Ecopetrol Says Oil Output on Target as Rebel Sabotage Rises
Ecopetrol SA (ECOPETL), Colombia’s largest oil company, expects to meet production targets this year as the government tightens security after an increase in guerrilla sabotage, Chief Executive Officer Javier Gutierrez said.
The company, based in Bogota, plans to produce a daily average of 800,000 barrels of oil and natural gas and add about 400 million barrels of reserves, Gutierrez said yesterday in an interview in the northern Colombian city of Cartagena. More pipeline attacks doesn’t mean rebels regained strength, he said.
“Ten years ago when you talked about attacks on infrastructure, there was a certain level of uncertainty,” he said. “The country has been able to show for a long time that it does have the capacity to guarantee operating conditions.”
Increased strikes by guerrilla groups cut oil production last month in Colombia, which has drawn record international spending on energy and metals reserves from investors including billionaires Carlos Slim and Eike Batista. Sabotage of energy towers, pipelines, roads and bridges rose last year for the first time since 2008, according to government statistics.
The strikes will delay reaching Colombia’s production goal of 1 million barrels of oil a day, said Juan David Pineros, an analyst at Colombia’s largest brokerage Interbolsa SA (INTBOL). In February, output slid 4.8 percent from January to an average of 896,000 barrels a day after attacks restricted oil transport.
“It’s pretty problematic,” Pineros said by telephone from Medellin on March 12. “The guerrillas seek to destabilize things. They go after high impact targets.”
Pineros doesn’t own shares in Ecopetrol. Interbolsa has a sell rating on the stock, saying gains in the shares have outpaced profit growth.
Ecopetrol is working on repairs this week to the Cano Limon Covenas pipeline in eastern Colombia, which guerrillas sabotaged more than a dozen times this year, Gutierrez said.
The line, carrying about 70,000 barrels a day of crude, was attacked in two different sites on March 11 by the Revolutionary Armed Forces of Colombia, or FARC, producing fires and a spill, according to police.
Such attacks are concentrated in the nation’s northeast and show a decrease in the military force of the rebels compared with a decade ago, Gutierrez said.
“Before there were movements that were more massive,” Gutierrez said. “Now clearly it’s more individuals and cells, which is a different presence from what it used to be.”
Ecopetrol closed unchanged at 5,300 pesos in Bogota after gaining as much as 2.1 percent following Gutierrez’s comments. The stock has added 26 percent this year, compared with an 11 percent gain in Colombia’s benchmark COLCAP index. Ecopetrol is ranked ninth among global oil and gas companies by market value, according to Bloomberg calculations.
The government is making additional investments to guarantee security as rebels act out of “desperation,” Mines and Energy Minister Mauricio Cardenas said yesterday.
A military strike in November killed the FARC’s leader Alfonso Cano. He had replaced the movement’s founder, Manuel Marulanda, known as “Tirofijo,” or “Sureshot” in Spanish, who died of a heart attack in 2008.
‘Ups and Downs’
“Colombia is going to have ups and downs,” said Stephen Johnson, director of the Americas program at the Center for Strategic and International Studies, in a March 8 telephone interview from Washington DC. “The people involved in these movements aren’t going to just say ‘Hey, our latest leader has died and ‘Sureshot’ is gone, so let’s become car salesmen.’”
Last week, Colombia’s second-largest rebel group freed 11 workers taken hostage near a $4.2 billion oil pipeline project being developed by Ecopetrol. The men were kidnapped Feb. 28.
President Juan Manuel Santos is using investment in energy reserves to fuel his nation’s $288 billion economy. Rising exports of oil and coal helped Colombia garner an investment- grade credit rating last year. The country was raised to Baa3, the lowest investment grade level, from Ba1 by Moody’s Investors Service on May 31. Standard & Poor’s increased Colombia to BBB- in March 2011.
Rising production has made Colombia the third-largest crude producer in South America after Venezuela and Brazil. Production at Ecopetrol rose to 741,700 barrels of oil and natural gas a day last quarter, from 651,300 barrels a year earlier.
Ecopetrol is studying an $8 billion pipeline to carry heavy crude oil from eastern Colombia to the Pacific Ocean, a project that probably will need partners, Gutierrez said. The pipeline may attract investment from China, he said last year.
Ecopetrol also is studying oil blocks to be auctioned this year by Colombia’s government, where the company is in the early stages of exploring for non-conventional fuels, Gutierrez said. Non-conventional fuels include gas extracted from shale. Colombia’s government owns 88.5 percent of Ecopetrol.
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