Ecopetrol pressured to sell U.S. shale venture by Colombia's leader

(Bloomberg) – Ecopetrol SA shares plunged after Colombian President Gustavo Petro called on the oil producer to sell its operations in the U.S., citing his government’s position against fracing, which he says is destructive to nature and humanity.

Shares of the majority state-owned Ecopetrol fell as much as 2.4% in Bogota trading. The company had announced this week it was extending a joint venture with Occidental Petroleum Corp. in the Permian Basin in the southwestern U.S. through June 2026. The final decision rests with Ecopetrol’s board, which has flip-flopped on approving deals on U.S. assets before and whose only two independent members quit last year. 

Read more: Ecopetrol, OXY to drill 34 wells in Permian under development plan extension

“I want that operation to be sold to invest in clean energy in Colombia,” Petro told Energy Minister Andres Camacho on Tuesday in a chaotic cabinet meeting that was broadcast live. “Let it be discussed technically and economically, but it cannot be that we are for death and not for life.”

The board has already approved investments and drilling activity by the joint venture for the entire extension period, according to BTG Pactual analyst, Daniel Guardiola.

“In theory the contract is already signed for one year. But this announcement should bring uncertainty back to the table,” he said.

Ecopetrol didn’t reply to a request for comment.

The company’s production growth has come from the Permian Basin, fully offsetting the decline in the production in Colombia, BTG Pactual analysts including Guardiola wrote in a report Wednesday. The assets, which accounted for around 14% of output in the third quarter, could be worth $5.5 billion, or 27% of the company’s current market capitalization, they wrote. 

Colombia’s leftist leader has called fighting climate change a matter of “life and death,” has proposed a ban on fracking and has refused to grant licenses to explore new natural gas wells, even as the Andean nation faces a shortfall of the fuel.

It’s not the first time that Petro has asked Ecopetrol to backtrack on a deal with Occidental. Last year, Ecopetrol pulled out of a $3.6 billion deal to buy a stake in Texas shale-oil assets from the U.S. company.