A complex investment climate

Colombia

Claudia Navarro, partner at Brigard Urrutia, and the late Marianna Boza, the firm’s former head of oil, gas and mining, spoke to The Energy Year about the current investment climate in Colombia’s oil sector and how the company is supporting energy companies. Brigard Urrutia is a Colombian law firm covering all areas of business law.

What is the current investment climate for the oil sector in Colombia?
Marianna BOZA: Colombia’s oil and gas sector is navigating a complex and challenging investment climate. Recent court decisions allowing royalty deductions from income tax have been positive for investors. However, the sector faces significant challenges, including uncertainty from the government’s position on fossil fuels: while exploration activities are officially halted, some continue quietly under the radar.
Prior to the current administration, 64 new exploration blocks were awarded, indicating ongoing interest in the sector. However, companies now encounter stricter environmental regulations and increased social conflicts, especially when it comes to communities and environmental licences.
The offshore sector is promising, with new gas discoveries boosting optimism. Major companies such as Chevron and Ecopetrol are either maintaining or increasing their production levels. Nevertheless, the government’s definitive exclusion of fracking, which is potentially capable of quadrupling existing reserves, remains a notable constraint.

How is Brigard Urrutia supporting energy companies amid uncertainties?
Claudia NAVARRO: Brigard Urrutia, Colombia’s largest law firm, with over 90 years of experience and more than 100 lawyers, has developed a strategic litigation service to assist investors whose investments are significantly affected by regulatory changes.
In addition, from our regulatory practice, we have been aiding clients in implementing strategies to make sure they have the energy required to continue their operations, regardless of the grid’s availability. In that sense, we have been aiding them in structuring self-generation renewable projects.
This interdisciplinary team combines industry knowledge with expertise in constitutional and regulatory law to support our clients in court proceedings and interactions with government authorities. We also provide specialised advice on renewable energy projects, helping companies adapt to new regulations and take advantage of incentives, such as the ones granted in Law 1715/2014 and 2099/2021.
We also offer tax structuring services, environmental consulting and assistance with community relations. This approach is characterised by a deep understanding of the energy sector, allowing us to provide tailored advice that addresses the technical and business aspects of our clients’ operations.

What incentives are available for renewable energy investments in Colombia, and how does the country compare to other investment destinations?
CN: Since 2014, the government has been offering regulatory and tax incentives to boost the use of nonconventional and renewable energy sources, as we are heavily reliant on hydropower, and the energy transition is among the goals set up by the past and current governments.
This year, the El Niño phenomenon caused significant issues and showed the importance of setting a strong plan for maintaining the availability of energy on the grid, regardless of the technologies connected and supplying electricity.
To address this, the government has pledged strong support for renewable energy. This commitment is reflected in the National Development Plan, which outlines the government’s priorities for 2022-2026.
These include a 50% reduction in income tax over five years, VAT exemptions for products associated with renewable energy projects, accelerated depreciation and import duty deductions. The government has also promised to streamline consultation processes and environmental licensing to reduce project delays. These have been significant issues in areas such as La Guajira, where wind projects have faced three-year delays due to community issues.
The effectiveness of these incentives can vary depending on the investor’s country of origin and whether there’s a double taxation agreement in place.
While countries such as Chile have made significant strides in areas such as hydrogen development, Colombia’s diverse renewable resources and improving regulatory framework make it an increasingly attractive destination for green energy investments.
In addition, we should not forget the ongoing, more-than-10-year-long initiative to interconnect Colombia with Panama, opening the path to export electricity to the Central American energy market. If completed, this project may allow Colombian investments in the energy sector to increase since our energy prices are very competitive compared to the Central American energy market.

What is the current situation in Colombia’s mining industry?
MB: The mining sector in Colombia, especially for critical minerals, faces significant challenges but also holds great potential. The government’s environmental stance has made it difficult to obtain environmental licences, particularly for what it considers “dirty” mining operations.
Despite these obstacles, there’s growing interest in critical minerals, especially copper. Colombia updated its critical minerals list in 2022 to include copper, recognising its importance in the energy transition.
Currently only one medium-scale copper mine is in production, but several large projects are in the exploration phase. These include the Alacrán project by Cordoba Minerals and Minera Cobre in Chocó. The copper belt in Colombia, which extends to Chile, offers significant potential.
However, government support, particularly in approving work plans and environmental licences, is crucial for these projects to move from exploration to production. Some large, tier-one companies are investing in Colombia with a long-term perspective and are prepared to wait for more favourable conditions.

How does Brigard Urrutia differentiate itself in the energy sector?
CN: Since the introduction of Colombia’s renewable energy law in 2014, the firm has structured a dedicated practice. We have four lawyers specialising in electricity regulation, allowing us to have in-depth knowledge of the regulations and challenges that the industry faces.
This dedicated practice combines expertise across multiple disciplines and has an extended dedicated group with different specialities focused on energy law and projects. We offer clients a complete package, with specialised partners handling project finance, tax analysis, structured finance, environmental issues and other aspects of renewable energy projects.
This level of specialisation allows us to provide in-depth, industry-specific advice. The firm’s environmental practice even includes an engineer to provide technical insights alongside legal counsel. We pride ourselves on understanding the technical aspects of our clients’ businesses. We speak the language of the industry, whether it’s discussing ounces in mining, barrels in oil or megawatts in energy.
Many of our lawyers bring international experience, adding a global perspective to our advice. This combination of technical knowledge, industry understanding and international experience allows Brigard Urrutia to provide practical, comprehensive advice from project conception to execution, covering all aspects from personnel hiring to potential litigation.

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