Colombian Oil Industry Looking for Boost from Ceasefire

The Colombian government and FARC rebels are close to ending their decades-long armed conflict following the anticipated signing of a bilateral ceasefire.

The announcement of the agreement was made on the 22nd of June 2016 via a joint statement issued by state and guerilla representatives negotiating in Havana, Cuba.

“The national government and FARC delegations inform the public that we have successfully agreed a definitive and bilateral ceasefire, the laying down of arms, security guarantees and the fight against organized crime units,” said Colombian government spokeswoman Marcela Duran.

Details of the ceasefire arrangement are expected to be provided on 23 June at a ceremony in Havana with attendance by all negotiators, Colombian President Juan Manuel Santos, U.N. General Secretary Ban Ki-Moon, and the heads of state for guarantor countries supporting the peace process.

Talks between Colombian officials and the country’s largest rebel army formally began on 19 November 2012. Both sides have thus far reached five pre-agreements, including the one for a bilateral ceasefire, and must now agree to a scheme for the implementation, verification and approval of a final peace deal.

The armed conflict has taken its toll on infrastructure targeted by the guerillas, including oil pipelines and refineries. Eighty Colombian pipelines were bombed in 2015, particularly during a suspension of peace talks between May and July. Incidents somewhat died down following the unilateral ceasefire on 20 July 2015, but a new spate of at least fifteen bombings have occurred at the hands of the ELN rebels.

Experts consulted by Argus Media believe the oil industry will likely undergo difficulties in the beginning of the post-conflict period. It will take some time to quell conflict in oil-producing provinces such as Meta, Putumayo, Norte de Santander and Arauca.

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Furthermore, smaller localized conflicts characterized by community blockades and social unrest is likely to act as growing challenge to oil operators in the post-conflict period.

Aside from the armed struggle, the Colombian oil industry has also been reeling from the low costs of crude. Joe Bormann, a Managing Director at Fitch Ratings, believes the faltering oil sector will present a challenge to foreign investors considering opportunities in Colombia.

Nevertheless, Colombia’s business community has largely backed the peace process and is optimistic that the national economy will blossom during a post-conflict era.

By Erwin Cifuentes for Oilprice.com

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