Potential oil industry flashpoint centers on OXY's Colombian rainforest wildcat

The drillsite lies less than 5 km outside a reservation for the U'wa indigenous community, which opposes any oil operations on what they contend is 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 on their claimed ancestral land. Because of such opposition, OXYCOL's efforts to explore the Samoré block have been delayed for years.

The decision to award a drilling permit establishes what could become an important 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 up efforts 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 presstime, 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 environmental and human rights concerns.

It is not too much of a stretch to imagine events cascading into the kind of situation that attracts an intense international spotlight for well beyond the duration of those events. If the U'wa were to carry out their grim threats, the result would certainly garner the kind of worldwide shock and approbation that the Exxon Valdez oil spill did in 1989-with comparable repercussions lingering for years. If the protest campaign continues to gather momentum, another scenario looms, akin to the controversy surrounding Royal Dutch/Shell's efforts to dump the idled Brent spar in the deepwater Atlantic Ocean; the wildfire protest that swept much of Europe led Shell not only to scuttle the dumping plan but to reassess its fundamental corporate mission.

Of course, flashpoints on indigenous rights and petroleum operations are emerging elsewhere in the world, such as Nigeria, Sudan, and Myanmar, as well as other South American nations (see Watching the World, p. 24). But Colombia has its own special set of continuing sociopolitical problems in which the petroleum industry has been thrust center stage-namely a seemingly intractable civil war that has been fed by drug cartel money and that has seen 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 either side 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 stakeholder relations-or tantamount to another Brent spar or Exxon Valdez.

Authorization granted

OXYCOL got the go-ahead to continue exploration in the Samoré block, located along the eastern cordillera of the country, after the Ministry of the Environment assigned the necessary license as Resolution 0788 on Sept. 21.

The authorization covers what is known as the Gibraltar Area of Exploratory Interest (AEI), which OXYCOL thinks may have potential to hold a world-class oil 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 14.8 sq km, a portion of the initial 208,504-hectare Samoré block that straddles national parks and lands set aside for the U'wa indigenous community.

OXYCOL is the operator of the project. The remaining interests in the Gibraltar joint venture are held by another OXY affiliate, Occidental Andina, and Venezuelan firm Cia. de Petroleos Cordillera. Under Colombia's petroleum contractual procedure, state petroleum company Empresa Colombiana de Petróleos would also exercise a 50% purchase option if the field is declared commercial.

The decision to grant the environmental license represents an important turnaround in government policy that would substantially speed up similar cases in the future. Since OXYCOL acquired the block, Samoré has become synonymous with strong indigenous opposition alongside national and international NGOs and a case study for what goes wrong when government policy is unclear.

Change in climate

OXY is quite optimistic about the change in climate: "The fact that Samoré will be drilled is most favorable for the country and for us. The efforts the government has made to resolve the difficulties faced during this process have been very important." This change in events should enable investors 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 government awarded the long-awaited license. The government's approach is indicative of a new policy within both ECOPETROL and the Ministry of Mines and Energy to boost upstream development. Even the Ministry of the Environment, which had sometimes been slow to resolve conflicts involving infrastructure projects, is more supportive. Unpopular contractual and fiscal conditions, along with massive expansion of activity by left-wing guerrillas who target the oil infrastructure and personnel, have severely retarded exploration in the country over the last few years.

The resulting decline in discovered reserves now places the country's oil self-sufficiency at risk. According to the Ministry of Mines and Energy, without significant improvements in exploration, Colombia would have to import crude oil by the year 2004, an unsustainable scenario in macroeconomic terms. This situation underlies a concern that state responsibility for minority rights and environmental protection must not block economic development.

History of resistance

Samoré exploration has faced strong resistance from the U'wa indigenous groups located in and around the block. Since 1991, when OXYCOL acquired rights to Samoré, these traditional communities have successfully impeded exploration 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 that holds that hundreds of U'wa leapt to their deaths from a 1,400 ft cliff rather 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, hence the suicide threat. However, OXY since then has pointed to independent research that casts doubt on the veracity of the centuries-old legend. In recent 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 Samoré block became a major issue after OXYCOL signed a 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 clear parameters and then requested the expansion of their reservation. Such consultation procedures are a prerequisite to obtaining a license from the environmental ministry when indigenous communities are located in exploration areas and include the joint definition of possible project impacts and the formulation of social and environmental management plans.

