Juan Manuel Santos’ administration and the Revolutionary Armed Forces of Colombia (FARC) kicked off peace negotiations in October 2012. The chosen methodology ("nothing is negotiated until everything is negotiated") and the absolute secrecy of what is being discussed at the table have left society uncertain about the country’s future. There have recently been suggestions that the government will also start negotiations with the National Liberation Army (ELN), providing evidence that the government strongly intends to close Colombia’s “insurgency” chapter. The government, however, has not paid adequate attention to the oil industry’s unavoidable link to securing a post-conflict Colombia, nor considered whether the industry will agree with the negotiated outcome.
The oil industry plays a huge role in financing the Colombian government’s spending. The extraction of oil represents 22 percent of foreign direct investment, 52 percent of exports, and about 30 percent of fiscal revenue. As a result, the downward trend in international oil prices, coupled with dwindling Colombian reserves, makes for a worrisome economic outlook. It is uncertain whether the country will be able to finance the necessary undertakings, such as developing rural infrastructure, to secure a post-conflict period in light of its weak fiscal position.
Assuming it can, the possibility of entering into a post-conflict period presents a unique opportunity to discuss, in a broad and participatory manner, the future of energy and how the mineral wealth of the nation will be used to set a course for sustainable and equitable territorial development. These discussions are currently prevented from taking place due to the distrust between different social and economic actors in the industry, the lack of common agendas, and the absence of credible and legitimate conveners.
The oil industry is also concerned about how a peace deal would rank its priorities against those of the insurgent groups. The ELN and the FARC are opposed to the presence of multinational companies in their claimed territories and argue that a national oil agenda should prioritize the environment, energy sovereignty, redistribution of social participation in the production and consumption of energy, national technological development, and strengthening of unions and union activity. This attitude toward how the oil industry should be managed contrasts with the acts committed by these insurgent groups against the industry and its infrastructure. The ELN and the FARC are culpable for bombing pipelines, which causes serious environmental, economic, and social damage, affecting some of the poorest Colombians. They have also extorted and kidnapped industry employees and workers. It is unclear if a negotiated settlement will hold the insurgent groups responsible for these actions.
Given the climate of uncertainty in the negotiations and the context of the international oil market, companies have not been able to develop specific strategies and plans to contribute to a post-conflict framework. The unpreparedness for such a period could seriously damage the oil industry’s already limited chance of success, especially considering there will be local, national, and international implications for the oil industry if the negotiations succeed. At the local level, the end of the armed conflict between the Colombian government and the insurgents will generate transformed, social struggles. There will be increased popular complaints regarding the lack of state presence, abundance of basic unmet needs, and demands for jobs. In tandem, the vacuum left by the demobilized rebel groups will be taken up by narco-traffickers and other criminal organizations to extort the industry’s value chain, making it less attractive to investors. At the national level, the General System of Royalties, implemented in 2011, has revived the debate between the national government and local governments about the use of royalty revenues from the oil industry. The Colombian government intends to use the royalty revenues to advance its social and macroeconomic stability goals, many of which can be used to finance post-conflict initiatives, such as reintegration programs.
Finally, the most controversial point internationally is whether the oil industry (and the country's business sector as a whole) decides to be part in a truth commission and discuss the role they have played in financing and extending the armed conflict. Oil companies have helped finance the Colombian military through taxes and special security agreements. At the same time, there is evidence that they have paid extortion and security fees to the FARC, the ELN, and paramilitary groups to protect their infrastructure or workers. This financial support provided the armed actors with the impulse to further carry out some of these activities. It remains to be seen if this issue could imply legal consequences for the major global oil companies operating in Colombia.
Signing a peace agreement with the FARC and the ELN represents only the first step of what will be a very long process moving forward. It is essential that the government, private industry, and society have an open and frank discussion of a realistic path forward, addressing the concerns of key stakeholders along the way. Meanwhile, in the absence of such a discussion, the oil industry should strategize for the best-case and worse-case scenarios or risk being left behind as the country moves forward.
