Colombian president's statements on Gaza jeopardize close military ties with Israel

MANUEL RUEDA and ASTRID SUAREZ
Thu, October 19, 2023 






People attend a vigil coined "Palestine Lives," to show support for the Palestinians in the latest Israel-Hamas war, in Bogota, Colombia, Tuesday, Oct. 17, 2023. 

(AP Photo/Ivan Valencia)

BOGOTA, Colombia (AP) — Escalating tensions between Colombia and Israel over the Gaza war could undo decades of close military ties between them and hamper Colombia’s ability to fight drug traffickers and rebels, security analysts say.

Israel has been one of Colombia’s main suppliers of war planes, surveillance equipment and assault rifles since the 1990s. But on Sunday its foreign ministry announced a suspension of defense exports to Colombia, after President Gustavo Petro refused to condemn Hamas’ attack on Israel and compared Israel's actions in Gaza to those of Nazi Germany.

Analysts in Bogota say that the suspension could jeopardize several contracts, including a $5 million deal between Colombia’s Defense Ministry and Israeli company IAI to maintain Colombia’s ageing fleet of Kfir fighter jets.

Colombia’s government also recently hired an Israeli company to outfit two Boeing 737’s with electronic warfare equipment and intelligence tools that can help the military jam communications of the nation’s remaining rebel groups and monitor their movements.

Israel’s embassy in Bogota declined to answer questions about the export ban and whether it applies to contracts that have already been signed.

Security analysts in Bogota said that if the ban is sustained, it could seriously affect Colombia’s armed forces due to their reliance on Israeli hardware and technology.

“It will be debilitating and extremely costly,” said Jorge Restrepo, the director of CERAC, a security think tank in Bogota. “It can take months or years to find new providers and to train personnel to use and trust new equipment.”

Colombia deepened its military ties with Israel in the late 80’s by purchasing a group of Kfir fighter jets. The war planes, whose name translates to young lion, are able to launch laser-guided bombs.

They were used by Colombia’s air force in numerous attacks on remote guerrilla camps that debilitated the Revolutionary Armed Forces of Colombia and helped push the group into peace talks that resulted in its disarmament in 2016.

But as Colombia’s fleet of 22 Kfir fighter jets becomes older it also relies more frequently on maintenance from its Israeli manufacturers, said Erich Saumeth Cadavid, a Colombian defense analyst.

Cadavid noted that one potential result of the export ban could be less sorties for the Kfir planes, which are Colombia’s only fighter jets and also the only planes in the nation’s arsenal that are capable of launching bombs with precision.

Colombian officials have been slow to replace the fleet despite offers from manufacturers in France, Sweden and the United States, as Petro’s administration prioritizes spending in other areas.

Israel’s military export ban comes as Colombia’s government continues to face the threat of rebel groups that did not join the 2016 peace deal with the FARC, and have grown stronger in some rural parts of the country following the FARC’s withdrawal from these areas.

Petro’s administration recently signed cease-fires with two of these groups — the ELN and the EMC -- that will expire early next year, while it is fighting against the drug trafficking group known as the Gulf Clan, which is the nation’s second largest armed group.

Wilder Alejandro Sánchez, a military analyst and president of Second Floor Strategies, a consulting firm based in Washington, said that the effects of Israel’s export ban will take some months to be felt by Colombia’s armed forces.

He said that while Colombia has a “diverse” set of weapons in its arsenal, including Brazilian made Super Tucano planes that can attack enemies on the ground, the nation relies heavily on Israel for the maintenance of surveillance equipment, including drones.

“Colombia continues to face a plethora of internal security challenges, and they need a strong military with various capabilities” Sánchez said. “So this ban, if it really does come through, comes at a really bad time.”

Another contract that could be jeopardized by the ban, Sánchez said, is a license through which Colombia’s state owned military factory, Indumil, produces Israeli designed Galil assault rifles, which have become the principal weapon used on the ground by Colombian troops.

Following Israel’s announcement of its intent to suspend military exports, Colombia's leftist president threatened to cut diplomatic relations with Israel and blamed the country for the growth of paramilitary groups in Colombia, though he didn't provide evidence for that claim.

“If we must suspend relations with Israel, then that is what we will do,” Petro wrote on the social media platform X. “From the people of Israel I demand help for the construction of peace in Colombia, in Palestine and in the world.”

Petro, who was once a member of a left-wing rebel group that made peace with Colombia's government in the 1990s, has written dozens of messages on X about the war in Gaza since the conflict began on October 7.

In some, he has compared the conditions in the Gaza strip to those of a concentration camp, and in other messages he has written that Israel’s bombardment of Gaza is equivalent to “genocide.”

But the president has refused to condemn Hamas' attack on Israel, despite numerous calls by Colombian politicians and intellectuals for him to do so.

While Petro’s supporters commend him for speaking forcefully about the plight of Palestinians, critics are worried that his brand of online diplomacy could eventually lead to a complete rupture of relations with Israel, and undermine Colombia's relations with other countries.

