By Naomi Mapstone

A partially privatised state oil company and a raft of foreign investors are leading the charge, as exploration lots long denied them by 45 years of civil war have become available.

The bonanza follows the improving security situation. Ecopetrol, which the government “democratised” in 2007 via a $2.8bn initial public offering for 10.1 per cent of the stock, is the fourth-biggest oil company in Latin America and the country’s single biggest, with 62 per cent of total production.

The newly entrepreneurial company is also rapidly forming exploration partnerships outside Colombia, in Peru, the Gulf of Mexico and Brazil, in an effort to break the magic 1m barrels a day barrier.

Ecopetrol’s story is one of surprises. Juan Pablo Cordoba, chief of Colombia’s stock exchange (BVC), recalls that when the IPO was launched, not even the investment banks running the show believed they could place 100 per cent of the funds in the first tranche.

“Not only did they have 480,000 Colombians buying the shares, but it was clearly the largest transaction in Latin America in 2007. Brazil had two deals that were larger, but 70 per cent of those IPOs were bought by foreign investors. Ecopetrol was 100 per cent in the domestic capital market. It was sold in the supermarkets.”

The speed with which it has transformed itself from inefficient state oil behemoth has also surprised. Alberto Bernal, of Bulltick Capital Resources, says: “Ecopetrol is by far the best reform that President Uribe has made, because if you have self-sufficiency in oil you will have stable external account and a very nice inflow.

Even though Ecopetrol is no longer part of the government, it pays taxes, it pays royalties and dividends, so the money comes into the public coffers, it’s just much more efficient.”

Shell, ExxonMobil, Petrobras of Brazil, Lukoil of Russia, Canada’s Pacific Rubiales Energy, BHP Billiton, Total, Perenco, BP, Repsol, and Chevron of the US are among those to partner Ecopetrol in Colombia.

As part of an aggressive $60bn investment strategy, the company this year acquired Hocol, a subsidiary of France’s Maurel & Prom, for $580m, and took a 50 per cent stake in PetroTech Peruana for $450m, in partnership with KNOC of Korea.

“For us, the crisis was an opportunity,” says Alvaro Vargas, vice-president of strategy and growth. Hocol and PetroTech Peruana will add 132,000 bpd to the company’s tally by 2015. If it is to meet its 1m bpd target, another 406,000 bpd will come from known reserves and 462,000 from new finds.

Some analysts say the 1m bpd goal is overly ambitious, noting the reliance on exploration, and the lag time between new discoveries and production, especially where heavy crude is involved. Armanda Zamora, director of the National Hydrocarbons Agency (ANH), has predicted a return to Colombia’s historical production peak of 850,000 bpd by 2014, with a rise to between 650,000 and 700,000 bpd by the end this year.

The country signed 59 oil exploration contracts last year and a further 48 so far this year, with the ANH planning another offer of onshore and offshore technical exploration agreements and more than 85,000 sq km in exploration and production licences in November.

While a big part of Colombia’s recent success in attracting investors is improved security – there were 11 pipeline attacks last year, compared with 171 in 2000 – an improved regulatory framework, tax incentives and perception of greater stability have also had a role.

“Colombia is sort of the odd man out in Latin America,” says Joydeep Mukherji of Standard & Poor’s. “From Mexico down to Argentina, in all the countries that have any kind of oil and gas deposits, the trend in the past few years has been to increase the role of government, either directly or indirectly. Maybe in a country like Brazil they are holding still.

“But Colombia has systematically opened up its oil and gas sector: they’ve separated the oil company from the regulatory job it used to do, set up an independent regulator, put in a level playing field between government and companies. The results speak for themselves.”

Eduardo Rodríguez Tamayo, president of Shell Colombia, says the company pulled out of exploration and production in 2000 because of a restructuring and decided to return in 2007 because the country offered “a positive landscape”.

He says: “Colombia is an oil country; it has a clear agenda,” citing security and regulatory improvements and the government’s infrastructure programme as draws.

Compartir: