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Matthew Smith is Oilprice.com's Latin-America correspondent. Matthew is a veteran investor and investment management professional. He obtained a Master of Law degree and is currently located…

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A New Civil War Would Decimate Colombia's Oil Industry


The strife-torn South American nation of Colombia was rocked by anti-government protests which commenced in late April 2021 and lasted for roughly two months.

By mid-May 21 road blockades had sprung up all over Colombia in response to President Ivan Duque’s government violently repressing the protests, impacting the economically crucial oil industry.

By the end of July-2021, the deaths of 45 protestors at the hands of authorities had been recorded by peace thinktank Indepaz. That coupled with the government’s unwillingness to negotiate with the national strike committee caused civil dissent to escalate leading to nationwide blockades of roads which prevented the movement of supplies impacting the economy and oil industry.

Those events came on the back of Duque’s unwillingness to fully implement what increasingly appears to be a failed peace agreement with Colombia’s largest leftwing guerilla group the FARC. It is the rapid growth of dissident FARC groups, those guerillas who refused to accept the 2016 peace accord, that has been a driver of a sharp uptick in violence. 

By the end of 2017, it was estimated that 7,000 FARC combatants, most of the active guerillas, had demobilized and surrendered their weapons in a process supervised by the UN mission in Colombia. It was believed that less than 1,000 FARC fighters had rejected the peace agreement remaining active in their struggle against the state. After a series of missteps by the national government in Bogota and increasing unwillingness to implement the peace deal since Duque took office in late-2018 those dissident FARC groups surged in strength.

Estimates put the number of dissident FARC at around 2,500 combatants plus civilian supporters, which is roughly three times greater than the number of fighters at the end of 2017. The National Liberation Army (ELN – Spanish initials), Colombia’s last remaining leftist guerillas, took advantage of the demobilization of the FARC to seize control of the abandoned territory and significantly expand operations. By the end of 2020, it was estimated that the ELN is operating in 156 municipalities across Colombia compared to 96 at the time of the 2016 FARC peace accord.

The Marxist group which is believed to have 2,500 armed combatants and 5,400 members rely heavily upon violence to enforce its territorial control. The ELN has aggressively expanded into Venezuela, taking control of vast regions of the near-failed state, filling the vacuum left by authorities as Maduro’s regime steadily crumbles due to a lack of resources.

The ELN is locked in conflict with the Gulf Cartel, Colombia’s largest neo-paramilitary group, and the remnants of the Popular Liberation Army (EPL – Spanish initials) for control of lucrative coca cropping territory and smuggling routes. During August 2019 key former FARC leaders, notably including former peace negotiator Ivan Marquez, announced a return to arms under what was called the Second Marquetalia and sought refuge in Venezuela.  These events, which are the result of Duque’s failure to implement the 2017 peace deal, are fueling a sharp uptick in violence with massacres (defined by the UN as the killing of three or more people at any one time) rising sharply during 20201. According to Indepaz, there were 60 massacres during the first seven months of 2021 compared to 39 a year earlier. That is compared to 36 massacres recorded during 2019, a year the UN described as the most violent in nearly a decade.

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Of considerable concern is the numbers for the first seven months of 2021 are more than double the 29 massacres recorded for 2018, the year President Ivan Duque won Colombia’s top office, and more than five times the 11 massacres reported during 2017, which was the first year after the historic FARC peace was signed. It is Colombia’s remote regions, where there has long been a minimal government presence, that are the most severely impacted and it is in those areas where upstream oil operations are located. The uptick in violence, as well as growing lawlessness since Duque took office, is a key driver of further conflict and anti-government sentiment.

Former FARC fighters are rearming and joining dissident groups as a form of self-protection and war-weary civilians are campaigning against the Duque administration’s mishandling of an escalating security crisis. While a return to the multi-actor asymmetric conflict, which peaked in the 1990s, is unlikely, heightened violence is a significant contributor to Colombia’s growing turmoil. That in turn is hurting the reactivation of Latin America’s fourth-largest economy and its crucial oil industry. Duque’s failure to fully implement the FARC peace treaty and curb the surge in violence means Colombia is yet to enjoy the long-awaited economic dividend that a sustained peace would deliver. 

The considerable political turmoil and civil dissent triggered by a breakdown of law and order under the Duque administration is responsible for an escalation in community protests against the petroleum industry and disintegrating social license in some communities. That has resulted in violent oilfield invasions in the Llanos basin and community blockades that have forced oil companies to shutter operations. Nationwide road blockades during May 2021, caused by the Duque administration’s violent repression of anti-government protests, pressured onshore oil producers to shutter operations.

As a result, oil output plunged to a low of 650,864 barrels per day at the height of the anti-government protests. For this reason, May 2021 crude oil production plunged by 5.6% compared to a month prior and 3.9% lower year over year to be an average of 703,478 barrels per day, That sharp decline compared to a year earlier is of particular concern because May 2020 production fell to a multi-year low due to Colombia’s pandemic lockdown, which forced drillers to shutter operations to contain the coronavirus. 

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The notable decline in May 2021 crude oil output highlights just how vulnerable Colombia’s onshore petroleum industry is to being disrupted by a deteriorating security environment. That is impacting Colombia’s economy because crude oil is the crisis-driven country’s largest export, followed by coal and coffee, responsible for around one-third of all export income for the first five months of 2021. During 2020 crude oil was responsible for earning 17% of Bogota’s 2020 fiscal income and generating over 3% of GDP, further illustrating the petroleum industry’s importance to Colombia’s economy.  

The marked uptick in violence is weighing heavily on Bogota’s much-vaunted economic reactivation further weighing on an economy deeply damaged by the pandemic, with 2020 gross domestic product shrinking nearly 7%. The risks posed by rising violence and deteriorating security, particularly in rural regions, are adversely affecting Bogota’s push to bolster investment in exploration for hydrocarbons. Colombia’s low proved crude oil reserves (Spanish) of 1.8 billion barrels only have a short production life of just over six years. Those numbers underscore the urgency with which Colombia must boost exploration activities if any new significant petroleum discoveries are to be made, with no major onshore oil finds occurring over the last decade.

President Duque’s reluctance to implement the FARC peace treaty and escalating violence, as well as lawlessness since he took office in August 2018, is weighing heavily on Colombia’s economy. Rising violence, notably in rural regions is directly impacting Colombia’s oil industry. This along with political turmoil engulfing the Andean nation, combined with the oil industry disintegrating social license, is responsible for protests and violent attacks upon the industry which are impacting operations and production.

Those developments along with Colombia’s high breakeven price, which averages up to $45 per barrel and is higher than offshore Guyana, Suriname, and Brazil, are deterring urgently required investment needed to boost exploration and development activities. While civil war, on a scale reminiscent of the 1980s and 1990s, is unlikely not to return to Colombia, a deteriorating security situation and rising violence will impact the strife-torn county’s economically crucial oil industry.


By Matthew Smith for Oilprice.com

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