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Petrobras S.A. (PBR - Free Report) and Ecopetrol (EC - Free Report) have suffered a major setback while drilling for an offshore gas well in Colombian waters. A Colombian judge has ordered the companies to stop the drilling of the Uchuva-2 well in response to a suit filed by an indigenous community that sought protection. The community hailed from the Taganga area, which lies close to the city of Santa Marta.
Dispute With the Indigenous Community
The community stated that the companies should have sought their approval prior to drilling the well, per a document published by Caracol Radio. The judge favored the indigenous community and ordered the companies to stop drilling the gas well in the country’s Caribbean waters. The Tayrona Block, situated offshore Colombia in the Caribbean maritime zone, is operated by Petrobras. PBR holds a 44.4% stake in the block and the remaining 55.6% is owned by Ecopetrol.
Potential Natural Gas Shortage in Colombia
Colombia may be dealing with a shortage of natural gas starting next year. The country is banking quite heavily on the development of its deepwater wells to alleviate the shortage. Ecopetrol has highlighted that it could bring the production from wells in the Caribbean waters online, as soon as 2029. However, the company also mentioned that the timeline depends on how soon it can secure the environmental licenses and approval from the local communities.
Challenges Posed by Legal and Environmental Disputes
Ecopetrol has been facing significant challenges in its exploration efforts. The judge’s orders to pause the drilling of the Uchuva-2 well is only one of them. The company has also faced a setback in drilling the Komodo-1 well in partnership with Occidental Petroleum. The environmental licensing authority in Colombia has halted the approval process for drilling another offshore oil well at water depths of approximately 3,900 m (nearly 13,000 ft). The drilling of the Komodo-1 well was scheduled for later this year.
The pause on the Uchuva-2 well drilling also counts as a setback for the Brazilian energy firm. Petrobras had previously faced a similar challenge in Brazil, where it was barred from continuing drilling operations along a key part of the Equatorial Margin due to environmental concerns.
Zacks Rank and Key Picks
Currently, PBR carries a Zacks Rank #3 (Hold), while EC has a Zacks Rank #4 (Sell).
MPLX LP owns and operates a wide range of midstream assets. The partnership's midstream assets include oil and natural gas gathering systems and transportation pipelines for crude, natural gas and refined petroleum products. MPLX is least exposed to commodity price fluctuations as it generates stable fee-based revenues. Furthermore, it surpasses its industry peers in terms of distribution yield, reflecting its commitment to returning capital to its unitholders.
VAALCO Energy is an independent energy company involved in upstream business operationswith a diversified presence in Africa and Canada. Having a large inventory of drilling locations in premium Canadian Acreage, the company’s production outlook seems bright.
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Petrobras' Drilling Plans Offshore Colombia Suffer Legal Setbacks
Petrobras S.A. (PBR - Free Report) and Ecopetrol (EC - Free Report) have suffered a major setback while drilling for an offshore gas well in Colombian waters. A Colombian judge has ordered the companies to stop the drilling of the Uchuva-2 well in response to a suit filed by an indigenous community that sought protection. The community hailed from the Taganga area, which lies close to the city of Santa Marta.
Dispute With the Indigenous Community
The community stated that the companies should have sought their approval prior to drilling the well, per a document published by Caracol Radio. The judge favored the indigenous community and ordered the companies to stop drilling the gas well in the country’s Caribbean waters. The Tayrona Block, situated offshore Colombia in the Caribbean maritime zone, is operated by Petrobras. PBR holds a 44.4% stake in the block and the remaining 55.6% is owned by Ecopetrol.
Potential Natural Gas Shortage in Colombia
Colombia may be dealing with a shortage of natural gas starting next year. The country is banking quite heavily on the development of its deepwater wells to alleviate the shortage. Ecopetrol has highlighted that it could bring the production from wells in the Caribbean waters online, as soon as 2029. However, the company also mentioned that the timeline depends on how soon it can secure the environmental licenses and approval from the local communities.
Challenges Posed by Legal and Environmental Disputes
Ecopetrol has been facing significant challenges in its exploration efforts. The judge’s orders to pause the drilling of the Uchuva-2 well is only one of them. The company has also faced a setback in drilling the Komodo-1 well in partnership with Occidental Petroleum. The environmental licensing authority in Colombia has halted the approval process for drilling another offshore oil well at water depths of approximately 3,900 m (nearly 13,000 ft). The drilling of the Komodo-1 well was scheduled for later this year.
The pause on the Uchuva-2 well drilling also counts as a setback for the Brazilian energy firm. Petrobras had previously faced a similar challenge in Brazil, where it was barred from continuing drilling operations along a key part of the Equatorial Margin due to environmental concerns.
Zacks Rank and Key Picks
Currently, PBR carries a Zacks Rank #3 (Hold), while EC has a Zacks Rank #4 (Sell).
Some better-ranked stocks in the energy sector are MPLX LP (MPLX - Free Report) and VAALCO Energy (EGY - Free Report) . MPLX presently sports a Zacks Rank #1 (Strong Buy), while VAALCO Energy carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.
MPLX LP owns and operates a wide range of midstream assets. The partnership's midstream assets include oil and natural gas gathering systems and transportation pipelines for crude, natural gas and refined petroleum products. MPLX is least exposed to commodity price fluctuations as it generates stable fee-based revenues. Furthermore, it surpasses its industry peers in terms of distribution yield, reflecting its commitment to returning capital to its unitholders.
VAALCO Energy is an independent energy company involved in upstream business operationswith a diversified presence in Africa and Canada. Having a large inventory of drilling locations in premium Canadian Acreage, the company’s production outlook seems bright.