Oil & Gas Journal
Article Date: November 29, 1999
Magazine Volume: 97 Issue: 48
Potential oil industry flashpoint centers on OXY's Colombian
rainforest
wildcat
A potential flashpoint for the petroleum industry is developing
around a
controversial wildcat that Occidental Petroleum Corp. wants to
drill in
Colombia's mountainous rainforest. OXY unit Occidental de Colombia
(OXYCOL) in September was awarded the first exploratory drilling
license on
its controversial Samore exploration block.
The drillsite lies less than 5 km outside a reservation for
the U'wa
indigenous community, which opposes any oil operations on what
they
contendis their ancestral land-which they also contend extends
outside the
reservation to include the OXYCOL prospect.The U'wa-spurred on
in their
opposition by an aggressive, internet-savvy coalition of outside
nongovernmental organizations (NGOs)-have threatened,as a last
resort, to
commit mass suicide if OXYCOL is allowed to drill ontheir claimed
ancestral
land.
Because of such opposition, OXYCOL's effortsto explore the
Samore block
have been delayed for years.The decision to award a drilling permit
establishes what could become animportant precedent for foreign
oil
companies operating in the country towards ending years of legal
battles
over ethnic rights and development in Colombia.
The government, facing a deep recession and stagnating
oil production, has recently introduced oil policy reforms and
has stepped
upefforts to entice more foreign investment in an oil sector made
moribund,not by its lack of hydrocarbon potential but by its lack
of an
attractive investment climate (see related story, p. 21).
But at press time, hundreds of U'wa were gathering near the
drillsite in an
effort to halt drilling operations by blocking roads to the site-although
OXYCOL has yet to confirm that it has lined up a drilling rig
to undertake
the project or even that it will proceed with the well at all.
And an
internet-fueled protest campaign by outside NGOs has been
accelerated,including protests at OXY's headquarters in Los Angeles.
What's at stake here goes beyond a potential billion-barrel
oil
field,beyond whether an exploration license is honored in Colombia,
or
beyond whether Bogota can stir up foreign investor interest in
a petroleum
sector long plagued by high government takes, guerrilla attacks,
and
environmentaland human rights concerns.
It is not too much of a stretch to imagine events cascading
into the kind
ofsituation that attracts an intense international spotlight for
well
beyondthe duration of those events. If the U'wa were to carry
out their
grimthreats, the result would certainly garner the kind of worldwide
shock
andapprobation that the Exxon Valdez oil spill did in 1989-with
comparablerepercussions lingering for years.
If the protest campaign continues togather momentum, another
scenario
looms, akin to the controversy surroundingRoyal Dutch/Shell's
efforts to
dump the idled Brent spar in the deepwaterAtlantic Ocean; the
wildfire
protest that swept much of Europe led Shell notonly to scuttle
the dumping
plan but to reassess its fundamental corporatemission.Of course,
flashpoints on indigenous rights and petroleum operations areemerging
elsewhere in the world, such as Nigeria, Sudan, and Myanmar, aswell
as
other South American nations (see Watching the World, p. 24).
But Colombia has its own special set of continuing sociopolitical
problems
inwhich the petroleum industry has been thrust center stage-namely
a
seeminglyintractable civil war that has been fed by drug cartel
money and
that hasseen both sides slaughtering civilians.Added to this volatile
mix,
the continuing standoff with the U'wa has escalated to a critical
mass, to
the point where the next step by eitherside could put the white-hot
spotlight of the world on a single well. That well could become
a symbol
for a noteworthy industry success on stakeholderrelations-or tantamount
to
another Brent spar or Exxon Valdez.
Authorization granted OXYCOL got the go-ahead to continue exploration
in
the Samore block, located along the eastern cordillera of the
country,
after the Ministry of theEnvironment assigned the necessary license
as
Resolution 0788 on Sept. 21.The authorization covers what is known
as the
Gibraltar Area of ExploratoryInterest (AEI), which OXYCOL thinks
may have
potential to hold a world-classoil discovery.
It plans to drill an exploratory well, Gibraltar 1, early next
year to a
targeted depth of about 14,000 ft. If the well is successful,the
company is
likely to drill appraisal wells on the AEI, which covers 14.8sq
km, a
portion of the initial 208,504-hectare Samore block that straddlesnational
parks and lands set aside for the U'wa indigenous community.
