By Steven Dudley
Special to the Washington Post

BOGOTA, Colombia –– U.S. coal giant Drummond Co. had relatively few problems in Colombia until a couple of months ago. But when the Birmingham, Ala.,
company decided to increase production significantly this year, it ran into big trouble.

In September, the Revolutionary Armed Forces of Colombia (FARC), the country's largest rebel group, dynamited train tracks belonging to the company. The rebels
also kidnapped six Drummond employees, five of whom were subsequently released with a message for company officials: Pay up or risk more attacks.

The attacks continued on Nov. 4, when rebels from the country's second-largest guerrilla group, the National Liberation Army (ELN), reportedly dynamited another
Drummond train.

Guerrillas have targeted oil companies in Colombia for years, extorting money, blowing up oil pipelines and kidnapping workers for ransom. But during the past 18
months, they have begun hitting other parts of the country's vital energy sector.

Oil is Colombia's top export, earning $3.8 billion last year. Coal is third, with $848 million in sales in 1999, making Colombia the world's fourth-largest coal exporter;
government officials in the coal sector have said they would like to see production double over the next five years. Colombia also hopes to export natural gas and
electricity in the near future.

But guerrilla attacks have cast a shadow over many of these projects.

When the government privatized its coal company last month, two of the five bidders dropped out at the last minute, including Drummond. The remaining
three--Switzerland's Glencore, South Africa's Anglo American PLC and Britain's Billiton PLC--formed a consortium to purchase the company for the minimum
asking price, $384 million.

"What [the attacks] show is that the government cannot provide these companies the protection they need," said Alvaro Reyes Posada of the Colombian economic
research group Econometria.

Since the beginning of 1999, rebels have also destroyed more than 500 electricity pylons. The attacks are one of the reasons the government has delayed selling its
largest electricity generator, its transmission service and 14 local electricity distribution companies.

The $1.5 billion expected from the sales was to be used to help the government reduce its ballooning deficit. The sales were a condition for a $2.7 billion
International Monetary Fund loan approved last year. The delays suggest that the government fears that the value of the companies may have dropped because of the
attacks.

Both major guerrilla groups also seem to be using the new tactics to pressure the government at the negotiating table. The government began a peace process with
FARC and held preliminary talks this year with ELN. But talks with FARC have stalled on several occasions, including last week when the rebels demanded the
government do more to combat right-wing paramilitary forces.

The stepped-up campaign against energy companies comes as the government prepares to implement Plan Colombia, its $7.5 billion strategy to fight drugs and shore
up the ailing economy. The United States is contributing $1.3 billion over two years, most of which is for military hardware to fight the guerrillas in drug producing
areas.

Rebels siphon a tax from the drug producers and traffickers to finance their war and recently linked their campaign against energy companies to the increased U.S.
role in the 36-year conflict.

ELN said after a spate of bombings along the Caqo Limon oil pipeline in July and August that the attacks were a "protest against North American intervention." The
pipeline transports 95,000 barrels a day of California-based Occidental Petroleum Corp.'s crude to an Atlantic port for export.

The two guerrilla groups have bombed Caqo Limon 87 times this year, and 739 times since 1986, spilling more than 2.3 million barrels of oil. In September,
Occidental Petroleum was forced to suspend its contractual obligations at Caqo Limon because of the bombings.

FARC rebels hit state oil company Ecopetrol's southern pipeline 31 times in September, forcing Ecuador's state oil company, Petroecuador, which uses the line to
transport 45,000 barrels a day for export, to suspend its obligations.

Oil workers have also become targets of new actions, beyond kidnappings for ransom. In the last few weeks, a driver contracted by Occidental Petroleum and an
engineer contracted by BP Amoco PLC were stopped, then killed, by suspected rebels as they traveled along country roads between project sites.

Despite these problems, oil remains one of the few industries that can still draw new investors to Colombia. In September, Ecopetrol auctioned off 21 areas, some of
them larger than 500 square miles, where companies could explore for oil. Thirteen areas drew offers, and four of the winning companies have not worked in
Colombia before.

Ecopetrol officials said the auction will bring more than $600 million in new investment over the next six years. Ecopetrol has also signed 25 new oil exploration
contracts with mostly small to medium-size companies this year.

Some representatives of multinational companies working here say the perception is worse than the reality.

"It's a dangerous place," said Martin Keeley of the British oil firm Emerald Energy, which discovered a sizable oil field last year. "But the danger is manageable."

Still, others argued that Ecopetrol's auction suffered from the effects of the deteriorating security situation. Twenty-five companies participated in the bidding after 44
initially expressed interest. Those that dropped out included Occidental Petroleum, Texaco Inc. and Chevron Corp.

"We are worried," the head of the Colombian Petroleum Association, Alejandro Martinez, said. "We are starting to ask ourselves: Is it worth it to invest in this
country?"