At first, Pacific Rubiales Energy had the magic touch in Colombia. Forty-two of its first 48 exploratory wells struck oil — an almost unheard of success rate.
The Toronto-based firm, whose Colombian operations are
run by exiled Venezuelan oilmen, now pumps nearly one-quarter of the country's
present crude production of 953,000 barrels per day, and it's the main driver
behind a boom that may well see the country reach 1 million barrels per day by
the end of the year.
But this week, violent protests at the massive Rubiales
and Quifa fields in the state of Meta completely halted Pacific Rubiales' production.
Disgruntled oil workers and local residents blocked roads, cut electricity
lines and burned backhoes and dump trucks, forcing the company to evacuate some
of its personnel by helicopter. "This is not a labor protest,"
complained company executive director Camilo Valencia. "This is a hostile
takeover of our installations."
Valencia may be partly right. Though the protesters have
legitimate beefs about wages and benefits, government officials suspect that
guerrillas of the Revolutionary Armed Forces of Colombia, or FARC, may have
infiltrated the demonstrations. Either way, the production stoppage of 225,000
barrels per day has also disrupted the upbeat meme about Colombia overcoming
security issues and other problems to become a safe, business-friendly
alternative to oil-rich Venezuela. "Oil companies are quite
concerned" about the troubles in Colombia, said Heather Berkman, a Latin
America analyst at the Eurasia Group in New York City. "It's definitely
had a ripple effect in the investment community."
It's hard to say how big that ripple will be. On
Thursday, Sept. 22, Pacific Rubiales announced it had reached a temporary
accord with the protesters and said production would return to normal next
week. What's more, Colombia is no longer the near failed state where marauding
guerrillas, paramilitaries and drug traffickers put huge chunks of the national
territory off limits to oil exploration. In the past decade, a U.S.-backed
military offensive has reduced guerrilla forces by more than half. And while Venezuela
and other big producers in the region have changed investment laws and royalty
rates to give their governments a greater share of oil profits, Colombia by
contrast has reduced royalty rates and allowed foreign companies to own 100%
stakes in oil ventures — incentives that opened the door to newcomers like
Pacific Rubiales.(See why FARC won't die.)
Still, the oil boom has provoked numerous protests over
labor and social and environmental concerns — sensitive issues in a country
where there have been so many murders of union leaders, for example, that the
U.S. recently demanded labor reforms as a condition for ratifying a bilateral
free-trade pact. At the same time, the influx of foreign companies has provided
soft and easy targets for FARC, which still has about 8,000 fighters, many of
whom operate in oil-producing states like Meta and Caquetá. In June three
Chinese oil workers and their translator, working for U.K.-based Emerald
Energy, were kidnapped by FARC rebels in Caquetá. In August FARC set fire to
numerous oil-tanker trucks and activated a roadside bomb in Caquetá, killing
one oil worker and wounding six others. Police officials recently claimed that
at least three petroleum companies in Caquetá had been paying extortion money
to FARC, and that the attacks began when those payments were stopped.
In fact, a nationwide increase in rebel attacks and crime
prompted the Aug. 31 resignation of Colombian Defense Minister Rodrigo Rivera.
It also persuaded President Juan Manuel Santos to station more police and army
troops along vulnerable highways in oil-producing areas. "The growth in
oil exploration has been dizzying," Santos said last month. "The area
of the country under exploration has jumped from 8 million to 38 million
hectares [20 million to 94 million acres]. That requires the presence of the
armed forces. Oil companies are asking for this protection."
Amid the bonanza, oil firms are also being asked to do
more. Most of Pacific Rubiales' workforce is employed by contractors and
subcontractors, and workers insist that these companies are failing to comply
with Colombian laws regarding salaries and benefits. That's what sparked this
week's disturbances as well as a July protest at Pacific Rubiales installations
that also briefly shut down production. The Ministry of Social Protection
announced this week that it has opened 40 investigations into labor conditions
for oil workers in Meta state.
It's not just oil workers who are angry. People in Puerto
Gaitán, an oil boomtown located near the production sites, are pressuring
Pacific Rubiales to do more for their community, like buying local products and
hiring local residents. "When they have oil running underneath them,"
says Meta governor Darío Vásquez, "the people believe they have acquired
new rights."
But some wonder who "the people" really are in
certain cases. According to Pacific Rubiales and government officials, this
week's demonstrations may have been inflated by FARC infiltrators — though it
has often been a convenient excuse for officials and executives in Colombia to
peg demonstrators as traitors. Oil companies also contend that while they're
already paying out huge sums in taxes and royalties, politicians have sometimes
squandered the riches. While petrodollars and huge growth in the mining sector
have helped fuel Colombia's robust economic growth over the past five years,
many towns and villages around production sites remain mired in poverty. One
example is the oil-rich state of Arauca, where officials wasted millions on
grandiose projects like an Olympic-size velodrome and a water park with a wave
pool. Annual royalties to Puerto Gaitán's city government have jumped from
chump change to about $50 million — yet 44% of the population lives in poverty
and running water is available for just a few hours a day.
For now, peace has been restored in Meta, and Pacific
Rubiales will soon be back to pumping its 225,000 barrels per day. But Rodrigo
Vecino, a leader of the USO, or Colombian Oil Workers' Union, warns that unless
the companies become more responsive to local residents, labor strife
"will be constant."