Headlines August 24th through 30th

There is a lot to know about oil and gas, its future,current situation, and here’s is where you will find the most valuable news.

Minimal guerrilla activity

Guerrilla-initiated incidents by both groups stayed down this week and the Armed Forces also cut back their activities, at least in oil-and-gas areas. As a result, total incidents fell to 22.

MinMinas approves Agreement 03

The Ministry of Mines and Energy (MinMinas) has approved three more measures to promote exploration and production and confront the fall in oil prices. The Agreement 03 is part of its “PIPE” stimulus for the industry.

Caño Limón Coveñas hit hard by past attacks

Even though the Farc has backed off and not attacked any pipelines since the start of its July 20 truce, the Coveñas/Caño Limón Pipeline (CCL) has suffered in the month of August due to the attacks over the last two months.
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USO says monitoring Reficar

The USO says it has been observing the Cartagena Refinery (Reficar) project to make sure it has been meeting quality and labor standards as the process to finish the plant winds down.

Without oil there will be no peace

‘The Mad Economist’ is the nom-de-plume of Camilo Vega Barbosa, Director of the economic blog El Mal Economista (EME). (See his coordinates at the end of the article.) We thought his observations were spot-on for a topic we find concerning: paying the bill for the post-conflict when low-oil prices and lack of government support have pushed government oil revenues into a tailspin.

(Almost) everything peaked in 2012

Clients ask us for quick graphs from our statistical databases for their presentations or other studies. (You can too!) Having done a number of these lately, it struck our Analyst that the peaks all occurred at the same time (roughly) 2012. But sometimes our eyes and minds can play tricks on us so we decided to index a number of key indicators for the industry and pu them all on the same graph. We started in 2006 because we like to start looking at things before the economic crisis which started in about 2007 and to span the commodity price spike in 2008.

By 2017 production could fall to 750,000bd

Considering a fall of 70% and 80% in seismic work and exploratory wells and declining mature fields, Colombia’s daily production could fall as low as 750,000bd in just two years, says the executive director of Colombian Association of Oil Engineers (ACIPET), Carlos Leal.

Barrancabermeja sees improved results despite problems

Record production from nearby fields, along with optimized contracts, processes and operations have helped the Barrancabermeja Refinery report operational profits, despite facing a rocky labor scenario within.

Transportation costs hurting competivness

Issues like the lack of adequate roads and poor advancement of infrastructure safety mechanisms have caused some to consider Colombia the most expensive country for oil operations in the region.

Peace Process: Debate continues over agreements, “Congresito” 

Havana chief negotiator Humberto de la Calle announced some of the options being considered for the development of agreements with the Farc and defended the “sovereign powers” of the executive to submit agreement proposals.

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Headlines August 17th through 23rd

We offer our subscribers the most current information on oil and the industry

Guerrilla definitely backing off

Guerrilla-initiated incidents by both groups went way down this week, but the Armed Forces picked up the slack driving total incidents up to 28.

ECP trumpeting cost cutting

A local paper published a document from Caquetá professionals in the field of social research who see the region’s unique environmental riches and the impact on the social conflict as the main reasons why the region is not suited for oil production.

The argument against oil in Caquetá

A local paper published a document from Caquetá professionals in the field of social research who see the region’s unique environmental riches and the impact on the social conflict as the main reasons why the region is not suited for oil production.

CSR Summary: GeoPark, Gran Tierra promote health and safety

GeoPark trains high altitude workers on safety procedures, meanwhile Gran Tierra Energy (TSX:GTE) implements a preventative health and safety campaign. These and other stories on Corporate Social Responsibility (CSR) in our periodic summary.

Why does it feel like things are moving sideways?

The Northern Europeans are probably jubilant with the events of the last couple of weeks and editorial cartoonists have started once again to lampoon President Juan Manuel Santos’ alleged Nobel Peace Prize ambitions. But I read the tea-leaves a bit less optimistically. Production will probably be up for the next four months – assuming the latest truce holds – but no one should be planning to cut back on security budgets in 2016.

Ecopetrol becoming a transportation company?

