Communities: Freedom to produce, freedom to protest

Perhaps the only problems concerning Colombia's oil and gas industry more than environmental permitting are community-related issues. “Many communities will completely refuse to accept oil and gas activities in their area,” says William Augusto Franco Castellanos, general manager of Colombian firm Meridian Consulting. “Other communities are the opposite; they demand a lot of the oil and gas companies before any operations can begin.”

Environmental and community issues are not exclusive of one another; the permitting procedure incorporates community consultation, which puts a lot of power in the hands of the communities. As the first on the ground, seismic companies have become accustomed to dealing directly with communities at the early exploration stage, the top seismic firms making it a key selling point of their service offering.

“SAExploration's strong engagement with local people can aid in the environmental permitting process,” explains Arturo Méndez, vice president of SAExploration in Colombia, “but in many cases you simply cannot please everyone. We may have an area of 400km2 to cover, for example, but 100km2 is owned by one person who flatly says no to any oil and gas activity. In those situations it becomes very difficult, even when the majority of local people agree to the exploration program. In addition, the community element does not only play a part before exploration activity but also during and even after.”

Previously - can Exploration (SAE), the company has rebranded as SAExploration since their expansion beyond the continent and listing on the NASDAQ. Their strong record with communities has played a big part in their success in Colombia, still their biggest market, where they have served clients such as Pacific Rubiales, Talisman, Pluspetrol, Shell and Lewis Energy. “SAExploration has extremely good relations with the local communities in Colombia, which is very significant for our clients as it allows us to solve a lot of the problems for them during the exploration stages,” continues Méndez.

Historically, protests were suppressed by a mixture of heavy-handed policing and, often, paramilitary intervention. Today, most Colombian paramilitaries have been demobilized, and government forces have tightened their control over oil-rich basins across the country. The Colombian government has also taken measures to reduce violent policing and hold the military accountable for human-rights abuses. These generally positive developments may have led to a growth of vocal discontent in communities frustrated by resource exploitation in their back yards.

“In the past, the security situation meant social activism and community unrest was very low key, but now they are coming to the forefront as companies enter new areas. This has taken seasoned Colombian investors by surprise,” says Daniel Linsker, VP at risk management firm Control Risks.

Direct civil action from local peoples often revolves around environmental concerns and disagreements over the distribution of royalties earned from oil extraction. Previously, proceeds from oil production were distributed through local municipalities and departments. This system, however, led to the widespread misappropriation of funds by local authorities, prompting the central government to make radical changes.

In a move which many describe as swinging the pendulum too far the other way, the distribution of oil royalties has been centralized with an intention to see funds benefit the whole country rather than just oil-producing provinces. Communities are now required to submit formal and comprehensive proposals for development projects that require funding from oil revenues. It is fair to say that the majority of these communities are ill prepared to organize such proposals in the formal manner required.

With access to funds reduced, communities feel they have little choice but to target oil and gas companies active in their region to pressure, albeit indirectly, the central government. “Part of the reason we have community issues is because of the unfair distribution of funds by the government, but the easiest target for community frustrations remains the oil and gas company in their backyard,” says Nightingale.

Companies feel the demands being placed on them are tasks that should be fulfilled by local and central government. This seemingly endless cycle spins atop the backdrop of poverty and extreme economic divide which still grips a South American nation struggling to emerge from its troubled past.

While the companies have clear objectives and the government clear responsibilities, it is the communities who clearly hold the power. For Colombia to reach its ambitious hydrocarbon production targets in the coming years, it will have to have the oil region communities on board.

This report was prepared by Caroline Stern, Alice Pascoletti, Ramzy Bamieh and Josie Perez of Global Business Reports. For more information contact info@gbreports.com.

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