Plan Colombia Benefits U.S. Oil Companies

December 4, 2004

According to recent reports published by the New Colombia News Agency, U.S. oil companies are increasing their ownership and exploitation of Colombia's oil resources.

In an article posted on November 16, the New Colombia News Agency writes;

"In addition to providing half a billion dollars a year in Plan Colombia aid during his first term, President Bush has . . . Deployed U. S. Army Special Forces troops to protect a major oil pipeline. The escalating U.S. military intervention in Colombia, along with International Monetary Fund (IMF)-imposed economic reforms, has created favorable conditions for foreign companies such as Harken seeking to exploit Colombia’s oil reserves.

"U.S. military aid is providing a secure environment in which U.S. oil companies can operate in Colombia. In conjunction with military aid, IMF structural adjustment programs are creating an economic environment favorable to foreign companies.

"In return for loans in December 1999 and January 2004 totaling almost 5 billion, the IMF demanded that Colombia restructure state-owned entities. Accordingly, President Alvaro Uribe has restructured Colombia’s state oil company Ecopetrol over the past two years, providing favorable investment conditions for foreign oil companies.... Harken Energy is the latest oil company to benefit from the United States’ escalating involvement in Colombia. On November 4, the Texas-based company announced the signing of a new oil exploration and production contract in Colombia. The company is closely linked to President George W. Bush who served on its board of directors from 1986 until 1990.

"Harken’s November 4 press release stated that its subsidiary Global Energy Development PLC "will own 100% of the contract subject only to an initial 8% royalty payable to the Colombian Ministry of Energy." Harken goes on to note that the "contract grants Global exclusive exploration and production rights to 85,000 acres which adjoin the established, producing Palo Blanco field," which has "proved reserves of approximately 1.8 million net barrels."

Occidental Petroleum

Along these same lines, Occidental Petroleum, another U.S. corporation, is also increasing its ownership and exploitation of Colombia's oil.

Currently Occidental is operating 264 wells in Cano Limon, near the Venezuelan border. These wells yield 98,000 barrels per day. Each barrel is enough to produce 21 gallons of gasoline, 4 of kerosene, 2 of asphalt, 1 of petrochemical derivatives, lubricants, fuel oil and motor fuel.

According to the New Colombia News Agency, "under a contract named Cravo Norte, Occidental de Colombia and Ecopetrol participated in the activities in the Caño Limón field under the form of associations. The associations were 40 % for the U.S. company, 40 % for the Colombian state company, and 20% for the state. Participation was structured through royalties. At the same time, the state participation was also distributed: 47% for the regional government, 32% for the National Royalty Fund, 12% for the municipality, and 8% for the municipality of the port where the production is shipped.

"But this contract, which stipulated that the field, as well as the infrastructure, would be turned over to the Colombian state upon its expiration in 2008, was modified last year with the signature of a new agreement called Chipirol agreement.

"And not only was the participation structure altered in that contract. At this moment, Occidental de Colombia owns 70% of the property against 30% owned by Colombia. The worst part is that the reservoir has been granted for good. But furthermore, after a negotiation by the National Hydrocarbon Agency, royalty payments were reduced to from 20% to only 8%, which means we are walking a in a direction that is totally opposite to the trend followed by Venezuela, which increased royalty payments from 1% to 16 2/3%."