Sunday, February 15, 2015

Tough Times for EcoPetrol

A sick iguana?
The price of its main product has plummeted, its reserves are declining, and it's embroiled in a corruption scandal.

These are tough times for Colombia's national oil company, EcoPetrol.

Any company would be devastated if the value of its principle product suddenly dropped by more than half. But the plummeting world oil price comes at an already difficult time for EcoPetrol, which, along with associated private companies, pumps the great majority of Colombia's oil. And oil until recently generated most of Colombia's export revenue.

Colombia's oil reserves - the petroleum underground which could be profitably drilled - is shrinking because of scarce new discoveries. And the plummeting oil price has caused EcoPetrol to slash its exploration budget, meaning that even less new oil will likely be found.

Colombian oil potential during the 1990s.
Things are no longer so rosy.
At the same time, the emblematic Colombian company is embroiled in a mushrooming bribery scandal. Executives of a United States oil services company, PetroTiger, allegedly paid bribes to an EcoPetrol executive's wife in an attempt to obtain valuable contracts.

PetroTiger's founders have been indicted in a U.S. federal court. One of them, as well as a company lawyer, have plead guilty, but the other founder is fighting the charges.

However, the PetroTiger affair may be only the tip of a corruption iceberg inside EcoPetrol, according to news reports.

EcoPetrol's stock value, which had soared about 5,000 pesos in 2013, has dropped to around 2,000 pesos.

The national oil company's troubles have major implications for Colombia's economy, which will lose several points of GDP, as well as its peace process, which requires huge investments to demobilize guerrilla fighters and compensate victims.

Colombia will muddle thru this economic hit, (altho neighbor Venezuela may not be so lucky). But the episode contains valuable - and obvious - lessons, such as 'Don't put all your eggs in one basket,' and 'Develop a diversified economy not based on exporting raw materials.'

That way, Colombia might save its economy - and its environment as well.

By Mike Ceaser, of Bogotá Bike Tours

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