We doubt that CEO Juan Carlos Echeverry would agree with the statement in our title and it is admittedly, more than a little exaggerated for effect. But the company’s profits at least are shifting towards the hydrocarbons transportation line-of-business. It can be seen in the above graph (we scaled 1H15 results by days-remaining-in-the-year to get our 2015e) but perhaps more dramatically in some of the charts we show below.

Has anything changed regarding environmental licensing?

Repeatedly cited as one of the drawbacks for the industry, the government announced a new framework for environmental licensing, and the Chamber of Oil Goods and Services (Campetrol) found that the proportion of licenses approved versus those filed has changed since the last year.

Crude oil prices have little influence in fuel formula

Much has been said about the formula used to determine monthly gasoline and diesel prices, especially since the fall of international crude prices. But it is becoming clearer that the Brent and WTI have only a small impact in the Ministry of Mines and Energy (MinMinas) calculations.

MinMinas kicks off 2015 regional strategy in Arauca

Following up on actions in 2014, the Ministry of Mines and Energy (MinMinas) has extended a series of workshops to facilitate better relations between regional authorities, companies and communities, choosing Arauca as the first host for the meetings this year.

Royalties Roundup: A look at Maparregalías

A monitoring tool for the general public Maparregalías has been unveiled, and offers a window into CoP$16.8T (US$5.5B) in royalty resources that have been approved for projects in the first half of 2015, meanwhile a report reveals inefficiency in royalty project execution. These and other stories in our periodic roundup.

Why does it feel like things are moving sideways?

The Northern Europeans are probably jubilant with the events of the last couple of weeks and editorial cartoonists have started once again to lampoon President Juan Manuel Santos’ alleged Nobel Peace Prize ambitions. But I read the tea-leaves a bit less optimistically. Production will probably be up for the next four months – assuming the latest truce holds – but no one should be planning to cut back on security budgets in 2016.

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Headlines August 10th through 16th

Learn the day to day of the oil and gas industry.

GTE Q2 production flat, loss continues

Gran Tierra Energy (TSX:GTE) issued its results for the second quarter, the first full earnings period since a new management team took the helm of the firm and redirected its strategic focus to Colombia, posting steady but flat production and a narrowed net loss.

Exploration goal continues to drop

Falling exploration activity remains one of the biggest concerns for the industry’s long term potential in Colombia, and the reduced goals set out by the National Hydrocarbons Agency (ANH) and the Colombian Petroleum Association (ACP) confirm this.

Puerto Gaitán: From bust to boom, back to bust

In ten years Meta’s Puerto Gaitán, located next to the Rubiales field, went from the department’s poorest community to oil boom town, and with the price drop the bubble has apparently burst once again for the local economy.

USO raises red flag on Reficar labor conditions

As the Cartagena Refinery (Reficar) advances, the USO has taken aim at labor conditions and says it has formed a delegation which along with the Labor Ministry will visit the refinery to confirm its accusations.

Why does it feel like things are moving sideways?

The Northern Europeans are probably jubilant with the events of the last couple of weeks and editorial cartoonists have started once again to lampoon President Juan Manuel Santos’ alleged Nobel Peace Prize ambitions. But I read the tea-leaves a bit less optimistically. Production will probably be up for the next four months – assuming the latest truce holds – but no one should be planning to cut back on security budgets in 2016.

Ecopetrol becoming a transportation company?

We doubt that CEO Juan Carlos Echeverry would agree with the statement in our title and it is admittedly, more than a little exaggerated for effect. But the company’s profits at least are shifting towards the hydrocarbons transportation line-of-business. It can be seen in the above graph (we scaled 1H15 results by days-remaining-in-the-year to get our 2015e) but perhaps more dramatically in some of the charts we show below.

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Headlines August 3rd through 9th.

Get the latest oil and gas news, 

Holdovers and the ELN

Guerilla-initiated incidents dropped close to the average experienced during the previous Farc unilateral truce. Half were attributed to the ELN but it would be difficult to unequivocally call the rest ‘truce violations by the Farc’.

MinMinas says PIPE2 addressing problems

The Minister of Mines and Energy (MinMinas) Tomas González said that its PIPE2 plan is already keeping investment in Colombia and production above a million barrels a day.

