EC Ecopetrol SA

By Sara Schaefer Muñoz 

BOGOTÁ, Colombia--Colombian President Manuel Santos on Tuesday night pressed for a full inquiry into the $4 billion overrun of state-controlled oil firm Ecopetrol's Cartagena refinery project.

The project, which began in 2006, aimed to expand and modernize the Refinery of Cartagena, known as Reficar, transforming it into a refinery capable of processing 165,000 barrels of crude a day and add as much a 1 percentage point to Colombia's annual GDP.

Yet in recent days the refinery, which opened in October amid fanfare and a visit by President Santos, has been the target of public wrath after the Comptroller's office found that costs rose to $8 billion, double the initial estimate, on contracts to vendors, project managers and a three-year delay in getting the refinery online.

The Comptroller's office said it is pursuing a detailed audit to determine any irregularities. President Santos urged regulatory authorities to use their full powers to examine why the project ran so drastically over its initial budget.

"After seeing these figures, Colombians are shocked," he said. "Cost overruns of this magnitude have no justification whatsoever."

News of the price overruns come as Colombia's oil sector, which accounts 60% of it export dollars, has been hobbled by collapsing oil prices and a lack of new discoveries at its two biggest oil producers, the state-controlled Ecopetrol and Canadian firm Pacific Exploration & Production.

The runaway spending is a potential source of embarrassment for President Santos, who this week is making a three-day trip to Washington to discuss American aid that would help Colombia modernize once its civil conflict with Marxist guerrillas is over. The U.S. Congress has provided $10 billion in aid to Colombia over the last 15 years.

President Santos deflected criticism for the Reficar issue by pointing a finger at the administration of former President Álvaro Uribe, his arch political rival, who was in office when the project was launched. President Uribe responded in comments on his official Twitter account that the Santos' government had overseen the project for five years and "now wants to wash its hands."

The Colombian Comptroller's office said it is requesting information from two foreign companies involved with the project: Chicago engineering firm CB&I and Switzerland's Foster Wheeler AG. Messages left with spokespeople for the companies weren't immediately returned.

A spokesman for Ecopterol didn't return a request for comment. Ecopetrol President Juan Carlos Echeverry has in the past publicly acknowledged the cost overrun, noting that the initial estimate was poorly calculated and that a strike by refinery workers contributed to the higher price tag.

On Wednesday, Ecopetrol told investors it wouldn't distribute dividends this year amid low prices of oil. The company's share price has fallen 70% over the past 12 months, to $5.95 on the New York Stock Exchange.

Write to Sara Munoz at Sara.Munoz@wsj.com

(END) Dow Jones Newswires

February 03, 2016 13:08 ET (18:08 GMT)

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