OCCIDENTAL PETROLEUM: REDUCTION IN OIL EXPORTS DUE

C O N F I D E N T I A L SECTION 01 OF 02 BOGOTA 002304

SIPDIS

E.O. 12958: DECL: 03/08/2015
TAGS: ENRG EPET MCAP MOPS CO
SUBJECT: OCCIDENTAL PETROLEUM: REDUCTION IN OIL EXPORTS DUE
TO ATTACKS ON THE CANO LIMON PIPELINE


Classified By: Ambassador William B. Wood, Reasons 1.4 b and d


1. (C) Summary: The Cano Limon pipeline has been hit eight
times this year, generating losses of over USD 25 million
(more than the losses in 2004). The area attacked has also
changed, with half the attacks in the Catatumbo region of
Norte de Santander Department, where repairs are more
difficult and time consuming. Oxy reps credit the increased
attacks on increasing narco-terrorist activity in the
Catatumbo region as narco-terrorist groups are driven out of
Arauca, where the Infrastructure Security Program (ISP) has
been successful. Oxy also credits the release of those
jailed in large-scale detentions in Arauca for some of the
the increase in attacks there. Oxy also believes that the
deployment of helicopter assets in the ISP would give
increased coverage to the pipeline and discourage potential
attacks. Despite the recent events, Oxy is continuing its
increased investment in Cano Limon and signing new
exploration contracts elsewhere in Colombia. End Summary.


2. (C) The Ambassador hosted Occidental Petroleum
Colombia's President Guimer Dominguez and Oxy's Government
Affairs chief, Jorge Camacho, to discuss the current
situation on the Cano Limon pipeline. The DCM and ECONCOUNS
also attended. Dominguez raised Oxy's concern that there had
been an increase in attacks on the pipeline and electrical
infrastructure that had caused Oxy to shut down production
this year, generating a USD 25 million loss. The pipeline
was hit eight times in the first two months of 2005, compared
with 17 attacks in all of 2004. The electrical system was
hit four times in two months, compared to ten times in 2004
(and all four attempts have been near the Cano Limon field).
Unlike previous years, where pipeline attacks in Arauca were
the vast majority, the attacks were now evenly split between
two neighboring departments, Arauca and Norte de Santander.


3. (C) Dominguez expressed particular concern about the new
attacks in the Catatumbo region of Norte de Santander
department, as the terrain was mountainous and access far
more difficult. The 5th brigade (that covers the area) has
not received training under the Infrastructure Security
Program. In addition, judicial programs in place in Arauca
that had helped drive down the level of attacks from 170 in
2001 to 17 in 2004 were also not in place. The difficult
terrain and security situation mean that it takes longer to
secure the area and make repairs, translating into more lost
oil production. Dominguez also highlighted the fact that
there was increased narco-terrorist activity in the area, and
cited local reports of dramatic increases in coca production
(Embassy estimates do not bear those out, but post will do
reconnaissance flights over the area).

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Oxy Seeks Judicial Solutions
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4. (C) Dominguez said the GOC inter-agency effort in Arauca
produced 600 arrests in the past two years and several dozen
successful prosecutions and the release of some 300
detainees. According to Oxy's sources, many of those freed
returned to attack the pipeline, especially in Arauca. The
attacks had also spread to the electrical grid supplying
Oxy's Cano Limon field, as the towers were less protected
than the pipeline. Oxy explained that the tower attacks hurt
production as Oxy depended on the local power grid for a
third of the power needed to run the pumps in the wells.


5. (C) Dominguez thought that it was possible to counter
the increase in attacks in Norte de Santander by applying the
successful lessons learned in Arauca under the ISP.
Dominguez explained that the pipeline attacks were usually
done by small groups, so the use of small military patrols
all along the pipeline and not just in Arauca would have an
important deterrent affect. Dominguez also felt that the
inter-agency effort in Arauca, especially the use of
intelligence packages by judicial authorities, would also
dramatically increase the effectiveness of the program in
Norte de Santander. Dominguez also suggested that any cases
developed should be heard by judges from other regions of the
country to lessen the judges' potential security concerns.
Finally, Dominguez stated that the prompt delivery of the ten
helicopters under the ISP was very important. The rapid
reaction and increased patrolling capability these airframes
provide would give the military much needed abilities to
patrol the entire pipeline. Dominguez told the Ambassador
that he had discussed these concerns with the GOC's Defense
and Mines and Energy Ministers and both were receptive and
helpful.

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Signs of Confidence
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6. (C) Oxy is concerned about the increased attacks, but
the company feels that with rapid action the problem can be
contained. As a result, Oxy is moving forward with plans to
invest an additional USD 100 million in new technology to
help recover remaining reserves in Cano Limon and has also
signed new exploratory contracts that could potentially
involve an additional USD 500 million in investments in
Colombia.
WOOD