Conflict on prior consultation after court decision

The Superior Tribunal of Pasto (Nariño) has ruled in favor of a Putumayo based indigenous association (ACIMVIO) and ruled against a prior decision from Interior Ministry to not certify the presence of the Inga group in an area of influence for a Gran Tierra Energy (TSX:GTE) exploration project.

USO takes PRE fight to the international stage

The USO claims workers have been pressured by anti-union forces in its attempt to negotiate entry to Pacific Rubiales Energy (TSX:PRE) through blackmail, and has taken to the international community to up pressure on authorities.

A guide or a warning on the Amazon?

The Amazon region represents both an area with interesting prospects for the hydrocarbons industry but also immense complexities. This has led the Ministry of Mines and Energy (MinMinas) to reach out to the Organization of the Colombian Amazon Communities (OPIAC) and a subsequent line up of eight workshops designed to bring these indigenous groups into a closer dialogue with authorities and the hydrocarbons industry. We read the document with interest but have comments on its practicality.

Crude prices moving in the wrong direction

At one time in late May, there was a hope that oil prices were rebounding, that somewhat like 2008/2009 there would be a rapid so-called ‘V-shaped’ recovery. After hitting bottom in January 2015, and a separate slightly higher bottom in late March, WTI rose for 11 straight weeks. Back in 2008, the bottom was WTI/Brent at US$33 (there was no gap at the time) in December but by August of 2009, both were back up over US$70. However mid-2015 has, so far, turned out quite different from 2009: both benchmark prices have fallen for 7 of the last 9 weeks.

ECP profits rise sequentially but production falls

Ecopetrol (NYSE:EC) grew its profit for the second straight quarter since its first loss as a listed company in the 4Q14, with refining posting a profit and adding a boost. Production has grown yearly, but fell off slightly compared to the previous quarter.

MinMinas budget cuts spark concern

Comments that the Ministry of Mines and Energy (MinMinas) will face a readjustment of its budget has led to concern from observers who say this could further impact a sector that is already suffering and combines poorly with the fall in exploration.

Governors vs Finance Ministry on royalties

A decision to freeze royalty funds after the fall in oil prices has the Finance Ministry at odds with departmental leaders, who want the funds to move forward with regional projects.

Peace Process: A glimmer of hope for the final stretch

The Colombian government’s chief negotiator in Havana Humberto de la Calle came forward with a strong statement that the talks are moving forward in Havana, and even put a time-frame on an agreement.

A guide or a warning on the Amazon?

The Amazon region represents both an area with interesting prospects for the hydrocarbons industry but also immense complexities. This has led the Ministry of Mines and Energy (MinMinas) to reach out to the Organization of the Colombian Amazon Communities (OPIAC) and a subsequent line up of eight workshops designed to bring these indigenous groups into a closer dialogue with authorities and the hydrocarbons industry. We read the document with interest but have comments on its practicality.

Crude prices moving in the wrong direction

At one time in late May, there was a hope that oil prices were rebounding, that somewhat like 2008/2009 there would be a rapid so-called ‘V-shaped’ recovery. After hitting bottom in January 2015, and a separate slightly higher bottom in late March, WTI rose for 11 straight weeks. Back in 2008, the bottom was WTI/Brent at US$33 (there was no gap at the time) in December but by August of 2009, both were back up over US$70. However mid-2015 has, so far, turned out quite different from 2009: both benchmark prices have fallen for 7 of the last 9 weeks.

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Headlines July 27th – August 2nd

Where is the gas consumption trend heading?

Nothing seems to be 100% sure in the natural gas industry. Will a recent call for comments from the Ministry of Mines and Energy (MinMinas) on a planned resolution regarding planning for future gas consumption trends help clear things up?

Find out what is going on with the Colombian oil and gas markets.

MinMinas presents 10 benefits for mining, hydrocarbons

The Minister of Mines and Energy Tomás González formally presented 10 measures designed to improve the competitiveness of the mining and hydrocarbons industry, pointing to their strategic role in the Colombian economy.

CREG ties propane prices to natural gas

The Energy and Gas Regulation Commission (CREG) has approved a change that allows Ecopetrol (NYSE:EC) to fix propane cylinder prices based on the internal price of natural gas, a move which the propane distribution association Gasnova says will hurt Colombia’s poorest.