OXYCOL is the operator of the project. The remaining interests
in
theGibraltar joint venture are held by another OXY affiliate,
OccidentalAndina, and Venezuelan firm Cia. de Petroleos Cordillera.
Under
Colombia'spetroleum contractual procedure, state petroleum company
Empresa
Colombianade PetrOleos would also exercise a 50% purchase option
if the
field isdeclared commercial.
The decision to grant the environmental license represents
an important
turn around in government policy that would substantially speed
up
similarcases in the future. Since OXYCOL acquired the block, Samore
has
become synonymous with strong indigenous opposition alongside
national and
international NGOs and a case study for what goes wrong when
governmentpolicy is unclear.Change in climate OXY is quite optimistic
about
the change in climate: "The fact that SamorE9will be drilled
is most
favorable for the country and for us. The effortsthe government
has made to
resolve the difficulties faced during thisprocess have been very
important."
This change in events should enabl einvestors to look more
favorably upon
the country, the company added.Thanks to a clearer and more-pragmatic
approach after years of stalling during the previous administration,
President Andres Pastrana's governmentawarded the long-awaited
license. The
government's approach is indicative ofa new policy within both
ECOPETROL
and the Ministry of Mines and Energy toboost upstream development.
Even the
Ministry of the Environment, which hadsometimes been slow to resolve
conflicts involving infrastructure projects,is more supportive.
Unpopular contractual and fiscal conditions, along withmassive
expansion of
activity by left-wing guerrillas who target the oilinfrastructure
and
personnel, have severely retarded exploration in thecountry over
the last
few years.The resulting decline in discovered reserves now places
the
country's oilself-sufficiency at risk.
According to the Ministry of Mines and Energy,without significant
improvements in exploration, Colombia would have toimport crude
oil by the
year 2004, an unsustainable scenario inmacroeconomic terms. This
situation
underlies a concern that stateresponsibility for minority rights
and
environmental protection must notblock economic development.
History of resistance Samore exploration has faced strong resistance
from
the U'wa indigenousgroups located in and around the block. Since
1991, when
OXYCOL acquiredrights to SamorE9, these traditional communities
have
successfully impededexploration on their lands. In 1995, the U'wa
declared
that, if petroleum exploration were to take place on their tribal
territories, they would opt to commit collective suicide. That
threat
hearkens back to U'wa legend tha tholds that hundreds of U'wa
leapt to
their deaths from a 1,400 ft cliffrather than submit to occupying
Spanish
authorities.
The U'wa believe that any extraneous presence would weaken
their culture
and environment, citing any attempt at drilling as a violation
of a sacred
Mother Earth-whose"blood" is oil-with which they feel
a kinship vital to
their survival, hencethe suicide threat. However, OXY since then
has
pointed to independentresearch that casts doubt on the veracity
of the
centuries-old legend. Inrecent weeks, this threat has apparently
not been
reinstated, but indigenous resolve still remains strong. In the
words of an
U'wa leader, "We have resisted since the Spanish Conquest
and will continue
to do so."
Conflict regarding the Samore block became a major issue after
OXYCOL
signeda consultation process agreement with the U'wa in 1995.
Upon
completion of that process, the Ministry of the Environment issued
a
seismic exploration license in February 1995. The U'wa refused
to accept
this on the grounds that the consultation had not been completed
within
acceptably clearparameters and then requested the expansion of
their
reservation.
Such consultation procedures are a prerequisite to obtaining
a license from
theenvironmental ministry when indigenous communities are located
in
exploration areas and include the joint definition of possible
projectimpacts and the formulation of social and environmental
management
plans. Under the initial exploration license, OXYCOL in 1996 completed
seismicstudies over a portion of the Samore block begun during
1995,
reprocessingand interpreting 202 km of seismic data to pinpoint
a location
for theGibraltar 1 wildcat.
It believes this prospect to be on trend with BP AmocoPLC's
Cusiana,
Cupiagua, FloreF1a, and Pauto discoveries that have combinedreserves
of 2
billion bbl of oil."Geologically, the SamorE9 prospects are
comparable to
these discoveries,"OXY said in announcing plans for an exploratory
well
that was most recentlyscheduled to get under way in first-quarter
1999.
Taking into account U'wa petitions, the company did not conduct
seismicsurveys over indigenous reservation land that existed then.
