Border conflict affects Colombian coal industry

Over the weekend, the rise in tensions between neighboring Colombia and Venezuela dominated headlines. Venezuela started by closing several border crossings but then escalated the situation by deporting Colombians from the Venezuelan border state of Táchira. The Venezuelan government has deported more than a thousand Colombians, but more than 7,000 Colombians have voluntarily decided to leave for fear of being forcibly expelled.

Venezuela is one of Colombia’s largest trade partners, and although trade between the two countries has dropped steadily since 2012 along with the Venezuelan economy, this latest conflict could greatly exacerbate the situation. Colombia’s impoverished and rebel-ridden Norte de Santander department will likely be the hardest hit. This border region depends heavily on trade with Venezuela, and the conflict combined with the newly-arrived refugees will make it even harder for Norte de Santander to work on its 40% poverty rate.

In oil-related news, Mexican newspaper 20 minutos reported on the beleaguered Colombian oil industry. The report focused heavily on Colombia’s dwindling reserves, warning that Colombia will run out of oil unless it dramatically increases oil exploration and soon.

Additionally, Colombia Reports noted that Chilean oil company GeoPark limited announced a discovery of a new oil field in Colombia’s Llanos region. For the most part, the Colombian oil industry has focused on offshore exploration, so this announcement will be very welcome.

Social conflicts over mining and oil in Peru

Both international and domestic news outlets covered the 24-hour protest staged in the Peruvian department of Loreto demanding that Peruvian state-owned oil company Petroperú take control of Lot 192, the country’s largest oil block. According to Peruvian Interior Minister José Luis Perez Guadalupe, several people were arrested, but the police had the situation under control. In recent months, the Peruvian government has repeatedly been forced to deploy the country’s military in response to violent social conflicts.

In related news, Aidesep, a federation of various indigenous tribes living in the Peruvian Amazon, outlined to the press a 27-point plan that it had submitted to the government asking for quicker action to clean up the damage done by oil extraction to the environment and the local communities.

Aidesep president Henderson Rengifo noted that the Peruvian government had established a development fund for the benefit of the indigenous communities. However, he added that Aidesep is also asking for 20 million hectares of jungle to be officially designated as indigenous lands.

On the subject of social conflicts, La Republica interviewed Carlos Herrera, ex Peruvian Minister of Energy and Mines, about the Tía María conflict. Herrera blamed Southern Copper’s lack of communications skill for generating the conflict with the local community, but he warned that the Peruvian government could be on the hook for a $100 million fine to Southern if the project does not go forward.

Colombia's Caño Limón pipeline finally back online

On Wednesday, Colombia’s Caño Limón-Covenas pipeline finally came back online after being closed for 67 days. The pipeline is crucial to transporting oil out of the Colombian llanos, as it is the second-biggest pipeline in the country by volume, with the capacity to carry 220,000 bpd of crude oil from the department of Arauca to the Caribbean.

According to Reuters, this was the longest the pipeline has been closed town since it started working in the 1980s. The Colombian government blamed the shut down pipeline for the country’s failure to meet its oil production target of 1 million bpd in July.

In mining related news, four miners died in a mining accident in the municipality of Socha in the Colombian department of Boyacá on Monday night. By Wednesday, the corpses of all of the miners had been taken out of the mine. Other workers at the mine blamed its inadequate ventilation system for the gas bubble, which triggered the explosion. Mining and Energy Minister Tomás González assured that the Colombian government would fully investigate the accident in pursuit of a safe and legal mining industry.

In other mining news, nickel miner Cerro Matoso accused the National Mining Agency of applying an illegal tax formula on the company’s profits. Colombian business journal Portafolio explained that the Agency recently updated its formula for calculating its tax, but Cerro Matoso is incensed that the Agency is trying to retroactively apply this new formula to nickel production in 2012, 2013, and 2014.

Petroperu awards controversial oil contract to Pacific Rubiales

On Friday, Peruvian state-owned oil company Petroperu announced that it had decided not to exercise its option for a 25% stake in the block 192 oil field, as allowed for under Peruvian law. Ultimately, Petroperu awarded the newly-renamed Canadian oil company Pacific Exploration and Production Corp a two-year service contract to operate block 192. The contract decision came not a moment too soon, as the 30-year contract with the block’s current operator, Pluspetrol, was set to expire in just 8 days.

Petroperu President German Velasquez explained that the oil company passed on its option because the terms of the two-year contract carried too much risk and not enough reward. He added, “And you're not going to be able to take advantage of the generation of wealth as much as in a long-term contract.”

Despite the announcement of the contract award, the controversy over Block 192 has not ended. Local indigenous communities in the Loreto region had wanted Petroperu to assume full control over Block 192 and not hand its operation over to a foreign oil company. Loreto regional governor Fernando Meléndez told the press that his constituents reject the contract award and are holding firm to their demands.

As a result, local authorities, unions, and indigenous organizations in Loreto organized a 24-hour strike today to try to force the government’s hand and put Petroperu in charge of the operation of Block 192. Some organizers warned that if the government does not cave to their demands, the protests could escalate.

Colombia continues to battle global oil crisis

On Sunday, Colombian daily El Tiempo reported on a new dimension to Colombia’s oil crisis. Colombian state-owned oil company Ecopetrol and Colombian oil sector officials are deeply worried about the ongoing shutdown of the Caño Limón-Covenas pipeline. The oil pipeline was originally shut down in the wake of a FARC bombing several months ago, but bringing the pipeline back online has proven to be much more difficult than was originally expected.

Repair technicians have found additional damage to subterranean sections of the pipeline, which will need to be repaired before it can be reactivated. As a result, oil production in the Colombian department of Arauca has been completely halted since the end of June. The total amount of oil production lost because of the delay comes to 65,000 bpd, according to Francisco José Lloreda, president of the Colombian Petroleum Association (ACP).

In other oil news, El País reported on the free-falling price of oil, wondering whether the price of oil could possibly fall all the way to $30 per barrel. Rubén Darío Lizarralde, president of the oil sector trade association Campetrol, warned that although everyone hopes that prices will not go below $40 per barrel, Colombia needs to reduce its oil dependency.

In mining-related news, El Espectador interviewed Robert Murray, Murray Energy CEO and the new owner of Colombia Natural Resources. Murray stressed that he believes that only the lowest cost producers can be competitive in the global coal markets, and CNR will pursue that very strategy in Colombia.