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Security Threats And Labor Woes Undermine Colombia's Oil Dreams

Colombia, already the fourth-largest oil producer in Latin America, is hoping to reach the million-barrel-a-day mark by Christmas. The holiday wish may come true, but there are still major obstacles in Colombia's path to oil riches.

BOGOTA - All Mauricio Cárdenas wants for Christmas is a million barrels. That would come in the form of an announcement from the president that Colombia’s oil industry has finally reached the magic one million barrels per day mark.

“It’ll be a very important day for Colombia,” says Cárdenas, the country’s mining and energy minister. “Hopefully this will be our sector’s [Christmas] present, because a million barrels of oil means a million barrels of money for prosperity and social investment.”

Colombia, whose GDP is expected to grow by at least 5% this year, has steadily increased its production of crude oil, and is now Latin America’s fourth largest producer, following Venezuela, Mexico and Brazil. Five years ago, production averaged 550,000 barrels per day. In October it was just shy of 940,000 barrels per day. Last month it crept up to a daily rate of 965,000. Industry analysts say the million-barrel mark is now just a matter of time.

The country currently boasts 130 exploratory wells, up from 12 in 2006, when Colombia exported some $6.3 billion worth of oil and petroleum derivatives. In the first nine months of this year, exports exceeded $20 billion, according to the National Statistics Department.

The boom can been attributed in part to the security improvements brought about by the government of President Alvaro Uribe (2002-2010), which helped attract direct foreign investment to the oil sector. The sky is not, however, the limit for Colombia’s oil industry, which faces two major obstacles: a recent increase in guerilla activity and, perhaps even more importantly, ongoing labor conflicts.

In June, four Chinese citizens employed by Britain’s Emerald Energy were kidnapped in in the southwestern department of Caquetá. To date, their whereabouts remain unknown. Thirty-one other oil workers were kidnapped in three different incidents, though pressure from the army has since won the release of most of them.

The oil sector has also suffered material losses: 19 attacks have been carried out against industry infrastructure, 26 trucks and trailer-tractors have been burned, and one helicopter belonging to the Argentine firm Pluspetrol was also destroyed.

“One has to admit sadly that this has an impact because every potential foreign investor is going to factor it into his or her decision,” says Hernando Barrero, president of the Colombian Association of Oil Engineers.

The government insists that it’s taking measures to protect the oil industry, which is pushing into new, often remote corners of the country. “Colombia is prepared to guarantee security,” says Minister Cárdenas. “[Security] isn’t an impediment. It shouldn’t be a reason for companies to leave or to avoid coming here.”

Barrero disagrees, saying security forces haven’t been able to keep up with the industry’s expansion. Alejandro Martínez, president of the Colombian Oil Producers Association (ACP), also admits that that security is a problem, but says the attacks being carried out by the FARC guerilla army are more about visibility than ideology. “It’s not that [the FARC] is ideologically opposed to foreign investments. It’s about showing that they’re still relevant,” he says.

The security situation has in some cases put foreign companies and the Colombian military at odds. Following the Chinese kidnapping incident, Emerald Energy – a subsidiary of China’s Sinochem – announced in mid-November that for security reasons it is closing its 4,000 barrel-per-day facility in Caquetá. Military leaders reacted with indignation. “They can’t use security as an excuse not to honor the agreements they’ve signed with different institutions,” said Gen. Fabricio Cabrera of the 12th Brigade.

The government, furthermore, warns that it will expel any multinationals that give in to guerilla extortion demands. It has also adjusted its strategy to better defend the sector, promising over the next two years to create six new battalions for the specific purpose of defending energy and mining infrastructure.

Labor troubles

Security, however, isn’t the only problem oil companies are butting up against in Colombia. Community relations are a sticking point as well. In many of the places through which the industry’s oil trucks pass, local residents complain about damage both to roads and the local environment. Reports from Colombia’s Comptrollers Office and by national environmental authorities show that the national Ecopetrol holding has spilled more than 15,000 barrels of oil in different parts of the country over the past three years. 

But perhaps the biggest difficulty, at least in short-term political terms, are recent conflicts that have broken out between oil companies and workers. The Canadian company Pacific Rubiales, which operates in the western part of the country and accounts for a full 25% of Colombia’s total production, is locked in a serious struggle with unions. Twice this year, the multinational had to suspend operations after demonstrations turned violent.

Petrominerales, another multinational oil firm, Brazil’s Petrobras and Ecopetrol have faced protests as well. The latter turned last month to the armed forces to assure safe entry for workers in its Barrancabermeja refinery in the northern Colombia, after a strike there sparked violent clashes that left 15 people injured.

The oil companies blame the labor strife on competition between various unions, which are vying with each other to attract new members and better position themselves in what they see as a growing and lucrative industry. Rodolfo Vecino, president of a labor union called USO, denies such claims. The oil companies, he explains, invented the competition theory in order to discredit the unions and steer the debate away from the workers demands for better salaries and labor conditions.

“We don’t agree with the violence. But we don't agree with the violence against the workers,either,” says Rodolfo Vecino, president of a labor union called USO, who accuses authorities of beating union members during protests.

According to Martínez, head of the ACP oil industry association, strikes have cut production by between 40,000 and 50,000 barrels per day. Still, any day, Colombia will pass the one million barrel market. And, Martínez adds, that will rise to 1.2 million just three years from now.

Read more from AméricaEconomía in Spanish

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About this article source Website:

America Economi­a is Latin America's leading business magazine, founded in 1986 by Elias Selman and Nils Strandberg. Headquartered in Santiago, Chile, it features a region-wide monthly edition and regularly updated articles online, as well as country-specific editions in Chile, Brazil, Ecuador and Mexico.

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