Peace Process week of June 29: Farc attacks wear at support for talks

The toll of the latest Farc offensive, one with grave environmental consequences, has shown itself in a recent Gallup poll which found that 46% of Colombians support a military-led approach to defeating the Farc, one percentage point above those who favor negotiations.

Trust Consulting’s Ernesto Borda: Can Colombia’s pipelines be kept safe?

We think Ernesto Borda is one of the clearest observers of the social and security challenges in Colombia’s countryside. His firm, Trust Consulting, helps companies in the extractive sector manage the complex political, social and security environment where they operate. With both guerrilla groups stepping up their actions against pipeline infrastructure we wanted to hear what he thought about the drivers and what might be done.

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Headlines July 19th – 26th

With our oil and gas journal, you will be up to date with the latest industry news daily.

HASTA LUEGO SENATOR NAME

Monday, July 20th, 2015 was not only the first day of the Farc’s unilateral truce but the last day of Senator David Name’s reign as president of the Colombian Congress. We can hope that the CREG can now get on with setting natural gas prices based on reason and not politics.

Colombian sessions of Congress run from July 20th of one year to July 19th of the following. The day is one of the county’s seemingly innumerable holidays but it importantly celebrates the first declaration of independence from Spain….

WHAT’s NEXT FOR MEXICO’s ROUND?

With a lackluster result in Mexico’s Round One, the focus now turns to the next four rounds as observers comment on how the first results can be interpreted and impact the rest of the process.

To recap, despite heightened expectations for the round, only two of the 14 blocks on the table were assigned, and both to the same company. We took a look at some of the comments from Mexico, where authorities took a, and we paraphrase here, ‘hey, at least it happened and someone showed up’ argument. A ‘lesson’ that is the first step in a large process. The next two rounds remain scheduled, and the remaining blocks, 12 of them, will be offered in the future and not revert back to Pemex.

Revised or even just public minimum bids would have led to a different outcome. Perhaps four more blocks could have been assigned (because they received bids that were too low) and the whole round would have been viewed in a completely different light…

TAKING A DEEPER LOOK

We took the opportunity to analyze a number of sector elements this week in our daily graphs. For starters, an offhand comment from a multinational oil company got us thinking about the difference between E&P companies that are top-of-mind because they have a lot of production and companies that are top-of-mind because they are responsible for a lot of operations.

Another repeating theme is the growing skepticism from the Colombian public and several political sectors, as it is becoming harder to explain to why they are supposed to tighten their belts fiscally because of lower crude oil prices but they do not see associated relief at the pump. The main ‘villain’ behind the disconnect between what consumers / voters and politicians hear on the nightly news (crude oil prices in US dollars have gone down) and what they experience at the pump, is the rapid devaluation of the Colombian peso against the greenback…

OTHER NEWS

In company news, Ecopetrol (NYSE:EC) has dropped another 45 places in the Fortune Global to number 346, which is hardly surprising but another blow to national pride…

Gran Tierra (TSX:GTE) announced share buy-back program lasting up to 1 year which foresees purchasing up to 5% of outstanding shares at market rates, and Denham Capital acquisition of Platino (TSX:PZE) received its shareholder approval...

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Headlines July 12th – 19th

What to expect when investing in oil and gas in Colombia

ALFA DROPS PRE BID, ECP DROPS FROM MEXICO ROUND 1

Mexican investment group Alfa and Harbour Energy have terminated an agreement to purchase all of the remaining shares of Pacific Rubiales Energy (TSX:PRE), setting off a flurry of speculation and a deep dive in the share price of Colombia’s largest private oil operator. The company did not address why, and there was speculation on whether the actions of O´Hara Investment, the Venezuelan run group with nearly a 20% share, had influenced this…

FARC DELCARES NEW CEASE FIRE AFTER A VIOLENT JUNE

The Farc announced that it would put in place a new unilateral cease fire for one month, starting on July 20, after an escalation in violence in the weeks following the termination of its prior unilateral cease fire on May 22…

REVENUES AND 2015 PRODUTION

The National Hydrocarbons Agency (ANH) released its detailed crude oil production results for April 2015 and we continue to look for the reasons behind the country’s gravity-defying achievements.

