(Argus, 11.May.2020) — Colombia’s state-controlled Ecopetrol is exploring options to expand storage capacity in response to oil market oversupply and slumping demand caused by the Covid-19 pandemic.
The company has “adjusted the whole logistical system” in response to the unprecedented oil market conditions, including a cut in production and refinery throughput, said chief executive Felipe Bayon.
“We are looking at opportunities for floating storage or storage in some parts of the Caribbean, but up to now we have been able to face this stress with the systems we have in the country. We are looking at this permanently to be able to adjust to what is happening with this crisis,” Bayon said.
Ecopetrol in its January-March quarterly earnings statement said that consolidated crude storage capacity totalled 4.7mn bl. Suezmax and very large crude carrier storage options are permanently evaluated, in addition to third-party onshore options in Colombia. Oil products storage totals 6.7mn bl. Different storage options mainly in the Caribbean are systematically reviewed, the company said.
Ecopetrol’s operations held steady in the first quarter. Production averaged 735,000 b/d of oil equivalent, up modestly from 728,000 boe/d for the same period a year earlier. Refinery throughput dipped to 345,000 b/d from 351,000 b/d a year earlier, according to corporate results issued late today.
Midstream, crude and products transport was nearly flat at 1.136mn b/d.
The company has shut in some 300 wells, Bayon said, but noted that production is sustainable at a Brent crude price of $30/bl.
The average differential to Brent for Ecopetrol’s crude export basket widened to $10.50/bl in the first quarter compared with $7.60/bl a year earlier. This was partially offset by a strengthening of products differentials, as well as a 13pc depreciation of the Colombian currency relative to the US dollar.
Ecopetrol took an impairment on assets in the first quarter of 1.2 trillion Colombian pesos, or $295mn at the 31 March 2020 exchange rate. About 40pc of the impairment corresponds to exploration and production assets, with 60pc to downstream assets. After the impairment profit was $37.2mn, down by 95.2pc from first quarter 2019.
Ecopetrol’s capital expenditure has been slashed to $2.5bn-3bn for 2020 compared with an initial $4.5bn-5.5bn.
Despite the difficult conditions, Ecopetrol recently issued $2bn in bonds, which was oversubscribed by $3bn in a sign of investor confidence in the firm, Bayon said.
Revisions to the firm’s 2020-22 business plan will be released in the second half of the year, Ecopetrol said.
— By Patricia Garip