Glencore to Goldman Face 3-Year Wait on New Colombia Rail

A project to double capacity of Colombia’s main coal railway is set to take another three years, according to the line’s operator, curbing government plans to boost exports of the fuel used by European power plants.

Environmental permitting delays and opposition from local communities have held up work, Pat Ross, acting president of Ferrocarriles del Norte de Colombia SA, or Fenoco, said in an April 7 interview at the company’s Santa Marta offices.

Subsidiaries of Goldman Sachs Group Inc., Glencore Xstrata Plc and Drummond Co. are among companies that use the 246 kilometers (153 miles) of track to transport coal from northern mines to ports on the Caribbean coast, from where it’s shipped to Europe. A 46-kilometer stretch of single track still needs to be turned into double track, Ross said.

“The second quarter of 2017 is the deadline at the rate we’re going, unless it’s expedited,” he said. “As long as you have one kilometer of single track, the inability to optimize our resources remains.”

Last year, the railway transported 44 million metric tons of coal, with a capacity under current contracts of 66.5 million tons, according to Fenoco. “When the second line is completed the capacity will almost double,” Ross said.

Fenoco has spent $164 million since 2007 on an expansion that include a new high-tech signaling system, with a forecast total spend of $319 million.

Drummond Catchup

Companies working in the cement, oil and oil derivatives industries have expressed interest in using the upgraded line once it’s complete, Ross said.

Colombian Mines and Energy Minister Amylkar Acosta said Feb. 20 that completion of the second line would help Drummond partially recuperate lost exports after the Birmingham, Alabama-based company failed to install a mandatory direct-loading system at its Caribbean port by a Jan. 1 deadline.

The ministry didn’t reply to two e-mails and a voicemail seeking comment on the railway upgrade timeframe. Officials in the communications departments of Glencore’s Prodeco and Goldman Sachs’s Colombian Natural Resources declined to comment when contacted by phone on the railway expansion time line.

President Juan Manuel Santos has earmarked mining as an engine for the country’s economy. Coal is Colombia’s main export after oil.

Of 11 minerals identified as being strategically important, Colombia has the greatest potential in thermal coal, according to a study commissioned by the government’s mining and energy planning unit.

“Colombia’s coal reserves are gigantic,” the unit’s director, Angela Cadena, said in a March 26 interview. “The reserve-production ratio is close to 100 years.”

To contact the reporter on this story: Andrew Willis in Bogota at awillis21@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Stephen Cunningham

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