Toronto's Colombian connection

GLOBAL ENERGY REPORTER

When Colombia's top energy regulator Armando Zamora kicked off his effort to raise international interest in the country's latest round of bidding for oil concessions, his first stop was not Calgary or Houston or even New York.

He began his international tour in Toronto, which for the last few years has been the most important source of capital for the country's mining and oil industries.

Mr. Zamaro arrived this week for a two-day visit with pension funds, private equity firms and other investors - a gesture that underscores the critical role played by Toronto's stock exchanges and capital market in financing Colombia's oil boom.

After ringing the bell for the opening of trading at the Toronto Stock Exchange, the director of Colombia's Agencia Nacional de Hidrocarburos (ANH) moved to the downtown Hilton Hotel, where he walked more than 50 investors through Colombia's economic and political conditions, its efforts to attract foreign investment, and the launch of a new round of bidding for 225 exploration blocks.

"We started in Toronto because this is where the money decides to back the exploration companies - this is where the decisions to invest in the country are made," Mr. Zamaro said in an interview yesterday, before flying to Calgary for meetings with independent oil companies.

He said Canadian investors are increasingly comfortable with Colombia's political and economic stability, achieved after years of kidnappings and violence that had stymied oil exploration and discouraged foreign investment.

Colombia has sought to capitalize on the anti-capitalist approach taken by governments in Venezuela, Ecuador and Bolivia to welcome foreign investment.

In 2004, the government overhauled its oil and gas industry and encouraged foreign investment with attractive royalty and taxation rates. Canadian companies have been among the most aggressive at exploiting that opportunity.

By the end of last year, the country was producing 750,000 barrels of oil equivalent per day, and Mr. Zamaro said it will exceed its peak production by the end of the year.

While the state-oil company, Ecopetrol, is Colombia's largest oil producer, the recent growth has been fuelled by a cadre of independents listed on the TSX and formally headquartered in Toronto and Calgary.

They include Pacific Rubiales Energy Corp., the country's largest independent; Petrominerales Ltd., a spinoff from Calgary's Petrobank Energy and Resources Ltd.; and Gran Tierra Energy Inc., also based in Calgary.

Pacific Rubiales is managed by a group of Venezuelan ex-patriots, former senior executives from Petroleos de Venezuela SA. But it is formally headquartered in Toronto and is listed on the TSX Venture Exchange.

"We consider that Toronto is the most important stock exchange in terms of understanding the nature of the oil business and especially the exploration," Pacific Rubiales chief executive officer Jose Francisco Arata said in a telephone interview from Bogota.

The TSX has the largest number of oil and gas listings of any exchange in the world, hosting not only Canadian firms but also international companies that have no presence in the country other than a Toronto listing. Oil and gas firms accounted for 22 per cent of the TSX Venture Exchange, by market capitalization, and 20 per cent of the senior TSX exchange.

Rafi Khouri, a Calgary-based analyst with Raymond James Ltd., said several factors make Colombia attractive. "It's a proven hydrocarbon basin but for a good part of last 25 years - up until five years ago - it was underexplored for fiscal and political reasons," he said.

"Oil companies can go in and find oil. ... And unlike some other hydrocarbon countries, Colombia actually worked its fiscal terms to attract foreign investment."

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By the numbers

750,000

Colombia's average daily production of oil equivalent, in barrels, in 2009.

850,000

Expected daily production, in barrels, in 2010.

$3.5-billion

Amount of foreign investment, in U.S. dollars, Colombia expects to see in the oil sector this year.

1.88 billion

Proven reserves, in barrels, of Colombia's state-controlled oil company, Ecopetrol SA, in 2009 - up 35 per cent from 2008 levels.

Reuters and staff