“By not condemning the terrorist attack, he is drifting away from Colombia's strategic allies and putting Colombia next to the nations that support terrorism,” said Diego Molano, a former Colombian defense minister.

“Petro is impulsive and he sees in the Palestinian cause something that he can become a vocal supporter of that aligns with his ideology and his passion for anti-colonialism,” said Sergio Guzmán, a political risk analyst in Bogota. “But he is not taking Colombia’s interests into consideration, and it puts Colombia in a difficult position.”

On Thursday afternoon Petro held separate meetings with the ambassadors of Israel and Palestine and posted photos on X. He announced Colombia would send humanitarian aid to the residents of the Gaza strip and wrote on his account that he had told both ambassadors about his desire to help set up an “international peace conference that opens the path for two free and independent states.”

Israel suspends defense sales to Colombia
José Higuera
Wed, October 18, 2023 

RAUL ARBOLEDA

SANTIAGO, Chile — The Israeli government has suspended all sales and supplies of defense and security hardware and related services to Colombia.

The move followed a heated exchange on X, formerly known as Twitter, between Colombian President Gustavo Petro and Israeli Ambassador in Bogota Gali Dagan about the ongoing conflict in the Gaza Strip.

Petro had refused to condemn the Hamas raid. When Dagan urged Petro to speak about the attack on Israel, Colombia’s president replied with a message that “terrorism is killing innocent children in Palestine” and followed up with messages in which he accused Israel of turning Gaza into a “concentration camp.”

Petro doubled down on his criticism of Israel over the weekend, describing its military campaign in Gaza as “genocide” and threatening to break off relations with the Jewish state.

“If we must suspend diplomatic relations with Israel, then that is what we will do,” he wrote on X on Sunday. “You cannot insult the president of Colombia.”

Ultimately, Israel called Colombia’s ambassador to a meeting in which she was informed that defense cooperation between the countries would be suspended, the Israeli Foreign Affairs Ministry said in a news release.

Colombia’s Defense Ministry did not reply to Defense News’ request for comment.
Defense relations

Colombia has had a close relationship with Israel, with the former having acquired military hardware and security equipment from the latter for decades. But relations chilled after Preto became president in August 2022.

Emilio Meneses, an independent security analyst based in Santiago, told Defense News the president’s “outburst of criticism against Israel, which could have been expressed in a more appropriate language and through proper diplomatic channels, is helping neither the Palestine people nor Colombia. Quite the opposite.”

Colombia has plans to acquire the Barak MX air defense system, made by Israel Aerospace Industries, to meet a requirement for protecting deployed personnel and strategic facilities.

The Colombian Air Force’s primary fighter jet and only high-performance combat aircraft is also made by IAI. The service has an estimated 24 Kfir fighters. Technical problems involving their General Electric J79 turbojet engines led to the Air Force grounding its Kfir entire fleet in 2015.

Restoring the fleet required involvement from IAI, which has historically provided extensive maintenance services, in both Colombia and Israel. In January 2023, the parties renewed the contract for these services until 2025.

The Kfir jets are also armed with weapons acquired from Israel, including the Derby BVR medium-range air-to-air missiles from Rafael Advanced Defense Systems and Griffin laser-guided-bombs from IAI.

And the Kfirs use Python III and Python IV all-aspect, heat-seeking, close-range air-to-air missiles, made by Rafael. Those weapons are also used for the service’s A-29 Super Tucano turboprop aircraft.

The main infantry rifles in use with the Colombian military are the Israel Weapons Industries-made 5.56mm Galil automatic rifle machine gun and 7.62mm Galil sniper rifle. Since the 1980s, they were produced in Colombia under license by the state-owned concern INDUMIL, which has exported these weapons to other countries in South and Central America. Colombia has started to replace the Galil weapons with the newer Galil ACE infantry rifle, made locally by INDUMIL under license from IWI.

The Spike weapon from Rafael is the main anti-tank missile in the Colombian Army’s inventory, while the Sikorsky UH-60 Arpia IV ground-fire support helicopters from the Air Force are armed with ER, LR and NLOS versions of the same weapon.

The Associated Press contributed to this report.

Cocaine, Guns And Gushers: Colombia’s Oil Industry Struggles To Reactivate

By Matthew Smith - Dec 26, 2021

• Rising security risk and rural violence, which is mostly fueled by the vast profits generated by the cocaine trade, is a key deterrent to attracting onshore oil investment in Colombia.
• 
  
• According to the UN, Colombia’s cocaine production during 2020 increased by 8% compared to a year earlier, despite a 7% decrease in the volume of land used for coca cropping. 
• 
  
• Despite the risks associated with operating in onshore Colombia, the Andean country’s 2021 bid round found some success.