Under the initial exploration license, OXYCOL in 1996 completed seismic studies over a portion of the Samoré block begun during 1995, reprocessing and interpreting 202 km of seismic data to pinpoint a location for the Gibraltar 1 wildcat. It believes this prospect to be on trend with BP Amoco PLC's Cusiana, Cupiagua, Floreña, and Pauto discoveries that have combined reserves of 2 billion bbl of oil.

"Geologically, the Samoré prospects are comparable to these discoveries," OXY said in announcing plans for an exploratory well that was most recently scheduled to get under way in first-quarter 1999.

Taking into account U'wa petitions, the company did not conduct seismic surveys over indigenous reservation land that existed then. However, the U'wa, with support from public and private human rights defense groups, appealed the license. In 1997, the case appeared before the Colombian Constitutional Court, which required that the process be repeated on the grounds that the U'wa had not been appropriately consulted. Shortly thereafter, the Colombian Council of State declared the 1995 consultation as valid, citing factors that included state rights over the subsoil.

Later that year, the Colombian government called upon the Organization of American States (OAS) to complete a conflict-resolution study. The conclusions recommended suspension of petroleum activities in Samoré, clear definition of U'wa territory, and the implementation of ethnic minority-government interaction based on mutual understanding, among other recommendations. In compliance, OXY suspended all activities in the area, and the Colombian government started another dialogue with the U'wa regarding the expansion and verifiable definition of their legalized territory.

The Colombian Constitution upholds minority-environmental rights in addition to national development. The U'wa believe their cause is in the country's interest and suggest that their culture and their tribal lands provide an ecological and spiritual backbone for the remainder of the globe. Thus they oppose and refuse to accept compensation for petroleum activities in their territory. In fact, although the Gibraltar license was officially issued, it is pending activation due to an appeal the National Indigenous Organization of Colombia (ONIC) filed before the Ministry of the Environment. In addition, the U'wa are reactivating a national and internationally based support campaign.

Reconciliation efforts

At 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 to 220,275 hectares in the form of a "Unified U'wa Reservation."

To stimulate improved relations with that group, the government negotiated the reservation expansion with the U'wa in terms of the general OAS recommendations. To facilitate industry activities, the government had previously decreed that consultation pro- cesses with such communities could be eliminated, assuming companies retailored their exploration blocks around indigenous-occupied lands.

In light of these developments, the current Gibraltar area of interest does not 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 no overlap. The company said that, "...in accordance with notification from the Ministry of the Interior and our own studies, no indigenous presence exists in Gibraltar."

However, the U'wa don't agree. They argue that the new well area is unacceptable, being within what they term "traditional" territory and would in 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 they cite regarding the Caño Limón 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 working with the U'wa. Local observers have noted that the guerrillas oppose any indigenous autonomy as a threat to their own campaign-and, in fact, depend upon the revenues that accrue from kidnapping and extortion targeting oil companies. Yet the guerrillas also have denounced the oil companies' efforts with the natives and declared their solidarity with the U'wa, which have, in turn, rejected the guerrillas' overtures.)

Most development agencies do not accept the concept of traditional territory, indicating this would include the entire country and is detrimental to the interests of the country's population of almost 40 million. The U'wa include these extensive traditional zones around the Unified Reservation within their cultural sphere, much of which was occupied by settlers and urban zones after the 1940s.

Charged with responsibility for balancing these interests, the Ministry of the Environment has found itself in a delicate position. This entity is attempting to further the processes geared towards negotiation and reconciliation between development activity and the rights of ethnic minorities. 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 these efforts and said, "We have been and are willing to enter into a process of dialogue."

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 efforts to explore for and develop oil and gas resources in the sociopolitically high-stakes arena that is Latin America's rainforest.