A year ago Ecopetrol, Colombia’s state oil company was still repairing several of its office buildings that were partially destroyed in an attack by guerilla fighters. In the same attack, rebel fighters from the FARC, Colombia’s largest left-wing guerilla group also set fire to five of Ecopetrol’s vehicles. Now Ecopetrol is launching a US$7 billion investment campaign, and planning to expand further into some of Colombia’s more remote regions, areas that are largely controlled by groups like the FARC. Analysts say that in the run-up to Colombia’s 2010 presidential election, oil companies operating in the country, and in particular Ecopetrol are likely to be targeted by militant groups looking to discredit the government and attract attention to themselves. In spite of the obvious security risks, oil companies in the country are moving forward with ambitious investment programs. Thanks in part to these investments, Colombia’s economy is expected to fully recover from the 2009 recession, and report economic growth of 2.5% in 2010, according to estimates from the country’s Ministry of Finance.
Although Colombia has many strengths, it is also a country in which businesses face special risks. In a recent statement to reporters in Bogota, Colombia’s capital, Armando Zamora, director of the country’s National Hydrocarbons Agency said that despite the government’s efforts to boost security and encourage oil infrastructure investment, companies with facilities in isolated areas remain “easy” targets for rebels.
Due to military operations undertaken under the right-of-center administration of Alvaro Uribe, Colombia's president, oil pipeline assaults in the country fell from a peak in 2001, when a single pipeline was attacked 171 times, to about 11 in 2008. Official figures for attacks in 2009 have yet to be published.
Oil companies in Colombia operate in an environment that can put them in a squeeze between sabotage, terrorist attacks, and kidnappings by left-wing guerilla groups on one side, and theft, extortion, and attack from right-wing paramilitary and criminal groups on the other side. Ecopetrol, Colombia’s state-run oil company, is affected by a particularly high level of political and security risk.
Unlike multinationals like British Petroleum or newcomers like China’s Sinopec, Ecopetrol is a national symbol with links to Colombia’s government. Not only does the government own 80% of Ecopetrol’s shares, but five out of eight members of the company’s board of directors have worked in senior level positions within the Uribe administration.
According to a biography posted on Ecopetrol’s website, board member Mauricio Cardenas is Colombia's former Minister of Transportation. Directors Hernan Martinez, Carolina Renteria, and Oscar Zuluaga Escobar are all high-ranking government officials. The company's Chairman, Fabio Echeverri served as the campaign director and senior adviser to Mr. Uribe, Colombia's president.
Ecopetrol has operations in rural regions of Colombia that are often affected by ongoing conflicts between armed groups, criminal activity, kidnappings, terrorism and vandalism. During the last decade there have been several hundred attacks on oil pipelines in the region in which the company operates. In 2000 Ecopetrol rescheduled an oil shipment and was prevented from repairing damage to sections of its pipeline caused by previous attacks by rebel groups due to heavy fighting then occurring in the region between right-wing paramilitary groups, the national army and left-wing guerrilla fighters.
In 2001, one of the company's regional pipeline security supervisors was murdered, allegedly by a regional criminal group. Ecopetrol has publicly accused paramilitary groups of illegally reselling millions of dollars of gasoline that had been stolen from company facilities. On Friday, September 19, 2008 three Ecopetrol employees were kidnapped by the ELN, a left-wing criminal guerrilla group that operates in rural regions of Colombia. The company has been in the news more recently because of similar incidents.
Although kidnappings of oil engineers and attacks on oil companies in Colombia also have decreased this decade under Uribe, some former Ecopetrol employees remain in captivity by criminal groups. Kidnappings in Colombia have tumbled to 213 people last year from 2,882 in 2002, when Uribe took office, according to Ministry of National Defense figures. Contacted this week, Mariana Torres Montoya, an Associate at the World Economic Forum, who grew up in Bogota, said that she thinks people in Colombia recognize that in recent years there has been a broad “transformation” in Colombia’s security situation. “With the constant presence of the military…people and freight are now traveling in the country's roads where before they either did not travel at all or they did not travel at night,” she explained.
Despite the risks, foreign companies’ oil investments in Colombia are expected to reach a record US$4 billion a year in 2010 and 2011, up from around US$3 billion in 2009, according to official government figures. According to a company press release filed in January, Ecopetrol, plans boost output and increase spending this year by 11 percent to US$7 billion. Expanding oil firms will no doubt seep into territories controlled by rebel groups and criminal organizations, creating a potentially combustible mix.
It can be lucrative for companies like Ecopetrol to expand further into rural Colombia. However, this type of expansion comes with obvious risks. Colombia’s government is at war with the drug cartels. Because of its ties to the government, Ecopetrol is likely to remain caught in the crossfire.
