By Jorge Sáenz, EL ESPECTADOR, March 3, 2023
(Translated by Eunice Gibson, CSN Volunteer Translator)
The exploitation of petroleum has an enormous impact on hundreds of municipalities in Colombia. The relationship in several places is one of total dependence. And this, at the same time, demonstrates the weak role of the government, which has sometimes come to be more of a business than a governing institution. A panorama that is not black and white and is vital in face of the energy transition.
What has been the source of prosperity for some regions of this country, for others has been a reason for condemnation and concern. The wealth of petroleum has not always been translated into economic and social development. The color of petroleum has been a premonition for the regions where it is found; behind the so-called “black gold” has come violence in the guise of development, riches, and frustration.
But at the same time, the money that arrived has been pilfered by the upper classes in the regions. Construction projects the Pharaohs would envy have proliferated and were never completed; still less did they play their social role of good living and development. In the end, it’s not the fault of petroleum that the money from the royalties slipped away for clearly illegal purposes.
This country seemed to be seeking intensely, and for several years, a diversification in its supply of exports. At the same time, it allowed the addiction to extractive industries to take off. The basic paradox is that petroleum has been the ruin or the glory for many places and for thousands of people.
It’s a relationship that can’t be defined in black and white, but rather in a gray where you can see clear signs of government abandonment, but you can also see the corporate abuses in towns that subsist (and are born) by the hand of petroleum, and others that find themselves close to ruin with this fuel.
The world in gray
Studies and experience show that the oil-rich municipalities tend to have better levels of living and development than their neighbors that don’t have hydrocarbons. It’s also true that the environmental effects have been greater where hydrocarbons are present than where there are none. The majority of municipalities that produce petroleum have become “mono-dependent”, just like the country has. Up to now, neither those municipalities nor Colombia have found the formula for replacing the income resulting from other productive activities.
A study by the Colombian Oil and Gas Association (ACP) showed that on average the petroleum-producing municipalities contribute to the economy of their departments through the PIB (GDP) more than 11 times more than the municipalities that don’t produce petroleum. The five departments that produce the most petroleum (Meta, Casanare, Santander, Arauca, and Boyacá) receive five times more income than those without petroleum in the area of taxes, royalties, and the General Participation System.
The trade association states that in 10 years, up to 2015, the municipalities in these five departments obtained 7.7 billón (roughly USD $1,630,000,000 at today’s exchange rates) in royalties, of which 90% were received by the oil-producing municipalities. “There is a multiplier effect in municipal taxes associated with the chain of goods and services from the petroleum sector,” states the ACP.
A report by Fedesarrollo (Foundation for Higher Education and Development) for Ecopetrol (formerly Colombian Petroleum Company) determined the importance of petroleum in the producing municipalities. It shows that, “in the last 15 years the mining and hydrocarbon sectors have had a dynamic that has made an important contribution to the evolution of exports, to foreign investment, and to tax revenue, not just to the central government but also to the entities in the countryside.”
This whole panorama for the country and the hydrocarbon producing regions could change in the coming years. The energy transition that the Petro administration is seeking to accelerate could slow down petroleum production in the future. While the fate of the new petroleum contracts remains in limbo, the income from the production and export of hydrocarbons could decrease dramatically, affecting national and regional finances.
Between January 2021 and May 2022, 2,943 projects for 15.7 billón (roughly USD $3,300,000,000 at today’s exchange rates) in mining-energy royalties were approved. Ninety-three percent of those, that’s to say, nearly 14.6 billón (roughly USD $ 3,000,000,000 at today’s exchange rates) would be funds for the General System of Royalties. The initiatives approved are principally related to education, housing, transportation, energy, agriculture and rural, city, and countryside development, and recreation and sports.
“Giving up those funds that our energy resources provide won’t save the world, but they will condemn our country to do without the funds to finance our economic, social, and energy transition,” states the Petroleum and Energy Industry Workers Union of Colombia (Utipec).
The taste of petroleum, more sweet than bitter?
The statistics managed by the petroleum industry on the benefits that petroleum has provided in the producing regions have a harsh contrast in environmental terms, in which the extractive industries have been passive throughout the country.
For example, Óscar Sampayo, a member of the Yariguíes Corporation, a group that studies extraction and the environment in Magdalena Medio, believes that the extraction of hydrocarbons in that region, particularly in the municipalities of Barrancabermeja, Carmen de Chucurí, Puerto Wilches, Yondó, and Cantagallo, “demonstrate that this supposed development brought by exploitation of petroleum and gas remains just a theory, because in reality, those towns are engulfed in poverty, and the living conditions of the people that live there are precarious.”
