On this edition of Columbia Energy Exchange, host Jason Bordoff is joined by María Fernanda Suárez, Minister of Mines and Energy in Colombia, where she manages the country's efforts to boost oil production, promote sustainability, and diversify their power portfolio to promote energy security and meet growing demand. She leads Colombia’s efforts to diversify its electricity sector from its current, largely hydro-powered composition, which is threatened by El Niño conditions.
Recorded at CERAWeek, they discuss the future of Colombia’s oil and gas sector, particularly the role shale will play, its energy transition and added renewables to its electricity sector, and the impact of the crisis in neighboring Venezuela on Colombia.
CERAWeek is an annual event that brings together 4,000 industry leaders and policymakers from more than 75 countries.
Jason Bordoff: Hello and welcome to Columbia Energy Exchange. A weekly podcast from the Center on Global Energy Policy at Columbia University. I’m Jason Bordoff. At CERAWeek this year, the industry’s premiere conference gathering in Houston, I had the chance to sit down with Maria Fernanda Suarez. She’s the Minister of Mines and Energy in Colombia where she leads Colombia’s effort to diversify its electricity sector, increase oil and gas output, find market for its coal production, all while balancing social and environmental concerns. The minister and I sat down to discuss the future of Colombia’s oil and gas sector particularly the role shale might play. Its energy transition and the addition of new renewables to its electricity sector. The impact of the situation in neighboring Venezuela on Colombia and much, must more. Minister Suarez, thanks for joining us today on Columbia Energy Exchange. So, just congratulations on your recent appointment as Colombia’s energy minister. If we could just start with a broad overview of what you have on your plate? Can you talk a little bit about what you, what the challenges and opportunities you see right now are in what your goals are for the next year or two?
Maria Fernanda Suarez: Okay, well, hello, I’m happy to be here with you for the Columbia Center of Global Energy Policy. So, the overview of our government and energy is to, I will say, embrace all sources of energy. We do think that we are in a moment where the energy transition, it’s a key topic in our agenda. Therefore, one of the first things that we are looking forward to do is the introduction of viable renewables. Mainly solar and wind. We are looking forward to introduce around 8 to 10% of the energy metrics by 2022. Colombia has the sixth most cleanest energy metrics of the world. However, and this is…
Jason Bordoff: A lot of hydropower.
Maria Fernanda Suarez: Yeah, 70% come from hydro. And the paradox says that because of ______ [00:02:08], we are among one of the 20 most vulnerable countries to climate change. Due to the dependence on hydro and ______ [00:02:18] and those sorts of things, how can that be affect. So, introducing viable renewables that allow us to diversify our metrics. It’s something that is a key topic. Also, we are looking forward to develop more gas resources. We have important opportunities for gas. We do believe that gas is a very important for the transition. It is cleanest and it is cleanest for air and we have opportunities in offshore in Colombia and we have also opportunities in non-conventionals in Colombia and conventionals regarding gas. So, what we are looking forward is to embrace everything with transition. But make sure that we are able to develop all our resources in energy both for power generation or for gas or crude in a sustainable way.
Jason Bordoff: So, let’s pick up what you just said and talk about each of those different potential sources of energy. Major oil producer in the region. Oil production has been declining a bit. You come from a background of Ecopetrol. Talk a little bit about what it’s gonna take to reverse that trend? A lot of investment is needed in the sector. What are some of the barriers to increasing international investment into the Colombian oil sector, what policy steps might take to do that
Maria Fernanda Suarez: Actually, since we took office seven months ago, one of the things that we’ve been working very hard is to make sure that we put enough incentives for the industry to really make a jump start of the industry. So, we have done a starting offshore. Made some contractual changes that needed to be done for new companies to come and we will be seeing new operators coming into the offshore Colombia where we have discovered gas so far. But of course, companies are looking for liquid, either their prospects were liquids. On conventional side, it there is significant amount of potential. People have said, people for example like the CEO of ______ [00:04:27] that after the ______ [00:04:28] it’s a play that is in Colombia can be the most prospective basin in Latin America. So, definitely something and in terms of Colombia we can grow for.
Jason Bordoff: For Shale gas production.
Maria Fernanda Suarez: Yes, from shale gas. We can go from six years that we have now on oil to 15 and on gas the estimates are from 10 years to 30 years.
Jason Bordoff: Quite controversial. There is a lot of opposition to it.
