Colombia’s Controllership has recently unearthed excess spending and questionable operations during the process of expansion and remodeling of Reficar, the country’s second most important oil refinery, located close to the coastal city of Cartagena.
In the eye of the storm sits the Chicago Bridge & Iron Company (CB&I), a firm in which U.S. business magnate Warren Buffet has been reducing his investment, perhaps as a result of the scandal, El Espectador reported.
Colombia’s largest oil firm Ecopetrol, has also found itself embroiled in this financial mess. The company is responsible for hiring CB&I despite being fully aware that the firm lacked any prior experience. The same newspaper detailed how works began to lag behind deadline, while budgetary inconsistencies that were gradually inflating the total cost began to emerge out of a stack of paperwork and construction costs.
National authorities failed to investigate properly, despite allegations made by various functionaries. The initial budget of $3,993 billion soon soared to some $8,016 billion. The Controllership estimates that Reficar will no longer receive an estimated $1,106 million profit, the same daily added.
A total of 17 percent of Reficar’s contracts exceeded initial budgets by some $142 million while 29 percent of the CB&I contracts reported excesses of $43 million.
Senator Daira Galvis told Noticias Caracol that even the sons of some Ecopetrol executives went to the United States to fund companies that were allegedly contracted to act as auditors in the now messy financial process.
Juan Carlos Echeverry, President of Ecopetrol announced that the firm are considering to take the case to an international court of arbitration, according to Semana magazine. Along with Mauricio Cárdenas, Finance Minister; Tomás González, Mines and Energy Minister; and Reyes Reinoso, Reficar president; Echeverry agreed that the firm had taken poor decisions and tried to shake off the responsibility.
Ecopetrol now finds itself in even hotter water as the scandal continues to be splashed across the front pages of Colombia’s national publications and printed press. President Juan Manuel Santos said that issues began in the previous government, when the project was assigned to Glencore (2006), a company that later left the country. Ecopetrol had to reassume construction and operation of the refinery, before it was assigned to CB&I.
According to a statement from the party of former president Álvaro Uribe, the right-leaning Centro Democrático, the project was approved at the end of 2009 (Uribe’s administration), but it was only executed in 2011 (Santos’s administration).
The Colombian economy has been resisting an ever-worsening financial crisis, currently one of the worst across Latin America, as unstable oil prices continue to rock global markets. Nevertheless, Colombia has retained one of the most expensive gasoline rates in the region, Portafolio published in October.
The country continues to face additional problems. Along the border with Venezuela, thousands continue to take part in the smuggling of subsidized gasoline into neighboring Colombia. Venezuelan President Nicolás Maduro has since ordered the closure of the border between the two countries, which continues to remain in operation.
Even worse for Colombia’s government is perhaps the sheer fact that Reficar has reared its ugly head while peace negotiations currently rumble on with rebel group the Farc in Havana, Cuba.