Contrary to that observation, the ACP emphasizes that the better economic conditions in the petroleum-producing municipalities go hand in hand with the more favorable signs of quality of life in the municipalities, in comparison with the quality of life in municipalities that don’t produce petroleum. ACP explains in a report that 70% of the variables in the Multidimensional Index of Poverty, used by the National Planning Department (DNP) to measure quality of life in its analysis of municipal classifications, show better results in the petroleum-producing municipalities than are found in the municipalities that don’t produce petroleum. This index measures the level of deprivations in the people’s homes in various aspects: education, health, public services, housing conditions, children and youth, and employment, according to the study.
At the same time, Luis Guillermo Vélez Álvarez, an economist, professor, and consultant, believes that the advantages of the petroleum municipalities in comparison with their neighbors are not all that evident. You have to look at the funds received in royalties, “but also at the concept of taxes such as those from industry and the commerce associated with petroleum production.”
But what’s true, when all is said and done, is that “there are some investments in infrastructure projects that, when they are built, have been engulfed in highly notorious activities of corruption,” Sampayo says.
The destination of the funds paid by the petroleum companies as royalties frequently doesn’t accomplish their objective, which is to contribute to the development of the producing municipalities.
And in good part, this has to do, in the view of DNP, with the absence of a strategic vision for this country. For the DNP Director, Jorge Iván González, Colombia is considered institutionally opposed to long range planning.
In a recent interview with this newspaper, González said, “Colombia has created a sectorial, departmentalized way of thinking. For me the ideal would be to get all the Congress members from the Eje Cafetero (Coffee Growers) and the Caribbean and propose the five biggest projects for those zones (. . .) How, with the environmental riches that we have, can the people be so poor? Why is one of the regions with the highest rainfall in Colombia without water systems? How do we explain that the Magdalena Medio area has been producing oil for 100 years and the people living there are still poor?”
For his part, for César Loza, President of the Laborers Union (USO), the petroleum industry has been socially passive in the petroleum-producing communities. He points out that, “The petroleum industry was born 105 years ago in the District (corregimiento) of Centro.” He adds that, “throughout history oil production has supported the country around the Magdalena Medio: Centro, Lizama, Llanito, Sabana, Tisquirama, and Cantagallo exceed 3,500 million barrels; however, we have no industries in the area, we have no 4th level hospital, there is no development of alternative economies, because the territories have lost their vocation, and the potable water in Barrancabermeja, which has the biggest refinery in the country, is of terrible quality.”
Environmental passivity
The biggest problem dragging down the petroleum industry is its contamination of the environment.
It’s estimated that between 2015 and June of last year, 2,133 incidents and petroleum spills were registered in the Colombian countryside. Santander was the area where the most incidents and spills were reported, with 879 cases. It’s followed by Boyacá, with 274 cases; Antioquia, 224; Meta 172; and Casanare, with 125.
Vélez notes an obvious point: “The disadvantages (of a petroleum region) have to do with the environmental impact of these projects. All of them, of any type, have some environmental impacts and some requirements that they have to comply with. It’s up to the authorities to see that they comply with those environmental commitments.”
Many of those problems of contamination result from bad management by the petroleum companies, that’s clear. But here we also have to mention that a not inconsiderable proportion is related to attacks on the petroleum infrastructure by the criminal gangs that are extracting the contents of the oil pipelines.
“The effects of extraction of petroleum have been very negative. In more than 100 years of petroleum exploitation, what we have seen are environmental impacts, contamination of the water and the air, harmful affects on human health, and deterioration of nature, and it worries us that this model is increasing in the countryside and in other regions of Colombia,” Sampoyo explains.
According to information from National Planning, in the last 35 years, 4.1 million barrels of petroleum have been spilled on the ground (associated with attacks and with accidents). That equals 16 times the amount spilled in the Exxon Valdez catastrophe, one of the greatest environmental disasters in the world.
What these statistics show, ultimately, is the enormous economic impact that petroleum exploration has on lives in these regions. And that relationship, in many places, has changed over the years into total dependence. If the extractive industries were to leave certain sites, there would not only be an immediate loss of resources, but an immediate alteration in how the people live in those places.
That panorama leads us to question the role of the government in these regions. We are talking now about an energy transition, but the conversation has to include how we re-define living in the places where now the companies have almost become the government, in the face of the abandonment by local, regional, and national governments.