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Plan Petroleum in Colombia

Canadian PoliticsUSA PoliticsLatin America and the Caribbean

In December 2000, U.S.-trained counter-narcotics battalions, U.S.-supplied Blackhawk helicopters and U.S.-piloted spray planes descended on Putumayo to conduct Plan Colombia’s initial aerial fumigation campaign. In the four years since the initial spraying of coca crops, Putumayo has been a repeated target, as have many of the country’s other southern departments. Although the U.S. government claims its fumigation prescriptions finally began decreasing coca cultivation in 2002 and 2003, there is still no evidence that Plan Colombia has achieved its principal goal of dramatically reducing the flow of cocaine to the United States. On the other hand, Plan Colombia’s militarization of Putumayo has contributed significantly to increased oil exploration by multinational companies in this resource-rich region.

Bringing security for foreign oil companies

In July 2002, the Bush administration convinced Congress to lift conditions restricting Colombia’s U.S. military aid to counternarcotics operations, allowing it to be used to fight the country’s illegal armed groups as part of the global war on terror. The lifting of the conditions led to the direct use of U.S. military aid to target the Revolutionary Armed Forces of Colombia (FARC) guerrillas responsible for attacking the oil operations of multinational corporations.

Shortly after September 11, 2001, U.S. Ambassador Anne Patterson made clear the importance of finding alternative sources of oil in the context of the war on terror. She said that Colombia, already the third-largest exporter of oil in Latin America and one of the top ten foreign suppliers to the United States, “has the potential to export more oil to the United States, and now more than ever, it’s important for us to diversify our sources of oil.”

The escalation of the civil conflict in Putumayo over the past decade, however, has made foreign oil companies hesitant to exploit the vast oil reserves that exist mostly in rebel-controlled regions. That is, until the arrival of right-wing paramilitaries in the late 1990s and the implementation of Plan Colombia, both of which have resulted in greater security for oil operations.

Canada a big player in Putomayo’s oil operations

The remote municipality of Orito, where four oil pipelines interconnect, is the hub of Putumayo’s oil operations. Two pipelines carry oil from nearby fields currently being exploited by the state oil company Ecopetrol, U.S.-based Argosy Energy and Petrominerales, a subsidiary of Canada’s Petrobank. Another pipeline brings oil from the Ecuadorian Amazon where U.S.-based Occidental Petroleum and Canada’s EnCana have operations. The fourth is the Transandino pipeline, which transports oil from the other pipelines across the Andes to the port of Tumaco on Colombia’s Pacific coast.

Ecopetrol’s facility in Orito consists of a small refinery, which only produces enough fuel for local consumption by vehicles and helicopters used by the company and the military, and several large storage tanks that supply crude to the Transandino pipeline. The facility also contains an army base housing 1,200 specially trained troops whose mission is to protect Putumayo’s oil infrastructure. Leftist guerrillas have repeatedly targeted Colombia’s oil pipelines to protest the exploitation of the country’s resources by multinational companies. In a seeming contradiction, the rebels profit from the very industry they are attempting to destroy by extorting money from foreign oil companies and their contractors in return for not targeting oil operations.

A target for leftist guerrillas

The country’s most attacked pipelines in recent years have been the Caño Limón in the northeastern department of Arauca and the Transandino in Putumayo. After the Caño Limón pipeline was attacked 170 times in 2001, the Bush administration provided $93 million in counterterrorism aid to Colombia and deployed U.S. Army Special Forces troops to help safeguard the pipeline, which is partly owned and operated by Occidental Petroleum.

Though none of the foreign oil companies admit to paying off the guerrillas, Occidental Vice President Lawrence Merriage has admitted that in the past his company’s contractors have met extortion demands in Arauca.

The implementation of the $1.3-billion Plan Colombia in Putumayo followed on the heels of a dramatic increase in the number of attacks against the department’s oil infrastructure from 48 in 1999 to 110 the following year. According to the army commander responsible for protecting Putumayo’s oil operations, Lt. Col. Francisco Javier Cruz, U.S. drug war aid has made the region safer for conducting oil operations because the army has been able to use “helicopters, troops and training provided in large part by Plan Colombia.” But while the number of attacks had been reduced to 43 by 2002, last year they leapt to a record 144.

