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Speakers offer contrasting views of national oil companies

Colombia and Mexico offer revealing contrasts on management and performance of national oil companies.

In morning plenary sessions at IHS CERA Week Mar. 6, energy leaders from both countries reviewed performances of their state-owned oil companies—Ecopetrol in Colombia and Pemex in Mexico.

Ecopetrol, said Colombian Minister of Mines & Energy Mauricio Cardenas, was segregated from public finance under reforms begun in 2008 and since then has doubled its oil production, now approaching 1 million b/d. While still paying taxes and making other payments to a government that retains 88.5% ownership, the company is managed for profitability like a privately owned company and has American depository receipts traded on the New York Stock Exchange as well as shares traded on other exchanges.

Ecopetrol also has a 2020 production target of 1.5 million b/d and is spending $8 billion/year on upstream projects, expansion and upgrading of its two refineries, and other investments. It has operational interests in Peru, Brazil, and the US Gulf Coast. And this year it is offering 119 blocks in an international licensing round—11 of them offshore and 30 of the onshore blocks believed to have shale oil and gas potential.

Asked what prompted Colombia to liberalize the management of Ecopetrol, Cadenas said the nation feared the loss of oil self-sufficiency and recognized that operations would benefit from improved security conditions. He said the change was a “collective decision to change the institutional setting” for oil and gas work that has been supported by a sequence of governments.

Mexico’s production slipping

That Mexico’s oil production has declined in recent years isn’t a problem of hydrocarbon endowment, said Pemex Director General Juan Jose Suarez Coppel. Since 2006, crude oil production has slipped from 3.26 million b/d to about 2.5 million b/d at present.

With giant offshore Cantarell oil field in decline since 2004, the main production increases come from the offshore Ku-Maloob-Zaap complex, which aren’t enough to keep output from falling overall.

But promising resources remain. Mexico, Suarez Coppel said, has a reserves-production ratio based on proved reserves of 10 years, a level characteristic of mature producing regions.

When the assessment is based on proved and probable reserves, the R-P ratio gains 10 years, Suarez Coppel said. An assessment that includes proved, probable, and possible reserves adds another 10 years.

Despite some relaxation in 2008, however, Pemex remains integrated with national finances. The company paid tax at the rate of 56% of income last year and lost money. On exploration and production profits, the government take from all Pemex payments exceeds 95%, which limits investment.

Still, the company is exploring—including in deep water, where it has drilled 18 wells since 2003 with what Suarez Coppel described as “44% commercial success.” He said Pemex drilled five wells last year in about 2,000 m of water.

Pemex is now adding proved reserves fast enough to replace production, an achievement Suarez Coppel says requires investment of $2.5-3 billion/year.

Contact Bob Tippee at bobt@ogjonline.com.


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