Month-long protest of Pluspetrol finally ends

The month-long conflict between Argentine oil company Pluspetrol and the Achuar indigenous community of Pampa Hermosa finally ended on Thursday after an agreement was reached between Pluspetrol and the indigenous community for compensation for use of their ancestral lands. Pluspetrol noted that oil production would immediately recover by 3,050 barrels per day. Carlos Sandi, the leader of the Federation of Indigenous River Communities, the umbrella organization for the region’s indigenous groups, broke the news to reporters and added that the occupation of Pluspetrol’s local airfield also ended.

However, a different Achuar indigenous community in Nuevo Jerusalen, seized at least six oil wells on Sunday to exert additional pressure on Plupsetrol in meeting the community’s demands for compensation following a 2014 oil spill. This sets a dangerous precedent for oil companies looking to do business in Peru, as protestors have learned that they can escalate conflicts without repercussion.

In mining-related news, Peruvian business journal Gestión interviewed EY Peru partner Marcial García about the tax reforms that he believes the Peruvian government should implement to support the country’s mining industry and mitigate the effect of falling metal prices. García pointed out that the Peruvian government created a special tax on mining in 2011 when prices were at record highs, and now that prices have fallen again, the government should respond accordingly and reduce the tax and keep the country attractive for mining investment.

EY Peru also revealed that Peru performed very well in the new study released by the Fraser Institute, ranking 112 countries on their attractiveness for mining investment. Peru rose from 37^th to 30^th in the list, making it the second most attractive country in Latin America for mining investment, behind Chile.

The rise and fall of Colombia's oil boom town

The Associated Press put out a lengthy piece on Wednesday reporting on the impact that the collapse in global oil prices will have on Colombia’s oil boomtowns. Puerto Gaitan, in the Colombian llanos, is technically the country’s richest city, thanks to the revenues pumped into the small rural town by its booming oil industry. According to the report, now that oil prices have come plummeting back to earth, the town’s 45,000 residents are either tightening their belts or preparing to leave the area altogether. The story of Puerto Gaitan is all too familiar, as the flood of money was spent on lavish construction projects and extravagant forms of entertainment. Mayor Edgar Humberto Silva tried to put a silver lining on the crisis, “In the long run this could be a good thing because oil has made us all idiots.” He hopes to stimulate the areas ecotourism industry. We wish him good luck.

La Republica published an article that took a step back and compared the historical trajectories of the Peruvian and Colombian oil industries. In 1982, Peru actually exported oil to Colombia, but since then, the oil sectors in the two countries have taken very different paths. The article attributes this difference in fortunes to policy decisions: Colombian state oil company Ecopetrol accounts for 70% of Colombia’s oil production, whereas Peruvian state oil company Perupetro does not produce a single barrel. This article serves as a reminder that though future growth will not be easy for Colombia’s oil sector, things could be much worse.

In mining-related news, the Colombian edition of La Republica published a report ranking Latin American countries on their attractiveness for mining investment. Colombia came in a very disappointing fifth in the region. Luis Ernesto Mejía, the ex Colombian Minister of Mining and Energy, explained that the Colombian mining sector is going through a rough time. Local communities greet mining companies with hostility, and the Colombian government provides very little policy or security support. Though the government is working to get better, Mejía said that it has a long way to go before it catches up with global leader Chile.

Social conflict continues between Pluspetrol and Loreto indigenous groups

The conflict continues between Argentine oil company Pluspetrol and the indigenous communities of the Loreto region in Peru. This conflict escalated significantly a few weeks ago when the indigenous groups seized Pluspetrol’s oil fields to put pressure on the company in negotiations over indemnifications for damage to the environment and compensation for the company’s use of local infrastructure. Tensions increased again over the weekend when the indigenous groups seized control of the oil company’s airfield.

According to the top police official in the region, General PNP Jorge Pérez Flores, the indigenous people are acting peacefully and police officials are in the area to maintain order. The protestors did not cause any damage to equipment or hurt anyone, they simply shut down the oil company’s operations in the area. Estimates regarding the number of protestors who seized the airfield ranged from 50 to 400 people.

As usual, reports on the latest incident noted that Pluspetrol was not available to comment. The Argentine oil company has consistently been late to engage with the press and present its side of the story to influence reporting of the conflict.

Meanwhile several oil companies are eagerly anticipating the resolution of negotiations between Pluspetrol and the indigenous groups. Peruvian oil company Perupetrol is waiting for the talks to conclude so that it can open up bidding on the 1-AB oil block, which is currently occupied by the protestors.

In separate news related to the oil industry, Peruvian business journal La Republica reported on foreign ownership of Peru’s oil resources. The report explained that the Peruvian government plans to strengthen Perupetro, the Peruvian state oil company, giving Perupetro an ownership stake in the country’s domestic oil projects. Globally, 85% of oil reserves are in the hands of state oil companies. However, in Peru, 51.7% of oil production is in the hands of foreign state oil companies, principally Chinese companies.

Mining strike ends in Colombia

According to Colombian business journal Portafolio, the Colombian Ministry of Mining and Energy agreed to include within the National Development Plan proposals to characterize small-scale mining as part of the formal economy of the country. With that concession, the leaders of the National Confederation of Colombian Miners, Conalminercol, decided to end the strike that had started last Wednesday. 

This however does not mean the end of negotiations; conversations will continue this week and next to decide on exactly what proposals will make it into the National Development Plan. The Colombian government also left no doubt that it will continue to crack down on illegal mining, differentiating between informal and illegal mining.

In news related to the Colombian oil sector, Colombian state oil company Ecopetrol announced on Monday its updated proven reserves of hydrocarbons, which rose 5.7% from the end of 2013 to the end of 2014, to 2.08 billion barrels of oil equivalent (boe). While this is good news for the oil company, but does not necessarily mean any relief for Colombia, which is in dire need of new proven reserves in order to avoid becoming a new importer of oil.

The collapse in global oil prices also created a record trade deficit for Colombia in 2014, and forced Colombia’s government to delay $2.44 billion in government spending, corresponding to 3% of the national budget.

Peru's mining sector woes

On Sunday, Peruvian business journal El Comercio ran a feature peace detailing the woes afflicting the country’s mining industry. The report explains that profits and revenue plummeted in 2014 because of depressed metal prices. The fear is that these prices are not “depressed” but are actually signs of a new normal, where prices and profits will be much lower than they had been.

Some observers, however, warn that the problem facing Peru’s mining industry isn’t just one of a new reality regarding mineral prices, but also a question of competitiveness. The lack of clarity in Peru regarding licensing procedures, social conflicts, and a clear path for the industry in the future have created a lot of uncertainty in the sector.

In addition to these global, macro-economic factors, the Peruvian mining sector has also been battling the question of how to deal with the country’s large population of informal miners. On Saturday, El Comercio reported that Juan Antonio Fernández Jeri, the Peruvian High Commissioner for Miners’ Formalization, had told reporters that, since the end of last year, more than 400 informal miners in Puno had begun the formalization process. Fernández called on other regions in Peru to follow Puno’s example.

In related news, police in the Cusco area disabled heavy machinery that was going to be used for illegal mining. The equipment had no documentation showing that it was intended for a licit purpose, and the Peruvian authorities ultimately decided to put them out of service.