The preliminary production number was 1,025mbd but the final result for April was nearly 1,028mbd. The 4Q14 number was 1,005mbd. As crude oil prices slid off a cliff there were pundits saying Colombia would struggle to make 1mmbd. Assuming June comes in above 1mmbd despite increased guerrilla attacks on pipelines and tanker-truck convoys, then it would take a disastrous second half NOT to make 1mmbd.

But despite these gains in production, the picture for revenues is not as pretty, in fact according to our calculations the industry as a whole will produce only at levels similar to six years ago, in 2009…

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Headlines July 1st – 12th

Latest news of Colombia’s oil and gas industry.

Industry oil revenues roll back 6 years or more

Considering that production is up over 3.5% so far this year but crude oil prices are way down, we decide to see how total industry revenues might be tracking. 

Master Transport Plan advances

The Transport Ministry’s Intermodal Master Transport Plan looks to consolidate the transport and logistical infrastructure in Colombia, and held its third socialization ahead of its next national meeting in August of this year. 

Filling the royalty gap

The National Planning Department (DNP) says that it will dip into resources from the Regional Development and Stabilization Fund and use past surpluses so that the 2015-16 royalty budget can be implemented despite a CoP$6T gap in funding due to the fall in world oil prices. 

CSR Summary: Parex, Ecopetrol active in Casanare

Parex Resources (TSX:PXT) and Cepcolsa are working with local suppliers in Aguazul in an initiative led by a Casanare assembly representative, while Ecopetrol (NYSE:EC) also signs four agreements for Corporate Social Responsibility (CSR) projects in Casanare. These and other stories in our periodic summary.  

Industry heavyweights to discuss the state of the industry

The Colombia-Canada Chamber of Commerce (CCCC) is a protagonist in the oil and gas industry, considering the importance of Canadian investors in the sector. Last week, the CCCC organized a breakfast with an ‘all-star’ cast: National Hydrocarbons Agency (ANH) head Mauricio de la Mora, Colombian Petroleum Association (ACP) leader Francisco José Lloreda, Campetrol president Rubén Dario Lizarralde and acting head of the petroleum engineers’ association (ACIPET) Carlos Leal Niño. The moderator was ex-Vice Minister of Mines and Energy and current president of Vitol Colombia, Henry Medina. The standing-room-only crowd at Bogotá’s Metropolitan Club was not disappointed by the debate. 

Alfa drops Pacific Rubiales purchase

Mexican investment group Alfa and Harbour Energy have terminated an agreement to purchase all of the remaining shares of Pacific Rubiales Energy (TSX:PRE), setting off a flurry of speculation and a deep dive in the share price of Colombia’s largest private oil operator. 

June most violent month in last three years

The Resource Center for Conflict Analysis (Cerac) says that June of this year was the most violent month since the peace process begun three years ago. 

Colombia losing appeal to foreign oil professionals

The fall in oil prices and resulting drop in investment has led to more competition between Colombian citizens and foreign oil professionals, thus making the country less attractive for these expat workers, a recent report found. 

Peace Process week of July 6: Farc announce new unilateral cease fire

The Farc announced that it would put in place a new unilateral cease fire for one month, starting on July 20, after an escalation in violence in the weeks following the termination of its prior unilateral cease fire on May 22. 

Industry heavyweights to discuss the state of the industry

The Colombia-Canada Chamber of Commerce (CCCC) is a protagonist in the oil and gas industry, considering the importance of Canadian investors in the sector. Last week, the CCCC organized a breakfast with an ‘all-star’ cast: National Hydrocarbons Agency (ANH) head Mauricio de la Mora, Colombian Petroleum Association (ACP) leader Francisco José Lloreda, Campetrol president Rubén Dario Lizarralde and acting head of the petroleum engineers’ association (ACIPET) Carlos Leal Niño. The moderator was ex-Vice Minister of Mines and Energy and current president of Vitol Colombia, Henry Medina. The standing-room-only crowd at Bogotá’s Metropolitan Club was not disappointed by the debate. 