Maria Fernanda Suarez: It has been very controversial. One of the most difficult things is that, is the debate that should be technical and have become political. So, one of the steps that we took in order to have a different conversation. I will say was to trying to make to take the debate out of Twitter and put a debate really on a technical perspective. So we set up panel of experts. It’s 13 panelists. Two of them Americans and the rest are Colombians. From different disciplines. So we have engineers, experts, people that are geologists, people that are oil engineers, environmental engineers. Sociologists, philosophers. So different, hydrologist. Different disciplines. And they made a full review of the community’s concerns and the groups of interest concerns and they just released a review on our regulation and the lessons learnt mainly from the U.S., I’ll say on the conventional place.
Jason Bordoff: And just released it last month, correct.
Maria Fernanda Suarez: And just released it and they recommend us to go through a pilot phase. So, that’s something that we are looking right now and analyzing very deeply to see how can we take over the recommendations of the experts and hopefully being able to set up those pipes.
Jason Bordoff: And where do you anticipate the need for policy changes to meet the demands, the recommendations of the expert commission report?
Maria Fernanda Suarez: Something that was something, that was significant is that they, after the review, they said that the regulations and the technical perspective was okay and it was really at a high level of what we were demanding from companies and from standards. The recommendations regarding regulations were more relating to strengthening the environmental capacities on the ministry of environment and on the national environmental agencies. Also, the second thing was relations with communities. So, how should we make changes to make a different relation with the communities. And a lot regarding data transparency. The government data transparency and also companies data that can be available for the public. So it was more broader than just the technique.
Jason Bordoff: And so, what happens now? So, the pilot project mean, you’ll move forward with shale development pilot projects in that region.
Maria Fernanda Suarez: We are currently at this stage that we are in the moment that we are reviewing the recommendations. Actually the document will be given to the government next week. And after that, I will sit with the ministry of environment, that is really the key person in this discussion to set up which should be the path for us in this topic. But the opportunity in terms of…
Jason Bordoff: Is there a timeline for implementation at this point?
Maria Fernanda Suarez: No, it’s something that we have to sit and decide. But the opportunity in terms of reserve, in terms of economic growth, it is impressive. So, really what we are looking forward is to make sure that we develop those resources are made with highest standard to be sure. It can be sustainable and for communities and for environment.
Jason Bordoff: And what would be the role of Ecopetrol versus international partners and JV in pursuing those path finders?
Maria Fernanda Suarez: Okay, so currently in the blocks, we have mainly four blocks, I will say right now that people are interested to go through that pilot phase. One of them, it’s Ecopetrols and two others are, one is by Exxon and another one is by ConocoPhillips. We have seen ______ [00:08:51] also interesting in these activities. So, I will say that it’s a combination. It’s a moment where it will, the country will benefit from the learning curve that the U.S. has gone through. And Ecopetrol, it’s an important player in the way that it knows the both surface challenges very well.
Jason Bordoff: And what would, you also have large offshore gas resources. What’s your view of developing offshore capability?
Maria Fernanda Suarez: We are at a very early stage. We discovered gas so far. But we need the appraisal phase to happen and after that appraisal phase also we need more activity and that’s where we are incentiving via contractual changes that we made and also via some tax incentive that we have set up in place for as a general in the country. So, we lower the corporate tax rate from 34 to 30 and also the BAT that companies pay on Capex can be creditable to the taxes. So, those benefits are bringing companies back into activity in Colombia.
Jason Bordoff: How, well, it’s been the impact of the oil price collapse of the last couple of years and how big an impact is that had on the outlook for the sector and just on the economy in general.
Maria Fernanda Suarez: It was a difficult time. It was really, really a difficult time. Actually, I used to be the CFO of Ecopetrol. So, I think it was one of the most challenging years of my career when I was seeing the oil price at 28 and we having a discounted $12. So, we were selling really at $16 per barrel. So, it was really, really, really hard. I think that after the crisis, really we used the crisis to take advantage of it. Ecopetrol right now has a level of efficiency that it’s a first year in terms of efficiency when you see wood marks of IHS ______ [00:11:02]. It has really gained a level of efficiency that it has been impressive. So, on that perspective, I think that for the sector, it was good. On the fiscal income, I will say that there are a lot of lessons learnt. Before the oil prices drop, the country did made a change in the royalty system and we distributed the percentage of production areas vis-a-vis the rest of the countries and that harm a lot the activity on producing areas. And that’s something that we are discussing again. Colombia, it’s a place that the way we see, we say, it’s a place with oil not an oil country. It’s a country with oil not an oil country. So, more or less on the national fiscal side, 15% or so come from the oil and gas sector. It went up to 25% and went down to almost zero in 2017. But Colombia was able to go through that adjustment complying with the fiscal rule that we have and keeping our investment great. So, it was hard but we went through.
