Colombian state oil company Ecopetrol saw its earnings drop from April through June, in part due to weaker prices and in part due to a surge in rebel attacks against its pipelines during the period, company CEO Juan Carlos Echeverry said Thursday.
"This was a very challenging quarter," Echeverry said a day after the company published statements showing its earnings in the second quarter of 2015 were about $508 million, or a 42 percent decline from a year ago. He cited situations in the U.S., Iran and China for creating a difficult commercial environment.
Crude oil prices are declining in a context in which the U.S. saw a surge in its own production, he said. China, another great consumer, is seeing a slowdown of its economy. In addition, the possibility of the easing of sanctions against Iran could allow the large crude oil producer to increase exports, dropping prices even further.
In April, monthly crude oil production reached its highest level since May 1971, according to data released in the second quarter by the US Energy Information Administration. This comes after advances in technology for accessing oil from shale formations helped producers in the U.S. increase production. With the rising output, there is pressure in the U.S. to lift a long-standing ban on crude oil exports.
As for Iran, a recent agreement between Tehran and world powers on nuclear issues could lead the way to easing restrictions on crude oil exports from that country which could depress prices more. Then there are increasing concerns that the economy in China may be slowing down faster than projected, which has put downward pressure on all commodities. China is a very large importer.
Ecopetrol has tried to offset this impact from prices by increasing the efficiency of its operations. Echeverry said that the company has installed equipment to make its refining operations significantly more efficient.
The company has also worked in renegotiations with contractors to try to reduce costs, explaining that it faces a different and more challenging environment, Echevarry, who took over in April, said.
Then Ecopetrol also suffered in the second quarter what it has called a string of attacks against pipelines in some areas located next to Colombia´s borders with Ecuador and Venezuela.
Just one attack in June had caused what the government described as possibly the worst environmental disaster in the country´s history. Some 10,000 barrels of oil polluted rivers and even threatened the Pacific Ocean. Ecopetrol at the time deployed 500 employees to help stop pollution but another rebel attack came a week later as the cleaning job continued.
The rebel attacks have occurred even after the main rebel group in Colombia, known as Farc, declareda ceasefire in May. Colombia has been plagued by guerrilla warfare for decades.
Alerts Sign-up