By Dan Molinski
CEDEÑO, Colombia--The recent blast was routine: Marxist rebels
detonated dynamite remotely by cellphone along the Caño Limon oil
pipeline, scorching the jungle as it blew up its target.
And once again, an economic lifeline for Colombia--a 480-mile
pipeline that can carry 220,000 barrels of crude a day to a
Caribbean port--closed for repairs.
"The guerrillas gave us advanced notice, so I sent the kids home
a bit early," said Melida Wilches, a teacher at a school adjacent
to pipeline mile-marker 79, where the blast occurred.
Over the last two years, attacks by rebels against Colombian
pipelines have punctured a hole in the progress and the
self-assuredness of one of Latin America's most dynamic economies
and raised questions about the outlook for Colombia as a reliable
provider of crude to the U.S.
Following a boom by a sector that President Juan Manuel Santos
had called an economic locomotive--when oil production doubled to 1
million barrels a day--the sector contracted by 2.2% in the second
quarter, even as Colombia's GPD rose 4.3%.
Oil investment, at $2.8 billion through June, was the lowest for
that half-year period since 2011. An oil auction in July lured
commitments of $1.4 billion, just more than half of what the
government had intended.
To be sure, part of Colombia's woes can be traced to lower
global oil prices, the U.S. fracking boom, which has dampened
energy investment across Latin America, and bureaucratic delays in
Colombia for granting drilling rights, say oil executives and
government officials. Still, rising rebel attacks are a main factor
in the falling production and energy companies' reluctance to
invest here, these people say.
"There's a pessimism that wasn't there before among companies in
Colombia, an increasing risk perception," said Lisa Viscidi, an
energy analyst at the Washington-based policy group, Inter-American
Dialogue.
The situation has become so delicate for the government that Mr.
Santos publicly said in late July that continued attacks by the
Revolutionary Armed Forces of Colombia, or FARC, could jeopardize
ongoing peace talks aimed at ending a half century of conflict with
that main rebel group.
"You're playing with fire," he warned the rebels in a
speech.
Jaime Bocanegra, who oversees state-oil company Ecopetrol's
network of pipelines, said the attacks were a "hard blow to the
national economy," which depends on oil for half of export revenue.
The strikes have resulted in Ecopetrol producing nearly 30,000
fewer barrels a day through August, the equivalent of $3 million
daily. "All this means fewer royalties," he said.
Such attacks were believed to be in the past after Colombia's
military had weakened the guerrillas over a several-year
period.
Here in the sparsely-populated eastern plains where the Caño
Limon pipeline lies, Colombian counter-guerrilla troops trained by
U.S. Special Forces soldiers from Fort Bragg, N.C., were able to
lower the number of bombings from 170 in 2001 to just 37 a year
between 2007 and 2010.
The improvements, though, proved fleeting, as the attacks rose
over the next three years. Neither the Farc nor the second main
guerilla group, the National Liberation Army, could be reached for
comment on their motivation for the attacks.
But Major General Germán Eudoro Velasco, who commands a unit
that protects one of Caño Limon's most dangerous stretches, said
the FARC's commanders want to bolster their bargaining power at the
peace talks by demonstrating military strength.
Jorge Enrique Bedoya, Colombia's deputy defense minister, said
90% of the country is free of rebels. But hundreds of miles of
pipelines where the rebels still retain a foothold, like the far
south or here in the east, are easy targets.
"We could be standing shoulder-to-shoulder along the pipeline,
and the attacks would still be tough to stop," said one soldier, an
automatic rifle at his side, as he patrolled along Caño Limon on a
recent day.
The rebels are projecting strength "without hurting public
sentiment in the way attacks on innocent civilians would do," said
former President Andrés Pastrana, whose administration in 1998
created the special battalions still in use today that are trained
to protect energy infrastructure.
In 2013, pipeline bombings totaled 259. The pace of attacks have
dipped this year but still average one every three days through
August, according to the Defense Ministry. Nonetheless, their cost
has risen.
Francisco Lloreda, president of the Colombian Oil Association,
an industry group representing Exxon Mobil Corp. and other foreign
firms here, said rebel attacks this year have cost the sector $522
million in lost oil production compared with $350 million in all of
last year.
A new $1.6 billion pipeline, the Bicentennial, completed last
year and slated to carry 110,000 barrels a day through what
officials said would be virtually impenetrable cement, hasn't been
spared. It was shut 174 days through the first eight months of this
year, mostly because of rebel violence, Ecopetrol officials
say.
The attacks are giving ammunition to the government's critics,
who charge that the president has softened security strategies to
advance talks with the FARC.
"As the peace process drags on, the armed forces are no longer
attacking the guerrillas like before," said Alfredo Rangel, an
opposition senator.
The government denies it has softened security. Ecopetrol said
that thousands of troops are being deployed, with at least 100
rebel strikes thwarted this year.
"We're not sitting here with our arms crossed," Finance Minister
Mauricio Cardenas told reporters recently.
Companies that are already well-entrenched in Colombia say they
remain confident of long-term prospects, including Los
Angeles-based Occidental Petroleum Corp., which provides most of
the oil used by the Caño Limon pipeline.
"We believe there are ample opportunities in the country for
future investment," said Robert Palmer, president of the company's
local unit.
But with investments sagging, Mr. Lloreda said the search for
new oil deposits has become tougher. Reserves now stand at 2.4
billion barrels, which the government says is enough to last less
than seven years at current extraction levels. Mr. Lloreda said the
country needs to drill 230 wells a year to boost reserves, but only
71 had been perforated through late August.
"The current level of reserves no longer guarantees our
country's energy self-sufficiency." Mr. Lloreda said. "We could
lose it and that would be grave. It would mean importing oil."
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