China’s Foreign Direct Investment in Colombia

Colombia has been a major recipient of foreign direct investment (FDI) throughout the last several decades, particularly in sectors such as services, agribusiness, and mineral resources. Nevertheless, a newcomer into the Colombian FDI arena is China. The Asian Giant has been increasing its presence within several economic sectors in Colombia, notably the petroleum and oil refining industries.

China’s Foreign Direct Investment in Colombia

The China Petrochemical Corporation, also known as the Sinopec Group, owned and administered by the central government of the People’s Republic of China, is Asia’s largest petrochemical and oil refining company. Created in Beijing in 1998, the Sinopec Group ranked as the third largest company in the world in terms of revenue during 2016, with an annual revenue of approximately US$267 billion. The main subsidiary of the Sinopec Group is the China Petroleum and Chemical Corporation, also known as Sinopec Limited. Within Colombia’s petroleum and natural gas industry, Sinopec operates through yet another subsidiary headquartered in Bogota, called Mansarovar Energy Colombia Limited, which was created in 2006 as a joint venture with the Indian Oil and Natural Gas Corporation (ONGC). According to company statements, Mansarovar Energy’s annual revenue for its activities in Colombia totaled some US$600 million during 2014.

The company’s revenue comes from the management of 189 kilometers of the country’s Velasquez-Galan oil pipeline, the Velasquez field, the Llanos 69 Exploratory field, and the NARE Association oilfields, which are co-managed with Colombia’s national petroleum giant, Ecopetrol. The NARE Association oilfields include Abarco, Under River, Moriche, Chicala, Jazmin, Nare Sur, and Girasol. Most of the operations Mansarovar Energy manages are located along Colombia’s Magdalena river valley and are long-term leases or joint concessions. While state-owned Ecopetrol manages little over 50% of Colombia’s oil output, in about a decade, Mansarovar Energy has become the country’s fourth largest extractor of heavy crude oil, pumping out more than 40.000 barrels per day. Furthermore, the Chinese-Indian joint venture has represented more than 8% of the foreign direct investment into Colombia’s crude oil sector in recent years, with an average annual investment of US$300 million.

Another Chinese multinational corporation that has been growing its operations in Colombia is Shandong Kerui Petroleum Equipment Limited. Entering the Colombian energy sector in 2007 with an initial investment of US$50 million, Shandong Kerui has expanded its activities despite the fall in international oil prices. This company’s services and the extractive machinery that it sells help optimize everyday activities in the oil fields, which ultimately implies lower costs for both suppliers and buyers of oil as well as greater profitability for the operations. Currently, Shandong Kerui is a close associate and service provider for Mansarovar Energy. Similarly, the company is seeking to further strengthen its activities in Colombia through partnerships with other national companies.

(Read more about Commercial Relations between Colombia and China)