Analysis: Colombia oil woes: rebels take back seat to protests

Reuters News
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Posted: Sep 14, 2011 12:04 PM
Analysis: Colombia oil woes: rebels take back seat to protests

By Jack Kimball

BOGOTA (Reuters) - High-profile kidnappings, oil pipeline bombings, murders, extortion and now a surge in blockades -- just another day in Colombia's booming oil industry.

Explorers have moved into new areas opened up by a successful U.S.-backed offensive against Marxist rebels, and output in Latin America's No. 4 crude producer has hit historic levels this year -- nearing 1 million barrels per day (bpd).

But while rebel attacks on infrastructure are much less frequent than at the height of the war, they have picked up this year. Protests by local communities around oil fields also pose a threat to the industry.

"Insecurity as an area of concern is really in third or fourth place," Alejandro Martinez, president of the Colombian Oil Association, a private industry group, told Reuters.

"We're now really worried about social conflict in areas where communities have unfounded expectations ... that is generating blockades," he said, adding that the number of blockades had risen 50 percent from last year to 1.5 a week.

As the oil industry grows, residents near major projects are demanding jobs, better services and compensation for infrastructure and environmental damages.

Protests have rocked producers this year, briefly stopping output at Colombia's largest producing oil field run by Pacific Rubiales, and most recently at a project operated by the country's No. 4 producer, Petrominerales.

While demonstrations against oil companies and mismatches between local desires and realities on the ground are nothing new here, analysts say the scale is shifting.

"We're used to hearing about that in some neighboring Andean countries, but in Colombia that's a little unusual. With the uptick in exploration and production, it's not surprising," said RoseAnne Franco, an analyst at Wood Mackenzie.

"The companies need to be aware of the rising expectations regarding social issues and employment. Initially, it wasn't on the radar. Now communities are reminding them."

REBEL ATTACKS

A military crackdown over the last decade pushed rebels of the Revolutionary Armed Forces of Colombia, or FARC, back into remote hideouts, and improved fiscal terms have seen an influx of foreign oil companies snapping up assets in a country once largely dismissed as a failing state.

The FARC is weaker than it has been in decades, but still poses a threat and has stepped up attacks on the oil industry.

Rebels hit oil infrastructure 13 times from January to July, up 18 percent from the same period in 2010, and a spate of high-profile kidnappings has also shaken the sector.

That has forced President Juan Manuel Santos' government to say it will redesign its security strategy for the oil and mining sectors.

Still, officials point out that the area under exploration has grown astronomically to 38 million hectares (93 million acres) -- roughly the size of Japan or Germany -- from around 8 million hectares only a few years ago.

The oil industry's success will depend largely on whether it can keep finding new reserves and managing needs of local communities.

"Since security has changed, has improved, in one way or another, new concerns arise regarding respect of human rights, environmental protection, the rights of communities," said one oil consultant whose clients include top Colombian producers.

"When that's done, there'll be others."

(Additional reporting by Luis Jaime Acosta and Monica Garcia; Editing by Daniel Wallis, Kieran Murray and David Gregorio)