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INVESTMENT CLIMATE IN COLOMBIA

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Presentation on theme: "INVESTMENT CLIMATE IN COLOMBIA"— Presentation transcript:

1 INVESTMENT CLIMATE IN COLOMBIA
Isaac Yanovich F. President ECOPETROL S.A. Cartagena, Mayo 20, 2005

2 Investment Climate in Colombia
AGENDA Investment Climate in Colombia Partnership Opportunities with Ecopetrol Why Partner with Ecopetrol S.A.

3 Key Measures – Government Level Key Measures – Ecopetrol S.A.
INVESTMENT CLIMATE Colombia has adopted bold measures to enhance investment climate Key Measures – Government Level Creation of National Hydrocarbon Agency (ANH) Enhanced fiscal terms for E&P contracts Improved physical security Increased exploration budget for Ecopetrol and ANH Key Measures – Ecopetrol S.A. Leadership role of promoting new projects and ventures in Exploration and Production

4 Incumbent players strengthening their position
INVESTMENT CLIMATE We have seen a strong industry response Incumbent players strengthening their position Occidental Petroleum, ChevronTexaco, BP, Total, Petrobras, Perenco New players entering the market ExxonMobil return after 10 years, BHP Billiton, Repsol, Burlington Resources, Lukoil Overall, E&P investment has increased significantly

5 ECOPETROL INVESTMENT PROGRAM
Ecopetrol is spending the highest E&P budget in recent years Exploration Budget (US$MM) Production Budget (US$MM)

6 Investment Climate in Colombia
AGENDA Investment Climate in Colombia Partnership Opportunities with Ecopetrol Why Partner with Ecopetrol S.A.

7 Current partnership opportunities with ECP Ecopetrol Priorities in E&P
Ecopetrol priority in E&P is to halt declining production Current partnership opportunities with ECP Ecopetrol Priorities in E&P Lead industry into high impact exploration areas Maximize output from existing fields Develop heavy oils Attract investment into small and medium size prospects Expand internationally Acquire licenses jointly for new areas from ANH Develop mature fields (e.g. Tibú Project) Develop heavy oil potential (e.g. Castilla Project) Joint ventures with Ecopetrol to operate in other Latin American countries Invest in the Private equity Exploration Fund Ecopetrol was created fifty two years ago when the concession De mares reverted to the Country. It’s the largest and most important company in Colombia, It’s a stock company fully owned by government and other government companies. Integrated in the whole value chain. Ecopetrol has a significant administrative autonomy and has a large and long-dated experience with foreign partners. The Colombian portfolio of exploration opportunities is directed to investors in the oil sector. Contracting has been made attractive by easy and flexible processes, and by technical and commercial competitive advantages in a country of high prospectivity.

8 PARTNERSHIP OPPORTUNITIES
1. New Areas offered by ANH General Description Potential Colombia is vastly unexplored ANH has wide acreage available for licensing Fiscal terms of new contract are very attractive. Ecopetrol is willing to invest in exploration and diversify risk through partnerships Diverse project sizes Requirements Technical studies $20 to $30 US$ million in Piedemonte areas $5 to $15 US$ million in other areas Ecopetrol was created fifty two years ago when the concession De mares reverted to the Country. It’s the largest and most important company in Colombia, It’s a stock company fully owned by government and other government companies. Integrated in the whole value chain. Ecopetrol has a significant administrative autonomy and has a large and long-dated experience with foreign partners. The Colombian portfolio of exploration opportunities is directed to investors in the oil sector. Contracting has been made attractive by easy and flexible processes, and by technical and commercial competitive advantages in a country of high prospectivity.

