VZCZCXYZ0003
RR RUEHWEB

DE RUEHBO #3848/01 2961619
ZNR UUUUU ZZH
R 221619Z OCT 08
FM AMEMBASSY BOGOTA
TO RUEHC/SECSTATE WASHDC 5176
INFO RUEHBR/AMEMBASSY BRASILIA 8446
RUEHPE/AMEMBASSY LIMA 6672
RUEHCV/AMEMBASSY CARACAS 1214
RUEHQT/AMEMBASSY QUITO 7362
RUEHLP/AMEMBASSY LA PAZ OCT PANAMA 2534
RUEHRI/AMCONSUL RIO DE JANEIRO 0127
RUEHSO/AMCONSUL SAO PAULO 2344

UNCLAS BOGOTA 003848 
 
SENSITIVE 
SIPDIS 
 
WHA/EPSC FOR FCORNEILLE; WHA/AND FOR RMERRIN; EEB/ESC FOR 
MMCMANUS 
 
E.O. 12958: N/A 
TAGS: ENRG EINV ECON PGOV CO
SUBJECT: ECOPETROL TO EXPAND COOPERATION WITH PETROBRAS 
 
REF: BOGOTA 570 
 
¶1. (SBU) SUMMARY. Reinforcing its growing international 
focus, Colombia's state-owned hydrocarbons company Ecopetrol 
has agreed to increase cooperation with Brazil's parastatal 
Petrobras.  The companies recently announced they will 
jointly cooperate in exploration in Colombia and Brazil, 
block offerings in third countries, and downstream businesses 
including refining, petrochemicals and biofuels.  While the 
companies have not yet dedicated specific resources to the 
plan, Colombia-based representatives of both firms told us 
the agreement represents a strategic step in cooperation 
between two market-oriented state companies and will provide 
Colombia new investment and capacity to complete Ecopetrol's 
transition into a major regional hydrocarbons firm.  END 
SUMMARY. 
 
A New Era 
--------- 
 
¶2. (U) On October 13 in Rio de Janeiro, Ecopetrol President 
Javier Gutierrez and Petrobras President Sergio Gabrielli 
signed a memorandum of understanding which expressed the 
firms' intent to expand coordinated exploration activities in 
oil and gas blocks already in operation, as well as 
participate in joint bids on block offerings in Brazil, 
Colombia and third countries.  In addition to increased 
upstream cooperation, Gutierrez and Gabrielli agreed that 
Ecopetrol and Petrobras will seek out opportunities for 
downstream joint ventures in refining, distribution and 
petrochemical production.  Recognizing Brazil and Colombia's 
regional leadership in biofuels, the firms also intend to 
cooperate in biofuels blending and distribution. 
 
¶3. (SBU) No specific amounts or investment projects were 
announced as part of the signing, but Petrobas Colombia 
President Abilio Ramos told Econoff that the agreement 
nevertheless represented a important step in building a 
strategic relationship between Petrobras and Ecopetrol. 
While Petrobras began operating in Colombia in 1972, Ramos 
noted that the relationship remained relatively limited until 
the joint discovery of the Guando field in 2000.  Since then, 
Ecopetrol and Petrobras have expanded their cooperation in 
specific projects and blocks including exploration offshore 
of Colombia and Brazil.  Ramos described the latest agreement 
as the first time the firms have agreed to broadly cooperate 
across the whole hydrocarbon commercial chain. 
 
Following in Petrobras' Footsteps 
--------------------------------- 
 
4, (SBU) Ecopetrol Vice President for Strategy and Growth 
Alvaro Vargas echoed the assessment, saying his firm has 
increasingly looked toward Petrobras as a model in adopting 
market-oriented practices and expanding its strategic 
business vision beyond national borders.  Vargas noted that 
Ecopetrol, which accounts for approximately 60 percent of 
Colombian national oil production, expects much of its future 
production growth to shift outside Colombian borders. 
Ecopetrol previously announced that it will invest a large 
portion of the capital generated in the 2007 privatization of 
ten percent of the company in international exploration 
ventures (reftel). 
 
¶5. (SBU) Ramos told Econoff that Petrobras, which plans to 
invest USD 361 million in its existing Colombian operations 
between 2008 and 2012, is well-positioned to help Ecopetrol 
become a full-scale oil and gas operator, including offshore. 
 Ramos characterized Ecopetrol as a company in transition 
from a former regulator operating in a non-competitive 
environment to a dynamic, market-oriented firm with the 
potential to operate sophisticated fields without joint 
venture partners.  To complete the transition, Ramos said 
Ecopetrol must build its technical capacity through closer 
collaboration with major international firms.  He cited 
Ecopetrol's joint venture with Petrobras and ExxonMobil in 
the offshore Tayrona block, where exploratory drilling is 
underway, as the example Ecopetrol must follow to reach the 
next level. 
 
Comment 
------- 
 
¶6. (SBU) Given that details are vague and no specific 
resources have been dedicated, the long-term impact of the 
Ecopetrol-Petrobras agreement remains unclear.  Nevertheless, 
it represents a further step, along with Ecopetrol's 
September listing on the New York Stock Exchange, away from 
the model of a statist, internally-focused company and toward 
an outward-looking firm eager to cooperate with major 
international players.  Such focus and access to technical 
capacity are key if Ecopetrol is to permanently reverse the 
slide in domestic oil production since 1999 and preserve 
Colombia's net oil exporter status beyond 2015. 
BROWNFIELD