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Matthew Smith

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…

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The Dirty War For Colombia’s Oil

  • Colombia’s petroleum reserves have been a key element in the bloody strife between its government and various armed groups.
  • Crude oil is Colombia’s dominant legal export, generating $17 billion alone for the period from January 2022 to November 2022.
  • The pressure to export more crude amid high prices has led to a renewed militarization of oil-producing regions in Colombia.

 

 

  The Latin American country of Colombia is synonymous with violence, drug cartels and cocaine trafficking after decades of bloody multiparty low level asymmetric conflict. While cocaine, and the vast profits the narcotic generates, has long been recognized as a leading force behind the extreme bloodshed, the civil war is not limited to battling for control of lucrative coca cropping regions and smuggling routes. The rapid growth of Colombia’s petroleum industry provided fertile ground for the proliferation of illegal armed groups. The dirty fight for control of Colombia’s petroleum resources surfaced as an important element in a murderous civil war that has rocked the Andean country for decades claiming at least 262,000 lives, mostly civilians. There is a simple reason for this, a swathe of valuable world class discoveries during the 1980s and 1990s saw Colombia arise as a major regional oil producer and exporter triggering considerable investment as well as outsized profits. The aggressive expansion of the petroleum industry, despite the concerns of local communities and environmental defenders, saw it become a crucial economic driver and source of revenue in a country where the informal economy still dominates.

Crude oil is Colombia’s dominant legal export, generating $17 billion alone for the period from January 2022 to November 2022, which amounts to just over a third of total export income. Petroleum is also responsible for earning a sizable proportion of the national government’s fiscal income through royalties, taxes and dividends paid by state-controlled energy company Ecopetrol. It is estimated that Colombia’s oil industry is responsible for generating around a fifth of Bogota’s revenue making it a crucial source of income for a government struggling to control a massive budget deficit. National oil company Ecopetrol is as a powerful driving force of Colombia’s flourishing oil boom. In 1961 the integrated energy company assumed control of the Barrancabermeja refinery, purchased the Cartagena refinery from Intercol in 1974 and went on to partner with foreign energy companies in a range of world-class petroleum discoveries. 

Related: The Oil Market Crisis Sparked By Russia’s Invasion Is Nearing Its End

It was those discoveries in Colombia’s eastern plains and foothills that drove the expansion of Colombia’s oil industry during the 1980s and 1990s catapulting Colombia to becoming a major oil producer and petroleum exporter. These game changing discoveries were Occidental Petroleum’s 1983 discovery of the Caño-Limon oilfield followed by BP’s Cusiana and Cupiagua fields in 1988 and 1991, respectively. As a result, oil production soared from under 200,000 barrels per day at the start of the 1980s to around 800,000 barrels per day by the end of the 1990s. The surge in recoverable oil resources gave Colombia’s beaten-down economy an important boost at a crucial time when it was being pummeled by a rapidly escalating multiparty civil war.

During 1982 gross domestic product grew by a meagre 1.9% but by 1990, as petroleum production rocketed higher, GDP growth soared to an impressive 6.1% and then expanded by a notable 5.1% during 2000. By the late 2000s, as energy investment poured into Colombia, oil production grew further and domestic security stabilized, the economy started growing once again at an impressive clip. Between 2005 and 2011 Colombia’s GDP grew at an average annual rate of 4.9% making the conflict-torn country one of the fastest growing economies in South America. For these reasons, oil rents became a major part of Colombia’s GDP. By 1990 oil rents comprised 6.1% of GDP compared to 3.7% a decade earlier and after a period where that contribution declined, they then surged to 5.1% of GDP during 2000 and then were a whopping 6.8% of GDP during 2011. Those numbers underscore how important the petroleum industry became for Colombia’s economic miracle and highlights why Bogota took ever greater precautions to protect what was now an economically crucial energy patch.

Rapidly rising petroleum investment, surging oil production and the government’s growing dependence on hydrocarbon revenues saw leftist guerillas the ELN and FARC regard the oil industry as a legitimate target in their struggle against the state. That saw attacks on oil pipelines, trucks transporting crude and oilfields become common place. The extortion of energy companies, through kidnapping employees and threats to sabotage wells as well as other infrastructure, became a lucrative source of income for both leftist guerilla groups. As a result, at the behest of energy companies operating in the affected areas, many of Colombia’s principal oil producing regions, notably the municipality of Barrancabermeja at the heart of the Middle Magdalena Valley Basin, were militarized. During the 1960s, in response to the threat posed by the communist FARC, ELN and Popular Liberation Army (EPL – Spanish initials), Colombia’s military recruited civilians to be formed into civil defense patrols. These groups joined the military in counter insurgency campaigns aimed at eliminating leftist guerillas and their supporters. During 1968, Colombia’s Congress passed Law 48 which essentially formalized irregular civil defense groups and their role in suppressing guerillas as well as maintaining public order. 