9 General Description Potential Timetable PARTNERSHIP OPPORTUNITIES
2. Develop mature fields – Tibu Project General Description Potential 90 – 255 mmbls proven Undeveloped Reserves. Incremental production: kbopd Required investment: $USMM Existing “Tibú” field with current production: 2,000 bopd, °API Low Recovery Factor: 27% Low efficiency water flood system (Tertiary formations). Opportunity Tertiary Infill Drilling Redesign of Waterflood Pattern Cretaceous Horizontal or highly deviated drilling (Cretaceous). Timetable Prequalification round in progress Deadline for prequalification documents June 30, 2005 ECOPETROL invites all of you to a special presentation about Tibu Project tomorrow at 11:30 (Pegasso Room)

10 PARTNERSHIP OPPORTUNITIES
3. Develop heavy oils – Castilla Project GENERAL DESCRIPTION OPPORTUNITY PRODUCTION Existing “Castilla” field with current production of 47,000 BOPD, 13 °API. To reach 60,000 BOPD in In September 2005 Existing “Chichimene” field, San Fernando Formation, current production of 400 BOPD, 9 °API MMBLS Proved and Unproved Reserves. Incremental production: BOPD EXPLORATION Cristales and Arama Prospect to be drilled in 3Q and 4Q 2005. Caño Sur Block. Reprocessing Seismic in 2005 in 1.6 MM Hectareas. MMBLS Heavy Oil. ACTIVITIES REQUIRED: Drill development and exploratory wells D and 3D seismic programs Pipe Line and Facilities Investment “Upgrading Plant” INVESTMENT REQUIRED > US$ 700 MM TIMETABLE: Ecopetrol will open public process in June 15, 2005

11 PARTNERSHIP OPPORTUNITIES
4. JV´s with Ecopetrol to operate in other Latin American countries We are looking for investment opportunities with existing production and low and medium exploratory risk Focus: Target markets: Ecuador, Argentina, Brazil, Venezuela Target Size of net reserves: MBLS. Target size of minimum production: BOPD Preferably crude, not gas. Preferably producing basins, with exploratory upside

12 PARTNERSHIP OPPORTUNITIES
5. Private equity exploration Fund General Description Potential Establish Colombia’s first Oil & Gas Private Equity Fund raising US$ 100 million Invest in often left-out oil & gas properties Enhance value by raising productivity and diversifying exploration and new incremental / secondary production projects Exit via trade sale within a 10-year time frame, 5-year investment period Fund manager with proven track record More than 30% net return to investors Royalties reduced to 8% for most small and medium size fields Colombia is unexplored; 38% of the potential reserves are in below 10 mmboe reservoirs Ecopetrol was created fifty two years ago when the concession De mares reverted to the Country. It’s the largest and most important company in Colombia, It’s a stock company fully owned by government and other government companies. Integrated in the whole value chain. Ecopetrol has a significant administrative autonomy and has a large and long-dated experience with foreign partners. The Colombian portfolio of exploration opportunities is directed to investors in the oil sector. Contracting has been made attractive by easy and flexible processes, and by technical and commercial competitive advantages in a country of high prospectivity. Requirements Target funding: US$100 MM ECOPETROL will fund US$25MM Fund closing: 2Q 2005

13 Investment Climate in Colombia
AGENDA Investment Climate in Colombia Partnership Opportunities with Ecopetrol Why Partner with Ecopetrol S.A.

14 E&P Knowledge and expertise in Colombia
ECOPETROL – LEADER IN COLOMBIA Why partner with Ecopetrol? Strong Company Valuable assets E&P Knowledge and expertise in Colombia Extensive experience in managing partnerships with world class companies

15 Net Income in Millons US Dollars
ECOPETROL – LEADER IN COLOMBIA Strong Company Net Income in Millons US Dollars Total Sales in US$ Billion 5,1 3,9 4,0 3,8 59% Exports 40% 44% 59% 41% Local Sales 60% 56% 41% Total revenues in 2003 year end will reach US$4,000 million. And total exports accounts for over 40% of total sales. 2001 2002 2003 2004