More than half of last year’s attacks occurred in November when FARC guerrillas launched a major offensive against Putumayo’s oil infrastructure. The government immediately responded by removing the local army commander responsible for defending the oil installations and replacing him with Lt. Col. Cruz. The transfer of Cruz from an elite Colombian Army counterinsurgency unit, the Rapid Deployment Force (FUDRA), signified the importance the administration of President Alvaro Uribe has placed on protecting Putumayo’s oil infrastructure. The special operations group of Lt. Col. Cruz’s Ninth Special Battalion has advanced weapons and night vision equipment that allow it to conduct counterinsurgency operations as part of a strategy to pre-empt future attacks. The battalion also has two helicopters–owned by the state oil company Ecopetrol and Canada’s Petrobank–at its disposal for transporting troops on counterinsurgency operations. Lt. Col. Cruz clearly states his mission: “Security is the most important thing to me. Oil companies need to work without worrying and international investors need to feel calm.”

Foreign oil companies clearly have a vested interest in Lt. Col. Cruz’s troops being able to maintain security in Putumayo. According to Steven Benedetti, a Petrobank representative in Bogotá, the company began operations in the region in June 2002 because “we believe there is a big prize in Putumayo.” That “prize” is the estimated 1.1 billion barrels of oil in the Orito field, of which 80 per cent still remains untouched. Despite several of the company’s drilling sites having been targeted in the FARC’s November 2003 offensive, Petrobank increased production by 18 per cent over the previous year.

According to Lt. Col. Cruz, the army alone cannot prevent future guerrilla attacks against the oil infrastructure. His men often rely on civilian informers working as part of the informant network created under Uribe’s Democratic Security Program. Cruz notes that, in order to accomplish his mission, it is very important that the army “make the people understand that when they collaborate to avoid terrorist attacks, everybody wins.” He is referring to the fact that when oil production halts, there is a corresponding reduction in royalties paid by foreign oil companies to the Colombian government. Colombian law stipulates that these royalties are supposed to be used for social and economic programs.

The politicians steal the royalty money

It is difficult to find the benefits of the oil royalties in Orito. Orito municipality is the Putumayo department’s largest recipient of oil revenue, but the degree of poverty and underdevelopment is no less stark than in other comparably sized towns that receive no oil funds. The reason Orito has not benefited from the royalties, according to one local resident, is that “the oil leaves Putumayo and the royalties go into the wallets of the administrators.” Another states it even more bluntly: “The politicians steal the money.” In contrast to his decision to cut-off royalty payments to the oil-rich Arauca department because corrupt municipal governments are allegedly sympathetic to leftist guerrillas, President Uribe has allowed the money to continue flowing to corrupt local officials in Putumayan towns controlled by right-wing paramilitaries.

Despite, or perhaps because of the presence of the army and the National Police, the town of Orito is controlled by paramilitaries belonging to the United Self-Defense Forces of Colombia (AUC). The paramilitaries arrived in Putumayo in the late 1990s and after a series of massacres they successfully seized most of the department’s significant towns including Orito. Even though the FARC has recently regained several smaller towns, and despite Lt. Col. Cruz’s claims that the army is fighting the AUC, the paramilitaries’ ruthless tactics have helped them retain control of Orito. According to one local, “They kill innocent campesinos just because they might be guerrillas.” The day I met with Lt. Col. Cruz, paramilitaries assassinated local campesino leader Alirio Silva in Orito.

Sweetening the pot

Militarization through the war on drugs and terror is not the only factor creating favourable conditions for foreign oil companies in Putumayo; Plan Colombia’s economic program has also made oil an inviting enterprise for foreign companies. When the initial phase of Plan Colombia was implemented in 2000, the economic component simply consisted of the economic austerity measures already imposed on Colombia by the International Monetary Fund (IMF) in return for a three-year $2.7-billion loan in December 1999. The neo-liberal policies called for by the IMF included public spending cutbacks, opening domestic markets to foreign companies, and privatizing and restructuring state-owned companies.

