MercoPress. South Atlantic News Agency

Colombia to privatise part of state oil group

Colombia will privatize up to 20 percent of state oil firm Ecopetrol in a bid to draw investment needed to modernize the country's ailing petroleum sector, the government said yesterday.

It marks Ecopetrol's first opening to private investors, and comes as other Latin American countries like Venezuela, Bolivia and Ecuador are wresting control from foreign firms over their natural resources.

The government issued a statement saying it would prefer to sell the stake to Colombian pension and employee funds.

"The country needs to make big investments in the exploration and production of hydrocarbons, as well as in the modernization of its petroleum infrastructure," the statement said.

The Andean country wants to find new oil fields before its 1.5 billion barrels in reserves dry up.

Colombian oil production has fallen from a peak of 820,000 barrels per day in 1999, due in part to violence associated with the country's four-decade-old guerrilla war. Production was 538,709 barrels per day (bpd) in May.

"The difference between Colombia and some of its neighbors is that Colombian oil production is declining. So they need private investment in order to stabilize production and, hopefully, raise it," said Linda Giesecke, an analyst at Boston-based Energy Security Analysis Inc.

In bucking the Andean trend toward state control over the energy sector, Colombia is looking for partners to share the risk of exploring for oil in a country where Marxist rebels often attack pipelines and other energy installations.

Colombian President Alvaro Uribe, popular for cutting crime as part of his U.S.-backed crackdown on the guerrillas, is liked on Wall Street for his market-friendly economic policies. Two months ago he won re-election in a 62-percent landslide.

"Colombia is moving in the direction of a more balanced hydrocarbons policy," said Eduardo Gamarra, Latin American analyst at Florida International University.

"I do not expect this move to cause tensions with neighboring countries that are moving in the opposite direction because everyone knows that Colombia's oil sector needs capital," he added.

Earlier this month, Colombia sold its biggest state gas transportation company, Ecogas, to local pension and employee funds for $301 million.

The sale was part of the government's privatization plan that includes state bank Granbanco-Bancafe, the expansion of its oil refinery in Cartagena and the modernization of Bogotá's Eldorado airport.