: “The prospective for the
near future is really good but the real aim is
to build a foundation so that the company
will stable and well established once the
boom in investment starts to find equilibrium.”
As Colombia’s oil and gas sector expands
and evolves, the services that are required
also shift. Luis Polanco is CEO of Colombian
June 2012 ▪ OilandGasInvestor.com C-23

oilfield service provider Topen Group. He
cites his industry experience as key to the
way that he designed the service offering of
his company: “I discovered that services companies
had some failures related to the offer
of integral services; because, for example,
with constructors, you could never find a firm
that provided all the services you needed.”
With Topen, Polanco decided to create
the first company with integral solutions in
the construction industry. He also decided
to focus on innovation, since he saw that
new techniques for efficiency are the key to
growing Colombia’s production.
For the past two years, Topen has been
partnered with Zap-Lok pipeline systems, an
American producer of non-welding
pipelines. Topen is the only company that
offers this kind of pipeline, which significantly
reduces the time and costs required
for construction of pipeline infrastructure.
Topen is now looking to grow the scope
of its business in order to fill other niches
that it sees in the Colombian market. “We
are looking for partners with the sufficient
financial strength that can help us develop
bigger projects,” says Polanco.
Colombians going overseas
One indicator of the growing standard
and confidence of Colombian oil and gas
services is the international ambitions of
many of its key players. Indequipos is a
Colombian company based mainly in the
country, but is now planning to move into
the U.S. market. “Indequipos is a pioneer
Colombian service company; we are a local
company going global,” says Luis Germán
Bustamante, the company president.
“We plan to set up our U.S. operations
from scratch and grow organically. However,
it is difficult to break into the market
in the U.S., not only because of cultural differences
stemming from the fact that Inde-
“We believe that
international work will
be an ever-increasing
part of our business.”
—Camilo Ángel,
sales director, Falco
quipos is a Latin American company; the
market is really saturated, with plenty of
players of all sizes.”
Bustamante notes that Colombia is becoming
known for talented engineers that
are highly motivated and well prepared:
“Many major companies choose Colombia
as their main engineering base, even for operations
carried on elsewhere. This means
that companies and investors know the benefits
of working in Colombia and with
Colombians.”
Falco Campamentos is a Colombian
family business that has over 30 years of experience
at building modular camps for the
oil and gas industry. Due to the high competitive
environment in this field and the
logistical considerations that the company
has evolved though its work in Colombia, it
is now able to offer a world-class service to
other oil and gas markets.
The company recently won a contract to
supply modular camps to a project in the
Democratic Republic of Congo, where logistics
and climate conditions match parts of
Colombia.
“The quality, strength and mobility of
our products have been well received. We
believe that this international work will be
an ever-increasing part of our business,” says
Camilo Ángel, sales director at Falco.
Colombian services are also emerging as
a target for acquisition from international
giants. Masa Team has established a 20-year
reputation for the high quality of its oil and
gas services in the Colombian market. In
2007, the company was acquired by the
Dutch multinational Stork Group.
Through its years of operation, Masa developed
five business branches to provide its
clients solutions throughout the entire value
chain: maintenance, projects and construction,
early tests of wells temporary facilities
maintenance consulting and industrial services.
“With all the services we offer, and
with the business strategy we have, we are
heading our way to become a worldwide
competitor and be the partner of choice of
most companies in the market,” says company
present Antonio Villegas.
Becoming part of Stork, and gaining a
multinational company’s financial and operational
support, has allowed the company to
significantly broaden its horizons. “Before
the acquisition, we had no more than 2,000
employees and now we have more than
4,000. We are also going to represent Stork
in Latin America and also we are going to
lead the expansion of the company in the
region,” says Villegas.
Regional input
As the cycle of investment has shifted to
make Colombia the hottest market in Latin
America, companies that have developed
expertise in more established market are
bringing that influence to Colombia. Given
the number of highly placed Venezuelan executives
in companies exploring and producing
in Colombia, it is inevitable that
Venezuelan services also play a major role.
ConFurca is a Venezuelan based construction
firm that was founded in 1976, offering
oil field services such as gas
compression stations and pipelines. Since
C-24 OilandGasInvestor.com ▪ June 2012

developing a reputation in Venezuela, in 2006, ConFurca established
operations in Colombia.
Although Venezuela remains the company’s core focus, Colombia
is now a significant market for the company in which it sees
great growth potential. “Venezuela is already a petroleum country,
with a rich history in exploration and production. Colombia has
had a serious oil industry for no more than 15 years, but it will become
an increasingly important market with a lot of opportunities
for all oil and gas services,” says Furlaneto.
Another neighbour to Colombia, with a longer history in oil
and gas exploitation, is Ecuador. Adrialpetrol was founded in 1995
in Ecuador as a consultancy. It has developed enormous expertise
within the Colombian oil and gas sector and collaborated in many
major projects.
“It is hard to say if Ecuadorian influence might be as important
as Venezuelan, but it is true that most professionals have had some
experience in the Ecuadorian market that gave them a vision of
how is to work in this country and the possibilities that are in the
market,” says Adrialpetrol’s general manager, Jaime Durán.
The company now acts as representative for international product
manufacturers that cover the entire chain for drilling and production
operations. Although competition is becoming strong,
Durán feels that it has an advantage because the company represents
world leaders in this market and possess over three engineering
research lines to support their clients.
“We hope in five years we can be as big as any of the other
major competitors in the region. In Colombia we would like to be
the biggest services company in the support and innovational technologies
for the artificial lift market. We think our technology advances
and investment are going to lead us to the goals we have,”
says Durán. ▪
June 2012 ▪ OilandGasInvestor.com C-25