Colombian breakthrough in peace talks likely to help the oil industry

On Wednesday, Colombian President Juan Manuel Santos, together with the leaders of the FARC, announced a significant advance in the lengthy negotiations between the two sides over a peace treaty. The two sides finally agreed on the fourth point in the peace agreement, negotiating a new legal setup to try FARC fighters for human rights abuses.

Negotiations however are not yet over, as the two sides still must figure out how the FARC will demobilize, disarm, and provide reparations to the victims of the conflict. President Santos added that Colombians will also provide their opinion on the agreement through a referendum, and that the final deal will also need to be approved by the Colombian Congress.

Nonetheless, this announcement provides some much-needed relief to the beleaguered Colombian oil industry. One of the FARC’s favorite targets in recent years has been the country’s oil infrastructure. This announcement means that those attacks will soon become a thing of the past.

Earlier this week, the Colombian government also announced a plan for new incentives for the Colombian oil industry to encourage new investment in oil production and exploration. Colombia’s reserves are quickly running out, and given the current climate of depressed oil prices, the government needs to do everything it can to stimulate the industry.

Perumin mining convention dominates headlines in Peru

As the 32^nd Perumin mining convention is currently ongoing in Peru, much of the news centered on announcements and developments that took place at the convention.

The CEO of one of Buenaventura, one of the largest mining companies in Peru, told Reuters that the Peruvian is losing its competitive advantage over other countries because of the bureaucratic mess that has delayed mining exploration projects. However, Peruvian Deputy Mines Minister Guillermo Shinno disagreed with Roque Benavides’ assessment, saying, “Companies always want more, I've explained to them how we have made progress. There is definitely more we can do but we are advancing.”

Also at Perumin, the Ministry of Energy and Mines in Peru and the Ministry of Mining in Chile signed the renewal of their Memorandum of Understanding on cooperation between the two countries two support the development of their mining industries. Deputy Minister Shinno announced, “The extension of this agreement is for 5 more years, in order to continue the exchange of information and discuss new issues for the sector, such as the development of cluster mining, the relationship between mining and communities, and others.”

Colombian government declares war on illegal mining

Over the weekend, the Colombian government declared war on the country’s illegal mining industry. Colombian vice minister of Defense for political and international affairs Aníbal Fernández de Soto explained that illegal armed groups now make more money from illegal mining than from drug trafficking. He added that the FARC, the ELN, and mafia groups like the Úsuga clan are the organizations in the country that control the most illegal mines.

According to Fernández de Soto, the government has already started accelerating its campaign against illegal miners. He pointed to the government’s decision to create new military units specifically for fighting illegal miners, and to the increase in arrests of illegal miners and the increase in seizures of contraband gold.

In other mining related news, El Espectador reported on some of the lesser-known difficulties related to the formalization of the Colombian mining industry. Of the 6,000 mining titles in Colombia, more than half are administered by just 5 regional corporations.  These corporations do not have the resources that they need to ensure that the mining companies comply with the country’s environmental regulations. 

In oil-related news, Vanguardia reported on the effect that the Colombian oil crisis has had on the country’s oil workers. According to studies, three out of every ten oil engineers are currently unemployed, and students who had aspired to work in the oil industry are now seeking out new careers. One expert on the oil industry workforce told Vanguardia that recent changes in Colombian law have allowed oil companies to bring cheaper and more experienced Venezuelan workers into the country to work on oil projects. Regardless, this trend is a simple consequence of supply and demand - if the price of oil goes back up, working in the oil industry will once again be an attractive career option.

Shutdown of Peru's Lot 192 continues

Over the weekend, Peruvian business journal Gestion reported that Peruvian oil field Lot 192 has been shut down for over one week, costing the country 10,000 barrels in oil production per day. Gestion added that a team of high-level negotiators was expected to arrive in Loreto later in the weekend. The protestors are looking for the government to give them more concessions regarding oil extraction in the area.

Peruvian President Ollanta Humala spoke publicly on the controversy regarding who will operate Lot 192. He said that the Peruvian Council of Minister would review the bill passed by the Peruvian Congress on September 4 allowing Peruvian state oil company Petro-Perú to operate the oil field. The government had initially opposed that move, and Humala explained that, “We have to strengthen Petroperu, but not try to destroy it. So, we have to give it the opportunity to gradually take on greater responsibilities.”

In mining-related news, Peruvian media outlets reported over the weekend that two Peruvian police officers died from dehydration during a raid on illegal miners in the La Pampa area of Peru’s Madre de Dios region. According to unnamed sources, the officers’ superiors were to blame, as they gave the officers just 1.5L per officer for two days’ work in the region.

The two officers died en route to the hospital, and three others also were rushed to the hospital and are still under observation. Although an investigation is under way, experts are already questioning the commanding officer’s decision not to send a medic as part of the police operation.

Colombia needs to diversify beyond commodities

On Friday, Colombian business journal Portafolio spoke with Xavier Serbiá, an international financial analyst for CNN Money. Serbiá stressed that although Colombia has greatly benefitted from its oil and mining sectors, it is time for the country to move beyond commodities and develop its value added products.

He explained that the best way to do this is through focusing on education and developing the Colombian work force. The CNN analyst added that Colombia should be considered one of the top 5 economies in the region, thanks in large part to its macroeconomic stability.

Although Colombia needs to work on diversifying its economy, it also cannot lose sight of its economic base. La República published a lengthy piece explaining the extreme importance of offshore oil exploitation due to Colombia’s dwindling oil reserves. The business journal argues that offshore drilling is a difficult challenge that will need to be tackled jointly by all of the actors in the Colombian oil industry.

In other oil-related news, both Occidental Petroleum’s and Colombian state oil company Ecopetrol’s stock rose on news of their joint $2 billion investment to increase production at the La Cira-Infantas oil field. Despite Colombia’s bleak oil future, the market considers the oil companies’ investment to be a wise one.

Peruvian ombudsman calls for a negotiated end to social conflict in Loreto

On Thursday, the office of the national Peruvian Ombudsman called for the country’s federal government to organize a committee to negotiate a solution and end to the protest by indigenous leaders over the operation of Lot 192, the country’s largest oil field. The statement by the Ombudsman stressed that the sides need to come to an agreement even how the negotiations will proceed.  Similarly, the Ombudsman encouraged indigenous leaders to refrain from actions that could lead to an escalation in violence.  

The oil field has been completely shut down since Saturday, when indigenous protestors seized it and a nearby airfield. The protestors claim that the prior consultation with the local community over who should operate the oil field was a fraud and has been ignored by the federal government. The leader of the group stressed that he is not against oil extraction, but that basic human rights need to be respected.

In mining-related news, the Peruvian National Society of Mining, Petroleum and Energy (SNMPE) told the press that the mining sector should continue to grow by almost 10% through the end of the year. SNMPE Director Jose Miguel Morales attributed the growth to production at massive mining projects including Toromocho, Anatamina, Cerro Verde, and Constancia.