Jason Bordoff:Colombia, as you said, also most of its electricity from hydro power but it also has goals to continue to increase renewable energy development domestically pretty small as a share now but plans to expand it and grow it. Talk a little bit about what it’s gonna take to achieve those goals to expand renewable energy use domestically.
Maria Fernanda Suarez: Okay. So, on renewable energy. First, we want to, right now, we have zero percentage on the energy metrics of solar or wind or variable sources of other energy. So, first of the things that we are doing is making sure that we introduce these new sources. We had an option on February that it’s the option for expansion and that it pays for reliability and the good news is there we were able to put 1.4 gigawatts in solar and wind. So, we are in that path already. Those who come 2022 or before. And we are also in the moment where we are developing another type of mechanism to have long term contracts for those technologies to have a financial closure and that have an introduction into the market. We have set up a goal of introducing 1.5 gigawatts but we are almost there, so the president has said that he is thinking in increasing that goal. And with it something that is very important is to bring all the digitalization and technology and innovation together with into regulation. So that’s also a priority on our agenda. We have set different kind of topics in order to make sure that we bring all that together because unless, you put really a good digitalization of the system, you will lose a lot of the benefits that comes with diversification of the energy metrics. And one important thing, is that Colombia has a huge potential on wind. The speed average of ______ [00:14:37] that is the north part of Colombia, it’s double the world average. So, the factor planned, I will say that the average factor plan for a wind farm in the world, it’s between 20 to 40% and in Colombia ______ [00:14:55], you have 40 to 60%. So, really that is a good opportunity and we see in Colombia that can be, that have a huge potential on solar and wind and that can be an exporter in the future of those types of energies. We’re working for example, we have an interconnected line with Panama. We are also increasing our capacity with Ecuador. So, and the, if you had the potential of solar and wind, it’s higher than our potential on hydro. So it’s really very significant. And these and how we are just, we are just starting, so we are starting on onshore. But there is also a big opportunity for offshore wind. So, those are like the type of things on discussion that we are having right now on how to make sure that we can develop all those energy resources.
Jason Bordoff: And you mentioned a minute ago how vulnerable Colombia will be to the impacts of climate change. We are seeing a shift, I think in some sense in the United States about climate change recently becoming a higher and higher priority among voters, especially young voters, how important a priority is it for people across the board in the political spectrum in your popular opinion in Colombia?
Maria Fernanda Suarez: So, for our government, it is very important and we believe is that, that is why it’s so important to introduce renewables. That is why, it’s so important to go to the utilization because in the utilization, you have other energy efficiencies. And we have set up a full plan on my sector, on the oil and gas sector and the electricity sector, on the mining sector on how we are going to comply with our commitments on the Paris agreement. So, we have a certain target that as a country and from that target as a country, there is a target that I have to accomplish. So, we have sit with companies, with almost all the companies that operate in Colombia and said, clear goals to be achieved by 2022, by 2025. Something is that, everybody talks in 2030 like if it was a long time from now and it’s really too short. So, we have a lot of things regarding energy efficiency, this is the…
Jason Bordoff: And what about resilience to climate impacts? Is there a plan so thinking about how to act to the adaptation?
Maria Fernanda Suarez: So, we launch a plan on climate change and that plan has three different chapters. So, one is mitigation, the other one is adaptation and the other one is governance. And we are working in the three of them. So, regarding mitigation is where we have the full plan on how to reduce emissions and that it’s very important to have the highest standard possible and here innovation is absolutely key. These industry, it’s a cutting-edge industry in terms of technology and innovation and it has to put all that capacity in able to make sure that we only produce the emissions that we cannot control. But we need to control as much as we can and that’s something that we have in a very hard part of our agenda because we need to make sure that whatever resources, we develop, we develop them in the most sustainable way. And regarding adaptation, the renewables part has to do a lot of adaptation. And because having a more diversified metrics and hopefully, it will build from 10% right now to a higher percentage in the future, will made us less dependent on hydro. Actually, there is an impressive diversification because when the ______ [00:18:49] phenomenons comes and it’s there is less rain the speed of wind in ______ [00:18:56] it’s high. So, it’s like a perfect complementary to the situation. We have also set up some thermal gas plants to complement the hydro for the reliability. And in adaptation, we are also working a lot regarding making sure that for example, pipelines are saving off and that we have, where you have extreme climate phenomenons, we will not have an oil spill and things like that. So, all of those sorts of things are in our plan for us to comply and to make sure that we can go through these climate change process in the most responsible way.
