Ecopetrol, six firms partner in Colombian pipeline project

Colombia’s Ecopetrol is joining with six other firms to build and operate a 450,000 b/d oil pipeline system that will transport crude from Araguaney, in the Casanare Department of central Colombia, to the Covenas Export Terminal on the Caribbean Sea.

Nov 15th, 2010

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Nov. 15 -- Colombia’s Ecopetrol is joining with six other firms to build and operate a 450,000 b/d oil pipeline system that will transport crude from Araguaney, in the Casanare Department of central Colombia, to the Covenas Export Terminal on the Caribbean Sea.

“The pipeline will be the largest of its kind in Colombia and developed in four phases,” Ecopetrol said, adding that all phases of the project are due for completion by yearend 2012 or the start of 2013.

The first phase includes a 40,000 b/d truck off-loading facility now under construction in Banadia, due for start up this month. The remaining phases include construction of the 120,000 b/d Araguaney-to-Banadia line and the 330,000 b/d Banadia-to-Coveñas line.

Ecopetrol will hold a 55% stake in Oleoducto Bicentenario de Colombia (OBC), the company that will build, own, and operate the new line. The other partners are Pacific Rubiales 32.8%, Petrominerales 9.6%, Hocol 0.96%, Grupo C&C Energia Barbados 0.5%, Rancho Hermoso SA-Canacol Energy Ltd. 0.5%, and Vetra Exploracion & Produccion Colombia 0.5%.

Ecopetrol’s six partners paid a total of $139.5 million for their combined stakes. They will also put up $700 million for the $1.03 billion for the pipeline’s first phase, with 70% coming from loans and 30% from direct capital contributions.

“This financing will be structured to maximize the use of export credit agencies and multilateral financing, as well as to access the Colombian capital markets,” said Pacific Rubiales, which has become the country’s second-largest oil producer (OGJ Online, Nov. 9, 2010).

The Canadian firm also said the OBC line will add to the capacity of the country’s existing pipelines, which connect Los Llanos basin to export markets.

Pacific Rubiales said the existing lines “are projected to reach full capacity as the increase in planned production from Colombian producers materializes in the midterm.”

The country’s Agencia Nacional de Hidrocarburos (ANH) last month reported that Colombia's oil output increased by 17.4% year-on-year to 798,000 b/d in September—the highest monthly value for over a decade. The country averaged 775,000 b/d in this year’s first 9 months, compared with an average of 671,000 b/d in all of 2009.

Colombian government officials expect their country’s oil output to reach 900,000 b/d by yearend, increasing to 1 million b/d in 2011. The expected surge in output is due to improved security in areas of the country once controlled by members of the terrorist Fuerzas Armadas Revolucionarias de Colombia (FARC).

With an eye to boosting output, the Colombian government earlier this month awarded 78 oil exploration and production blocks to 40 international companies, opening the way for projected investment of more than $1 billion over the next 3 years.

“This process will allow the country to increase investment in exploration, which is expected to rise to more than $1 billion during the next 3 years, continuing to contribute to higher future hydrocarbons production," said ANH Director Armando Zamora.

Contact Eric Watkins at hippalus@yahoo.com.

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