Ecopetrol Aims to Strengthen Low-Carbon Business

Colombia’s Ecopetrol aims to generate up to half of the company’s earnings from its low-carbon business by 2040 as it strives to put technology at the heart of sustainable energy production, according to the company’s CEO Felipe Bayón.

“We are accelerating the use of renewables. It’s avoiding large amounts of CO₂ emissions, but it’s also providing us a lower operating cost,” Bayón said during Rystad Energy’s 2023 outlook webcast. “Two-thirds of our energy is self-generating… A third we buy from the grid. This is providing a good alternative.”

As part of Ecopetrol’s Energy that Transforms 2040 strategy, the company said it has committed to investing between about $1.2 billion and $1.4 billion in renewable self-generation, hydrogen, transmission and roads and energy efficiency. These areas, along with carbon capture, are expected to represent about 23% of the company’s investment plan for 2023.

During the next three years, more than $860 million in planned investment could make way for 900 megawatts (MW) of renewable energies and more than 50,000 tons of green hydrogen with a CO₂e emissions reduction of nearly 400,000 tonnes.

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Tapping renewables

Wind and solar energy are fundamental parts of the plan.

In late 2022, Ecopetrol began measuring wind in two of its main oil- and gas-operating areas in the Colombian Foothills. For 18 months, the company plans to evaluate wind energy potential in the areas, Bayón said.

“Next year, we’ll be starting our first geothermal experiences in Ecopetrol in some of the operating areas we have,” Bayón said. “We’re looking at the energy from the sea as well. So, there’s quite a bit of things we’re doing in renewables, and we’re also investing heavily in hydrogen.”

Ecopetrol currently produces about 130,000 tons of hydrogen per year, mainly gray hydrogen that is created from natural gas, or methane, using steam methane reformation without carbon capture. However, the company intends to grow production of low-carbon hydrogen —green, blue and white (hydrogen found underground)—spending on average about $140 million each year through 2040. The company earlier this year launched its first green hydrogen pilot at the Cartagena Refinery in Colombia.

Seeking opportunities

Ecopetrol is also eyeing additional transmission opportunities, after having purchased a majority stake in region’s largest energy transmission company, ISA, just over a year ago.

“This is currently 48,000 km of high voltage transmission lines, operating mainly in Brazil, Chile, Peru and Colombia, and a small presence in Central America,” Bayón said. “It’s a company that virtually touches 200 million people every day. We are convinced that without transmission, there’s no transition.”

Transmission and the ability to take energy from renewable areas to consumption centers are key, he added, briefly mentioning Ecopetrol was days away from inaugurating its third solar power park.

“We are convinced that without transmission, there’s no transition.” – Felipe Bayón, Ecopetrol

“In combination of the low emission businesses, which is a new division that we've created, plus ISA, which is a transmission company, those two businesses can provide the 40% to 50% of EBITDA by 2040,” he said.

When asked whether Ecopetrol would invest in renewable generation outside of Colombia, Bayón said it is a possibility.

“We’re looking at, for example, entering into the U.S. as well with transmission,” he said, highlighting the company’s transmission experience in project management, construction and operating capability. “We’ve said strategically that we want to remain in this continent. There are many countries outside of Americas that knock on our door and would like for us to join some of the efforts in some other parts of the world. But for now, we will stay around the block.”

Getting gassier

While focus is on renewables and transmission, natural gas also has a key position in Ecopetrol’s 2040 strategy as it looks to increase gas production. Calling natural gas “the hydrocarbon of the energy transition” on the company’s latest earnings call, Bayón said the company plans to invest roughly $1.8 billion to explore and develop gas.

“Traditionally, we produce 15%-16% of our volumes from gas; it’s reaching 20%,” Bayón said. “In this 2040 strategy, we want to come to some 30%-35%.”

Third-quarter 2022 efforts proved successful. Ecopetrol and partner Shell’s Gorgon-2 well hit gas in the ultradeep water in the Colombian Caribbean, bringing their total in the area to four. The Uchuva-1 well, drilled by partner Petrobras in deepwater offshore Colombia, also hit gas and opened a new gas province in the north Colombia Caribbean.

“Colombia has 3 Tcf reserves. In that area, we see 3 to 6 Tcf of additional gas,” he said. “We haven’t booked the reserves. We need to do some technical work, but we’re very, very encouraged.”

The company is also working with a subsidiary of Occidental Petroleum to jointly develop four deepwater blocks.

“The Caribbean has a lot of potential. These are world class discoveries that we want to bring into the production before the end of the decade,” Bayón said. “We’re trying to accelerate development. We’re looking at some … things like subsea to shore to start providing early production and cash flows.”

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