Privatization in Colombia

(Source Article: Colombia to privatize state oil - FT.com)

In an effort to draw domestic and foreign investment to the country, Colombia plans on privatizing 20% of state-owned oil company Ecopetrol. This is the first time Ecopetrol will be offered to private investors, and is in contrast to the rapid nationalization of oil companies in neighboring countries—specifically Venezuela. However, the government said it would prefer to sell to Colombian pension and employee funds.

Helping drive Colombia’s desire to modernize and update its oil refining capacity is the fact that it wants to begin exploring for new oil fields before its 1.5 billion barrels of reserves becomes depleted—a problem that makes Colombia much different than its neighbors, since its oil production is in decline while theirs increase; the government hopes that private investment can stabilize if not increase oil production.

In 1999, Colombia’s oil production peaked at about 820,000 barrels a day—in May it was at merely 538,709 barrels a day; the decline is due in part to violence spilling over from the decades-old guerilla warfare that plagues the country. Recently, rebel attacks caused an oil pipeline to shut down—cutting some 60,000 more barrels per day from the country’s production. (see Colombian rebel attacks shut oil pipeline - Reuters)

Additionally, the country recently sold its state gas transportation company, Ecogas, to private pension and employee funds. Officials do not believe that Colombia’s move to privatization will spark conflict with its neighbors, since everyone is aware that its oil sector needs improvement.