Eco (atlantic) Share News (ECO)

* Ecopetrol to start pilot project for unconventionalreserves

* Output to remain flat or rise in 2018(Adds details on auctions, domestic market)

By Marianna Parraga

HOUSTON, March 5 (Reuters) - Colombia's Ecopetrol SAwill look for assets to buy this year, and bid in oilauctions in the United States and Latin America, after emergingfrom a period of deep budget cutbacks, Chief Executive FelipeBayon told Reuters on Monday.

Low crude oil prices had forced Ecopetrol and other oilcompanies in Latin America to tighten their belts in recentyears, cutting exploration investment or delaying key projects,and severely hitting output and refining.

Colombia's state-run Ecopetrol halted production at 12oilfields as it reduced spending. But its operations startedexpanding again last year, when it reached a $2.2-billion netprofit, the highest in the last four years.

Last year "was a very good year for us. Analysts wereexpecting a lower profit," Bayon said on the sidelines of theCERAWeek energy conference in Houston.

The company expects its oil and gas production to remainflat or to rise slightly this year to 725,000 barrels of oilequivalent per day (boepd), under an investment budget of $4billion almost completely focused on exploration and production.

Part of that spending will go to projects aimed atreplenishing the firm's energy reserves, including a pilotprogram to explore unconventional resources at the MagdalenaMedio basin, where Ecopetrol estimates there could be up to 7.4billion barrels, more than triple Colombia's proven reserves.

Another part of the investment plan could go to biddingrounds in the U.S. Gulf, where it currently participates in twoblocks, as well as Mexico, Brazil and Argentina, which plan oiland gas auctions this year.

REFINING MORE, CONSUMING MORE

One of Ecopetrol's main refineries - the recently expandedCartagena - has increased crude processing to 154,000 barrelsper day (bpd), while reducing the proportion of imported oil itneeds to 30 percent versus 55 to 60 percent a year ago, Bayonsaid.

The cost of Cartagena's modernization doubled to $8 billioncompared with the $4 billion originally planned, but it has madethe company less dependent on imports while leaving a small fuelsurplus for export.

Ecopetrol is also reducing the volume of imported naphtha itneeds to dilute its heavy crude output by making changes at itstransportation system, according to Bayon.

Using alternative transport has allowed it to avoid frequentdeclarations of force majeure on its crude exports when its CanoLimon-Covenas pipeline is attacked by rebels, which has happened17 times this year alone.

Bayon also said that tighter controls by the Colombiangovernment at the Venezuelan border had cut gasoline imports,increasing the domestic need for gasoline and other fuels inabout 20,000 bpd.

Ecopetrol's Barrancabermeja refinery, where workers recentlywent on strike due to a salary dispute, is expected to restartits cracking unit in seven to 10 days after completingmaintenance work, he said.(Reporting by Marianna Parraga; Editing by Rosalba O'Brien andLisa Shumaker)