Ecopetrol's Partnership with Glencore in Cartagena Complicated by Global Crisis

| About: Ecopetrol S.A. (EC)

Like many other infrastructure projects, the expansion of Cartagena's refinery has not been different and has been subject to strong friction between the state owned Ecopetrol (NYSE:EC) and its Swiss partner Glencore, which could delay the expansion of the refinery of Cartagena, which is considered one of the key infrastructure projects and will improve the quality of fuels in Colombia.

President Álvaro Uribe made it very clear (on behalf of Ecopetrol) to Glencore that no risks can change the chronological milestones of the project in Cartagena, which has already been confirmed with signed contracts. The project was awarded to Glencore through a public auction in 2006.

The problem is due to the global financial crisis and restrictions to credit. Glencore (with 51% of the shares) asked Ecopetrol to postpone the development of certain activities and to suspend some purchase orders for sophisticated equipment, which had been made.

The request did not fall in good soil with the state oil company, Ecopetrol(with 49% of the shares). Ecopetrol is on their side committed to undertake the project, improve the fuel quality and increase Colombia’s production capacity of gasoline and other petroleum products.

At the end of the meeting Ecopetrol told its partner, Glencore, that it was aware of the current economic challenges in the world and is prepared to seek alternatives. However, Ecopetrol will not change the schedule of the project, which should be operative at the end of 2011 and beginning of 2012.

What is more, Ecopetrol turned to a partner for the expansion due to fiscal constraints of the time. Their leaders have acknowledged that if they had waited a few years, they’d be able to undertake the ambitious expansion by itself.

Ramiro Santa, vice president of Corporate Affairs Refinery, denied that the partners were going in different directions, but admitted that the global financial crisis has affected big projects and that the idea is to find solutions.

Another obstacle that was presented was the delay of the government on fuel subsidies (about 800,000 million pesos) to the refinery, money that will serve to leverage resources and provide air to the project, which has been spoken of for more than 10 years.