World’s oldest guerrilla force revives war on oil companies

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(Bloomberg) — Colombian rebels have reopened their war on the oil industry with a wave of pipeline attacks that sent crude oil gushing into rivers and sending plumes of black smoke into the sky.

The world’s oldest guerrilla force, known as the National Liberation Army, or ELN, has resumed its six-decade campaign of sabotage after peace talks with the government collapsed, raising the stakes for President Gustavo Petro by attacking the sector that produces a third of the country’s exports. The leftist group has also resumed hostilities with government security forces, opening fire on police bases and killing five soldiers in ambushes.

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The violence — including at least 19 pipeline attacks since late August — adds to Petro’s woes as security deteriorates in much of the countryside while he struggles to contain discontent in the cities. Last week, officials were forced to largely bow to the demands of striking truck drivers, whose crippling blockades have shut down schools and public transport.

It is also a headwind for Colombia’s struggling oil industry, along with falling reserves, high taxes and hostility from Petro, an environmentalist group that wants to phase out fossil fuels and refuses to issue new exploration permits.

Producers had been pumping crude oil relatively unhindered for more than a year, while guerrilla leaders met with negotiators seeking a deal that would see the group lay down its arms in exchange for legal and constitutional reforms to provide more support to the poorest citizens. The latest attacks show that the ELN still has the oil industry in its sights and is nowhere near ending the war.

Meanwhile, the group’s sophisticated extortion network continues to target companies operating in its territory.

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The rebels have long viewed the oil industry as a military target and a cash cow. The group’s hostility stems from a belief that Colombia should have sovereignty over its natural resources, rather than selling rights to private companies, said Carlos Velandia, a former senior commander with the group who left in 2004.

“The ELN believes that the oil companies have been able to secure contracts that are very beneficial to themselves but bad for the country,” said Velandia, who now monitors the conflict as head of the Peace Observatory at the National University of Colombia in Bogota.

While the supply disruptions from Colombia are not significant enough to disrupt global markets, the conflict is another example of the violence endemic in crude-producing regions around the world — from Houthi rebels in Yemen attacking tankers in the Red Sea to pipeline attacks in the oil-rich Niger Delta region.

Colombia’s state oil company Ecopetrol SA, which owns the pipelines, said on Sept. 4 that the attacks, along with a truckers’ strike and protests at a natural gas plant, had severely affected its operations. The company did not provide an estimate of how much production has been cut since the attacks resumed.

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On September 6, the Caño Limon-Coveñas pipeline was still damaged, while the Bicentenario pipeline was operational again. After planting explosives, the ELN often uses mines and snipers to make it more difficult for the army and repair teams to enter the area.

Most of the recent attacks have occurred in Arauca province, the ELN’s largest stronghold. The two pipelines connect Arauca, which produces about 58,000 barrels of crude oil a day — or 7% of the country’s output — to refineries and a Caribbean port. Canada’s Parex Resources Inc. and SierraCol Energy, a subsidiary of the Carlyle Group, operate in the region.

Petro took office in 2022 promising to seek “total peace” through talks with the guerrillas and drug cartels whose militias dominate much of the countryside. But the various negotiations have had only limited success so far.

Negotiations with the ELN stalled in May over issues including the government’s refusal to remove the rebels from a list of organized crime groups. But the group held on to its ceasefire until it expired in August, while efforts were made to get talks back on track.

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Petro himself is a former left-wing guerrilla fighter. But the ELN, which was inspired by the communist revolution in Cuba, says the Colombian “oligarchy” is blocking his efforts to reform the country’s conservative economic model.

Blackmail network

Electricity company Grupo Energia Bogota SA, the fourth most valuable company on the Colombian stock exchange, recently came into contact with ELN’s extortion network when it investigated the construction of a power line to connect Arauca to the national grid.

According to Juan Ricardo Ortega, the company’s CEO, the ELN’s extortion has made Arauca one of the most expensive places to do business in Colombia.

“When we looked at how much it would cost to have people build the towers and transport the materials, everyone started charging 45 percent more” than in the quieter regions of the country, he said.

The ELN sets fire to trucks and buses that enter its territory without permission. Even when large companies don’t make payments to the group, its subcontractors have little choice, driving up the price of everything from transportation to security services, Ortega said.

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Paying money to an illegal armed group could lead to U.S. charges of financing terrorism. For companies operating in regions dominated by the guerrillas, there are many ways to stay off the radar of the U.S. legal system, but there is no way to avoid the ELN’s attention, Velandia said.

“You can’t help but do business with them, but that doesn’t necessarily mean you have to hand over money,” Velandia said.

A common method is for civil society organizations sympathetic to certain ELN objectives to organize strikes to pressure a company to pay for projects, such as building a road or constructing a health center.

The guerrillas then take credit for attracting investment into areas abandoned by the government, while also receiving a share of the proceeds themselves.

“To tolerate the presence of a multinational, they tell the guerrillas to build a road, bridges or schools,” Velandia said. “That’s a way to disguise payments as social investment, rather than giving money to an organization that is classified as a terrorist group.”

Companies find it cheaper to pay and risk U.S. sanctions than to refuse the guerrillas’ demands, effectively leaving them unable to operate at all, said Rodrigo Villamizar, a former Colombian energy minister who now heads Electra, a Bogota-based think tank focused on the energy sector.

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Cocaine prohibition

In Arauca, the ELN has such influence over local politics that five former governors have been charged by prosecutors with ties to the group.

The region, which borders Venezuela, is unusual because oil, not illegal drug production, has long been a major cause of the violence. Since 2019, it has been one of the few Colombian conflict zones that does not have coca, the raw material for cocaine production, according to data compiled by the Justice Ministry.

That’s because the Domingo Lain Front, an elite group within the ELN that controls much of Arauca, became so wealthy from extorting companies and government contractors that it decided it no longer wanted or needed cocaine production on its territory and banned it throughout the 24,000-square-kilometer province.

(Updates with ELN’s history with Petro in the 15th paragraph)

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