April 30 (Bloomberg) -- Colombia’s second-biggest pipeline will be fixed in a matter of days after a five-week shutdown that has cut exports and production at state-owned Ecopetrol SA, Mines and Energy Minister Amylkar Acosta said.
Scheduled talks tomorrow are the last chance for an agreement with the forest-dwelling U’wa indigenous group, whose protests are inhibiting repairs to the Cano Limon-Covenas pipeline, Acosta said today in a telephone interview from Bogota. After that, the government will give the order to start repairs, he said.
“We’ve already had a month of paralysis of the pump, with all its consequences, and it can’t go on any longer,” Acosta said. “We expect that before the end of this week the pipeline will be fixed and functioning.”
Failure to mend the pipeline following a Marxist rebel attack on March 25 has reduced Ecopetrol production by 2.7 million barrels, the company said in an e-mailed response to questions yesterday.
Colombia’s average daily production will be about 970,000 barrels in April, compared with a government target of at least one million barrels, as a result of the protest, Acosta said.
The indigenous group wants Cano Limon-Covenas partially re-routed and a cessation of Ecopetrol’s exploration activities at the Magallanes project in the eastern Norte de Santander province.
U’wa members are blocking the entrance to the Magallanes site and are opposed to government plans to fix the pipeline without first reaching a deal, U’wa Association Vice President Heber Tegria said.
“We will resist, but only using words,” Tegria said yesterday in a telephone interview. “We are not optimistic the government will accept our requests.”
Ecopetrol first-quarter profit fell 3.6 percent, missing analysts’ estimates, after the pipeline disruptions reduced production and increased costs, the Bogota-based company said in a statement today. Shares rose after Acosta’s remarks.
Colombia may not have to declare a state of emergency to fix the pipeline as the damage is located outside the U’wa’s indigenous reserve, Acosta said.
An emergency declaration would give Colombian President Juan Manuel Santos powers to rule by decree for 30 days and would potentially overrule standard protocol when dealing with the group.
Royalties from oil, Colombia’s biggest export, are a key source of revenue for the government, which is currently battling farmer protests ahead of presidential elections in four weeks.
The Cano Limon pipeline takes oil from eastern Colombia to the Caribbean coast. The U’wa demand the duct’s path be partially altered to bypass ancestral lands that have suffered repeated oil spills and a rising military presence.
“The Colombian state has a historic social debt with the U’wa nation for ethnocide, genocide and ecocide,” the group said in an April 25 statement, demanding 2 trillion pesos ($1 billion) in compensation.
Colombia does have “an enormous social debt” with the U’wa and other indigenous groups, extending back over many governments, Acosta said.
The U’wa number more than 6,200, living in the remote Andes of northeastern Colombia, along the border with Venezuela, according to the website of U.S.-based NGO Amazon Watch. Both the U’wa and the cloud forest they inhabit are among the last of their kind in the world, the NGO says.
“The government has a very difficult balancing act,” James Lockhart Smith, a Latin America analyst with risk consultants Maplecroft, said by phone from London yesterday. “It wants to ensure companies can invest efficiently while making every attempt to be respectful of indigenous rights.”
Colombian pipeline explosions have surged over the past year as the government holds peace talks in Havana with the country’s largest rebel group, the Revolutionary Armed Forces of Colombia, or FARC. There were 33 pipeline attacks in the first three months of this year, and a total of 259 in 2013, according to Defense Ministry data.
Paralysis of the Bicentenario pipeline, which feeds oil into Cano Limon from Colombia’s Llanos plain, is exacerbating the situation, Acosta said.
In a first-quarter operational report April 23, Pacific Rubiales Energy Corp. said Bicentenario interruptions had contributed to higher transport costs. The company’s shares have tumbled since the report.
The pipeline outages are also weighing on Ecopetrol’s stock, Maria Velasquez, an analyst with brokerage Serfinco, said by phone from Medellin yesterday.
“People are taking these infrastructure attacks into consideration,” she said. “They’re generating a loss of confidence. In the end, without pipelines it’s hard to export.”
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