Gold has become the most highly valued asset in the world today. The strong wave of demand for the precious metal shot its price to more than 2,000 dollars an ounce, when only three months ago it was trading at 1,400. The global uncertainty created by covid-19 is one of the reasons for the recovery in the price of the metal.
The Minister of Mines, Diego Mesa Puyo, from Antioquia who graduated from Canada, believes that Colombia also received a “golden opportunity.”
He announces that the goal now is to triple his production. The new minister announces large mining-energy investments and reveals that the time has come to invest instead of saving.
Why was it necessary to reform the General Royalties System?
With the reform of the general system of royalties From 2012, the allocation to producer regions was significantly reduced. This caused growing discontent in these communities. In the legislative act approved by the Congress the allocation to these regions will more than double, from 11 to 25%, maintaining the allocation for non-producers. Additionally, the budget investment for municipalities with the greatest unsatisfied basic needs, which will go from receiving 10.7 to 15%.
Doesn’t this increase in mining and energy investments pose a threat to the environment?
One of the most important modifications is that we include, for the first time, resources for the conservation of strategic environmental areas and the national fight against deforestation.
If the budget for producing regions and the poorest municipalities goes up, for whom does it go down?
It won’t go down for anyone. Taking into account the needs of the country, these greater resources for the producing regions and the poorest municipalities will result from lower operating expenses of the system and from a new mechanism for stabilizing income.
What does it consist of?
Given the investment and infrastructure needs of the regions, we have decided to prioritize investment over savings. That is why the percentage of income saved in the system is reduced. Additionally, the stabilization mechanism makes it possible to have saved resources when the collection of royalties goes down. The formula for applying the current mechanism, which already has more than 10 billion pesos of savingIt is very complex and difficult to activate.
With the reform, we also make the activation more efficient and timely in the moments of less collection.
(You may be interested in: ‘The big bet in hydrocarbons is the offshore basins’)
Given the difficult economic situation, what will be the role of the Ministry of Mines and Energy in the economic reactivation?
The mining-energy sector is emerging as the protagonist of this reactivation, with 33 prioritized projects that add more than 35 billion pesos in investment and 53,000 jobs in the next two years.
But how will it be done?
This reactivation has three axes: accelerating the energy transition with the execution of alternative energy projects, diversifying the basket and capitalizing on the reactivation of the hydrocarbon sector.
What are the projects that would mark this sustainable reactivation?
In this first axis of the energy transition, we advanced in the execution of 14 solar and wind power generation projects that were awarded in the 2019 auctions, totaling more than 8 billion pesos in investment and that will allow us to take a historic leap, going from less than 1 percent of generation from unconventional renewables to more than 12 percent in 2022.
And what is mining diversification?
In mining diversification, we have nine projects that add nearly 17 billion pesos in investment and more than 35,000 jobs.
But for what?
In this region, large-scale metal mineral projects will be prioritized, which are also essential for the energy transition such as oro and copper.
Precisely, the global crisis led investors to redirect their investments towards gold, triggering its price. In gold production and export, how are we?
The figures show that Colombia has a golden opportunity. The price of this mineral hit all-time highs, surpassing the barrier of US $ 2,000 per ounce this week.
At the end of 2019, Colombia’s gold production reached 36.6 tons. Colombia wants to double its gold production by 2030 and exceed 60 tons with the entry of these large projects, through the transformation of the sector. For example, the Buriticá project in Antioquia, which is about to enter into commercial operation, will increase the country’s gold production by more than 20% and will generate about US $ 127 million per year in royalties and taxes.
And in the matter of hydrocarbons?
We have prioritized six offshore projects that have contractual commitments for more than US $ 2 billion in the exploratory stage.
Are the expectations good? Are they easy to extract deposits?
The expectations are very encouraging. Some of the blocks in the basins of the Colombian Caribbean are in ultra-deep waters, and only until the drilling is done will we know the type and volume of hydrocarbons What is there.
But many of the projects are still on the way to obtaining environmental licenses and prior consultations. Will they become a reality in the short or medium term?
We must ensure that these processes are complied with rigorously and promptly in order to ensure reliability in the electric power service. I give you an example: the construction of transmission lines on the Caribbean coast is essential to connect the wind farms that are being built in La Guajira and to support the energy service on the Caribbean coast, where there are more than 10 million users .
