Bogota, Colombia — The coronavirus outbreak has not yet impacted demand for Ecopetrol's crude exports, takers of which buy more than two-thirds of the state-controlled company's overall production, but the company's chief executive on Wednesday hinted to analysts that the pandemic and its potential market impact is a serious concern.
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Felipe Bayon, CEO of Colombia's vertically integrated oil giant, said that refiners in China, a major customer for his company's crudes, are already reporting reduced throughput because of the spreading disease and the resulting reduction in fuel demand. So far, however, demand from Asia for Colombia's heavy crudes, which make up more than half of all oil pumped, has not been impacted, he said.
But he did not rule out the possibility that it soon might.
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"There is already a reduction in refining runs in China," Bayon told analysts tuned in to a conference call at which he and other executives fielded questions about Ecopetrol's full-year 2019 financial results released late Tuesday. "We need to monitor and understand where it will go."
China and other Asian markets are very important to Ecopetrol as many refineries there are geared to process heavy oil. For the full year, Ecopetrol said in its financial report that Asia accounted for 187,600 b/d of Ecopetrol's total exports, or 46.3% of the full-year foreign shipments that averaged 405,400 b/d. Asia's percentage of Ecopetrol's export sales even grew to 53% during the fourth quarter, Bayon added.
Moreover, Asia is an important growth market. The full-year export average represented an 18% increase from the 158,000 b/d the company shipped to the region in 2018.
Meanwhile, Ecopetrol's crude shipments in 2019 to the US Gulf Coast refineries, the second leading market, increased to 149,000 b/d, an 14.6% increase from 130,000 b/d during 2018.
Ecopetrol's operations are intimately geared to the foreign market, as crude exports in 2019 represented 68.5% of total company output of 591,500 b/d of crude. The company is 88.5% state owned and accounts for more than two-thirds of Colombia's production of crude and its equivalents.
With Venezuelan production collapsing in recent years, foreign refiners favoring heavy crudes have looked to Colombia to make up some of the shortfall. That increased demand has helped narrow the gap between Brent prices and those of Colombia's basket of crudes to a $5.60/b difference in 2019 from $8.50/b in 2018.
But Bayon conceded that "directionally, the spreads could toughen and grow a bit" if China demand falls off and heavy crude exporters like Colombia see prices fall.
For now, Bayon is sticking to the company's three-year plan to invest between $13 billion and $17 billion through 2022, a plan that is based on Colombian crude prices of $57/b. But he acknowledged that "the uncertainty we are seeing the last few days" over the coronavirus outbreak and its effects on the market could alter that plan.
"Our crudes have become part of base runs in [Asian] refineries. There is still no impact on our exports. It's early days. The world is every day and every hour getting a lot more information and awareness of what's going on, how [coronavirus] will eventually spread and how deep geographically," he said. "We will keep our radar sweeping."