Colombia Oil: Insecurity Grows

Colombian guerrilla group FARC has stepped up attacks on oil pipelines. (Photo: Colombia's Energy and Mining Ministry).

Colombia’s oil industry will see more insecurity, even with a peace agreement, experts say.

Inter-American Dialogue 

Colombia’s FARC rebels have recently increased attacks against infrastructure and the armed forces after calling off a unilateral ceasefire, with pipelines, crude oil transport trucks and transmission lines being major targets of attacks. What’s behind the sudden surge in attacks on energy infrastructure, and will it continue? Is the FARC the only perpetrator of such attacks, or are other rebel groups or criminal organizations also security concerns? If the peace talks succeed this year, will Colombia’s oil sector see a meaningful improvement in its business operating environment?

James Lockhart Smith, associate director and head of Latin America at Verisk Maplecroft: The surge in FARC attacks since the ceasefire was called off has been notable. Data from our Global Alerts Dashboard shows that between May 24 and June 23 there were 39 FARC attacks on energy infrastructure—a rate of 1.35 per day, substantially above the 12-month pre-cease fire average of 0.28 per day. According to intercepted communications, in the wake of the government operations launched in late May against FARC units in Cauca and Chocó, FARC leader Rodrigo Londoño issued not just an end to the ceasefire, but an order for an immediate escalation by all units. This translated into a wave of attacks against the oil and gas sector because, as the FARC has been weakened militarily over the last decade, they have increasingly relied on infrastructure and energy sector attacks to undermine government interests. The oil and gas sector is a major source of revenue and economic growth, and state company Ecopetrol retains a central role, meaning any attack against hydrocarbon investment is an attack against the state. More generally, the surge has also responded to dynamics at the negotiating table, as the FARC has sought to secure gains on the fourth and fifth items on the joint agenda. The FARC is not the only perpetrator. The ELN has continued to hit the sector hard in Arauca and Norte de Santander over the last year. There is no sign of an equivalent process with the ELN yet beginning, and we would expect such attacks to continue after a successful settlement with the FARC. In addition, although paramilitary successor groups and other criminal organizations don’t currently represent the same strategic threat, they still have a pervasive negative impact on the local security environment in relation to, for example, the security of personnel. Such organizations may step up in areas where previously dominant FARC guerrillas have demobilized in order to more aggressively seek to extort and extract resources from oil and gas investors. So while hydrocarbon investors in some areas, notably southern Colombia, would benefit from an immediate peace dividend, the long-term outlook in other areas of the country, and in the long term in all areas, is less clear.

Maria Velez de Berliner, president of Latin Intelligence Corporation: The destruction of Colombia’s oil industry demonstrates a number of points. 1) The FARC is the ‘go-to’ culprit in any criminal activity that happens in Colombia. But it is known that FARC, ELN, bacrims (bandas criminales) and sundry criminals collaborate in, or help facilitate, these attacks. 2) FARC negotiators in Havana do not have command and control over the ‘wolf packs’ responsible for the attacks. 3) The attacks are the tools of terrorist and criminal organizations to bring Colombia’s leading economic sector to its knees, forcing the government to make concessions to criminal groups in search of a flimsy ‘calma chicha’ that buys time to patch up the industry somehow. The attacks not only cripple the oil infrastructure and paralyze key economic hubs, such as Buenaventura and Coveñas, but the insecurity and uncertainty they create also deter investment and hamper the utilization of human resources. No industry can prosper, let alone survive, under these conditions. Thirty-four attacks so far this year against Caño Limón, and other attacks against Trans-Andino, Buenaventura, Tumaco, Putumayo, Coveñas and Norte de Santander have devastated the livelihood of thousands, left industry deprived of electricity and urban populations without potable water for days and have wreaked irreparable ecological damage in the ‘other Colombia,’ the rural and coastal areas few care about, except for politically expedient, official pronouncements. These conditions are hardly conducive to the FARC and the government winning the hearts and minds of the majority of Colombians each needs to implement the peace agreement, if there is one. Having been the punching bag of sundry criminals since the opening of Caño Limón, the oil industry in Colombia is in for increased insecurity and uncertainty, peace agreement or not. Every Colombian will be the loser for it.

Sergio Torres, consultant at IPD Latin America: Energy assets are an easy target for guerrilla attacks. They receive broad media coverage and generate public impact. While seemingly irrational, the attacks are compatible with the FARC’s intention to highlight the high costs of negotiating peace amid an armed confrontation. The FARC’s primary objective has been a government suspension of military action since peace talks began in 2012. But it is extremely unlikely that the government will yield to such pretenses. With public approval of President Juan Manuel Santos and his peace process at a historic low, conceding to the FARC’s demands would create an enormous political cost for Santos. He has opted for a confrontational response. While both the FARC and the National Liberation Army pose clear threats to Colombia’s oil industry, the FARC’s unilateral ceasefire offered some relief to the industry while it lasted. If confrontation continues to re-escalate, however, the country’s ability to maintain crude production around 1 million barrels of oil per day will be compromised. It is unlikely that peace talks will succeed in 2015. However, the FARC’s unilateral and unreciprocated attempt at a ceasefire successfully demonstrated the value of this approach on the country’s overall business environment.

Jorge Lara Urbaneja, partner at Arciniegas, Lara, Briceño & Plana in Bogotá: FARC actions destroying Colombia’s oil infrastructure have contaminated rivers and large areas of farmland, and their effects will last beyond our foreseeable future. Besides reducing oil production, transportation and exports, they have caused irreparable damages to the lowest and most vulnerable segment of the Colombian population—peasants who helplessly watch as their habitats are reduced to mud and ashes. The FARC’s violence is not just a response to the termination of the unilateral ceasefire, because this is just normal procedure. They are using this opportunity to consolidate their power in rural areas and to control any production therefrom, such as cocaine base and other drugs, which the FARC exports mainly through Venezuela. Illegal mining has also been a major line of FARC business. This generates strong violence as it generally requires the use of machinery and equipment stolen from legitimate companies that are forced to close operations due to regulatory or security barriers. The FARC has done nothing for the benefit of any portion of the population. Clearly, the FARC leaders are not motivated by peace in Colombia. They just seek political power and the protection of their wealth. The way the peace process has been set up only works in their favor, because it is giving them the preeminence and exposure that assures their future. Meanwhile, Colombia’s legitimate businesses must pay the highest taxes and contributions to support the government’s peace plans, which are going nowhere, while the FARC’s illegitimate business and financial structure remain untouched.

Republished with permission from the Inter-American Dialogue's weekly Energy Advisor