Oil producers surge ahead
Some commentators compared it to Stalin’s purges. It was 2006 and Venezuela’s then-president, Hugo Chávez, said employees of PDVSA, the state energy company, who were not willing to side with him could leave. He also hinted that some might end up in prison.
“PDVSA’s workers are with this revolution, and those who aren’t should go somewhere else. Go to Miami,” Chávez said, referring to a Thermidorian reaction a few years earlier when, after a failed coup, his opponents led a two-month energy industry strike that crippled Venezuela’s economy.
After the strike, the president cleaned out PDVSA, sacking 20,000 employees, including some of its best petroleum engineers, geologists and managers. Some did indeed go to the US, but most were welcomed by Colombia, where they have been instrumental in helping oil companies to boost their lagging production of crude and turn the country into a regional energy powerhouse.
“Venezuela’s loss has been, for all means and purposes, Colombia’s gain”, says Carlos Alberto López, a Harvard-educated Colombian energy expert. After the decline in production and exploration during the 1990s, in the past decade Colombia has taken advantage of the commodities boom and a crackdown on Marxist insurgents. This spurred the interest of investors in the energy-rich parts of Colombia that were off-limits during the rough years of the drug-fuelled guerrilla and paramilitary violence.
The army of experienced Venezuelan oil workers and technologically savvy managers was a welcome pool of know how oil companies entering the Colombian scene could tap. “Without them, Colombia’s extraordinary oil boom might have faced significant lags”, López says.
Pacific Rubiales Energy, the Canadian-Colombian group, was one of the first private companies to take advantage of improved security, and is an emblem of Colombia’s oil boom. It became the country’s biggest independent oil producer by exploiting the long-neglected Rubiales field that disappointed many after an Exxon affiliate discovered oil there in the early 1980s. “Colombia was a great opportunity, with under-developed reserves and several million of yet-to-be-discovered barrels”, says Ronald Pantin, the Caracas-born chief executive and a former senior executive at PDVSA. Thanks to Venezuelan production technology, Pacific Rubiales has gone from extracting 14,000 barrels a day in 2008 to a forecast of more than 250,000 b/d this year.
The growth of Pacific Rubiales – the first international company to list in Bogotá – has strengthened the phenomenon of Toronto-listed oil producers operating in Colombia. Among those are Canacol, Petrominerales and Ecopetrol.
“Pacific Rubiales and its management team changed the dynamic of the oil sector in Colombia”, explains Rupert Stebbings, vice-president of equity sales at Bancolombia. “They are agile, know exactly what they are doing when it comes to heavy oil and know how to exercise their plans and take seriously their responsibilities on all aspects, not just getting oil out of the ground at any cost”.
This notwithstanding, some consider Pacific Rubiales’ style of doing business as arrogant, particularly after some controversial advertising and media campaigns. Even the Revolutionary Armed Forces of Colombia (Farc) rebels have called the company a “transnational vampire”.
“This new style works for most, but for others there are those ready to shoot them down at the first opportunity”, adds Stebbings. To a handful of observers this might mean Pacific Rubiales has been, to some extent, stealing the thunder of Ecopetrol, which produces about 60 per cent of the country’s oil. To many, that was exemplified by a recent court case that pitted the companies against each other over revenues from a jointly exploited oilfield.
Nevertheless, both have been aggressive in exploration and acquisition. While Pacific Rubiales is aiming at 1m b/d within a decade, Ecopetrol is shooting for 1.3m b/d in 2020, thanks to an $80bn investment programme already in place – something that helped make Colombia the region’s fourth-largest oil producer.
Despite neither having made a big oil discovery, Colombia has almost doubled production in the past six years to more than 1m barrels of oil equivalent a day, and has proven reserves of 2.4bn barrels.
The country is growing fast partly thanks to the liberalisation of the industry that created the National Hydrocarbons Agency and allowed for the fractional opening of the privatisation state-run company. According to Javier Gutiérrez, Ecopetrol chief executive, his company is following a model that “seems to be working” as it has increased production 16 per cent a year since 2008 and is now among the best-performing energy groups in Latin America.
The Colombian state still holds an 88.5 per cent stake in Ecopetrol, with the rest publicly traded, but the company has wiggle room for a further 8.5 per cent issuance. With a reform to open up Mexico’s oil and gas sector to private investment in the pipeline, some believe Pemex, the state oil monopoly, and even Ecuador’s Petroamazonas, could follow in the footsteps of their Colombian counterpart.
“Ecopetrol in Colombia is just like any other company competing for a share of the market”, says Gutiérrez. “We don’t have to ask the Colombian state what we can or can’t do. Not only has Ecopetrol grown, the energy sector in general has grown. Colombia’s transformation transcends any company”.