Colombia’s Oil Boom

Brazil, Canada and the United States are currently receiving a great deal of attention for an energy boom, which has seen dramatic growth in the oil produced in the Western Hemisphere. But there is one nation that may soon be added to this list, which has never been thought of as an energy power: Colombia. The reasons for this shed light on energy politics in South America, and suggest the costs that Venezuela may be paying for its policies.

As a recent article in The Economist noted, Colombia’s “output of crude has nearly doubled in the past six years, from 525,000 b/d (barrels a day) in 2005 to a daily average of 914,000 last year.” The article also discusses the ongoing problems of rural violence in Colombia. The oil industry has also suffered from labor unrest. While the challenges are real, what is striking is the direct foreign investment in Colombia increased more than ten-fold from 2003 to 2011. And who has received these funds? Often, it has been companies run by Venezuelans who were fired from the state oil company, PVDSA.

Petróleos de Venezuela, S.A (PVDSA) is Venezuela’s state-owned oil company. Venezuela has long been an oil powerhouse. The nation not only has the largest reserves of conventional oil in the Western hemisphere, but also the same form of unconventional oil found in Canada. For decades, however, many Venezuelans have perceived that the benefits from the nation’s oil production flowed to a small elite, while the majority saw few benefits from Venezuela’s wealth. The resulting discontent fueled the rise of Hugo Chavez, a nationalist army officer, who first sought to come to power through a coup, then (after serving a prison sentence) came to power through the ballot box. Chavez proved to be a polarizing figure, beloved by the poor, but feared by the elites and middle class. His administration’s nationalizations, price controls, and state-led development plans cost the business class heavily. In 2002-2003 the employees and managers of PVDSA went on strike, to protest government policies. Much like Reagan with the air-traffic controllers in the 1980s, Chavez responded with mass firings. As a result, petroleum engineers and experts wound up in the most unexpected of places, such as the Oil Sands of northern Alberta in Canada. But given the two nation’s geographic proximity, similar culture and common language, many petroleum experts wound up in Colombia, where they helped to rapidly increase the nation’s production.

Venezuela still produces four times as much petroleum as Colombia. But the gap between the two nations is closing rapidly. Given Venezuela’s unconventional oil holdings in the Orinoco belt, Venezuela has the resources to far outproduce its neighbor, with perhaps more than 200 billion barrels of economically viable reserves. But it takes vast amounts of money to develop unconventional oil resources. Venezuela does not have sufficient funds or expertise, and is unlikely to attract foreign capital, because of its history of nationalizing foreign firms. At this time, there seems to be little progress in developing this resource, while Colombia’s energy industry is booming. Colombia is now the fourth largest oil producer in the Americas. For Chavez’s opponents, this must seem to be their vindication.

Shawn Smallman, Portland State University

1 thought on “Colombia’s Oil Boom”

  1. Pingback: The Declining Power of the U.S. in the Americas | Intro to Global Studies

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