Despite the groundbreaking 2016 peace deal between the Colombian government and the largest guerilla group the Revolutionary Armed Forces of Colombia (FARC – Spanish initials) there are fears that conflict is escalating once again. Colombia, which is Latin America’s third-largest petroleum producer and the world’s largest manufacturer of cocaine for nearly a century, has been caught in a simmering low-intensity asymmetric conflict that reached boiling point during the 1980s. The primary flashpoint for the civil conflict, which currently engulfs Colombia and failed to end with the 2016 FARC peace accord was the April 1948 assassination of Liberal Party leader Jorge Gaitan in Bogota. That sparked the Bogotazo, days of violent rioting that swept across Bogota resulting in up to 3,000 deaths, which eventually evolved into a vicious 10-year civil war between the Colombian Liberal and Conservative parties known as La Violencia. While that brutal struggle ended in a 1958 power-sharing agreement between Colombia’s leading political parties, it sowed the seeds for the current low-intensity multiparty asymmetric conflict.  In 1964 the Colombian Communist Party formed the Revolutionary Armed Forces of Colombia (FARC – Spanish initials) after a military attack on the community of Marquetalia, a Communist peasant enclave established during the of La Violencia. That event saw the communist FARC emerge as the most powerful left-wing anti-government armed group during the conflict. The guerillas eventually cut ties with the Colombian Communist Party and increasingly relied upon kidnapping, extortion, and cocaine trafficking to fund their operations. Prior to these events, which cast Colombia into what appears to be a never-ending low-intensity asymmetric multiparty civil conflict, oil was discovered in 1918 at the La Cira-Infantas field in the Middle Magdalena Basin near the city of Barrancabermeja. Even after additional petroleum discoveries in the Middle Magdalena Basin, it was not until the giant Caño Limon, Cusiana, and Cupiagua oilfields were discovered between 1983 and 1993 that Colombia embarked on becoming a major oil producer. Those mega discoveries and a notable increase in foreign energy investment, as well as petroleum production, occurred despite violence surging because of the tremendous influx of profits from the booming cocaine trade.

Even the tremendous escalation of violence, homicides, kidnappings, and attacks on energy infrastructure which escalated in the late-1980s, lasting well into the early 21st century, had little material impact on Colombia’s hydrocarbon sector. By 1991 Colombia was pumping over 400,000 barrels per day, more than double its output in 1985, despite becoming the world’s murder capital with a homicide rate of 84 intentional killings per 100,000 people. That was more than eight times greater than the U.S. which reported 9.8 homicides per 100,000 head of population, 7-times higher than neighboring Venezuela’s murder rate of 12 and 8-times larger than Ecuador’s 11 homicides per 100,000 people.

Heightened insecurity and violence remained a persistent problem in Colombia, even after the collapse of the Medellin and Cali cartels, as the FARC and National Liberation Army ELN (Spanish initials) ramped-up operations as vast revenue flowed in from the drug trade. By 2000, after President Andres Pastrana’s peace negotiations with the FARC had failed, the leftist guerillas controlled a 42,000 square mile territory in southeastern Colombia and kidnappings had surged to a record high of 3,500 for the year. Even those events failed to have any material impact on Colombia’s oil boom. A combination of soaring oil prices and rapidly improving internal security during the early 2000s, because of Plan Colombia and President Alvaro Uribe’s military campaign against the FARC, saw foreign energy investment and hence crude oil production growth.

During 2003 when Brent averaged $28.83 per barrel, a 15% increase over 2002, Colombia pumped an average of 550,000 barrels of crude oil per day. When Brent had soared to over $140 per barrel during 2008, annual petroleum production averaged 600,000 barrels daily and kept growing to peak at a yearly record of just over 1 million barrels per day by 2013. Since 2016 Colombia’s petroleum output has been in terminal decline impacted at first by the late-2014 oil price crash, sharply rising violence, and finally because of the fallout from the COVID-19 pandemic. Even the 2017 demobilization of the largest leftist guerilla group the FARC, after a 2016 peace agreement was struck with the government of President Juan Manuel Santos, has done little if anything to arrest Colombia’s production decline. That in part can be blamed on current President Ivan Duque’s reluctance to fully implement the peace deal, contributing to an increase in violence and civil unrest in regional Colombia.

Related: Southeast Asia’s Oil And Gas Output May Never Recover To Pre-COVID Levels

During 2020, the crisis-driven Andean nation only pumped on average 781,300 barrels of crude oil per day as the COVID-19 pandemic, related national quarantine lockdown and sharply weaker oil prices impacted investment as well as production. More worrying, is that despite the pandemic lockdown ending by September 2020 and energy investment increasing, average petroleum output only reached 734,231 barrels per day for the first 10 months of 2021 which is 6% less than the full year 2020. That disappointing decline occurred because of heightened civil unrest with anti-government protests sweeping across Colombia during late- April 2021 lasting into May and early-June 2021. Falling crude oil output can also be attributed to rising insecurity in regional areas, where petroleum industry operations are concentrated, fueled by a marked uptick in violence related to the activities of illegal armed groups and cocaine production.

