Ecopetrol to Study Rubiales Field Future as STAR Pilot Ends

Ecopetrol SA (ECOPETL) is in no rush to decide the future of Colombia’s largest oil field, with the government saying that a technology being developed by Pacific Rubiales Energy Corp. (PRE) is one of many options that could be used.

A pilot project testing the Synchronized Thermal Additional Recovery technology, or STAR, will end, and a technical committee will carry out a study of the results, the two companies said in a joint filing yesterday.

Pacific Rubiales is seeking a new contract in the Rubiales field, where its license will expire mid-2016, and proposes to share oil extracted using STAR under a future deal with Ecopetrol. The technology has attracted criticism from the USO oil workers’ union and Alternative Democratic Pole Senator Jorge Robledo, who say it causes tremors and water pollution.

“This assessment carried out by technicians will determine the application of this technology,” Mines and Energy Minister Amylkar Acosta, who sits on Ecopetrol’s board, told reporters in Cartagena. “There is a whole range of technologies that aim to increase the recovery rate. STAR is one of them.”

Pacific Rubiales fell 0.9 percent to 34,720 pesos at the close in Bogota, the worst performance on the benchmark Colcap (COLCAP) index, which declined 0.1 percent. State-controlled Ecopetrol fell 1.7 percent to 3,215 pesos.

Hold Recommendation

Pacific Rubiales says STAR is safe and has pressed for quick implementation of the technology in the Rubiales field before pressure levels fall. The two companies may reach a deal in the field that will account for 40 percent of Pacific Rubiales’s net production this year by means of another technology, according to Acosta.

Tudor, Pickering, Holt & Co. lowered its recommendation on the Pacific Rubiales to hold from buy after the decision to end the STAR pilot program.

“Investors are likely to be disappointed,” since the company has been talking about expanding the pilot based on success, analysts at Tudor Pickering said in a report. With “constrained” production growth, the stock may struggle to perform in the near term, according to the report.

Pacific Rubiales Vice President of Corporate Affairs Federico Restrepo said today in an interview on Blu Radio that the company’s STAR project isn’t over.

“The STAR project continues; we’re entering a stage of analysis, and very soon we should have an answer on its implementation at the Quifa field and other fields where it would be plausible,” Restrepo said. “If this is successful, which is what we think, it may be used by us at other fields.”

STAR works by heating oil in the well and increasing its flow, with preliminary results from the pilot project at Colombia’s Quifa SW field indicating a doubling of the recovery rate, according to Pacific Rubiales.

“They aren’t married to STAR,” Acosta said. “There’s still a lot of time to evaluate what is the best deal for Ecopetrol and the country.”

To contact the reporters on this story: Andrew Willis in Bogota at awillis21@bloomberg.net; Oscar Medina in Bogota at omedinacruz@bloomberg.net

To contact the editors responsible for this story: Carlos Caminada at ccaminada1@bloomberg.net Tina Davis

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