New Ecopetrol president criticizes proposed Colombian ban on oil exploration

Ecopetrol's new president called for the Colombian government to abandon its pledge to ban future oil and natural gas exploration in the country.

The state-led company's top executive, Ricardo Roa, who has been a political ally of Colombian President Gustavo Petro, said that exploration is critical to future growth as well as to fund Ecopetrol's ongoing investments in clean energy.

"We have not said that we will not sign new search and exploration contracts," Roa said during a first-quarter earnings call May 10. "Hopefully there will be more and hopefully there will continue to be a debate on this topic because exploration is what gives long-term stability as an oil company. To increase its reserves it is necessary to have areas to explore and search for oil and gas."

Roa also expressed optimism over increasingly productive gas reserves off Colombia's northern coast, citing increased production at the Cartagena refinery and continued investment in infrastructure to better exploit known reserves near the Atlantic Coast.

Ecopetrol's first-quarter net income was down almost 14% compared to the same period last year, despite increases in production and refining. Roa was appointed president of the company in April after the resignation of Felipe Bayon, who had sharply criticized Petro's ban on exploration contracts in public comments.

"My priorities will be focused on maintaining value generation as we move towards an energy transition and sustainability in all our operations," Road said. He emphasized that his short-term goal was to focus on increased efficiency in both production and transportation, but suggested exploration is necessary for medium-term growth.

Current exploration contracts are being honored however, and Roa reiterated that Ecopetrol has 48 ongoing exploration contracts, which he said will allow it to be "more aggressive in the search for oil and gas. Opportunities have also been identified at 30 current production sites for increased output.

Roa's announcement is a sharp break from his earlier comments supporting Petro's"Just Energy Transition" plan before he became Ecopetrol president. Petro vowed on the campaign trail to reduce Colombian economic dependence on hydrocarbons, investing instead in renewable energy. He has also vowed to ban fracking and his political alliance Pacto Historico passed a bill in the Senate in April that permanently bans fracking in Colombia, but the proposal still awaits confirmation from the House of Representatives.

Crude production higher

Ana Carolina González Espinosa, senior program director in Colombia for the New York-based Natural Resource Governance Institute, said the moment to fund clean energy transitions has been accelerated by contemporary market pressures, but urges that "we need to consider what a just transition means. The hydrocarbon industry represents more than 20% of public revenues, and more than 50% of exports, and that isn't going to change overnight."

She welcomed Ecopetrol's goals of reducing their companywide emissions by 45% by 2025, as well as increased investment in renewables, but added, "Decarbonizing the energy industry is going to mean a colossal investment in transmission, storage and infrastructure. That money has to come from somewhere."

Roa has argued that maintaining Colombia's energy self-sufficiency is a critical factor in the administration's reconsidering a ban on exploration, stating that the country needs to find "a balance" to "meet the growing demand for fuels in a national context. We will continue working on solutions that are sustainable from a fiscal perspective" as well as an environmental one.

Ecopetrol's first-quarter crude production averaged 719,400 b/d, an increase of 27,300 b/d from Q1 2022. Refining throughput reached an all-time high 412,00 b/d and exports in were 441,00 b/d from 396,600 b/d in Q122.

Ecopetrol further noted in its earnings report that a rise in the value of Brent crude allowed the company to pay down debt acquired in 2022, a factor in its current EBIDTA of 46%. Despite positive production news, however, shares in Ecopetrol dropped nearly 1% after the announcement of earnings decreases in Q1.