TBY talks to Camilo Marulanda López, President of Cenit, on pipeline infrastructure, investment plans, and sector outlooks.
THE BUSINESS YEAR Ecopetrol established Cenit in 2012 to meet the growing need for oil transportation. How would you assess the pipeline infrastructure in the country?
CAMILO MARULANDA LÓPEZ The oil industry has changed significantly in Colombia in the last few years; previously, there used to be only a small number of players, all of them large companies that were developing infrastructure as they needed. Now, there are an important number of SMEs, and not that many large companies. This change has affected the pace of the development of new infrastructure, as the sector is growing quickly and more infrastructure is needed. Therefore, Cenit is committed to meet the demands not only of Ecopetrol, but also the entire sector. Ecopetrol has grown immensely over the years, and Cenit will contribute to focus on the logistics area. In this regard, we aim to further promote transparency within a clear regulatory framework in order to attract FDI into Colombia’s oil industry, especially in our segment. Finally, Cenit aims to create more synergies within Ecopetrol’s group, optimizing resources and making our activities more efficient. In terms of assets, Cenit is the second largest company in Colombia, and we expect that our company’s turnover for 2013 will reach over $1 billion. As for our activity in the near future, we aim to contribute to the development of the right regulatory framework to attract foreign companies to the sector, as well as implement expansion projects. However, we need to do this step by step, and right now we are recruiting people both from Colombia and abroad.
What are Cenit’s main investment plans in the short term?
Over the last three years, Ecopetrol’s group has invested around $4 billion in the mainstream segment, and we planned an initial investment of $2.2 billion for 2013. We foresee three priorities in terms of projects: the finalization of the bicentennial pipeline, the expansion of the Colombian and Ocensa pipelines, and the strengthening of secondary pipelines that transport oil to the trunking pipelines. It is important for the company to target between three and four large projects in its first year of operation, and we aim to achieve that through our strategic plan.
What will be the future impact of the bicentennial pipeline in the oil and gas industry?
It is one of the most important expansion projects in the sector, and we are developing it along with Petrominerales, Cepcolsa, and Pacific Pipeline Supply, among others. It will produce up to 160,000 barrels per day (bbl/d) in its first stage of development, and we expect to finish its construction by the beginning of 2013. One of the greatest advantages of this particular project is the possibility of future expansion. I believe that the next few months are very important for the development of the project, because it has yet to be decided whether we will fully implement the second stage. As of today, the projected second phase will add some 60,000 barrels more to the production mentioned above with an initial investment of around $60 million.
What are the specifications of the project to expand the Ocensa pipeline?
We are developing the project along with several partners such as Total, Petrominerales, and Cepcolsa, and at the moment we are in the process of changing some structures of governance in the company due to the difficulties and slowness of the decision-making processes. The Ocensa pipeline expansion project consists of two stages; one of them is designed for the long-term, which is two years. We are talking about a low-risk project with a relatively low level of investment, which makes it a very attractive proposition. We are not closing our doors on further expansion in the future, as I believe it will continue to be the most important pipeline in the country.
What steps should be taken in order to further promote the development of Colombia’s pipeline network?
There are some regulatory issues that should be addressed. Today, many producers transport oil through tankers instead of lines connected to the trunk pipelines due to the regulatory framework around prices and the transport capacity of these lines. In addition, we need to boost activity in the secondary market of the sector. These two elements will contribute to attracting FDI. Finally, I believe that we need to turn expansion projects into effective and profitable business activities for companies, because that would encourage them to implement pipeline expansion projects.
How would you assess the state of the development of security issues around pipeline networks?
Although there have been security incidents in the Arauca region as well as in other areas, we cannot generalize, and the government is taking the right steps to strengthen security via patrolling and supervising with units of soldiers that have already proven to be very successful. There is also a long-term strategy to start security flights along the main pipeline areas.
What’s your general outlook for the sector for the next five years?
The challenges the sector faces can be categorized into the following areas: environmental licensing, social responsibility with minority communities in the region, and security. The sector has a strong and stable regulatory framework and profitable activity, and that is generating high levels of interest among foreign investors. Over the medium term, we foresee the arrival of specialized players, and at the same time the companies already operating in the sector will consolidate their positions and activities. I believe that there are plenty of opportunities in the sector, as there are important investment projects such as new pipelines. That could lead to the creation of synergies between different companies in the near future.
This viewpoint will be published in 'The Business Year: Colombia 2013'. To pre-subscribe please e-mail us at email@example.com
© The Business Year - October 2012