Colombia’s state-owned Ecopetrol is aiming for dramatic growth in biofuels production by 2020 to capture what could be a rapidly-growing domestic market.

Ecopetrol plans to invest $516 million in biofuels to 2020, developing new capacity in sugarcane ethanol and palm oil biodiesel.

The firm is producing 100,000 tons per year (2,000 barrels per day) of biodiesel through its 50%-owned subsidiary Ecodiesel, which began producing in mid-2010. And Ecopetrol plans to invest $282 million to create 480,000 liters per day of ethanol production capacity through its 88%-owned subsidiary Bioenergy by the end of 2012.

This will bring Ecopetrol’s total biofuels production to 180,000 tons per year by 2013, a sharp increase over 100,000 tons per year in 2011.

And three additional projects–100,000 ton per year Ecodiesel 2, 100,000 ton per year Etanol, and 70,000 ton per year Bioenergy 2–will bring the total to 450,000 tons per year by 2020.

“We have incentives to produce biofuels and stable conditions of the price for internal consumption,” Executive Vice-President of downstream Pedro Rosales told Breaking Energy. Rosales also noted that Ecopetrol has opportunities for securing additional land for feedstock, sugarcane and palm oil.

Ecopetrol’s efforts may allow the firm to capitalize on what could be a rapid increase in demand if future regulations lead to higher percentages of biofuels blended into fuels.

Under such regulations, the firm’s projections show consumption at between 5,000 and 10,000 barrels per day of ethanol in 2011 at an E10 blend, rising above 15,000 barrels per day in 2019 at an E20 blend. For biodiesel, forecasts show 10,000-15,000 barrel per day demand in 2011 for a B10 blend, rising to around 25,000 barrels per day in 2023 for B14.

Biofuels to stay on the sidelines

But planned biofuels expenditures constitute a small fraction of the company’s planned $80 billion in capital expenditures over the next ten years. The firm anticipates allocating 80% to exploration and production, with just 14% to refining and petrochemicals, and 6% to transport.

Ecopetrol aims to increase production to 1.3 million barrels per day of oil equivalent (boe) by 2020, up from 707,000 barrels of oil equivalent (boe) per day in the first half of 2011, and less than 400,000 boe per day in 2007. Following annual production growth rates exceeding of 12% or more from 2008-2010, “if we continue at our pace we’re going to grown 20% in the present year,” said chief executive Javier Gutierrez.

“We want to be recognized as a company that is producing clean barrels,” he said.

A “clean” barrel?

One “with no accidents, no environmental incidents, harmonious labor relations, with the fulfillment of our commitments to all our stakeholders, with a return on capital employed of more than 17% and sustainable returns on the environmental, social, and economic aspects,” Gutierrez explained.

Photo Caption: Drilling operators employed by Ecopetrol at work checking a rig in an oilfield in Colombia circa 1960.