Ecopetrol Defends Alliance With the Venezuelan PDVSA

After President Petro’s visit to Caracas last weekend, the state-owned company Ecopetrol responded to the agreements announced by the president with Venezuelan Petroleum, SA (PDVSA) to import oil and gas from the neighboring country. In this regard, the Colombian oil company’s board explained that the company already had a “contract signed with PDVSA since 2007, valid until December 31, 2027.”

However, some experts have asserted that an association with the Venezuelan company could have consequences for Ecopetrol. This is because PDVSA is included in the commonly known “Clinton List,” which refers to the sanctions by the Office of Foreign Assets Control (OFAC) imposed by the United States.

Ecopetrol defends the alliance amid gas shortage

Ecopetrol is evaluating PDVSA’s offer to import Venezuelan gas starting in December 2024 through the binational Antonio Ricaurte gas pipeline. In this line, the Colombian company announced that, considering gas export and import data, it’s evident that Colombia has been importing gas from Venezuela through the Cartagena gasification terminal.

“Between October and the current November 2023, an average of 204 million cubic feet per day (MMscfd) has been imported, equivalent to 17% of the national demand, at a cost of approximately US$20 per MMbtu for demand,” announced Ecopetrol.

With this reality and considering future gas needs in Colombia, the company requested the government to evaluate alternatives to “ensure the availability of gas in the required quantities and times, within the legal framework and existing limitations, to guarantee timely and cost-effective energy security for the sector and the country’s benefit.”

The company reiterated that it has had a contract signed with PDVSA since 2007, valid until 2027, for the purchase, sale, and transportation of gas through the binational Antonio Ricaurte gas pipeline, “which in the past allowed gas exports to Venezuela and is currently in a stabilization period for equipment to enable gas flows to Colombia.”

PDVSA is on the Clinton List

However, some analysts and Juan Carlos Echeverry, former Finance Minister and former CEO of Ecopetrol during Juan Manuel Santos’s presidency, warned that the future association between the two companies could have negative consequences for Ecopetrol and for Colombia as a country.

This is because, despite the temporary lifting of sanctions on the neighboring country, its oil company remains on the OFAC’s Clinton List. In this list, the U.S. includes companies accused of participating in money laundering. Already in November 2022, Ecopetrol requested OFAC’s authorization to negotiate with PDVSA on hydrocarbons matters.

Critics of the “likely” commercial association between Ecopetrol and PDVSA, as announced by Petro, warned that the Venezuelan company is not a “reliable” entity and that there’s no payment guarantee. In this regard, they affirm that the Venezuelan company is controlled by the military, not by oil experts. Similarly, they accuse Nicolas Maduro of being unstable and not a reliable partner for Ecopetrol, as the Venezuelan president has absolute control over PDVSA, the economic giant of his country.

In this sense, they demand that the Colombian company has guarantees to repatriate its profits in case of non-compliance by the Venezuelan side. Likewise, they urge that technical criteria, not political ones, be considered when making such far-reaching decisions.

Opponents of the alliance, therefore, do not see guarantees for Ecopetrol in dealing with long-term operations with PDVSA. They recall that some sanctions imposed on Venezuela in 2018 after the U.S. deemed Maduro’s reelection as president fraudulent, were only temporarily lifted for a few months.