(You can also read: At no cost for users, the route to change electricity meters begins)
Is there no longer a danger of power shortages on the Coast?
In May we had a level of reservoirs at historical lows that had not been registered since El Niño of 1991-1992. However, winter arrived late, but decisively, and today we are calm with the current level of the reservoirs, which has already exceeded 60%. The ghost of a possible blackout for this year and next is completely gone.
The ghost of a possible blackout for this year and next is completely gone.
(It may be of your interest: Energy prices will remain stable in the remainder of 2020)
And in the hydrocarbon sector, what new opportunities are there?
After 5 years without signing a single exploration and production contract, in the Government so far we have signed 31 contracts with exploratory commitments for about 10 billion pesos. Of these, 25 are inland areas and 6 more in offshore basins.
Are you saying that during the last 3 years of the previous government not a single exploration project was signed?
Not even a single one.
Ecopetrol’s revenues fell brutally. Under this scenario, how much will the nation’s income and royalty payments affect the regions?
Ecopetrol continued to report profits, albeit lower, which means that it will pay dividends to the nation and represents good news for the country.
In terms of royalties, the biennium ends in December and we managed to collect most of the income that was expected, so the reduction should not be more than 1 5%.
But how can it not be an unprecedented fall from yielding profits of 6.2 trillion pesos to only 158,000 million?
Yes. It is an extremely strong fall, but remember that this is a sector with a long-term horizon that is also characterized by high volatility in the prices of the Petroleum in short periods of time, as happened in 2008, in 2015 and now. However, it is important to note that the company reported profits, unlike other multinationals that reported losses.
What do you think about the approach of selling the nation’s assets, including a percentage of the stake in Ecopetrol and ISA?
This is an issue that falls within the competence of the Ministry of Finance.
Yes of course. But what do you think? Will it be essential to dispose of something from the most important company in the nation?
They are decisions that must be evaluated in a comprehensive manner, given the fiscal circumstances and financial needs of the Nation.
What is the regulation of the ‘fracking’? When are the research pilots going to start?
We are fully accepting the recommendation of the Committee of Experts, which was also expressly authorized by the Council of State. The entire regulatory framework must remain firm this month and the ball will go to the field of the companies, which must make the respective request to the ANH.
What central axes will the regulatory framework have?
It focuses mainly on technical, environmental and social aspects.
Are you a supporter of ‘fracking’ to increase oil and gas production?
I am in favor of making decisions based on technical, environmental and economic foundations, and in the face of citizenship. I am in favor of carrying out pilot research projects, as recommended by the expert commission and as authorized by the State Council. The development of these fields represents an opportunity to end the specter of loss of energy self-sufficiency. But first things first, and this is to implement the recommendations of the commission of experts, and verify that this extraction technique can be carried out in Colombia safely with the environment and communities, as is done in other countries.
I don’t see why, if all nations have done it, starting with the United States, which went from importer to exporter, it can’t be done here …
That is precisely what pilot projects for comprehensive research are for. To clear doubts and make a responsible and informed decision, based on science.
A few days ago, Hidroituango reported a new postponement in the date of its entry into operation. Does this news put the country’s energy supply at risk?
EPM has publicly stated that the first generation unit would enter the first quarter of 2022, and that subsequently one unit would enter each quarter. This schedule does not put the country’s energy supply at risk.
How is the delivery of Electricaribe to the new operators going? Since when will they assume the provision of the service in the region?
The date of delivery of keys to the new operators remains firm for September 30. The connection with Electricaribe is underway. It is only fair that the nightmare for users in the region is over; the structural solution has already been achieved and the change will be gradual. Additionally, we are breaking the cycle of underinvestment. So far as the government has run, the number of works that have come into operation went from 9 to 21, with an investment of 2.7 billion pesos.
There are also many voices that oppose the development of some of these projects, especially in mining. What will happen to the Santurbán project?
Colombian law expressly prohibits the development of mining projects in páramos. The Soto Norte project, as conceived, is not within the vicinity of the páramo. Currently, there are two processes that are ongoing in parallel, but independently. That is in charge of the Environmental Licensing Authority.
Special for THE TIME