Jason Bordoff: And also Colombia is very clean, domestic energy sources, a large oil and gas producer, a large coal exporter. In other countries, where there is clean domestic mix and large hydrocarbon exports like Norway that is controversial in some circles and people debate, you know, what’s our contribution to climate. Talk about how that plays out in the context of the Colombian sort of political debate, the environmental activism. Is there a concern about the continued robustness of the global coal market as the world takes climate concerns more seriously?
Maria Fernanda Suarez: So, there is a debate that something that we are citizens of the world should not forget is that there is really something that we need to put the spotlight on, it’s under consumers. Because many times all these needs more regarding who are the producers. But really we as humans, we are absolutely addicted to energy. So, I feel as climate activist that when we put a carbon tax to gasoline, they complain because the gasoline prices are too high. So…
Jason Bordoff: President Macrion is thinking about that right now.
Maria Fernanda Suarez: And for us it has been very hard. So, that’s something that we cannot forget. We, for example with the coal. We export 90% of the coal that we produce. So, if I stop producing the coal, what will happen? China will import the coal from some other place of the world. So, the contribution will not really happen. And of course, Norway, it’s a country with a income per person completely different than Colombia. So, maybe they can afford some thing that I appreciate and I think that they are really on the edge on making sure how they can advance and walk their talk definitely where they put their money. We have a challenge. We have so much challenges above surface in terms of inequality, in terms of poverty, in terms of data theft. Can we really afford not to develop our natural resources with the level of poverty that we still have in the country? Just let me give some data. And this is within energy. We still have 500,000 houses without energy access in Colombia. That means almost 2 million of Colombians do not have energy access. And we are a country that is rich in energy, rich in solar, rich in wind, rich in hydro, rich in gas, rich in oil. So, that’s something that we just need to close those gaps first. That’s really my view and we need to make sure that we put all the technology in place to make sure that we can develop those resources in a sustainable way.
Jason Bordoff: You mentioned before the environmental activism, the concern about shale development in Colombia and obviously we faced that in U.S. but the shale revolution, a lot of opposition to that. Different in different parts of the country and part of the mission on the Center on Global Energy Policy is trying to produce objective, fact based analysis because the debate we have about energy is often driven by ______ [00:22:54]. It’s very polarized. You said, you create an expert commission in part to address that. Is that, how is that going? I mean are you, are you finding that it’s possible? How are you dealing with the activism around it? Are you finding it’s possible to bring people together and find common ground around the objectives, you just talked about, making progress on climate change and also developing the country’s resources?
Maria Fernanda Suarez: I think, it was very useful. I cannot talk about victory yet because we are still in the phase of analyzing. The oppositions and the[00:23:25] will not change mind. But I think that the common people, the people that do not have information and I was saying, well, it’s hard on the discussion is that, you put a Twitter that you said, water or oil? And people said, water. And that’s all. And for you to understand, that, that is not that you do not need to choose between water and oil, you need to read 100 pages of a paper. So, we knew what the panel of expertise was reviewing all the literature that was available and speaking to public. So, really my sense for now is that the public has a more balanced opinion of an independent panel of experts where they were people that are experts in dealing with communities, people that are environmental experts. They actually said that one of the most interesting experiences is the debates that they had between the 13 and how much, there were a lot of needs that has to be, that were partings, that they destructed each other on both sides. So, it was, I think it was, it has been very helpful and it has been, and it has been also helpful. I will say from my own public policy perspective because even though I come from the oil and gas industry, I have two kids. So, I’m saying, I really need to make sure that this is the best decision for the country, not for me. But for my kids. So, really to have a panel of independent experts that do not have or the fiscal had or just the resources had. It has been very interesting to say, okay, this is the path that we should follow.
Jason Bordoff: And what you talked about looking at the U.S. for some lessons. What are some lessons you think both in terms of building public consensus, also regulating in a smart way whether it’s pipelines, water disposal, set back provisions, what are some of the lessons that you look to what we have done in the U.S. that you think might be applicable?