It is the cocaine trade that is an enduring problem for Colombia. The tremendous profits that the trade generates are responsible for fueling what is a near-perpetual low-level asymmetric conflict where only the illegal armed actors change as the various groups fragment and reform. Estimates vary, but Colombia’s government believes the civil conflict has claimed up to 260,000 lives and displaced at least 9 million people. According to the UN Colombia’s cocaine production during 2020 increased by 8% compared to a year earlier, despite a 7% decrease in the volume of land used for coca cropping and an 18% increase in seizures. The scale of massive profits generated by cocaine is highlighted by former finance minister Juan Carlos Echeverry’s estimate (Spanish) that the drug trade generates $8 to $12 billion annually, which is equivalent to 5 to 4% of Colombia’s gross domestic product. Using Echeverry’s numbers the cocaine trade is contributing the same amount, if not more, to Colombia’s GDP than the oil industry which based on DANE data (Spanish) for the first 3 quarters of 2021 was responsible for 3% of GDP.

Rising security risk and rural violence, which is mostly fueled by the vast profits generated by the cocaine trade, is a key deterrent to attracting onshore oil investment in Colombia. A combination of security risks and mature assets saw Occidental Petroleum, in October 2020, sell its Colombian onshore petroleum assets in an $825 million deal, although the company retained its offshore exploration blocks. Despite the risks associated with operating in onshore Colombia, the Andean country’s 2021 bid round found some success. Seven companies made offers for 30 of the 53 blocks (Spanish) on offer with initial investment expected to exceed $148 million. Five of the offers came from national oil company Ecopetrol or its subsidiaries and 21 from intermediate energy companies with existing operational presence in Colombia, Parex Resources, Frontera Energy, and Canacol Energy. This indicates that Colombia is struggling to attract foreign onshore energy investment because of the heightened security risks coupled with high breakeven prices and elevated carbon content of the sour heavy crude oil produced.

By Matthew Smith for Oilprice.com

Is Colombia On The Brink Of A Coup D’Etat?

By Matthew Smith - May 17, 2023, 

• Last Thursday, retired Colonel John Marulanda threatened to depose Colombia’s president just a day after hundreds of veterans protested in Bogota.
• 
  
• Gustavo Petro is Colombia’s first leftwing president and tensions between his government and Colombia’s armed forces have been worsening of late.
• 
  
• While Marulanda appears unlikely to carry through with his threat, it is a clear sign of rising opposition against Petro.

It was a daunting moment last Thursday in Colombia, South America’s longest-running democracy, when retired Colonel John Marulanda, ex-president of the Andean country’s powerful Retired Officers Association (ACORE – Spanish initials), threatened to depose (Spanish) Colombia’s President Gustavo Petro. In a statement directed at Petro, Marulanda said they are going to “defenestrate a guy who was a guerrilla." Those comments came a day after hundreds of Colombia’s military veterans protested against Petro in Bogota. Since taking office on August 7, 2022, the relationship between former socialist guerrilla Petro, who is Colombia’s first ever leftwing president, and the public forces, which have experienced substantial resignations, has been particularly strained. Since then, fears have emerged that Colombia’s armed forces, a politically influential body with close ties to former hard-right President Alvaro Uribe, will not accept a former socialist guerrilla as president.

The political intrigues and conflict playing out in Bogota, long a focal point for clashes between the extreme left and right, are being fanned by considerable unease in the upper socioeconomic levels of Colombian society over a one-time leftwing revolutionary holding the office of president. As a young man, Petro joined the socialist M19 guerrilla movement, founded after the disputed and allegedly fraudulent 1970 presidential election. During his time with the M19 Petro was imprisoned and according to him tortured. After the group disbanded as part of the March 1990 peace deal - where Petro was a negotiator - struck with the government of President Virgilio Barco, he held various government appointments. Petro then went on to become a congressional representative in 2002 and a senator in 2006. After two earlier failed attempts to win Colombia’s presidency, in 2010 and 2018, Petro finally succeeded during the 2022 election.

Tensions are further heightened in Colombia because of the impact of the fallout from the 2020 COVID-19 pandemic with the Andean country struggling to recover from spiraling poverty, crime, and violence. By the end of 2021, nearly 40% of Colombians were living in poverty (Spanish) compared to 36% in 2019, while 12% of the population was living in extreme poverty against just under 10% 2 years earlier. Petro’s predecessor President Ivan Duque ignited a tinderbox of simmering community resentment in April 2021 when he announced plans to hike taxes subsequently triggering Colombia-wide violent anti-government protests.

After emerging victorious during the July 2022 presidential run-off, Petro announced his ambitious yet what increasingly appears to be an unachievable plan for total peace. This focuses on obliging the state policy to seek peace with the disparate illegal armed groups engaged in Colombia’s decades-long bloody civil conflict that has claimed 262,000 lives, the vast majority of whom were civilians. It is this low-level asymmetric war which is responsible for much of the violence occurring in the strife-torn country, notably in remote rural regions. As part of that plan, Petro prematurely declared a ceasefire at the start of 2023, but it was not recognized by the numerous illegal armed groups operating in Colombia which continued attacking crucial infrastructure, civilians, and the armed forces. That only heightened tensions with the military and police which have borne much of the brunt of the uptick in violence.

