OIL SITUATION IN COLOMBIA IS OF VITAL INTEREST

The debate in the Senate on the "indemnity" treaty with Colombia, which was recently ratified, has aroused considerable interest in the present status of American investments in that republic. Some critics have gone so far as to imply that much of the agitation in favor of the treaty was due to the pressure from American interests, especially banks and petroleum corporations, which are of course especially concerned oyer any issue affecting the future attitude of Colombia toward American enterprises. An appraisal of the present status of the latter is, therefore, a matter of timely concern.

American merchants and bankers have been making surprising progress in the expansion of their activities in Colombia. Before the war we were supplying 27 per cent of the total imports of that country, and but little effective headway was being made toward improvement, primarily because of the entire absence of American branch banks and of thoroughly American mercantile agencies. Today our commercial interests in Colombia are being aggressively developed through fifteen branch banks, an American Chamber of Commerce, and at least twenty large and well planned distributing organizations. This explains in large measure the growth in our share of Colombia's import trade from 27 per cent to 60 per cent within a decade.

Colombian Oil Has Possibilities

The most significant feature of American penetration into Colombia during the past few years has been in connection with the petroleum industry. Thus far the Colombian oil production has been amounting only to a few thousand barrels for local consumption. The rich possibilities of these deposits, however, and the relation of the American concessionaires to the Colombian government are factors which will figure conspicuously in the future relations between the United States and Colombia.

There are three salient features to the Colombian petroleum industry: first, the marked predominance, amounting almost to monopoly, of American capital in that field; secondly, the difficulty of access from the seaboard to the richer deposits, necessitating excessive costs of pipe line construction and drilling, which are nearly double those for corresponding work in this country and Mexico; thirdly, the legal status of the industry was radically changed in November and December, 1919, when a decree of the Colombian Supreme Court, followed by a new petroleum code, put an end to various government owner ships and "nationalization" schemes and removed several, though not all, of the legal hindrances to the expansion of the industry by private enterprise. The best proof of this is the fact that within three days after the new code had gone into effect about eighty applications were entered for oil concessions, and during the past year about 160 British and American prospecting parties have been scouring the interior for new claims.

Oil Deposits Are Promising

The bulk of the known oil deposits in the Republic lie in three fields; one on the northwestern coast, which has not proved to be extensive, and two in the interior, which are among the most promising field in the whole of Latin America, not excepting Mexico. One of these interior fields, the two million acre DeMares concession lies about four hundred miles up the Magdalena Valley, near the river town of Puerto Wilches. The Tropical Oil Company of Pittsburg which had been operating that concession, was amalgamated early in 1920 with the International Petroleum Company, a Canadian subsidiary of the Standard Oil, and plans have recently been formulated for the completion of a refinery near the wells and for the construction of a $20,000,000 pipe line to the Carribean ports. The Transcontinental Oil Company, of Delaware, organized in 1919, is about to undertake active exploitation of a tract of one million acres near the DcMares field; and the British Balfour group, which is interested in Peru, also holds a claim in that vicinity. This upper Magdalena basin may well become a second Tampico-Tuxpan.

200-Mile Pipe Line Proposed

The other interior field is the so-called Barco concession of about 1,500,000 acres near the Venezuelan border adjoining the prolific Maracaibo wells. This property, together with the oil rights on about two million acres nearby, is being exploited by the Carib Syndicate of New York, in cooperation with the subsidiary of the Henry L. Doherty interests of Pittsburg. Transportation problems have somewhat embarrassed these operations since the field is accessible only from the east by way of the Catatumbo River and Lake Maracalbo; but it is now proposed to lay a two hundred mile pipe line to the Carribean over a hitherto unfrequented pass which is over five thousand feet in elevation.

It is evident, then, that the greater part of the more promising Colombian deposits is in the hands of Americans, though it may be noted in this connection that the Carib Syndicate is associated with the British-controlled Burlington-Royal Dutch Shell interests in the exploitation of the western Venezuelan fields adjoining the Colombian properties of that syndicate.

The Colombian government's oil policy, as expressed in its code of December, 1919, is, in the opinion of competent experts, "sound in principle and workable in general details". That code is not unlike the United States oil land leasing bill, according to Judge J. W. Thompson of the United States Bureau of Mines. Hostile criticisms have been aroused, however, by the proposed assessment of high taxes varying from 10 to 20 percent of the gross product and by the close supervision of exports as a means of levying such taxes. It is evident from the above that the Colombian petroleum deposits are to be developed under concessions granted by the government and the latter is therefore in much closer contact with the exploiting companies than is the case in Mexico where practically all the producing oil wells are located on privately owned land.