Priced Out

In six months seven U.S. oil companies have folded their rigs and suspended drilling in Colombia. Last week Shell, having sunk $90 million trying to get profitably established, announced that it was forced to curtail operations. That left only two small outfits drilling for new fields in Colombia. Three big U.S. companies (Socony-Vacuum, Texaco and Jersey Standard's Tropical) have put too much money into old, producing fields to pull out now; but they have virtually given up trying to find new oil for the present.

Reason for suspension was that Colombia had just about succeeded in pricing itself out of the oil business. While Venezuela's tough but sense-making petroleum code fostered a billion-dollar industry, Colombia's confusing, ultra-nationalist oil laws had crippled efforts to develop resources. It often took ten years to get an exploration concession through Colombian courts. After that, the million dollars spent on drilling a new well would be subject to tax whether oil was found or not. Extra-legal riders of one sort or another jacked royalties as high as 25%; the total government take, in taxes and royalties, sometimes ran over half the value of a company's net revenue. "Colombia," growled an oilman in Bogota, "is the graveyard of oil profits from other countries."

But Colombian politicos did not seem disturbed by the virtual shutdown on wildcatting. Their country was bigger than Venezuela, they reasoned, with coffee, gold and other cash products besides oil. Many even argued that an oil boom would hinder the country's all-round development, and pointed to oil-rich Venezuela's deficient agriculture and industry for proof. "What will Venezuela have to show for lying supine before the drillers?" snapped a young Colombian oil-ministry bureaucrat. "Holes, that's all."

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