Colombia’s State Council has ended disputes between two of the largest oil companies in the country, by ruling on Tuesday that Canada’s Pacific Rubiales must pay increased shares to state-run Ecopetrol for joint oil production in an oil field.
An appeal by Pacific Rubiales — the largest independent oil company in Colombia – against a decision last year that favored Ecopetrol’s demands for a higher stake in production at Quifa oil field after an unforeseen surge in output, has been rejected by the State Council, Colombian economic newspaper Portafolio reported.
A clause in Pacific’s contract with their associates Ecopetrol states that when production in Quifa oil field — which is operated by Pacific and partly owned by Ecopetrol — reached 5 million barrels per year, the Canadian oil producers were to hand over an additional share of production.
Following an arbitral award — a decision made by a third body to mediate between two parties — granted by a Bogota Court of Arbitration in favour of Ecopetrol, by April last year Pacific had agreed to start paying the state-owned giant a higher stake for the increased production, which at the time was hitting 54,000 barrels per day (nearly 20 million barrels per year).
At the same time, however, Pacific affiliate Meta Petroleum had also filed an appeal to the State Council against the Court’s decision.
The years of controversy culminated on Tuesday with the State Council rejecting the appeal by Meta Petroleum to annul the decision for being unfounded. The Council consequently demanded that Pacific pay Ecopetrol the equivalent of 20 monthly legal salaries to cover the costs of the proceedings.
According to the Canadian company’s third quarterly report for 2013, their oil production had reached 127,728 barrels of oil equivalent (BOE) per day, or over 46 million BOE per year. The volume was 31% higher than during the same period of 2012.
These figures were higher than the upper limit of Pacific’s annual estimates, “despite having handed over additional volume to Ecopetrol,” stated the report.
Pacific Rubiales has a 60% working interest and is the operator of Quifa oil field, while the remaining interest is owned by Ecopetrol. The contract in question was signed in December, 2003 and will expire at the end of the year 2031.
MORE: Ecopetrol is Latin America’s biggest company: Study
Ecopetrol is Colombia’s wealthiest company, according to Fortune magazine’s Global 500 list of the largest corporations in the world.
The Quifa oil field in central Colombia is the site of an oil recovery pilot project by Pacific that could see the oil recovery factor doubling.
MORE: Colombia to investigate bribe of Ecopetrol official
Sources
- Consejo de Estado dio razón a Ecopetrol por campo Quifa (Portafolio)
- Pacific Rubiales announces preliminary independent evaluation of the progress of the Star Pilot Project in Quifa SW, demonstrating a potential doubling of the ultimate recovery factor (Press Release)
- Pacific Rubiales pagará a Ecopetrol crudo del campo Quifa (El Espectador)
- Pacific Rubiales 2012 Outlook & Guidance (Pacific Rubiales)
- Ecopetrol se salva de pagar millonaria indemnización a Pacific Rubiales (El Colombiano)
- Pacific pagará a Ecopetrol a pesar de presentar recurso de anulación (DATAiFX)
- Fortune Global 500 (CNN Money)