Petro, to the displeasure of the hard-right and many within the armed forces, resumed peace talks with the last remaining leftist guerrillas the National Liberation Army, known by its Spanish initials ELN. His predecessor Duque suspended negotiations (Spanish) with the guerrillas after their January 2019 bombing of a Bogota police academy claimed 21 lives. The ELN, which was founded in 1964, is believed to have as many as 2,500 combatants making it the second largest illegal armed group in Colombia after the Gulf Clan, a neo-paramilitary group that has an estimated 5,000 fighters. The Gulf Clan emerged in 2006 when senior paramilitary leader Vincente Castaño broke away from the demobilization process of the United Self-Defense Forces of Colombia (AUC – Spanish initials) and rearmed a paramilitary group. After clashing with a variety of other illegal armed groups the Gulf Clan emerged as Colombia’s most powerful criminal organization. There are also various bands of combatants from the Revolutionary Armed Forces of Colombia (FARC – Spanish initials) who didn’t accept the 2016 peace accord with Bogota.

There have been frequent scandals and allegations concerning Colombia’s police and army’s involvement in human rights abuses, illegal detention, torture, extrajudicial killings, and rampant corruption over the last two decades. The most severe instances occurred during the 2021 national strike where thousands of Colombians took to the streets to protest against President Duque’s proposed tax hikes, soaring corruption, and economic mismanagement. The crisis of impunity among Colombia’s public forces is so severe that the Inter-American Commission on Human Rights (IACHR – Spanish initials) expressed concerns over endemic police violence in Colombia in 2021. Petro’s desire to secure peace, eliminate corruption, and end the impunity enjoyed by Colombia’s armed forces and police when it comes to human rights abuses saw him appoint controversial prominent anti-corruption investigator Iván Velásquez as Minister of Defense. That further inflamed tensions with Colombia’s armed forces. 

This is all occurring at a time when there is considerable rumor and innuendo about a rightwing campaign by various former senior security officials as well as business leaders and supporters of former President Uribe to undermine Petro’s presidency. While Petro has been able to maintain an overall semblance of a functional relationship with Colombia’s Armed Forces despite evident tensions, his relationship with retired members of the military has been strained and antagonistic. Regardless of the issues discussed, Colombia’s active military has, thus far, shown no interest in Marulanda’s comments. Petro ridiculed the statement and warned the Colombian people of the threat writing via Twitter “Why are they conspiring for a coup d’état? Because they are terrified that we will put an end to impunity.” Indeed, the retired colonel later walked back his comments claiming that he was referring to the President of Peru Pedro Castillo, who was ousted from office during the first week of December 2022 to be later arrested and detained.

While a coup certainly appears unlikely with Marulanda’s comments appearing to amount to nothing more than saber rattling, Colombia’s Attorney General’s Office has opened an investigation (Spanish) to determine whether a crime has been committed. They have also inflamed tensions at a crucial time for Petro whose controversial health reforms, aimed at establishing a centralized government-monitored payment system to reduce corruption and improve care, were rejected. After the clashes over his health reform proposals, the president replaced seven ministers in his cabinet who were seen by many as moderates. There are also accusations that retired military members protested to create a distraction from the explosive testimony from paramilitary leader Salvatore Mancuso before the Special Jurisdiction for Peace. That includes claims of close ties between paramilitary forces, the Army, and police as well as their participation in extrajudicial killings.

By Matthew Smith for Oilprice.com

Colombia Accuses U.S. Coal Miner Of Funding Paramilitary Group

By Charles Kennedy - Jun 01, 2023,

The current head of Drummond in Colombia and his predecessor will be tried on charges of financing a paramilitary group, Reuters has reported, citing the office of Colombia’s attorney general.

According to prosecutors, there was “abundant evidence” that Augusto Jimenez and Miguel Linares, who headed the company from 1990 and 2012, and from 2013 onwards, respectively, had used company funds for illicit support to a right-wing group.

"Linares Martinez and Jimenez Mejia, between 1996 and 2001, increased the value of a food provision contract with a provider company to obtain additional resources and use them to cover previously-agreed illegal obligations with...the United Self-Defense Forces of Colombia (AUC)," a statement by the attorney general’s office said.

The purpose of the illicit transfers was to secure mining assets operated by the company in areas where the paramilitary group had a presence.

"These accusations are not backed up with credible proof and are based, principally, on false declarations by convicted criminals, who receive payments for testimony," Drummond said in response to the news.

The U.S.-based company is the biggest producer of thermal coal in Colombia, Reuters noted in its report, with total exports of the commodity this year seen at 30 million tons by Miguel Linares.

