Colombia Ecopetrol saw crudes priced in Brent rise in 2011
Sunday, 19 February 2012 | 00:00
Colombian state oil company Ecopetrol used the more-expensive North Sea Brent benchmark to price more of its crude in 2011 than it did in 2010, when Brent was closer in price to U.S. West Texas Intermediate crude, the company said.
The premium in Bent's price over WTI has grown due to rising oil inventories in the U.S. Midwest, including the Oklahoma delivery point for the New York Mercantile Exchange oil futures contract for WTI.
In an investor presentation, Ecopetrol said it priced 24 percent of its crudes using Brent versus none in 2010. Oil referenced to U.S. benchmark WTI declined to 58 percent in 2011 from 85 percent in the previous year, the company said.
"Clearly due to the market situation, the price today is referenced in indexes other than WTI, such as Maya or Brent," Pedro Alfonso Rosales, vicepresident of downstream, told investors in a call.
"For that reason in the last quarter of 2011, the conditions guided toward those two indexes. To the extent that that changes, we'll move to where the best price for crude sales is."
In October, market sources told Reuters Ecopetrol had switched the pricing basis for its Vasconia and Castilla grade crudes from WTI to Brent, but a company source later said the company had not abandoned WTI.
The spread reflects the limited deliverability of crudes from the interior of North America to the Gulf Coast due to a lack of southbound pipelines. Gulf Coast refineries are heavy users of imports from Africa and elsewhere priced against Brent.
The move away from WTI accelerated when major U.S. supplier Saudi Arabia in 2010 moved pricing of its U.S. cargoes away from WTI to the Argus Sour Crude Index, which is based on Gulf of Mexico crudes Mars, Poseidon and Southern Green Canyon.
Colombia's national oil output has ramped up to historic records in the last few years as easing security concerns have allowed greater exploitation of heavy crude areas in addition to incremental production increases at existing fields.
Ecopetrol said it expects group oil production to rise to 800,000 barrels of oil equivalent per day (boepd) in 2012, up 10.5 percent from the previous year.
Oil production from Ecopetrol SA - which does not include group output from operations outside Colombia - should rise nearly 12 percent to 750,000 boepd this year, it said.
Production will be focussed in the heavy-oil-rich Llanos basin, the company said.
On Wednesday, Ecopetrol said its 2011 net profit rose 85 percent to 15.44 trillion pesos ($8.65 billion) compared with 2010, pushed up by more output and exports.
The company said that it had completed 54 percent of the Cartagena refinery expansion plan by the end of 2011 while only 4 percent for the Barrancabermeja refinery.
Barrancabermeja gross refinery margin rose 40 percent last year to $11.2 per barrel from $8 in 2010, it said.
A military crackdown over the last decade that pushed rebels back into remote hideouts and improved fiscal terms have led to an influx of foreign oil companies snapping up assets in a country once largely dismissed as a failing state.
Thanks to better security, the Andean country may see as much as $16 billion in foreign direct investment this year, up from nearly $15 billion last year, according to the government.
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