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Colombia warns of emergency decree to resolve pipeline standoff

ANDREW WILLIS and OSCAR MEDINA

BOGOTA, Colombia (Bloomberg) -- A monthlong standoff with a forest-dwelling indigenous group is threatening Colombian oil exports and may force the government to declare a national emergency, Mines and Energy Minister Amylkar Acosta said.

Members of Colombia’s U’wa group are preventing repairs to the Cano Limon-Covenas pipeline following an attack by Marxist rebels March 25, cutting exports by more than 2.5 MMbbl, Acosta said. The country’s second biggest pipeline is controlled by state-run Ecopetrol.

“This almost merits a declaration of emergency by the national government,” Acosta told local radio station Caracol. “There are reasons of state, and there’s a public interest that takes precedence.”

An emergency declaration would give Colombian President Juan Manuel Santos powers to rule by decree for 30 days and potentially overrule standard protocol when dealing with local groups. Royalties from oil, Colombia’s biggest export, are a key source of revenue for the government, currently battling farmer protests ahead of presidential elections in four weeks.

The Cano Limon pipeline takes oil from eastern Colombia to the Caribbean coast. The U’wa group says it is demanding the duct be partially re-routed to bypass ancestral lands that have suffered repeated oil spills and a rising military presence.

“The Colombian state has a historic social debt with the U’wa nation for ethnocide, genocide and ecocide,” the group said in an April 25 statement, demanding $1 bn in compensation.

The President’s office and Ministry of Mines and Energy didn’t immediately respond to an email request for comment on the genocide claims.

As well as blocking the pipeline repair works in the eastern Norte de Santander province, the group tried to take control of Ecopetrol exploration facilities in Magallanes, and has halted gas exports from the Gibraltar field, Acosta said.

“The government has a very difficult balancing act,” James Lockhart Smith, Latin America analyst with risk consultants Maplecroft, said by phone from London. “It wants to insure companies can invest efficiently while making every attempt to be respectful of indigenous rights.”

Colombian pipeline explosions have surged over the past year as the government holds peace talks in Havana with the country’s largest rebel group, the Revolutionary Armed Forces of Colombia, or FARC. There were 22 pipeline attacks in the first two months of this year, and a total of 259 in 2013, according to Defense Ministry data.

Paralysis of the Bicentenario pipeline, which feeds oil into Cano Limon from Colombia’s Llanos plain, is exacerbating the situation, Acosta said.

In a first-quarter operational report April 23, Pacific Rubiales Energy said Bicentenario interruptions had contributed to higher transport costs. The company’s shares tumbled 17% over the following two days.

Ecopetrol shares have fallen 12% over the past month, making it the worst-performing stock among global peers tracked by Bloomberg. The pipeline outages are weighing on the stock, Maria Velasquez, an analyst with brokerage Serfinco, said by phone from Medellin.

“People are taking these infrastructure attacks into consideration,” she said. “They’re generating a loss of confidence. In the end, without pipelines it’s hard to export.”

04/30/2014

 

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