Ecopetrol is a publicly listed integrated oil and gas company headquartered in Colombia, with majority state ownership. In 2020, it had USD 14.61 billion in revenue and a reported 9,770 employees*. Ecopetrol has developed a decarbonisation plan with ambitious targets but continues to invest in oil and gas production and exploration, including in unconventional shale gas.
Ecopetrol has set three targets with the aim of reducing absolute greenhouse gas emissions. It plans to achieve a 25% reduction in scope 1 and 2 emissions by 2030, net-zero scope 1 and 2 emissions by 2050, and a 50% reduction in scope 1, 2 and 3 emissions by 2050. However, these targets include nature-based carbon offsets and could therefore not be assessed. Ecopetrol can strengthen its targets by focusing on emissions reduction solely through direct action, rather than using nature-based offsets. The company should also align its targets with its 1.5°C pathway.
Ecopetrol’s locked-in scope 3 emissions from its upstream activities are expected to account for at least 80% of its 1.5°C carbon budget between 2019 and 2050. This is based on Ecopetrol utilising all its remaining reserves at an annual rate based on forecast production from existing and approved fields. As the company’s business strategy is to grow its reserves and production, particularly its shale reserved in Colombia and the USA, the company risks exceeding its carbon budget. According to the International Energy Agency, no new oil and gas fields can be approved under a 1.5°C scenario.
In 2019, Ecopetrol’s low-carbon CapEx allocation was approximately only 0.4% of the company’s totals spending. However, as part of its energy transition strategy, the company has committed USD 600 million between 2021 and 2023 to low-carbon initiatives, including solar, wind and geothermal energy projects, followed by energy efficiency and fuel quality projects.
Ecopetrol discloses its planned total CapEx up to 2021. In 2021, the company’s planned CapEx in low-carbon and mitigation technologies will be approximately 5% of its total spending. Despite this progress, the company still lags far behind the sectoral expectation for oil and gas companies to direct 77% of CapEx towards low-carbon technologies and business activities to be aligned with a 1.5°C scenario.
Ecopetrol plans to increase its oil and gas production to reach production levels between 700 and 710 thousand barrels of oil equivalent per day in 2021, and 750 thousand barrels of oil equivalent per day by 2023. Furthermore, the company shows no signs of increasing the proportion of low-carbon products such as renewable power or energy efficiency services in its sold product mix.
As a result, Ecopetrol is not projected to be ready for a low-carbon transition over the next five years. The company would need to decrease the emissions intensity of its sold product portfolio by nearly 4% per year between 2019 and 2024 to align with its 1.5°C pathway.
As a majority state-owned national oil company, Ecopetrol has shown support for Colombia’s climate strategy and nationally determined contributions (NDCs). Further, it has participated in the drafting of climate policy documents at the national level, such as in the development of a national cap-and-trade system and a national adaptation plan for climate change. As a company with influence on national policy, Ecopetrol has the opportunity to show climate leadership by promoting climate policies and taking a position that supports limiting warming to 1.5°C.
At present, Ecopetrol does not have any low-carbon business activities and does not indicate a plan to develop such activities in the next 1-2 years. The company is researching green hydrogen fuel production. However, it has not disclosed a deployment schedule for this in the long term. Despite committing CapEx to renewable energy projects, the power generated will only be used in Ecopetrol’s own operations, rather than sold as a product.
Ecopetrol needs to develop strategies to incorporate low-carbon business activities into its operations and rapidly scale up the deployment of these activities to reduce its fossil fuel reliance.
Ecopetrol receives a trend score of -. If the company were reassessed in the near future, its score would likely decrease. The company’s new emissions reduction targets may reverse its increasing emissions intensity trend between 2014 and 2019, provided the company reduces its reliance on nature-based offsets in the long term. However, there is no indication that the company is transitioning away from oil and gas extraction and, at present, the company does not demonstrate plans to incorporate low-carbon business activities into its product offerings.
Ecopetrol aims to achieve net-zero scope 1 and 2 emissions and reduce its scope 1, 2 and 3 emissions by 50% by 2050. The company has an intermediate target to reduce scope 1 and 2 emissions by 50% by 2030. However, these targets include an undisclosed reliance on nature-based offsets.
Ecopetrol is focused on scope 1 and 2 emissions reduction in the short term. It plans to reduce flaring, improve energy efficiency and invest in 400 megawatts (MW) of renewable energy to power its own operations. The company also plans to invest in nature-based solutions and is researching green hydrogen production.
Ecopetrol has allocated USD 600 million to CapEx in low-carbon technologies between 2021 and 2023, thereby increasing the proportion of its CapEx on low-carbon technologies from approximately 0.4% in 2019 to 5% in 2021. However, the company is still pursuing growth in oil and gas reserves and production.
On average, the company’s direct production and refinery emissions intensity has increased between 2014 and 2019. Moreover, there is no evidence that the company is changing its product mix to reduce its scope 1, 2 and 3 emissions intensity.
Ecopetrol’s ambitious 2050 decarbonisation targets are undermined by its reliance on nature-based offsets. Despite planned decarbonisation CapEx, the company’s strategy aims for growth in oil and gas production. The company gives no clear indication of development and deployment plans for low-carbon business activities. All of this makes it unclear whether the company will be able to align with its 1.5°C pathway.