The news of the charges against Linares and his predecessor comes a day after Drummond’s Colombian unit announced plans to become a net-zero company by 2050. Measures would include switching from gas to electricity at one mine in the country, switching from gasoline to gas for its light vehicle fleet, and emission offsets for the carbon dioxide the company cannot reduce.

"We're looking for projects to see where we can reduce our emissions, how to offset what we cannot avoid and include all our allies in a commitment to reaching carbon neutrality by 2050," Linares told media without mentioning the price tag of the push into carbon neutrality.

By Charles Kennedy for Oilprice.com

Colombia’s President May Have To Rethink His Oil And Gas Exploration Ban

By Matthew Smith - May 31, 2023

• Colombia’s oil and gas industry already suffers from a shortage of proven reserves, a fact that will be made worse if President Petro ends new exploration efforts.
• 
  
• The country’s President hopes to stop new exploration contracts from being awarded and plans to ban hydraulic fracturing in the country.
• 
  
• Colombia’s oil- and gas-dependent economy will face significant turmoil in the coming years if it is unable to replace its proven reserves.

Colombia’s economically crucial energy patch is facing a grave crisis due to its shortage of proven oil and natural gas reserves coupled with leftist President Gustavo Petro’s plan to end awarding new exploration contracts. The Andean country’s hydrocarbon sector was hit particularly hard by the 2020 COVID-19 pandemic and has yet to recover. March 2023 oil production of 771,732 barrels a day was significantly less than the 884,876 barrels per day pumped for the same month four years earlier. Latest developments indicate Colombia’s economically vital oil patch may never return to a pre-pandemic operational tempo and production volumes. As a result of Petro’s plans to end awarding new exploration contracts and ban hydraulic fracturing, investment is falling, drilling activity is in decline, and international energy companies are even exiting Colombia. 

The latest news, which represents a considerable blow to Colombia’s oil industry, is the disappointing announcement from the Ministry of Mines and Energy that the Andean country’s reserves are not growing at the pace required. According to the ministry’s statement (Spanish) oil reserves only expanded by 1.7% year-over-year to a meager 2.074 billion barrels of oil with a commercial life of 7.5 years at the current rate of production. Of greater concern is proven natural gas reserves, which plunged by 11% compared to a year ago to 2.82 trillion cubic feet, only enough to support production for 7.2 years. Those meager reserves are incapable of supporting Colombia’s economically crucial hydrocarbon sector over the long term. The lack of hydrocarbon reserves and their short production life has the potential to roil Colombia’s oil-dependent economy.

A key issue to emerge is that vital capital spending in Colombia’s energy patch is falling. According to the country’s leading industry body, the Colombian Petroleum Association (ACP – Spanish), private investment in exploration (Spanish) during 2023 will fall by a third compared to last year, hitting $650 million to $700 million. That decline is reduced to 4% year-over-year, when increased exploration spending by national oil company Ecopetrol is accounted for, or $1.24 billion compared to $1.29 billion during 2022. Such a sharp reduction in investment will lead to reduced exploration and oilfield development activity thereby weighing on reserves and production volumes at a crucial time for Colombia.

This has been an ongoing problem since the price of oil collapsed in late-2014. Colombia’s oil industry regulator, the National Hydrocarbon Agency (ANH – Spanish initials), released data showing the volume of wells (Spanish) being drilled in Colombia cratered after 2014. During that year, when Brent averaged $98.97 per barrel, 113 wells, 112 onshore and one offshore, were drilled. A year later, in 2015, when Brent averaged $52.32 a barrel, a mere 25 wells, 23 onshore and two offshore, were completed. The volume of wells being drilled plunged to an annual multiyear low of 20 during 2020 when the COVID-19 pandemic caused oil prices to plunge into negative territory for the first time ever and Brent averaged $41.96 a barrel. 

Drilling activity only significantly recovered when oil prices soared, after Russia’s invasion of Ukraine, to a multi-year high of 68 wells, 66 onshore and two offshore. Regulator data shows that 10 wells were completed for the first two months of 2023, and industry body the ACP predicts 55 to 60 exploratory wells will be drilled in Colombia this year. According to the Baker Hughes Rig Count, by the end of April 2023, there were 31 active rigs in Colombia a decrease of three compared to a month earlier and the same number as a year earlier. Those numbers point to a sharp drop in activity in Colombia’s oil patch which doesn’t bode well for higher production or the ability to boost meager reserves. 

This is threatening Colombia’s long-term energy security and the future outlook for the hydrocarbon-dependent economy which is vulnerable to weaker oil prices and declining production. The considerable risks created by a lack of exploration success and meager proven reserves are magnified by many of Colombia’s primary producing oil fields being mature with rising decline rates. That means they are reliant on enhanced recovery methods such as waterflood, and gas injection to sustain production. This is impacting efforts by Bogota, the ANH, and ACP as well as other industry bodies to lift production so that it returns to pre-pandemic levels of nearly 900,000 barrels per day.

