4 lessons the industry can learn from Ecopetrol
Click here to read the May 2015 issue of Energy Digital
As reported by two of our sister sites, Business Review America Latina (en espanol) and Exploration World, very few industry insiders expected Empresa Colombiana de Petroleos, more commonly known as Ecopetrol, to reach a first quarter net income of USD $66.952 million.
But that’s exactly what they did, proudly announcing the accomplishment on the heels of a reported 42 percent drop in year-end profit for 2014 compared to 2013. Looking specifically at the fourth quarter comparisons reveals the most drastic point: USD $258.06 million in the red—down more than 126 percent.
That loss resulted in the largest drop Ecopetrol has encountered in six years yet was not entirely uncommon for the industry as a whole: oil and gas companies across the board have suffered due to plummeting prices.
Fortunately for this corporation, prudent planning and growth of the refining sector coupled with improved (but far from recovered) oil prices are helping to put it back on-track.
"Despite the decline in oil prices, in the first quarter of 2015, Ecopetrol reached a positive financial result due to the good performance of these different segments and favorable environmental conditions for the operation," CEO Juan Carlos Echeverry explained.
This significant growth has industry experts asking: What is Ecopetrol focusing on to achieve profits during the most volatile period in the industry's recent history?
1. Operating performance
The company was able to stretch its refining margin to $18.20 per barrel in the first quarter of 2015 compared to $16.30 per barrel during the same period in 2014, a 12 percent gain.
2. Production volume
According to Ecopetrol, production at the company grew by a modest 1 percent in the first quarter of 2015 however this translates to a total production volume of about 536,600 barrels of oil per day and 116,700 barrels of oil equivalent (in natural gas). The production rate of oil and natural gas together pushed growth up to 2 percent when compared to first quarter 2014.
Related: Risk management in oil and gas
Ecopetrol's affiliated companies also did their part to contribute to production growth in the group: The cumulative oil and natural gas production of Hocol, Savia, Equion and Ecopetrol America rose approximately 6 percent, or 51,400 barrels of oil equivalent per day. And when Ecopetrol took a hit from a public relations perspective as a result of a media attack by FARC (Revolutionary Armed Forces of Colombia) last year, the company combated the drop in shares by investing in international subsidiaries such as Germany GmbH.
4. Maintenance costs and contracted services
Efforts to reduce maintenance costs and contracted services have resulted in a 21 percent decrease, balancing the bottom line with the depreciation in oil.
Drax advances biomass strategy with Pinnacle acquisition
The Group’s enlarged supply chain will have access to 4.9 million tonnes of operational capacity from 2022. Of this total, 2.9 million tonnes are available for Drax’s self-supply requirements in 2022, which will rise to 3.4 million tonnes in 2027.
The £424 million acquisition of the Canadian biomass pellet producer supports Drax' ambition to be carbon negative by 2030, using bioenergy with carbon capture and storage (BECCS) and will make a "significant contribution" in the UK cutting emissions by 78% by 2035 (click here).
This summer Drax will undertake maintenance on its CfD(2) biomass unit, including a high-pressure turbine upgrade to reduce maintenance costs and improve thermal efficiency, contributing to lower generation costs for Drax Power Station.
In March, Drax secured Capacity Market agreements for its hydro and pumped storage assets worth around £10 million for delivery October 2024-September 2025.
The limitations on BECCS are not technology but supply, with every gigatonne of CO2 stored per year requiring approximately 30-40 million hectares of BECCS feedstock, according to the Global CCS Institute. Nonetheless, BECCS should be seen as an essential complement to the required, wide-scale deployment of CCS to meet climate change targets, it concludes.