Maria Fernanda Suarez: Okay, so first, I think that when the regulation was being discussed and this was during the Obama administration. It was also a difficult moment. But when you see the level of resources that U.S. has achieved being able to change from an importer to an exporter on gas for example. The price for gas and what that means for example for poor people. You said really okay, it’s really worth it and some thing that we cannot forget. It’s how much U.S. have reduced the level of carbon emissions. Due, it’s also a part of due to non-conventionals. Because the amount of gas, because the amount of emissions that were done by transporting and…
Jason Bordoff: You mean, shifted away from coal.
Maria Fernanda Suarez: Exactly. So, that’s something not to forget. Other lessons that I think we learnt. Technology has advanced significantly and many of the problems that you saw on non-conventionals in earlier stages was because you were proving that technology for the first time. So, the level of knowledge that is available regarding the type of standards that you need to use to protect water sources, to make sure that the liquid that you use for fracture, it’s a liquid that will not be of damage. Some thing that I think it has been came to U.S. and definitely something that we will apply is data transparency. So, all the wealth you can go well by well in the U.S. and see exactly all the information regarding how deep it was the well, the level of the fracture, the liquid that they use, the production, the curve of production and that’s something that is not available for conventional production in Colombia for example. So, data transparency I think, it’s something that is, it’s a lot of help. And those are the kind of things that we think is useful. Something that has been very useful in the states and that we do not have it is that really the owner of the resources, the owner of the land. So, there are huge incentives for communities to develop their resources. We do not have in that case. The owner of the resources, it’s the nation and there is not much incentive for the communities and they do not feel…
Jason Bordoff: Is that something government can address through the way it distributes the rents and the royalties and…
Maria Fernanda Suarez: It’s at the level of the constitution and it will be something that will be very hard because we have developed our natural resources, all the way down through these conventional way of having the royalties. But something that we are definitely thinking through on how to make sure that communities that are in the places where companies operate will see the development and that development brings a better life for those people. Because one of the things that we need to be very clear is that part of that, I will say of the persons in the communities that are opposed fracking and that’s something that experience said what worries you about fracking and they said, water. So, I said, okay, this is what happened with water. The development, the companies said, we are going to have better school. We are going to have better road that has they ever happened. But they went back to really to conventional discussion. So, for us the strategy regarding communities is a very important one.
Jason Bordoff: Final question. Can you just, the whole world is focused right now, right next door to Colombia. Talk a little bit about the impact that the tragedy in Venezuela is having on Colombia and what the outlook might be?
Maria Fernanda Suarez: So, for we as Colombian have had a lot of solidarity and we really committed and looking forward to see a change in Venezuela. What is happening, it’s really a humanitarian crisis. We have received 1.2 million Venezuelan into Colombia. It was 300,000, 18 months ago and that has increased significantly. And we have been dealing with it, the best way we can. In terms of resources, Venezuela, it’s a country that has a lot of richness and opportunities all around the place in the energy sector. So definitely, I think what we are looking for is for Venezuela to see a change and having their people having a different opportunity. We are experiencing the humanitarian crisis that you see in Venezuela.
Jason Bordoff: How difficult it is to rebuild the country, to rebuild the energy sector there if the government were to change?
Maria Fernanda Suarez: I think it will come, it will not be from one day to another and it will be like in a curve where you start to recover. So, in those sorts of things, you have some quick means and you have some long term, short term, they will construct. But I think that many of the Venezuelans that used to work in the energy sector of Venezuela are very, are working together to have a plan prepared and to set up how to recover the sector. So, definitely, so definitely, they have been thinking that very, thoroughly. Maybe one last thing, regarding something that, that we have to think as citizens of the world and you do have a lot of students is that everybody wants energy. But nobody wants it to be developed in their backyard. And that’s just not possible, just not possible. So, we want energy, we need to make sure it comes from some place. And that’s something that we do need to really understand because I do not see those climate change activists just walking or not using cell phones or not turning the lights on or the TV on. So, energy has to come from some part.
Jason Bordoff: Mrs. Suarez, I know, we are out of time. We have to let you go but you’ve been very generous with your time and much more to get to. Hopefully, we can have you visit Columbia or maybe we can visit next time in Colombia and ______ [00:31:54] which would be fun for me since I love coming to those places.
Maria Fernanda Suarez: I will love to have you there.
Jason Bordoff: So, thank you again for making time to talk to us a little bit about what’s happening in this important country for the region, for the energy world.
Maria Fernanda Suarez: Okay. Thank you very much.
Jason Bordoff: For more information about Columbia Energy Exchange and the Center on Global Energy Policy, please visit us online at Energypolicy.columbia.edu or follow us on social media at Columbiauenergy. We’ll see you next week. I’m Jason Bordoff. Thanks for listening.