- Colombia’s oil industry is facing multiple headwinds, including higher taxes, plans to end exploration, and its crude reserves running out.
- Perhaps the largest headwind is the violence associated with the country’s cocaine trade, as its largest oil-producing areas are also coca-cultivating regions
- In Colombia, oil is responsible for 3% of the gross domestic product, 12% of national income, a third of foreign investment, and 34% of total exports by value.
The ferocity of Colombia’s low-intensity multiparty asymmetric conflict is rising once again. This frightening turn of events started in late 2018 when Ivan Duque became Colombia’s 33rd president with massacres and the murder of community activists spiraling out of control. This is occurring despite Duque’s predecessor, Juan Manuel Santos, securing a 2016 peace deal with Colombia’s largest guerilla group the leftist Revolutionary Forces of Colombia (FARC – Spanish initials) which saw them demobilize in 2017. Recently inaugurated leftist President Gustavo Petro’s declaration of total peace has failed to diminish the violence. It is the lucrative cocaine trade fueling the conflict, much of which occurs in Colombia’s oil-rich regions that are responsible for most of the Andean country’s production. This is a significant hazard for an industry facing many headwinds, particularly higher taxes and plans to end petroleum exploration, where output is falling and reserves will be exhausted in less than eight years.
Colombia contains 23 sedimentary basins of which six are classified as mature basins that are responsible for essentially the Andean country’s entire oil production. Those are the onshore Caguán-Putumayo, Catatumbo, Eastern Cordillera, Eastern Llanos, Middle Magdalena Valley, and Upper Magdalena Valley Basins.
Source: ANH.
Many of those basins are situated in key coca cultivating regions, with the leaves of the coca plant providing the alkaloid that is extracted to make cocaine hydrochloride, which are hotspots for Colombia’s low-intensity civil conflict. The northeastern Catatumbo region, which contains the Catatumbo Basin, situated in the Norte de Santander Department on the border with Venezuela is the second-largest coca-growing area in Colombia. The United Nations Office on Drugs and Crime (UNODC) estimates that during 2021 (Spanish) there were 105,000 acres under coca cultivation in Catatumbo accounting for just over a fifth of the 504,000 acres allocated to growing the plant nationwide. This acreage has the potential to produce up to 238,000 metric tons of fresh coca leaves which in turn is sufficient to manufacture up to 705,000 kilograms of cocaine hydrochloride at 100% purity. The clashes between illegal armed groups fighting for control of the cocaine trade in Catatumbo are so severe the region is now synonymous with surging violence sweeping across Colombia. Catatumbo is rich in oil containing proven reserves of three million barrels, a further estimated 17 million barrels of undiscovered reserves, and four mature oilfields, the largest being the Ecopetrol-owned and operated Tibu field. The intensity of violence in Catatumbo deters privately owned energy companies from operating in the region.
The oil-rich departments of Arauca and Putumayo have long been at the center of Colombia’s decades-long low-intensity asymmetric civil conflict. That didn’t change when Bogota successfully implemented a peace deal with the FARC. Various illegal armed groups, primarily bands of dissident FARC combatants who don’t accept the 2016 peace agreement and the National Liberation Army (ELN – Spanish initials) frequently clash for control of Arauca’s illicit economy, notably the cocaine trade. Those criminal bands also engage in petroleum theft and have in the past reaped tremendous profits from extorting energy companies and kidnapping their employees. Escalating conflict is responsible for a sharp increase in the number of homicides occurring in Arauca. The department with proven oil reserves of 67 million barrels ranks fifth, behind Boyaca, Santander, Casanare, and Meta, by reserves. It is Colombia’s third most prolific oil-producing department, behind Meta and Casanare, pumping 20.3 million barrels during 2021. Arauca contains Colombia’s 10th most important oilfield, Caño Limon, which produced 7.1 million barrels of oil in 2021.
The conflict in Arauca has spilled over into the neighboring Venezuelan state of Apure, where the now-demobilized FARC was once welcomed as an ally by the Chavista Venezuelan state. In early 2021, President Nicolas Maduro mobilized his security forces vowing to rid Apure of the terrorists operating in the state. That resulted in a series of clashes between Venezuela’s military and police with the dissident FARC 10th Front. A handful of battle-hardened Colombian guerillas essentially fought Venezuela’s military forces to a standstill, preventing Maduro from achieving his goal of removing the 10th Front dissidents from Apure. The 10th Front is embroiled in a conflict with another FARC dissident group the Second Marquetalia in Apure while clashes with the ELN are occurring on both sides of the border.
The armed conflict in Putumayo, where the Caguán-Putumayo is situated, is escalating at a frightening pace. In November 2022, clashes between two dissident (Spanish) FARC groups, the Border Commandos and Carolina Ramirez Front, left 18 dead in the remote municipality of Puerto Guzman. Various illegal armed groups, mostly FARC dissidents, criminal bands, and neo-paramilitary groups are fighting for control of lucrative smuggling routes along the border with Ecuador and the region’s cocaine trade. Oil-rich Putumayo, which with 39 million barrels of proven oil reserves ranks among Colombia’s departments as ninth by reserves, is the strife-torn country’s fourth most prolific coca growing region. During 2021, UNODC estimated that 78,762 acres in Putumayo were devoted to cultivating the coca plant. That could potentially produce 177,000 metric tons of fresh coca leaf in turn yielding as much as 218 kilograms of cocaine hydrochloride. The escalating armed conflict in oil-rich Putumayo, along with community protests, regularly impacts the oil industry potentially disrupting industry operations in Colombia’s seventh most productive department which pumped 7.7 million barrels in 2021.
Colombia’s economically crucial oil industry is engulfed by headwinds. Petro’s recent tax reforms have nearly doubled the effective tax rate for drillers operating in Colombia which along with plans to end oil exploration sees many upstream oil companies slashing investment with some even contemplating whether to exit the country. The threats posed by those events to the oil industry, and ultimately Colombia’s economy, are tremendous. They will only further deter investment by foreign energy companies, which have already been dealt a grave blow by recent tax hikes and Petro’s plans to end contracting for hydrocarbon exploration. That will sharply impact Colombia’s economy where oil is responsible for 3% of gross domestic product, 12% of national income, a third of foreign investment, and 34% of total exports by value. Colombia’s meager oil reserves totaling a paltry 2 billion barrels will be exhausted by 2030 unless investment in hydrocarbon exploration continues and new discoveries are made. Declining production since 2015 is impacting Colombia’s economy. For the first eight months of 2022, the strife-torn country pumped an average of 747,215 barrels per day which is 26% lower than the 1,005,600 barrels produced daily in 2015. Colombia’s hydrocarbon output will decline further as oil industry investment falls and foreign energy companies choose to focus on operations in more competitive jurisdictions. These developments threaten Colombia’s energy security and could spark an energy crisis.
By Matthew Smith for Oilprice.com
More Top Reads From Oilprice.com:
Matthew Smith
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…
More Info"conflict" - Google News
December 02, 2022 at 06:00AM
https://ift.tt/F1uCsrf
Cocaine Conflict Is Causing A Crisis For Colombia's Oil Industry - OilPrice.com
"conflict" - Google News
https://news.google.com/search?q=conflict&hl=en-US&gl=US&ceid=US:en
https://rumputhijauau.blogspot.com/
Bagikan Berita Ini
0 Response to "Cocaine Conflict Is Causing A Crisis For Colombia's Oil Industry - OilPrice.com"
Post a Comment