Jersey’s competition enters


Jersey was faster than the other oil companies and it seized the first production wells in Colombia: The De Mares Concession. However, other companies, although they were not as lucky or were slower, were also aware of opportunities in Colombia. Their interest in exploring and producing oil in Colombia dates back to the first decade of the twentieth century. Diego Martínez in 1910 had already carried out, without success, exploration activities with Standard Oil of New York, and the British firm Weetman Pearson showed an interest in 1913, but Jersey impeded their entry with the help of the United States government.

 

In 1919 several North American companies and two British companies had experts in Colombia: For example, Francisco Burgos and the South American Gulf Oil Company carried out exploration of lands in the lower Sinú; the Carib Syndicate bought property of the Equatorial Company, which owned 250,000 acres next to the De Mares Concession of the Tropical Oil Co.; Kelley, owner of the Three Seas Petroleum company, organized a company to explore 150,000 acres between Cartagena and Barranquilla. In 1920 the Transcontinental Oil Company, incorporated in Pennsylvania by Benedum, was sold to Standard Oil of California, and in 1921 the New York Times reported that 21 North American companies and six British companies, other than those mentioned above, had expressed interest in exploring Colombia. In 1924 the Richmond Petroleum Company conducted exploration near Barranquilla and Cartagena, without success; in 1925 entrepreneurs from Britain and Standard Oil of Indiana reported an agreement to develop new fields in Colombia, and German entrepreneurs followed in the footsteps of Jorge Isaacs and explored in la Guajira and Urabá, and in 1920 the Texas Petroleum Company acquired the Velásquez territory, near to Puerto Boyacá, Boyacá, and slowly developed the only oil company on private land in Colombia (New York Times, 1920, February 20, September 4, 1921, March 14, December 9; Wall Street Journal, 1921, September 8; Bell, 1921: 120; Oil and Gas Journal, 1925, April 23: 180, June 25: 58; Angarita,1953: 117; Rippy, 1976: 115-117, 125; Isaza and Salcedo, 1991 : 115-116).

 


Advertisement of Troco gasoline illustrating the transport process of the product from the
Barrancabermeja refinery, to the gas station. Pan magazine, 1942.

 

In 1931 the Government issued Law 37, which established general rules for the exploitation of oil, declaring the oil sector of public interest and giving the Government power to expropriate. The law also made clear that individual rights would be respected obeying the Constitution, and it established the fees that the Government would charge for rental of each hectare in exploration territory and for each kilometer of oil pipeline construction, as well as tax rates or royalty rates for production and export. It also established an exemption from export taxes or those of another specific character during the first 30 years of operation of any project, leading a new wave of interest in the country’s resources.

Activity in 1930 was concentrated in the region of Magdalena Medio. In 1933 Societé Européne des Petroles obtained a concession, and in 1937 three new concession contracts were signed for oil exploration and exploitation in the region, in the vicinity of the De Mares Concession: One with Sociedad Nacional del Carare, and another with Bernardo Mora on the land that years before had been given in concession to Societé Européne des Petroles, and another with Compañía de Petróleos del Carare.

In 1938 Compañía de Petróleo El Cóndor was awarded a concession in Yondó, Antioquia, directly across from the De Mares Concession, on the west bank of the Magdalena. That same year, Shell Colombia and Compañía de Petróleo El Cóndor signed a contract in which Shell was made responsible for the exploration, exploitation and management of oil resources from the concession. In 1945 exploitation began, and in 1951 more than 12 million barrels of oil were being produced, equivalent to 33% of domestic crude oil, mostly for export (Boletín de Minas y Petróleos, 1933: 3, 24, 43, 48, 68, 70, 91, 96, 1935: 200-253; Boletín de Minas y Petróleos, 1937: 17, 1938 p. 27; Mendoza and Alvarado, 1939: 36; Angarita, 1953: 117, 133, 139; Shell, 1996: 16-22).

 

Exploration in other parts of the country also experienced success. After a long and complicated history, Texaco took on the Barco Concession, which in 1951 enabled it to produce approximately 10 million barrels of oil, about 25% of Colombian crude oil production. General Virgilio Barco, after acquiring the concession in 1905, was able to interest foreign investors in 1914 and carry out exploration activities; in 1915 he transferred the concession to the Carib Syndicate of the United States, and then in 1917, in circumstances that are not entirely clear, he transferred it to Compañía de Petróleo Colombia for a value of $ 100,000 plus 15% of gross production. The concession was granted for 50 years from the start of the contract in 1905, with the payment of royalties to the Government equivalent to 5% of gross production. Compañía de Petróleo de Colombia was created by Henry Doherty, an oilman from Pennsylvania, in order to access the concession, upon the national Government’s refusal to allow a foreign company to obtain it. At the same time, Doherty created the Colombian Petroleum Company in the United States as a mechanism to control the ownership of Compañía de Petróleo de Colombia from that country. In late 1925, Doherty sold his North American company to the Gulf Oil Corporation, owned by the Mellon family of Pennsylvania (Bell, 1921: 131, Boletín de Minas y Petróleo, 1930: 12; Mendoza and Alvarado, 1939: 22; Andrade (nd: 11-20).

In 1926 the government declared the Barco Concession null because work had not be started within it. In addition, between 1926 and 1927 the Colombian government pushed the renegotiation of the royalties paid by the Tropical Oil Co. and offered the Barco Concession to H. Yates, a British representative of the British Petroleum Company. The North American oil companies responded by pressing the Colombian government, and in 1928 these companies, in whose boards of directors the North American banks had a strong presence, acted so that the bonds issued by Colombian government agencies were not demanded, also convincing the United States Treasury Department to issue a circular to alert on the purchase of Colombian government bonds. The Government, in turn, was heavily indebted at the end of the 1920’s, after a decade in which they propelled the rapid growth of the Colombian economy through high public spending financed by external debt and the United States government compensation for Panama, prosperity by debt. Thus, in 1928, when the actions of multinational oil companies caused a significant reduction in access to credit for the Colombian government, this precipitated the economic crisis in Colombia, one year before the rest of Latin America, which entered a crisis when the stock market crash in New York in 1929 reduced access to credit to the other countries. On the other hand, the Colombian government required capital upon the start of the Great Depression, and negotiated a loan with National City Bank. Andrew Mellon, Secretary of the United States Treasury and partner of the Gulf Oil Corporation, made the loan conditional upon the Colombian government recognizing the right of this company over the Barco Concession. In 1931 Gulf’s right over that concession was recognized, and they in 1935 offered the concession, and Texaco and Mobil (Standard Oil of New York by then) organized a consortium and bought it. They built a pipeline from the wells in Tibú to the Atlantic Coast, and began production in 1939 (Wall Street Journal, 1928, March 8; New York Times, 1928 June 11; de la Pedraja, 1993: 32-38, 48-54).

So the first half of the twentieth century ended with two events that would mark the second half of the century: The first, when the contract for the De Mares Concession reverted to the nation, which marked the end of Jersey’s domination and the beginning of Ecopetrol, the leading company in the second half of the twentieth century; the second, when Shell and Texaco-Mobil began the exploitation of oil in 1940, which allowed them to produce 58% of the national total in 1951, thereby decentralizing the supply of oil and regionally diversifying production.


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