Uncertainty for Colombia's oil companies

El Espectador, one of the main daily newspapers in Colombia, ran a lengthy investigative piece over the weekend asking just what is going on with Pacific Rubiales. Started in 2003 by four Venezuelan businessmen who didn’t agree with what Hugo Chavez was doing to their country, Pacific Rubiales quickly became the darling of the Colombian oil industry and the Colombian stock exchange. As recently as 2013, Pacific was still riding high, snapping up smaller players in the Colombian extractive sector, and spending heavily on marketing and other discretionary expenses.

However, with the collapse in the price of global oil prices, rumors have started spreading that Pacific Rubiales is on the brink of insolvency. According to the paper’s sources, Pacific, is planning to lay off some 7,000 contractors, has renegotiated terms with many of its suppliers, and has delayed payment to other suppliers. Though Pacific Rubiales denied the paper’s claims, oil industry observers worry that the lower oil prices have left the Canadian oil company with little liquidity. Only time will tell whether Pacific Rubiales manages to weather this crisis.

Pacific Rubiales isn’t the only oil company in Colombia getting some unwanted attention. Ecopetrol, the Colombian state-owned oil company, is being investigated by the Colombian Justice Department for bribery relating to contracts with Petrotiger. The scandal started in January 2014 when the FBI started investigating an irregularity in a contract awarded for work in Colombia’s Casanare department. In response, the USO labor union called on Ecopetrol to cancel the 16 contracts that it still has with Petrotiger. Ecopetrol lost 43% of its value on the stock market during 2014, and being associated with a corruption scandal will not help its public image.