Colombia Table of Contents

In the late 1980s, much of Colombia's mining future rested with coal deposits. Estimates of reserves ranged from 16 to 40 billion tons in 1987, considered indisputably the largest in Latin America. Coal reserves existed throughout much of the country, from the Andean highlands to the Caribbean coast. Only 20 percent of the known coal reserves, however, had been surveyed by 1987.

Among the many areas where coal was found were the Caribbean lowlands department of La Guajira and the Andean highlands departments of Cundinamarca, Santander, and Antioquia. Although all these areas produced coal in 1987, most Colombian coal was extracted from the El Cerrejón field in La Guajira Department.

El Cerrejón was discovered in 1882, explored in 1950, and brought on line for production in 1985. The project was divided into the northern, central, and southern zones; the northern zone was given priority for production because of its estimated 3 billion tons of high-grade recoverable reserves. El Cerrejón was organized as a joint venture between the Colombian government and a subsidiary of Exxon known as International Resources.

To promote the exploitation of Colombia's vast coal reserves, Carbocol was created in 1976. Formed as a commercial company of the state, Carbocol was placed under the Ministry of Mines and Energy and initially capitalized with US$10.6 million. Carbocol sold shares to other government agencies; majority ownership rested with the Export Promotion Fund (Fondo de Promoción de Exportaciones-- Proexpo) and the Colombian Petroleum Enterprise (Empresa Colombiana de Petróleos--Ecopetrol). Investment in Carbocol grew rapidly in its first decade of operation, reaching US$347 million by 1985.

Carbocol managed all facets of the coal business from exploration and mining to marketing and sales, both locally and abroad. Carbocol's primary goal--to make Colombian coal a permanent competitive commodity in the international market--proved difficult because of low international prices for coal in the 1980s. Nonetheless, Carbocol continued to assist the coal industry by attempting to reduce production costs, developing strategies to expand exports, and creating opportunities for both domestic and foreign capital investment in the industry.

In the late 1980s, Colombia's coal was consumed both at home (40 percent of mined coal) and abroad (60 percent). The generation of electricity accounted for about a third of domestic coal use, but this use was not expected to grow, given the completion of hydroelectric projects. Industrial use, which accounted for twothirds of the domestic consumption of coal, was the most likely area for internal growth. Low international prices threatened further development of the industry because it could not attract long-term investment funds. Nevertheless, industry analysts expected this situation to change in the 1990s because of an anticipated increase in international demand for coal, allowing a competitive return on investment for Colombian coal projects.

In the short term, however, financial problems required that the coal industry solicit support from government agencies operating the oil industry. Ecopetrol's convertible assets permitted government planners to sell shares of El Cerrejón to Ecopetrol in order to inject money into the cash-poor project. This allowed the government to retain half-ownership of the industry rather than lose control of the coal program by selling equity shares to private investors.

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Source: U.S. Library of Congress