The Ecopetrol Barrancabermeja Refinery in Barrancabermeja, Colombia.Ivan Valencia (Bloomberg)
Oil giant Ecopetrol, Colombia’s largest company, through its subsidiary Reficar, has won a historic international arbitration in a dispute over delays in the expansion and modernization of the Cartagena de Indias refinery, an imposing complex stretching over an area comparable to up to 170 soccer fields on the Caribbean Sea. The lawsuit was filed in March 2016 by the Colombian company against conglomerate Chicago Bridge & Iron Company and its Colombian affiliate, who have been ordered to pay more than $1,000 million plus interest since 2015 for violating the construction contract they specified The costs amounted to back then at 3.777 million dollars and provided for a delivery time of three years. Both the duration of the works and the costs doubled due to the responsibility of the contractor, as evidenced by the decision of the International Chamber of Commerce, which is a historic judgment: the highest fine imposed in a dispute of these characteristics in the country .
The setback for the Anglo-American company comes after a seven-year arbitration in which the defense of CB&I asked for a reduction in compensation to $400 million. The allegation was dismissed by the New York-based court and the ruling even provides for the termination of the contract between Reficar and CB&I, as requested by the Ecopetrol subsidiary. Juan Carlos Echeverry, former Treasury Secretary and manager of the state oil company at the time the lawsuit was filed, says the contract was poorly drafted because the cost of the work was calculated “without completing the detailed design, which took two years” after construction was completed.
With this in mind, Echeverry points out that the original projection was essentially “fictional.” Since then, further problems and unforeseen events have accumulated. Echeverry points out that all the numbers around Reficar are huge. A strike during the construction process, for example, cost the company $500 million a month: “At one point, 18,000 people were involved in the construction of the refinery. The monthly payroll cost 80 million dollars.” Those responsible for the project managed to put the refinery into operation in October 2015. Today it’s a giant, refining 200,000 barrels of oil a day and producing clean fuels for Colombia’s Caribbean coast.
It’s also a key asset to the country’s energy self-sufficiency, and its operation has saved the country about $15.5 billion in fuel it didn’t have to import, according to Ecopetrol. In order to file the request for arbitration before the US court, the company presented a body of evidence of three million documents that the lawyers had collected since 2012 to prepare the lawsuit in detail. For this reason, the decision clarifies several questions regarding the actions of a number of officials, politicians or lawyers who were part of Reficar’s board during those turbulent years and who were later accused of corruption due to the project’s cost overruns: “I compare the role of many of them with those professionals who break into nuclear power plants to shut down the reactors, knowing that they are risking their lives to do so. They came to fix the problem and were held accountable. It has now turned out to be a problem for those who structured the original contracts in 2009,” says Echeverry.
Carlos Gustavo Arrieta, former lawyer and member of the Reficar board between May 2014 and March 2015, assures that the news is very positive for Ecopetrol and reveals that the decisions criticized at the time were correct: “The decision to stop the work of the refinery building and filing a lawsuit upon its completion was wise. The auditor’s view that we should have stopped the project is irrational. We couldn’t just throw it away halfway. The regulatory authorities’ investigation into Arrieta was archived in 2020 and today, in a phone conversation, he recalls that “CB&I, when they made their offer, didn’t show much experience, didn’t complete their engineering degree, they didn’t move very quickly.” According to all experts, the company underestimated the challenges of the job.”
It’s news that comes at a good time for the majority-state company. Awaiting payment, Ecopetrol today finds itself in the midst of political turmoil over the hydrocarbon business approach of President Petro’s government, which has been committed to promoting a diffuse energy transition since his campaign proposal. A proposal with an obvious impact on the expectations of international markets, very attentive to the movements of a sector that manages to attract half of the country’s exports. As if that weren’t enough, the company’s recently appointed president, Ricardo Roa Barragán, is in the midst of political tensions sparked by recent allegations by former ambassador to Venezuela Armando Benedetti of allegedly irregular funding of Petro’s presidential campaign, where Roa acted as manager.
Newsletter
Analysis of current affairs and the best stories from Colombia, every week in your mailbox
GET THIS
Subscribe here to the EL PAÍS newsletter on Colombia and receive all the latest information about the country.