As populist leaders in Bolivia and Venezuela are determined to nationalize their oil industries, Colombia's government is insisting on a privatization plan for its state-run oil company. By selling off 20% of Ecopetrol, Colombia hopes to net some $5 billion and finance new exploration to boost production, according to Armando Zamora, president of the National Hydrocarbon agency. He warns that if more crude isn't discovered soon, Colombia will begin importing oil in 2011, with devastating results for the government's finances, which depended on Ecopetrol for 7% of last year's $41 billion budget. In 2005, Ecopetrol had sales of close to $6.5 billion. The Colombian government is expected to release details of the sale in the coming weeks.
The plan is meeting dissent within the country. "Not one country in the world wants to sell off part of an oil company that has created so much wealth like Ecopetrol. Colombia is the only exception," said Sen. Hugo Serrano.
BP, Chevron and ExxonMobil, as well as smaller companies from India, China and Canada, are prospecting for oil in Colombia, investing close to $1.5 billion last year. The hydrocarbon agency, in charge of allocating exploration contracts, said these multi-nationals pay royalties of between 5 and 25 percent.
Leftist guerillas also pose a challenge for production. In 2005, Colombia's oil pipelines were attacked 146 times, the Defense Ministry reported.
Colombia has an estimated 1.4 billion barrels of oil in reserves that are rapidly being consumed. In 2005, production fell to just 526,000 barrels per day from a record 815,000 in 1999. In contrast, Venezuela exports 2 million barrels of oil a day.
In 2006, Ecopetrol plans to spend $350 million exploring for new oil from a total investment budget of $1.4 billion. Most of the rest will go to extracting more oil from wells already drying up.
"It's necessary to give more freedom to the company, but not to privatize it," said Serrano, a former oil engineer and member of the opposition Liberal party. "When oil is found, the country will lose 20% of that income." But former minister of energy and mines Carlos Caballero said state control is bottlenecking production. "Ecopetrol suffers from all types of restrictions that prevent it from competing and makes it more difficult to find more oil," he said.
The oil workers' union, representing a third of Ecopetrol's 6,000 employees, is "ready to take all the necessary measures to prevent this sale," union President Jorge Gamboa said. (AP [2], Sept. 9)
See our last post on Colombia [3].