Colombian government as well as industry data underscores how dependent the economy is on oil. Official statistics agency DANE shows that petroleum was responsible for (Spanish) a third of exports by value during 2022, while for the same year the hydrocarbon sector was responsible for 2.6% of gross domestic product. Colombia’s oil industry is a key source of income for the national government in Bogota. A decade ago, petroleum, after including dividend income from 88% state-controlled Ecopetrol was responsible for a fifth of fiscal revenue, while that amount has fallen in recent years it amounted to 14% of fiscal revenue for 2022. The proportion of government revenue contributed by Colombia’s oil industry will only increase after Petro’s November 2022 tax hikes.

It is Bogota’s reliance on oil revenues that has sparked speculation that Petro will not proceed with his plan to end hydrocarbon exploration in Colombia. This was fueled by Energy Minister Irene Velez reportedly avoiding answering questions from journalists as to whether the Petro administration will issue new exploration and production contracts after the productive life of Colombia’s proven oil reserves declined. Any immediate move to end oil exploration and production has the potential to damage Colombia’s oil-dependent economy which is an important part of the Andean country’s post-pandemic economic recovery. 

According to the International Monetary Fund, Colombia’s gross domestic product grew by a stunning 11% in 2021 and then 7.5% during 2022, but that will fall to a mere 1% in 2023 with a lack of energy investment and dwindling oil production weighing on the economy. In an effort to assuage the worries of energy investors, the ANH has proposed expanding deadlines, for drilling timetables, for oil and natural gas exploration projects to attract greater interest from foreign energy investors. The regulatory agency also suggested providing energy companies with greater contractual flexibility when forced to declare force majeure. These latest developments indicate that Petro may be rethinking his plan with regard to ending hydrocarbon exploration in Colombia, and even may implement a more gradual and pragmatic policy.

By Matthew Smith for Oilprice.com

BULLSHIT

Revised Colombia tax bill still puts mining investment at risk – industry group

Reuters | September 27, 2022 |

Colombia. Stock image.

A tax reform proposed by Colombia’s leftist government will put mining investment and production at risk, despite modifications to the bill announced this week, the head of the country’s mining association said on Tuesday.


Colombia’s new leftist President Gustavo Petro has said he wants to raise an additional 25 trillion pesos (some $5.6 billion) in tax revenue in 2023, before eventually adding about $11.5 billion annually for social programs to government coffers.

The government agreed on Monday to modify the reform to continue to allow oil and mining companies to deduct royalty payments from taxes in exchange for raising income taxes on them by 5% and increasing an export tax for oil and coal sold above certain threshold prices to 20%.

Oil and coal are Colombia’s principal exports and sources of national income. Petro campaigned on promises to move toward renewables and halt new oil exploration.

Juan Camilo Narino, Colombian Mining Association (ACM) president, said even the modified bill put an undue tax burden on miners, citing what he said was 90% effective tax rate.

“The tax structure must coincide with the realities of the business,” Narino told reporters. “These contributions are going to diminish and fall drastically in the short and medium-term,” he said referring to pressure the new tax regime will put on the industry.

Narino said the mining industry would contribute 48% of the revenue raised by the tax reform – some $2.62 billion.

The bill may compromise production of minerals, especially coal, Narino added, and reduce foreign investment by up to 17%.

“It puts at profound risk the viability of the Colombian mining sector, future investments and most seriously, the stability of 640,000 families” involved in the industry, he said.

Coal exports will pay the 20% tax when prices exceed $86 per tonne, based on a 20-year average, the ACM said.

The group has asked the government to remove that proposed charge in exchange for higher income tax, Narino added, similar to taxes levied on the financial industry.

Mining companies will pay 14.7 trillion pesos in taxes, royalties and high price duties this year, he said, a figure that could rise to 25 trillion pesos next year.

(By Luis Jaime Acosta and Julia Symmes Cobb; Editing by Jane Merriman)

Colombia May Shoot Itself In The Foot With Ban On Fracking

OR IT MAY KEEP THE PEOPLE HAPPY

(NOT PROTESTING)

By Matthew Smith - Sep 23, 2022

• Crude oil is Colombia’s largest export responsible for around a third of the Andean country’s total exports by value.
• 
  
• Colombia’s lack of proven oil and natural gas reserves, and the absence of large-scale discoveries for two-decades, points to fracking being the only viable means of sustaining its oil industry.
• 
  
• Colombia’s previous government was in favor of fracking, but the current government is looking to ban the practice altogether.

  The controversial hydrocarbon technique hydraulic fracturing, known as fracking, which sparked the U.S. oil boom catapulting that country to become the largest petroleum producer globally, is drawing considerable attention in Latin America. A major fracking boom is underway in the region’s third largest economy, Argentina, which is driving oil and natural gas production to record highs. Mexico is also embracing the controversial hydrocarbon extraction technique to boost economically crucial petroleum output. Fracking is also under consideration in Bolivia, Chile and Uruguay as Latin American economies, hit hard by the 2020 COVID-19 pandemic, struggle to boost growth and government income while reducing soaring poverty. In stark contrast the strife-torn Colombia is seeking to ban fracking with newly appointed leftwing President Gustavo Petro having campaigned on an anti-extractivist platform.

