Oil activities ban near Caribbean islands

BOGOTA: Colombian President Juan Manuel Santos said on Saturday the Andean nation will not award oil exploration and production contracts off the San Andres archipelago, an important bio-diverse tourist destination.

Oil companies in Latin America's No. 4 oil producer have run into problems over the last year with environmental permit requests and protests by communities even as the country continues to rake in billions of dollars in investment.

"I want to give all the inhabitants of San Andres de Providencia this news and the security that there won't be exploration or production," Santos said.

"I've studied it at depth with the environment and energy ministers the conclusion that we came to after studying it with experts on both sides is that we won't permit (the contracts) to be signed," Santos said in a weekly address.

Last year, Ecopetrol and Spain's Repsol-YPF won contracts to explore off San Andres, but those were halted because the government failed to consult communities and to give officials time to analyze the impact of oil activities on the islands.

Colombia's Caribbean coast is thought to have large reserves of natural gas as well as, to a lesser extent, crude oil, but the off-shore sector is under-developed.

The ban will not likely affect oil investment in Colombia, where a pro-investment stance, stable regulatory environment and improved security after a US-backed military offensive against insurgents has created a boom in oil and mining investment.

Once seen as a failing state mired in guerrilla and drug violence, Colombia is slowly turning its image around, attracting new investors that have allowed oil production to hit historic highs, approaching 1 million barrels per day.

Copyright Reuters, 2011