In 2001, the Colombian government established new regulations that no longer required foreign companies to enter into a 50/50 production partnership with Ecopetrol, allowing private companies to keep up to 70 per cent of the oil they extracted from new fields–even more in incremental production contracts for existing fields. It also extended the length of time that foreign companies retained production rights and dramatically lowered the amount they had to pay the government in royalties on their percentage of oil production. Before the new regulations, Colombia demanded a Latin American high of 20 per cent in royalties, but the new rules included a sliding scale under which most of Colombia’s oil fields–under 5,000 barrels a day–only required an 8 per cent royalty payment as described earlier. The government claimed these changes were necessary to make the country more competitive, encourage foreign investment and maintain oil self-sufficiency. A newly “competitive” Colombia quickly negotiated dozens of new contracts with foreign oil companies, among them Petrobank and Argosy in Putumayo.

The next step in meeting IMF structural adjustment demands took place on June 26, 2003. Uribe issued a presidential decree ordering the restructuring of the state oil company Ecopetrol. While it was not a privatization of the oil company, the result was the same. Ecopetrol split into three companies: a newly-truncated Ecopetrol functions as an oil producer and refiner, the National Hydrocarbon Agency negotiates all oil contracts and the Colombian Energy Promotion Association handles promotional duties. In March 2004–two months after Colombia signed a new $2.1-billion deal with the IMF calling for continued economic reforms–the practical consequences of Uribe’s restructuring of Ecopetrol became clear. Colombia’s Energy Minister Luis Ernesto Mejía announced in Houston, Texas that foreign companies could negotiate contracts with the National Hydrocarbon Agency without entering into partnership with Ecopetrol.

The new rules also eliminate time limits on production rights and allow foreign companies to keep up to 100 per cent of the oil for as long as a field remains productive. And, with the exception of those operating exceptionally large oil fields, of which there are currently only two in Colombia, most companies will continue to pay only an 8 per cent royalty. Clearly, the terms have shifted dramatically in favour of foreign companies, considering contracts signed four years ago called for equal partnership with Ecopetrol, 20 per cent royalty payments and a time limit on production, after which all the remaining oil and drilling assets had to be turned over to Ecopetrol.

In 2003, Canada’s Petrobank invested $50 million in its Putumayo oil operations. If Ecopetrol had used an equivalent amount from Colombia’s $2.1-billion IMF loan to fund the exploration and production itself, it could have retained all the oil instead of turning over 79 per cent of it to a foreign company. The sale of this oil abroad would have covered operation costs, allowed Colombia to pay back the loan and provided the government with much needed revenue. Such an oil policy implemented throughout the country using IMF loan money to cover start-up costs would allow Colombia to control its own valuable resources as do other countries with state oil companies such as Mexico, Venezuela and the world’s largest producer, Saudi Arabia. Clearly though, the IMF’s goal is not to support nationally focused economic projects.

The government has used the misleading concept of maintaining oil self-sufficiency to justify virtually giving away the shop to meet IMF-imposed structural adjustment conditions and to continue receiving U.S. military aid. And foreign oil companies have gladly benefited from Plan Colombia’s military and economic components, making Colombia an unsettling example of resource extraction in the neo-liberal era. As Petrobank’s Benedetti makes clear, the company is excited about the new contract rules and does not intend to let the civil conflict interfere with its plans to expand operations throughout Colombia. “We believe the benefits outweigh the risks,” says Benedetti. Yet many residents in Putumayo believe oil exploitation puts them at risk because it helps sustain the conflict. As one local candidly states, “Everyone knows the conflict in the Middle East is because of oil, and Colombia’s problems are no different. Maybe the coca is going, but there’s still oil. And if there’s oil, then the armed groups won’t leave because they are interested in places where there is money and power.”

Garry Leech is a freelance journalist and author of the book Killing Peace: Colombia’s Conflict and the Failure of U.S. Intervention (INOTA 2002). He is also editor of the online publication Colombia Journal (www.colombiajournal. org).

This article appeared in the July/August 2004 issue of Canadian Dimension .


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