Violence has broken out yet again in strife-torn Colombia after a law student was killed by police in Bogota two weeks ago for allegedly breaching coronavirus social distancing restrictions. Those clashes led to at least 13 dead after days of protest and come on the back of last year’s anti-government protests. Labor unions are currently attempting to revive countrywide mass protests against President Ivan Duque. That recently led to the formation of a car caravan in Bogota, Colombia’s capital, to protest the government’s economic and social policies. Rising insecurity in the capital and the countryside, where community leaders and massacres are increasing, triggered concerns that Colombia’s security crisis is spiraling out of control. This, it is feared, will sharply impact the Andean country’s economically vital petroleum industry, which had recently been showing signs of recovery. Growing civil unrest is spreading throughout Colombia as unhappiness over the policies of President Ivan Duque, who took the country’s top job in August 2018, increases. This is being magnified by a series of scandals involving Duque’s administration. These include allegations of vote buying during the 2018 presidential election, failing to implement the 2016 peace accord with the FARC, formerly Colombia’s largest Marxist guerilla group, and a growing number of social activists being murdered. Colombia’s military was caught in a spying scandal earlier this year, which even attracted the attention of U.S. Congress. The COVID-19 pandemic lockdown, which has contributed to an increase in poverty, and the recent detention of President Duque’s mentor former president Alvaro Uribe is adding fuel to the fire.
There is the very real likelihood of further significant protests which have the potential to disrupt Colombia’s economically vital oil industry. Rural communities have a long history of using barricades to exert control over local territory, including cutting the vital Pan-American Highway in Southern Colombia multiple times during 2013 and 2019. That combined with local blockades in the department of Putumayo, which holds the Putumayo Basin, and attacks on Colombia’s oil pipeline infrastructure, which is the only means of economically transporting crude in the Andean country, poses a key threat to the oil industry. Farmers blockades in Colombia’s southern Putumayo Basin forced the Andean country’s fourth largest oil producer Gran Tierra to shutter operations taking up to 5,000 barrels of crude daily offline.
Related: The Tipping Point For Mass EV Adoption
There has also been an uptick in the number of former FARC combatants remobilizing, which is fueling an escalation in violence. This is occurring primarily in rural areas where coca is grown, or major trafficking routes intersect. That along with the last major guerilla group, the ELN, and various neo-paramilitary groups seeking to extend their control of those regions is fueling greater conflict. This combined with growing community dissent against the oil industry is behind recent attacks on oil infrastructure, notably petroleum pipelines and the May 2020 assault on Ecopetrol’s La Cira-Infantas oil field which saw 31 wells disabled.
Those events are not only disrupting Colombia’s oil production but will lead to lower investment and notably a reduction in all-important exploration activity. A lack of oil exploration coupled with the Andean country’s low proven oil reserves of just over 2 billion barrels at the end of 2019, giving a limited production life of 6-years, poses a key risk to the sustainability of Colombia’s petroleum industry. In fact, there have been no major hydrocarbon discoveries for over a decade, underscoring the lack of potential.
Moves to boost economically vital oil reserves and production by opening Colombia to shale oil and natural gas exploration and production have met significant headwinds. Unconventional oil operations in Colombia has encountered significant community and legal resistance. It is feared that if the required legal approvals are obtained and production pilots start, they could trigger an escalation of attacks on oil infrastructure with shale oil operations being targeted.
The deteriorating security situation in Colombia is of grave concern for the petroleum industry. Even the historic 2016 peace agreement with the FARC, which was heralded as an event that would boost security and economic growth, has failed to substantially reduce violence. Many of Colombia’s oil fields are in rural locations where the state historically has lacked control, making well-heads and supporting infrastructure vulnerable to attack.
Crucial oil pipelines, which are the only economic means of transporting crude through Colombia’s rugged terrain, pass through hundreds of kilometers of remote countryside making them difficult to protect and particularly vulnerable to attack. That has also seen a sharp uptick in the illegal siphoning of crude from pipelines. According to Ecopetrol, during the first eight months of 2020, 900 illegal valves were identified on petroleum pipelines, a 20% increase over the 747 found for the same period a year earlier. That according to the national oil company, led to the loss of 2,5000 barrels of oil and derivative products daily, a substantial number. This activity has long been associated with criminal groups in Mexico and Venezuela, where it became an important source of income for illegal armed groups, and it appears Colombia is now on a similar trajectory.
The growing risks associated with operating in Colombia, especially because of the conflict-scarred country’s limited oil reserves, saw national oil company Ecopetrol look to other jurisdictions in which to operate. Colombia’s national oil company recently announced that in an alliance with Occidental Petroleum, it intended to develop acreage in the prolific U.S. Permian Basin by drilling up to 100 wells by the end of next year. This will allow Colombia’s national oil company to address the issues associated with its Colombian operations, most notably rising local security risks, which are disrupting oil production, and a lack of proven oil reserves.
When those factors are considered along with oil’s prolonged price slump and rising community discontent with the industry, global oil majors will look elsewhere to invest in lower-risk oil acreage and projects to develop. That means that Colombia will struggle to attract vital investment in its oil industry, especially that required to drive exploration activity in remote regions.
By Matthew Smith for Oilprice.com
More Top Reads From Oilprice.com:
- The World's Most Expensive Crudes Get Expensive Again
- The Debt Crisis Is Mounting For Oil Economies
- Shell May Cut Upstream Oil Operations By 40%