Colombia’s Ecopetrol to explore sale of its plastics unit

Marianela Toledo

06-Oct-2015

HOUSTON (ICIS)–Reports that Colombia’s state-controlled oil producer Ecopetrol SA has taken initial steps toward the sale of a plastics unit surprised traders on Tuesday, as the company has not made any formal announcement or confirmed the sale.

The potential sale was first reported by Bloomberg earlier on Tuesday, based on two sources with “direct knowledge” of the matter.

Ecopetrol’s plastic unit includes a polyethylene low density (LDPE) plant that has a production capacity of 64,800 tonnes/year, according to ICIS data; and a polypropylene plant (also known as propilco) of 140,000 tonnes/year operating capacity.

“I am in shock,” a Colombian plastic distributor told ICIS on Tuesday, after learning about the news of the potential sale.

The source says the PE unit may have not been rentable because it is small, only produces LDPE and there is the competition from imports, but as a polypropylene unit it is important as it supplies the domestic market, and also exports.

“Ecopetrol is being depressed because of crude oil (falling), and stocks have been falling,” the source added.

On 28 September, Ecopetrol stocks reached their lowest level since 2007, and were traded at $8.28, but have recovered since to $9.92 on Tuesday. However, this is still far from $32.67 traded a year earlier.

Crude oil prices have been declining as well, reaching below $40/bbl this year.

In September, Canadian petroleum company Parex Resources announced it had signed an agreement with Ecopetrol to operate Aguas Blancas field, located in Simacota, Santander.

The field is expected to produce 10,000 bbl/day.

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