Ecopetrol has been increasingly eyeing offshore exploration in the Caribbean and Gulf of Mexico, and Colombia’s state-controlled oil and gas company has now finalized the establishment of its Mexico City-based subsidiary.
The board of directors of the Bogotá-based company approved the move on July 12, and now, after receiving approval from Mexican authorities, Ecopetrol has formally launched ECP Hidrocarburos México S.A. de C.V. in the Mexican capital.
Ecopetrol S.A. is the sole owner of the new offshoot, with Ecopetrol Global Energy SLU, a subsidiary incorporated in Spain, holding 99% of the shares and the U.S.-incorporated Ecopetrol America Inc. holding the remaining 1%.
The “exclusive purpose” of ECP Hidrocarburos México “is the exploration and extraction of hydrocarbons,” said Ecopetrol in a statement. It will manage and oversee the oil contracts awarded to the company in Mexico, including stakes in multiple offshore blocks recently won at auction.
Finding new reserves, either offshore or within Colombia, is an increasingly urgent strategy push for Ecopetrol. Though it is one of the largest oil companies in Latin America, at current production levels, the publicly controlled giant only has an oil reserve life of around six years.
Mexican waters offer promise that is intriguing companies across the world. A few years ago, the country opened up its oil industry after more than seven decades of state monopoly, and auctions for exploration blocks are now occurring in earnest.
Earlier this summer, Ecopetrol won two holdings at auction in joint bids with other leading oil firms, including Mexican state oil company Pemex and Petronas of Malaysia. Other companies who were awarded blocks in the same shallow water auction include Royal Dutch Shell, Repsol of Spain, Total SA of France, and Eni SpA of Italy.
Two recent discoveries are already showing the vast potential of foreign investment in Mexico’s formerly closed petroleum sector. A massive find that could hold up to two billion barrels of oil — at a block jointly held by Talos Energy (U.S.), Sierra Oil & Gas (Mexico), and Premier Oil (U.K.) — is “being described as one of the largest shallow-water oil finds of the past 20 years,” according to the Financial Times.
The discovery adds optimism not just for its size but for how quickly it was made. The find was the product of the first well in Mexico drilled by a company other than Pemex in around 75 years. Another discovery, by Eni SpA of up to 1.3 billion barrels of crude at the Amoca field, per the Financial Times, has also shown how fast these investments can start to pay off.
In addition to looking for more oil in Mexican waters, Ecopetrol has also ramped up its exploration efforts in the Colombian Caribbean and the Gulf of Mexico through its Ecopetrol Americas division. Among its partial offshore holdings in the area are the Gorgon, Purple Angel, Kronos, Gunflint, and Warrior wells, each of which are either already in production or have proven oil or gas reserves.
These type of plays will continue to be a key component of the company’s strategy. After spending recent years looking to rein in costs and improve operational efficiency in response to the global plummet of oil prices, Ecopetrol has planned to more than double its exploration investment this year compared to 2016.
The projected expenditure was expected to increase from $280 million last year to $650 million USD in 2017, according to former Ecopetrol head Juan Carlos Echeverry, who resigned last week.
“Adding reserves and maintaining the pace of production are the company’s focus,” said Echeverry in March. “The exploration campaign will be stepped up significantly in regions of high prospectivity. Investment in exploration will rise from $280 million USD to $650 million USD, thus increasing offshore wells from two to six and onshore wells from five to 11 from 2016 to 2017.”