Good Partners

Something new in oil contracts was announced last week in Bogota. Colombia's government-owned oil company, Ecopetrol (Empresa Colombiana de Petroleos), and a private U.S. oil firm, Cities Service Co., agreed to share costs and profits in developing the promising El Carare area, a 2,200,000-acre tract near the Magdalena River 120 miles north of Bogota.

The contract provided that Ecopetrol will contribute a fourth of the capital investment and Colombia Cities Service Petroleum Corp. (a local subsidiary) the rest. The profits will be split in the same ratio. As is customary, the joint enterprise will pay a royalty to the government, as the owner of the underground oil.

Colombia is already a sizable oil producer, getting some 12% of its export earnings from sales of 32 million bbls. of crude a year. But over the years the risky Colombian oilfields have been good places to lose money as well as to make it, and hopeful 1950 oil decrees have attracted little new interest. Ecopetrol itself was created not as a nationalistic gesture but because a U.S. company handed back a concession that had expired, and no other foreign firm wanted to take over.

Nevertheless, El Carare, surrounded by the fields that pump up much of the country's oil, has always been a tempting gamble. Title litigation scared off the drillers until a recent court decision awarded the mineral rights to the government. Then Ecopetrol, unwilling to tackle the exploration alone, invited Cities Service to help.

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