16 ECOPETROL – LEADER IN COLOMBIA
Valuable assets EXPLORATION 19 Direct exploration blocks 6 Shared risk contracts (SRC) 3 E&P contracts signed with ANH 4 TEAs signed with ANH 34 Association Contracts under exploration PRODUCTION 48 direct production blocks 47 Association contracts under production INFRASTRUCTURE Two refineries Barrancabermeja: BPD Cartagena: BPD About 210 production fields 8.592 kms of pipelines Main port on the Caribbean Sea (Coveñas) Second port on the Pacific coast (Tumaco)

17 E&P Knowledge and expertise
ECOPETROL – LEADER IN COLOMBIA E&P Knowledge and expertise Geological Knowledge Local operational expertise: More than 200 production fields Competitive lifting costs Good Neighbor (Environment, Communities)

18 ECOPETROL – LEADER IN COLOMBIA
Experience in managing partnerships with world–class players Upstream ARGOSY BP BURLINGTON CEPSA CHEVRON- EMERALD EXXONMOBIL HOCOL LUKOIL NEXEN OMIMEX OXY PETROBRAS PETROLEUM PERENCO PETROSANTANDER PETROTESTING REPSOL-YPF TALISMAN ENERGY TEXACO TOTALFINAELF SAMPLE OF RECENT DEALS ExxonMobil/Petrobras/Ecopetrol to explore gas in Caribbean Offshore ChevronTexaco/Ecopetrol to expand production in existing gas fields OXY/Ecopetrol to invest in enhanced oil recovery in existing fields BP/Total/Ecopetrol to build gas processing plant (200 million cubic ft).

19 Security and overall business environment in Colombia has improved
ECOPETROL S.A. Final Remarks Final Remarks Security and overall business environment in Colombia has improved A wide range of opportunities exist in Colombia Upstream frontier areas, heavy oils, mature fields, marginal fields. ECOPETROL S.A. is an ideal partner to operate in Colombia

20 THANK YOU Contact info: Isaac Yanovich F. President Ecopetrol S.A. Ph: (571) Bogotá, Colombia

21 INVESTMENT CLIMATE The investment environment in Colombia is improving RESULTS DRIVERS Arrival of new companies into the country and return of others Better security Increased E&P activities Wells Seismic Rigs Enhanced fiscal terms for E&P terms Improved security Active role of Ecopetrol leading E&P activities and new ventures

22 Potential Target Players Timetable
PARTNERSHIP OPPORTUNITIES CARTAGENA REFINERY EXPANSION General Description Potential Equity participation in strategic refining location in the Caribbean Estimated budget: US$800 Million Cartagena Refinery expansion to: Double capacity to 140 KBPD Enhance conversion factor Comply with environmental regulations Position Cartagena as a key oil and petrochemical center in the Caribbean Ecopetrol is interested in attracting private investment to the refinery Target Players Oil and petrochemical players Equipment suppliers Industrial Service suppliers Financial institutions and export credit agencies Ecopetrol was created fifty two years ago when the concession De mares reverted to the Country. It’s the largest and most important company in Colombia, It’s a stock company fully owned by government and other government companies. Integrated in the whole value chain. Ecopetrol has a significant administrative autonomy and has a large and long-dated experience with foreign partners. The Colombian portfolio of exploration opportunities is directed to investors in the oil sector. Contracting has been made attractive by easy and flexible processes, and by technical and commercial competitive advantages in a country of high prospectivity. Timetable Construction Road show Mid 2005

23 General Description Potential Timetable PARTNERSHIP OPPORTUNITIES
2. Develop mature fields – Tibu Project General Description Potential 90 – 255 mmbls proven Undeveloped Reserves. Incremental production: kbopd Required investment: $USMM Existing “Tibú” field with current production: 2,000 bopd, °API Low Recovery Factor: 27% Low efficiency water flood system (Tertiary formations). Opportunity Yacimientos Terciarios Perforación “adicional” Rediseño del patron de inyección de agua Yacimientos Cretacicos Perforación horizontal o de alta desviación Timetable Prequalification round in progress Deadline for prequalification documents June 30, 2005 ECOPETROL invites all of you to a special presentation about Tibu Project tomorrow at 11:30 (Pegasso Room)


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