By the early 1980s, the rapid growth of the Medellin Cartel saw Pablo Escobar and other cartel leaders agree to form a private army, known as Death to Kidnappers (MAS – Spanish initials), to protect their vast rural properties and interests. The MAS along with private armies raised by wealthy landholders, notably Fidel Castaño who founded Los Pepes, coalesced under the paramilitary umbrella group the United Self-Defense Forces of Colombia (AUC – Spanish initials). The AUC went on to persecute a dirty war against leftist guerillas in Colombia where it collaborated closely with the country’s military and intelligence services. Paramilitary blocks were targeting anyone deemed to be a socialist or supporter of the guerillas including human rights campaigners, community leaders, union chiefs, lawyers, journalists and environmental defenders. 

According to Human Rights Watch by the early 2000s paramilitary units had been fully integrated into the Colombian army’s battle strategy, with them sharing intelligence in return for communications and logistical support. The excesses of the paramilitaries, who were responsible for the assassination of prominent lawyers, journalists and community activists, massacres and cocaine trafficking eventually saw the AUC designated as a foreign terrorist organization by the White House in September 2001. While the AUC had demobilized by 2006 successor paramilitary groups involved in cocaine trafficking, extortion and other illicit activities sprung-up, with those bands maintaining connections to the Colombian government, security forces and big business. The Gaitanist Self-Defense Forces of Colombia (AGC – Spanish initials) eventually emerged as the dominant AUC successor group and the most powerful criminal organization in Colombia.

It has long been alleged that various paramilitary elements in Colombia colluded with Ecopetrol and other energy companies to suppress unionized labor and community dissent against industry operations. This included assassinating and intimidating petroleum industry union officials, environmental activists, journalists and community leaders opposed to the oil industry. Paramilitaries were also involved in massacring and displacing local communities who challenged the petroleum industry in those areas where Colombia’s oil industry is focused, notably around Barrancabermeja. There were even allegations that managers within Ecopetrol and other energy companies like Pacific Rubiales were paying paramilitaries to secure operations and even schooling them on how to steal petroleum as well as embezzle funds. 

While Ecopetrol has repeatedly denied the allegations, many of which have come from former paramilitaries, there is no denying that the national oil company and Colombia’s petroleum industry were a lucrative source of income for paramilitary groups. The relationship between Colombia’s oil industry and the AUC provided paramilitary blocks with considerable funds that were directed to expanding the AUC’s operations, purchasing additional weaponry and recruiting further combatants. That saw the AUC and the various paramilitary blocks which made-up the illicit organization become formidable political players and armed groups. While the AUC has been disbanded for 16 years, little has changed with a series of successor paramilitary groups emerging as a formidable threat to public order and communities in Colombia’s oil patch. 

In 2021, Colombia’s Ombudsman warned of the growing threat posed by the paramilitary successor group the AGC in eastern and southeastern Colombia as it increased its presence around various oilfields in the region. The AGC was also disseminating pamphlets threatening social cleansing of leftist guerillas and their supporters, community leaders, Indigenous groups and environmental defenders. The emergence of a global energy crisis in the wake of Russia’s invasion of Ukraine, has considerably bolstered the importance of Colombia’s petroleum industry to grow considerably. President Joe Biden when facing spiraling domestic gasoline prices after banning Russian oil imports, asked Colombia in May 2022 to boost oil exports to the U.S. by 40,000 barrels per day. That places greater stress on an industry still struggling to recover from the 2020 pandemic and recently impacted by frequent attacks from ELN guerillas, notably in conflict-torn oil rich department of Arauca.

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Pressure to prevent production outages due to the sabotage of pipelines and wellheads, often as a result of oil theft, has led to a renewed militarization of oil producing regions. This is providing profitable opportunities for paramilitary groups, like the AGC, despite Bogota classifying them as criminal organizations, while allowing them to ratchet up violent action against various civil groups to which they are opposed. It is environmental defenders in Colombia who have long suffered from this violence. According to non-government organization and peace thinktank Global Witness, 322 environmental activists have been murdered in Colombia over the last decade. The strife-torn Andean nation regularly tops the list of the most dangerous country globally for environmental defenders.

By Matthew Smith for Oilprice.com

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