During his electoral campaign Colombia’s first ever leftwing president stated he intended to end contracting for oil exploration and ban fracking in the Andean country. This will sharply impact Colombia’s hydrocarbon dependent economy and potentially cut funding for Petro’s planned programs aimed at alleviating poverty. For over a decade Colombia has punched well-above its weight when it comes to hydrocarbon production. Despite a lack of proven oil reserves, which at the end of 2021 amounted to just over 2 billion barrels sufficient for 7.6 years of production, Colombia is Latin America’s third largest oil producer. The expansion of the oil industry over the last two decades, with annual average petroleum output exceeding one million barrels per day for the first time during 2013, saw petroleum become a key economic driver.

Crude oil is Colombia’s largest export responsible for around a third of the Andean country’s total exports by value. Data from Colombian government statistics agency, DANE, shows the Andean country exported $12.1 billion of crude oil and derivative products for the first seven months of 2022. That represents 35% of all exports, which totaled $34.6 billion, for the period, making petroleum Colombia’s single largest export. The peak oil industry body, the Colombian Petroleum Association, estimated the hydrocarbon sector (Spanish) directly contributed $20 trillion Colombian pesos to government coffers during 2021 which was a considerable increase over the $11.5 trillion generated in 2020 but less than the $26.2 trillion paid during 2019. The industry body believes that amount will rise to over $24 trillion pesos for 2022. Those numbers indicate Colombia’s oil industry is responsible for generating around a fifth of government revenue. That underscores the industry’s importance as a source of fiscal income, especially with the Petro administration planning to hike government spending on social programs in an uncertain economic environment weighed down by runaway inflation and fears of a global recession. 

Colombia’s endemic lack of proven oil and natural gas reserves, coupled with an absence of large-scale discoveries for two-decades, points to fracking being the only viable means of sustaining the Andean country’s vital hydrocarbon sector. This is especially the case with Colombia’s proven oil reserves set to expire by around 2030 and sooner if production returns to pre-pandemic levels of around 880,000 barrels per day. Since 2017 Colombia has been facing a natural gas crisis, which forced the country to start importing liquified natural gas in December 2017. That further stresses the need for Bogota to focus on bolstering energy security and expanding hydrocarbon reserves, particularly with proven natural gas reserves of nearly 3.164 trillion cubic feet only capable of sustaining production for eight years.

Fracking has long been seen as a solution to Colombia’s limited proven hydrocarbon reserves. The U.S. EIA estimates Colombia has at least 5.4 billion barrels of technically recoverable shale oil and 20.1 trillion cubic feet of shale gas in the Middle Magdalena and Llanos Basins alone. Colombia’s highest administrative tribunal the Council of State in a July 2022 ruling overturned its moratorium on hydraulic fracturing, established in 2018, and rejected a lawsuit seeking to ban fracking in Colombia. The court found that the rules implemented by the Duque administration, which left office on 7 August 2022 when Petro was inaugurated, for fracking are legal. The decision opened the door for the commencement of commercial fracking operations in Colombia.

Nonetheless, moves are afoot by Petro’s administration to ban fracking in Colombia despite the Council of State of Ruling. The Andean country’s Congress recently held a hearing for Bill 114 of 2022 (Spanish) which seeks to prohibit hydraulic fracturing of the exploitation of unconventional hydrocarbon deposits. The bill is supported by Colombia’s President whose Minister of the Environment and Sustainable Development Susana Muhammad was quoted as stating in local media (Spanish):

“We believe that fracking and unconventional ones are not a path that accelerates the energy transition because it would delay it, has high environmental costs especially in land use, in the use of water and irrigation not known and difficult to know only, as is the impact on the very complex Colombian geology,"

For the bill to proceed it must be debated by a congressional commission and discussed in both chambers before approval and authorization by Colombia’s president.

Rising uncertainty surrounding fracking saw Colombia’s state-controlled energy company Ecopetrol request permission (Spanish) from the industry regulator, the National Hydrocarbons Agency (ANH – Spanish initials), to suspend its two fracking pilots for 90-days. Ecopetrol, which is the operator, partnered with ExxonMobil to develop two fracking projects in the Middle Magdalena Valley, near the municipality of Puerto Wilches, known as Kale and Platero. The pilots are attracting substantial opposition from the local community, primarily over concerns regarding water contamination. A Barrancabermeja court ruled in the favor of a community organization which sought to end the projects on the basis that Ecopetrol had not consulted with the local community as required by Colombian law. The Administrative Court of Santander later overruled that decision finding the request for prior consultation by the local Afrowilches community was inadmissible. Those events indicate that even if Bill 114 of 2022 is not passed into law considerable opposition to fracking will continue in Colombia, making its introduction fraught with uncertainty, thereby deterring the required investment from energy companies.

By Matthew Smith for Oilprice.com