A specialist in Colombian energy and mining law

Colombia

Jorge Neher, partner at Dentons Cárdenas & Cárdenas, talks to The Energy Year about the outlook of the upstream sector in Colombia, how the company is helping its clients overcome licensing hurdles in the upstream market and the intricacies of the new mining law. Dentons Cárdenas & Cárdenas is one of Colombia’s largest law firms.

What is the outlook of the upstream scene in Colombia, and what issues are hampering its advancement?
There are many licences and E&P contracts awarded, as well as areas that have important potential for exploration. Some of these haven’t been explored yet because of environmental licensing, communities and security issues. For contracts that find themselves in force majeure for such reasons, the government is trying to reactivate them.
However, this will take time. For instance, you have to tackle the security situation first in order to get into the field and work. Secondly, you have to streamline the environmental licensing procedures and previous consultation procedures for these projects to go ahead. The government has not tackled these issues yet. Many projects in Colombia, not only in the hydrocarbons sector but in many other sectors, are delayed or suspended for such reasons.
There are also other areas in which companies are currently working. There have been several announcements of discoveries by companies such as Canacol, especially in the gas sector. Some new discoveries have also been made offshore, which has plenty of potential. This comes to say that for companies that were already permitted and working, it has been almost business as usual.
However, the situation is more complex for those that have had their contracts frozen due to security, consultation or environmental issues, and the government is seeking to provide solutions. Lastly, the government is not looking to license new areas or organise new bid rounds, so the country will have to deal with what it has for the time being.

How is Dentons helping companies overcome licensing hurdles in the upstream market?
We have an important environmental and communities practice that prepares companies for the consultations with communities, which are required to start any project. We also work with companies in terms of structuring their applications for environmental licensing and accompanying them in environmental licensing procedures.
Moreover, we work with several environmental consultants, which have technical capabilities and state-of-the-art technology to support permitting procedures. This allows us to produce environmental impact studies to the standards required by the environmental authorities, which helps companies obtain the required licences.
The problem is that neither the ministry nor ANLA [National Environmental Licensing Authority] have the manpower nor capabilities to process all the environmental applications they are receiving. In addition, many times such authorities come up with requirements that are very stringent, which complicates the process. So there are, on the one hand, complex requirements, and on the other, a lack of capacities to process them. This has given way to major bottlenecks in the handling and timing of environmental procedures. They can take years.
This is one of the major challenges the hydrocarbons sector is experiencing, and the challenge is even greater for the mining sector. Oil and gas is perceived as having a surface impact that is lower than mining.

What are the major intricacies and changes inherent in the new mining law?
The proposed law is a great challenge for the country. The government has proposed it, but there has to be more of a discussion around it. The newly proposed law is a recipe for what has not historically worked anywhere in Latin America or the world.
One of the main aims of the bill is to increase state intervention in the sector. In addition, it eliminates staking and awarding of concessions on a first-come-first-serve basis, which is the system in place in all countries with a thriving mining industry. The new law proposes a new state-owned company called Ecominerales that will be the one taking most mining licences. Ecominerales will also administer and do JVs with private firms.
Of course, Ecominerales is not much more than a paper tiger, with no budget or expertise to develop mining projects. Therefore, the company will just be a toll paid by private investors to access mineral rights.
This will result in the inefficiencies, higher costs and corruption that have been seen in most state-owned mining companies in Latin America, such as Enami in Ecuador, CVM/Minerven in Venezuela, Centromin and MineroPeru in Peru, and even with Minercol in Colombia. Even state-owned mining companies that are perceived as “successful,” such as Codelco, are far less efficient than their private counterparts.
On a different note, this country is the fourth-largest exporter of coal in the world, and the industry is the second-largest fiscal contributor in Colombia. However, the current public policy is to wind down projects and production as soon as possible.
The gold industry is also important, but there is a large presence of illegal mining (comprising perhaps up to 65% of the country’s production). Blockades and takeovers of formal operations by illegal miners are huge problems, and companies have responded with numerous formalisation initiatives.
The state has not been responsive in protecting mineral rights of private entities from takeovers and blockades by illegal miners, and therefore, they have to fend for themselves in minimising this issue.

In what ways was Dentons involved in the LNG Energy Group acquisition of Lewis Energy stakes?
We do a lot of oil and gas work in Colombia and Latin America. In mid-2023, we successfully advised LNG Energy Group in the acquisition of gas stakes from Lewis Energy Group in Colombia.
This deal was one of the most important hydrocarbons deals in Colombia last year and included several rounds of equity financing, project financing and a multi-leg acquisition. The total value of the transaction was USD 100 million in cash and shares.
The transaction was supported by a USD 70-million credit facility and an additional USD 22.5 million in financing involving a private placement and listing of LNG Energy Group shares on the Toronto Stock Exchange. The transaction involved advice from Dentons in multiple jurisdictions, such as Colombia, the Cayman Islands, the USA, etc.

What other key markets are you currently involved in that have hydrocarbons potential?
Mining and oil and gas are still our main sources of revenue. Renewables are still at an infant stage, and the projects are smaller. However, the industry is transitioning rapidly. We do not only cover Colombia but the whole region, as there are countries whose bedrock is crude oil.
We do a lot of work in Venezuela, which is now stagnating due to their elections. We now have loads of work in Guyana. Today, the country is producing around 640,000 bopd, and it’s aiming to boost production rapidly.
In 2023, this small Caribbean nation was producing half a barrel of oil per capita per day. Now it is producing almost one barrel of oil per capita per day. The opportunities and potential coming from Guyana are immense, and as it is still a relatively new market with plenty of players wanting to enter, we play a fundamental role in paving the way.

How important is Dentons as a law firm with a strong local stance and global expertise?
We have the most specialised oil and gas, mining and energy practices in the country. Second, we have a huge Latin American practice, with a presence in almost every country south of the Rio Grande (and of course in the USA and Canada as well). We draw experiences from all countries in the region. Today’s problem in Colombia was a problem in another country a few years ago, so we capitalise on knowledge transfer from the markets we work in.
Problems across LatAm tend to have a very similar nature and thus a very similar solution. We have the largest footprint of any law firm in the region, having offices in nearly all countries in LatAm. Our energy practice department has global and regional experience, which is a huge advantage when wanting to tackle any issue or case.

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