Colombia’s river of opportunity

What is Trafigura’s level of activity in Colombia?
Trafigura’s trade in Colombia is around 70,000 bopd crude oil. This makes us the biggest commodity trader in the country. This is not only due to the investment we have made through the years in infrastructure and logistics, but also how we have become involved with the industry.
We met with every producer in the country, and now have a working relationship with more than 15 producers. We have tried to solve their most pressing issues, mainly related to financing and logistics.
In Colombia, Trafigura has invested more than USD 1 billion in an inland port at Barrancabermeja and a multimodal transport system linking the Caribbean coast with the industrial heartland along the Magdalena River. The river port in Barrancabermeja was completed at the end of 2017 and since then, volumes of outbound crude oil and fuel oil and inbound naphtha and light crude oil through the system have gradually increased, alongside project cargo for the oil industry, containers and dry cargo, steel, coal and fertilisers.
These are the key factors for us: the volume traded today – which means we have something to offer and are a trusted company – and the infrastructure we have built over the last few years that no other competitor can offer.
We want E&P companies focusing on their core skills to produce barrels, add reserves and so on. Depending on location and quality, we decide on the best method to transport their crude oil. If we need to use the pipeline, we do. If we need to truck the oil all the way to Ecuador, we do that. If the best alternative is to use our multimodal transport via the Magdalena River, we do this as well.

How do you service an increasingly dynamic E&P segment in Colombia?
We are focusing a lot on small and mid-sized producers, with minimal financing and production in the range of 1,000-2,000 bopd. We believe producers are the future of the industry.
There were a lot of people left behind by the crisis, and those are the people we want to support today. The oil crisis, especially in Colombia, reduced the number of players through mergers or companies leaving the country.
It is a challenge for smaller-sized producers to increase their level of activity. Trafigura is here for the long term; we have invested in the country. We have a significant presence here.

What potential do you see in the Magdalena River for logistics in the country?
Our investment in the country depends a lot on the PPPs [public-private partnerships] the government is pushing forward with the dredging and diking of the Magdalena River, which will be an important logistical solution for all kinds of trade in Colombia for the next 30 years. For that to happen, we need to work together to turn it into a highway. We have a lot of volume on the river, but there still is a lot to be done.
We are very optimistic. The messages we receive are very positive from all levels of the government. Authorities are continuing with their due date of May 2019 to give a tender for the dredging and diking PPP contract. They are giving the right signals.

What level of trade do you envision for the river?
Many people ask how Trafigura can work with such big volumes of crude. We also buy fuel oil from the Barrancabermeja Refinery and export it via the Magdalena River at significant levels. We also transport imports of naphtha and are one of the main players dealing with imports into the country.
The big one is Ecopetrol. A lot of Ecopetrol’s supply is sourced by Trafigura’s international trading business. The rest of the barrels come from the Impala Terminals system on the river. We take it all the way to the injection point on the pipeline.
The Magdalena River is not just about crude. This reliable system opened up the opportunity for us to start importing crude oil from the United States through the river all the way to the Barrancabermeja Refinery. The refinery in Barrancabermeja is refining crude oil from the United States, which was impossible to even think of a couple of years ago. Now it is happening because we are providing an alternative, cost-effective supply route.

Do you plan to expand your participation in pipeline systems?
As a commodity trading company operating in Colombia, we need to stay flexible and we need to be open to a range of commodities, not just crude oil. The river allows this flexibility. In a barging convoy, you have a pusher and six to eight barges. You can take two barges of crude, two barges of fuel oil, containers and LPG, for which we built three specialised barges and brought into Colombia.
We are pushing the authorities to invest in the river as a reliable system to increase competitiveness. Colombia has always been thinking in terms of trucking or pipelines. To us, it is not a sustainable option in the long term.

How will your investment in the fluvial system impact offshore and hydraulic fracturing activities?
If Colombia develops offshore activities at levels that are interesting for the Barrancabermeja Refinery, the river would be the perfect solution to transport those reserves inland. If you think about shale oil and fracking in the Barrancabermeja and Santander regions and the Magdalena Valley, there is nothing better positioned than the river to help with transport.
If you think about services – moving tubes, heavy machinery and sand – you have an international port in Barrancabermeja. Any kind of player can import or export from our port in Barrancabermeja and then do a transit on the way to or coming back from the coast. If you think about exporting or supplying the Cartagena Refinery, our port, as it is built today, is able to handle 100,000 bopd.
Imagine what we can do with efficiency improvement over the next couple years. It is important to mention that it is a public port, or rather, a private port of public use. Anyone can have access. This is not a port for Trafigura only. We even had some deals with Ecopetrol using our port in the past, so there are a lot of options moving forward.
While we are waiting for the country to develop shale oil, we are willing to share our experience, as Trafigura is one of the main exporters of shale oil in the US and we do this mainly through a very good position in Corpus Christi, where we have a significant presence. We have a pipeline coming on line in 2020, which will have a take or pay [provision] of more than 300,000 bopd. We will continue to be a big player in the shale oil boom in the states, and can share our expertise here to develop unconventional oil and gas.

How do you see the country positioning itself to have the infrastructure ready for this?
Everything is up to PPP control. If you dike the river and prepare it for dredging and so on, all those ports will come on line as they were meant to. If you do not have a fully operational and efficient barging system, those ports will always be limited. For those ports to reach their potential, you need volume, and to reach the ports with these volumes you need efficiency on the river. The diking of the Magdalena River is essential to the Atlantic coast.
If it happens, the investment in the river will naturally help develop all of those ports on the coast. The main thing is the PPP for the river. It is so important for so many industries, not just oil and gas. It will reduce the cost of exporting or importing barrels. It is not just reducing the cost of transport to the coast, but reducing the dilution cost, as you will be able to bring in a lot more naphtha, providing the cheapest logistical cost.
They are saying the tender will occur in May 2019. There is lot of appetite from Chinese and Dutch companies. It is a big contract, and there is a lot of investment that wants to come into Colombia in terms of infrastructure. Colombia does not have that many infrastructure projects in the pipeline for the next few years, so it is a major contract for the country.
The way it is structured is very good for international companies. If it happens in May, it will take four to six months to be awarded. This means you would have companies working on the Magdalena River in 2020.

How would you describe the security situation surrounding the river?
Over the past five years, we have not had a single security incident on the river. It is a very safe system. You are continuously on the move if the river is efficient, and there is a lot of security around the river. Because of these precautions, there have been no incidents and we hope it remains that way.
The incidents with pipelines in Colombia are very sad for the industry, particularly with Caño Limón spending most of the time off line in 2018. These are the things the river allows us to avoid.

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