Analyst: Security Issues A Concern for The Foreseeable Future

Security issues are likely to continue posing a problem for oil companies operating in Colombia, according to James Lockhart-Smith, chief Latin American analyst at global risk analysis group Maplecroft.

"It is something companies have to deal with [and] are going to have to continue dealing with for the foreseeable future," Lockhart-Smith told BNamericas.

"They can offset it to some extent through risk management, but really if you have deficits of public security, and terrorist groups targeting you, there is only so much you can do."

Activity in Colombia's oil industry has boomed in recent years, with oil production almost doubling since 2006 and rig numbers reaching a record high.

Much of the boom has coincided with an improvement in the country's security situation and the successes of central government forces in pushing terrorist groups and armed gangs to the peripheries of the country. Despite this, the past year has seen a resurgence of attacks on the oil industry due in part to its continued geographical expansion.

Lockhart-Smith believes companies should consider changing some practices in order to be able to better handles the risks.

"That doesn't mean that operating in this country becomes impossible, it means that the impacts of these kinds of events have to be priced in. In relation to subcontractors, perhaps companies could draw up contracts in a way that the risk burden is shared, so it's not just them facing losses," the analyst said.

In the latest incident, Chinese firm Emerald Energy announced on Tuesday (Mar 6) that it suspended operations on its San Vicente field in the Caguán basin following repeated terrorist attacks. A similar course of action was taken by the firm in November, in the aftermath of bomb attacks on truck convoys and the kidnapping of four contractors earlier in the year.

Emerald Energy declined to comment on the recent stoppage when contacted by BNamericas, however, a source close to the firm confirmed that security issues had been a constant problem in and around the Caguán basin.

"It's a rough area of Colombia. On certain days there might be operation problems, but then they are back on again the next day," the source said.

In related news, 11 contractors kidnapped last week while travelling to work on state oil company Ecopetrol's landmark OBC pipeline project by armed gangs in the province of Arauca have been freed by their captors, according to local press reports.

Similar incidents since the start of 2011 have seen the seizure of over 40 oil workers, several of whom remain in captivity.


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