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Headlines June 15th – 30th, 2015

Investing in oil and gas in Colombia is a matter of many factors, one of them having the right information at the correct time. Following are some of our latest headlines.

Estimating the cost of attacks

Attacks on Colombia’s pipeline sit squarely in the center of the guerrilla’s strategy, and in 2014 the 136 registered attacks had an estimated impact of CoP$142.14B (US$55.7M) in repair costs alone, according to a study from the Colombian Chamber of Oil Goods and Services (Campetrol)…

ECP cost per barrel second highest in LatAm

Surging costs associated with transportation, refining, social conflicts and licensing have made Ecopetrol’s (NYSE:EC) cost per barrel the second highest among state oil firms in Latina America, says a report from the Colombian Petroleum Association (ACP)…

Could gasoline demand fall?

While the official analysis for gasoline demand in Colombia expects overall fuel consumption for mobility to grow 67% in 2030 compared to current levels, the use of alternative transport means and fuels could actually contract the market by up to 25% in 2050…

Peace process week of June 22: Farc asks Santos to “silence the weapons”

The Farc has asked President Juan Manuel Santos to make a truce amidst violence and “silence the weapons” while the two sides establish a bilateral cease-fire…

New defense minister sworn in as trends continue

The total incident count was back up slightly to 35 although guerrilla-initiated incidents (by our methodology) were down by 2 but the 4-week trend continued up…

Turnover at the top in Ecopetrol

In the last two weeks three executive managers at Ecopetrol (NYSE:EC) have retired as the company’s president Juan Carlos Echeverry adjusts his team…

Senator calls for greater intervention in Putumayo

Senator Manuel Enríquez Rosero made a call for congress to address the developing social and economic crisis building in Putumayo in its next ordinary session…

USO behind strikes in Arauca

Oil operations have been stopped at the international oil firm Occidental (NYSE:OXY) in Arauca. Workers have gone on strike to demand a response from the oil firm after heavy rains have caused a scarcity of potable water in the area and have flooded local homes…

Trust Consulting’s Ernest Borda: Can Colombia’s pipelines be kept safe?

We think Ernesto Borda is one of the clearest observers of the social and security challenges in Colombia’s countryside. His firm, Trust Consulting, helps companies in the extractive sector manage the complex political, social and security environment where they operate. With both guerrilla groups stepping up their actions against pipeline infrastructure we wanted to hear what he thought about the drivers and what might be done…

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Headlines June 1 – 15th, 2015

Hydrocarbons Colombia is the ideal place to stay updated about all aspects of the oil and gas market in Colombia.

ECP moves forward with plan to farm out fields

As part of its new strategy, Ecopetrol (NYSE:EC) is planning to focus on its larger producing blocks and implement a divestment plan for at least 45 of its smaller fields…

Ecopetrol has not considered selling Cenit

After statements made by USO president Edwin Castaño that Ecopetrol is considering selling part of its transport and logistics firm Cenit, Ecopetrol’s vice president Camilo Carulanda said that it is not an option being considered…

DNP says SGR working well, an opportunity for regions

The National Planning Department (DNP) published a statement in which it highlighted the arrival of royalty projects to all of Colombia’s departments, and said that things are going well…

CSR Summary: Ecopetrol advances water and education works

Ecopetrol installs new water infrastructure in Meta and plans to build educational infrastructure in Cupiagua. These and other stories on Corporate Social Responsibility (CSR) in our periodic summary…

May marks the 8th month above 1mmbd

Colombia continues its gravity (and naysayer) defying trick of maintaining production above 1 million barrels a day for yet another month. The mystery is how…

Ecopetrol lays out exploration plan

Ecopetrol (NYSE:EC) has offered more details on its new exploration strategy through 2030, which looks to reestablish its exploratory success and replace its shrinking supply of reserves…

A look at two thorns in the side of the hydrocarbons sector

High energy and transportation costs represent two of the major challenges for the hydrocarbons industry, and recent reports in a local business publication look deeper into the causes and future trajectory…

CSR Summary: Mayor accuses Ecopetrol on CSR work

Ecopetrol (NYSE:EC) has offered more details on its new exploration strategy through 2030, which looks to reestablish its exploratory success and replace its shrinking supply of reserves…

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