Pricing power, Colombia-Venezuela edition

There are many ways to translate “pricing power” into Spanish. But the easiest way to explain what it means is here (PDF), on page 7.

Ecopetrol’s export price for “gases” — which as far as I can tell is natural gas* — in the fourth quarter went up to US$5.80 per million BTU, from $4 in 4q2010. The average price for the year rose to $5 from $3.90. As long-time readers may recall, Colombian gas exports are basically to Venezuela, via a pipeline built (ostensibly) to export Venezuelan gas to Colombia. Because Venezuela’s natural gas situation remains grim, Colombian producers including Chevron Corp. sell to Colombian national oil company Ecopetrol, which in turn sells to PDVSA, the state oil company in Venezuela, which then sells the gas to power generators and chemical plants.

I’ll leave it to the Venezuela howling squad to worry about the fact that PDVSA’s retail prices for natural gas remain the same year after year. For me, the interesting thing here is that Ecopetrol has Venezuela over such a barrel that it seems able to pretty much raise prices. I mean, where else is Venezuela going to go? Volumes exported also rose 47 percent year-over-year because of “higher demand in Venezuela” and more gas available for export.

At some point, the shoe will be on the other foot, as Venezuela has a nearly bottomless pit of gas if it can ever figure out how to get it out of the ground, and Colombian gas — well, see the last entry for more on that. Gas sales in Colombia are at a 2-year low.

*It’s Friday night so I’m not going to bother Ecopetrol flaks about this, but this whole entry is off-base if the word “gases” includes butane. Sorry for the ambiguity, but this is the journalism you get for free. On Friday night.

3 thoughts on “Pricing power, Colombia-Venezuela edition

  1. Are

    What is the the fundamental issue of Venezuelan gas production and exportation? Aren’t they producing like 7mmscf/d? And flaring off a fifth of that? (I have witnessed this live)

  2. westslope

    US$5.8/MBTU is reasonable by global standards, and cheap compared to other sources of energy. Would guess that in a few years, prices paid for Colombian LNG exports will influence prices charged Venezuela.

    Interesting question Are. I’d love to find a global comparison of flaring practices. I’ll bet many western North American producers would love to flare large volumes of natural gas as the price sits well below the threshold that would allow most companies to cover variable costs.

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