However,
theU'wa, with support from public and private human rights defense
groups,appealed the license. In 1997, the case appeared before
the
ColombianConstitutional Court, which required that the process
be repeated
on thegrounds that the U'wa had not been appropriately consulted.
Shortly thereafter, the Colombian Council of State declared
the 1995
consultation asvalid, citing factors that included state rights
over the
subsoil.Later that year, the Colombian government called upon
the
Organization ofAmerican States (OAS) to complete a conflict-resolution
study. The conclusions recommended suspension of petroleum activities
in
Samore, clear definition of U'wa territory, and the implementation
of
ethnic minority-government interaction based on mutual understanding,
among
otherrecommendations.
In compliance, OXY suspended all activities in the area,and
the Colombian
government started another dialogue with the U'war egarding the
expansion
and verifiable definition of their legalized territory.The Colombian
Constitution upholds minority-environmental rights in additionto
national
development. The U'wa believe their cause is in the country's
interest and
suggest that their culture and their tribal lands provide anecological
and
spiritual backbone for the remainder of the globe.
Thus they oppose and refuse to accept compensation for petroleum
activities
in theirterritory. In fact, although the Gibraltar license was
officially
issued, itis pending activation due to an appeal the National
Indigenous
Organizationof Colombia (ONIC) filed before the Ministry of the
Environment. In addition, the U'wa are reactivating a national
and
internationally basedsupport campaign.Reconciliation effortsAt
present, the
government's efforts to reconcile indigenous rights with development
have
shown substantial results.
On Aug. 24, the state and the U'wa signed an agreement increasing
land
holdings from 69,500 hectares to220,275 hectares in the form of
a "Unified
U'wa Reservation."To stimulate improved relations with that
group, the
government negotiatedthe reservation expansion with the U'wa in
terms of
the general OAS recommendations.
To facilitate industry activities, the government hadpreviously
decreed
that consultation pro- cesses with such communities couldbe eliminated,
assuming companies retailored their exploration blocks
aroundindigenous-occupied lands.In light of these developments,
the current
Gibraltar area of interest doesnot extend over the U'wa legalized
territory
and did not require a consultation process.
In keeping with a stance of respect for the U'wa,OXYCOL reduced
the size of
the proposed exploration area to ensure nooverlap. The company
said that,
"...in accordance with notification from theMinistry of the
Interior and
our own studies, no indigenous presence existsin Gibraltar."However,
the
U'wa don't agree. They argue that the new well area isunacceptable,
being
within what they term "traditional" territory and wouldin
any case have an
impact upon their reservation, located 3-5 km away.
The U'wa fear adverse social and environmental effects similar
to those
theycite regarding the CaN LimOn fields located in the Department
of
Arauca,also operated by OXYCOL, where guerrilla attacks targeting
oil
facilities are commonplace.(Indeed, recent events helped substantiate
some
of these fears when left-wing guerrillas early this year murdered
three NGO
activists workingwith the U'wa.
Local observers have noted that the guerrillas oppose anyindigenous
autonomy as a threat to their own campaign-and, in fact, dependupon
the
revenues that accrue from kidnapping and extortion targeting oilcompanies.
Yet the guerrillas also have denounced the oil companies' effortswith
the
natives and declared their solidarity with the U'wa, which have,
inturn,
rejected the guerrillas' overtures.)
Most development agencies do not accept the concept of traditional
territory, indicating this would include the entire country and
isdetrimental to the interests of the country's population of
almost
40million. The U'wa include these extensive traditional zones
around the
Unified Reservation within their cultural sphere, much of which
was
occupiedby settlers and urban zones after the 1940s. Charged with
responsibility for balancing these interests, the Ministry ofthe
Environment has found itself in a delicate position.
This entity is attempting to further the processes geared towards
negotiation andreconciliation between development activity and
the rights
of ethnicminorities. Such strategies apparently could also apply
to the
"gray areas" surrounding some zones that indigenous
communities occupy.
While OXYCOL still plans to drill the Gibraltar 1 well, it
is also
favorable to theseefforts and said, "We have been and are
willing to enter
into a process ofdialogue."The fruits of that dialogue process
may well
determine not only the future of Colombia's oil sector success
but also the
petroleum industry's effortsto explore for and develop oil and
gas
resources in the sociopoliticallyhigh-stakes arena that is Latin
America's
rainforest.
******************************************************
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