Ecopetrol Barrancabermeja's refinery in Barrancabermeja, Colombia.Ivan Valencia (Bloomberg)
The oil company Ecopetrol, Colombia's largest company, has won a historic international arbitration award through its subsidiary Reficar in litigation over delays in the expansion and modernization of the refinery in Cartagena de Indias, an imposing complex that extends over an area comparable to 170 soccer fields on the Caribbean Sea. The complaint was filed in March 2016 by the Colombian company against the conglomerate Chicago Bridge & Iron Company and its Colombian subsidiary, which will have to pay more than 1,000 million dollars, plus interest since 2015, for having breached the construction contract that set costs at 3,777 million dollars at the time and stipulated a delivery period of three years. Both the time of the works and the costs were doubled by the contractor's liability, as explained by the decision of the International Chamber of Commerce, which is a historic ruling: the highest fine imposed in a litigation of these characteristics in the country.
The setback for the Anglo-American company comes after seven years of arbitration process, in which the defense of CB & I asked to reduce the compensation to 400 million dollars. The allegation was dismissed by the court, based in New York, and the ruling even stipulates the liquidation of the contract between Reficar and CB&I, as requested by the Ecopetrol subsidiary. Juan Carlos Echeverry, former finance minister and manager of the state oil company at the time the lawsuit was instituted, explains that the contract was poorly designed because the costs of the work were calculated "without concluding the detailed engineering, which was completed two years after finishing the construction."
With this background, Echeverry points out that the initial projection was, basically, "fictitious". Since then, other messes and unforeseen events have piled up. Echeverry points out that all the figures related to Reficar are huge. A strike during the construction process, for example, cost the company $500 million a month: "At some point there were 18,000 people working to build the refinery. The monthly payroll cost $80 million." Those responsible for the project managed to activate the refinery in October 2015 and today it is a giant that refines 200 thousand barrels of oil per day and generates clean fuels for the Colombian Caribbean coast.
It is also a central asset for the country's energy self-sufficiency and, according to Ecopetrol, thanks to its operation it has saved the country about 15,500 million dollars in fuels that have not been necessary to import. To file the arbitration request with the U.S. court, the company presented a body of evidence of three million documents that lawyers collected since 2012 to prepare the lawsuit in detail. That is why the decision clears multiple questions about the performance of a series of officials, politicians or lawyers who were part of the board of Reficar in those tumultuous years, and who were later accused of corruption for the cost overruns of the project: "I compare the role of many of them with those professionals who enter the nuclear plants to turn off the reactors. even knowing that they risk their lives. They came to fix the problem and came out responsible. Now it is shown that it was a problem of those who structured the original contracts in 2009, "says Echeverry.
Carlos Gustavo Arrieta, former attorney general and member of the board of directors of Reficar between May 2014 and March 2015, assures that the news is very positive for Ecopetrol and reveals that decisions criticized at the time were correct: "The decision to end the work of the refinery and litigate once finished was correct. What the Comptroller's Office maintained, in the sense that we had to stop the project, is irrational. We couldn't leave it dumped halfway." The investigations of the control bodies against Arrieta were archived in 2020 and today he recalls in a telephone conversation that when "CB&I presented its offer it did not show much experience, it did not finish the engineering studies, they were not very expeditious in the execution. For all the experts, the firm had underestimated the challenges of the job."
This is news comes at a good time for the company with a state majority. Waiting for payment, Ecopetrol is today in the midst of political turbulence due to the business approach to hydrocarbons of the Government of President Petro, committed since his campaign proposal to advance a diffuse energy transition. A proposal with an obvious impact on the expectations of international markets, very attentive to the movements of a sector that reaches half of the country's exports. As if that were not enough, the newly appointed president of the company, Ricardo Roa Barragán, is in the midst of the maelstrom of political tensions generated by the recent accusations of the former ambassador to Venezuela, Armando Benedetti, about alleged irregular financing of the presidential campaign of Petro, in which Roa served as manager.
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