BP's operations take place in the department of Casanare, located 200 kilometres northeast of Colombian capital city, Bogotá. Flat, grassy plains account for 82% of its 44,640 square kilometres, while the medium elevation foothills (piedmont) are home to the 90's significant discoveries.
Casanare is divided into 19 municipalities and only acquired departmental status and thus political autonomy after 1991's Constitutional reform. Current population hovers at 295,000 according to the 2005 National Census.
A remote and isolated region with frail ties to central government (and therefore investment), institutions were fledgling at best upon BP's arrival as is evidenced by the fact that there was no permanent military presence until 1992, while another six years were need to formalize the appointment of a Court of Appeals in 1998.
The challenges faced by both region and BP were significant: 1993 poverty was greater than in the rest of the country (53% for Casanare against the national 37%); Two years-later, in 1995, average income per-capita was still was half of Colombia's; sewage and treated water coverage was well below rest of the country. It could be said that low development levels were directly proportional to the distance from Bogotá.
Prior to the major oil finds, regional contribution to the national GDP was modest and came mostly from cattle ranching and agriculture. Overall, limited economic activity, low population density and lack of public infrastructure reinforced one another to constrain further economic growth.
The discovery of world-class Cusiana and Cupiagua oil fields spurred tremendous change in the area. Between 1985 and 1997, the population of Casanare jumped by 45%. Expectations flared with the oil bonanza and thousands migrated into the area, lured by the prospect of landing a high-paying job during the construction and development phases.
Demographically, the population spread shifted from a former 68% rural to today's 62% urban majority. This rapid influx of people into cities created many a problem, as local authorities were caught unprepared to deal with newcomers in terms of basic infrastructure, public utilities and housing. Pressure was certainly transferred to BP.
Those tensions started to subside as massive oil-generated revenue poured into local and regional coffers. In Colombia, oil producing regions and municipalities are entitled to significant royalties. During the 1993-2007 period, the government of Casanare and the municipalities of Tauramena, Aguazul and Yopal where Cusiana, Cupiagua and Floreña-Pauto are respectively located have received over USD $2.5 Billion, a majority portion of which was produced by those BP-operated fields.
By constitutional mandate, royalty funds can only be committed to augmenting coverage in infrastructure, basic sanitation, education and health via projects that should included in official developments plans. As a result, Casanare's social indicators have advanced significantly.
According to a first study commissioned in 2001 by BP to Fedesarrollo, one of Colombia's most important economic think tanks, Casanare had improved its quality of life indicators by over 20%. Water supply and electricity coverage both surpassed 90%, while 93% of the children between 5 and 11 were enrolled in elementary education. Unemployment for the region then stood at 11%, well below meagre national figure of 18%. One key conclusion stated that "...the positive impact of oil activity on the fiscal situation of several municipalities has translated into improved public utilities and in extended health and education coverage".
While regional growth also averaged well above the national figure, the economic profile of the area had changed. In 1985, prior to Cusiana and Cupiagua, 51% of local GDP came from agriculture, while the oil industry contributed only 12.5%. In 1997, oil activity accounted for 48% of the GDP, while agriculture dropped to 16%. Research revealed that other sectors such as financial and business services, construction and air transport also expanded on the crest of the oil wave.
In a second 2007 study commissioned again to Fedesarrollo, findings showed that per capita GDP in Casanare is 3.5 times greater than Colombia's per capita GDP. Between 1995 and 2005, Casanare saw its income multiplied by 10, compared to the 5.7 average for other departments. And between 1995 and 1999, economic growth in Casanare averaged 26.68% while Colombia's was 1.41%. All of this however revealed great dependence on royalties.
On the social side, basic education coverage in Casanare stands at 88%, up from 77% in 2002. Non attendance to school has dropped to 13.1%, down from 26% in 1993, while 90.55% of all students go to public schools.
At an impressive 73%, Casanare leads in health coverage within the subsidized system, almost doubling the national figure of 40%. Clearly, the majority of the population benefits from this system, which is intended to benefit low income individuals.
In 1993, 54% of the population had access to aqueduct services. By 2005 that figure had jumped to 84%. In those same years of reference, only one in every four homes had sewage. Today, nearly three out of every four (65%) have sewage.
Poverty levels in the municipalities where we developed Cusiana and Cupiagua also fell sharply. In Aguazul, poverty dropped from 43% to 19.7% while in Tauramena it went from 52% to 15.9%.
Oil revenue has certainly changed the face of Casanare and its municipalities, but there are challenges. Despite progress, illiteracy remains high at today's 9% versus 11% in 1993. And close to 40% of homes have at least one unsatisfied basic need, which is an official Colombian indicator for poverty.
Sudden wealth has also challenged regional and local governments into developing the institutional capacity needed to make the best use of royalty income, while managing community expectations. Also to be addressed is the design and implementation of permanent initiatives meant to create employment and income generation schemes based around agro-production.
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