1. Agencia Nacional de Hidrocarburos
Libertad y Orden
Agencia Nacional de Hidrocarburos A new era in the Colombian oil and gas industry Armando Zamora Reyes Director General
January 2005
Agencia Nacional de Hidrocarburos

2. Agencia Nacional de Hidrocarburos
Agenda
New Institutional Structure
New E&P contract
E&P Opportunities
Colombia at a glance
Improved business environment
Security issues
Agencia Nacional de Hidrocarburos

3. New institutional structure
ANH
Resource administrator
Ecopetrol
Operator & regulator
Ecopetrol Inc.
Operator
Association contract
New E&P contract
Agencia Nacional de Hidrocarburos

4. Functions
Integral administration of the nation's hydrocarbons resource
Knowledge
of resource base
Policy & planning
E&P
Licensing
E&P
Realizing
the benefits
Hydrocarbon potential
Exploration opportunities
E&P information systems
Oil & gas policies
Security of supply
Design
E&P contracts
Promotion and negotiation
Assignment of areas
Contract
administration
Royalty collection
Collection of
other economic
rights
Community
participation
Agencia Nacional de Hidrocarburos

5. Agencia Nacional de Hidrocarburos
Agenda
New Institutional Structure
New E&P contract
E&P Opportunities
Colombia at a glance
Improved business environment
Security issues
Agencia Nacional de Hidrocarburos

6. New E&P contract basic elements
Type of contract
Duration
Work Programs
Operations
Economic Terms
Royalty / Tax + High price participation
100% WI to contractor through contract life
Exploration 6 yrs yrs extension
Evaluation 1-2 yrs yrs extension
Exploitation 24 yrs Life of Field extension, per field
Extensions by default on fulfillment of pre-established conditions
Exploration Minimum program, per phase, adjustable
Evaluation At contractor's discretion
Exploitation Plan accepted by ANH, with updates
Annual work programs
Autonomy and flexibility to the contractor
Follow up by ANH
100% production to the contractor, after royalty payment
Sliding scale royalty + Tax
Eventual payment of 30% of surplus income over trigger price of
~ US$ 27/bbl WTI for light crude.
Natural gas and heavy oil with a very high trigger price and other
incentives
Assets belong to contractor
Agencia Nacional de Hidrocarburos

7. New E&P contract - elements
Contract type: royalties + taxes (+ ANH high price participation rights)
Phases’ length:
- Exploration 6 years years extension
- Evaluation 1-2 years years extension
- Exploitation 24 years + extension to final depletion
Assignment: though modern, transparent, and efficient procedures
Follow-up: with high international standards
Agencia Nacional de Hidrocarburos

8. Agencia Nacional de Hidrocarburos
Economic terms
Per field
Sliding scale
royalty
% production
Discount
Light crude
Gas Onshore
Heavy Oil
Gas Offshore
(>1000 ft) -
- 20%
- 25%
- 40%
20%
20%
20%
16%
16%
12%
12%
10% 8% 8%
4.8%
4.8%
Production
(mboed)
(mboed) 5 5
125
125
400
400
600
Payment to ANH
contingent to high prices
and when cumulative production > 5 mmbls
30% of surplus income
over trigger price
As a % of actual field realization
price
Trigger price
Light crude: ~ US$ 27/bbl WTI
Heavy crude: US$ 40/bbl WTI
Gas: agreed (Henry Hub)
Adjusted with US inflation
Agencia Nacional de Hidrocarburos

9. International competitiveness
60%
40%
Colombia
New Model
United Kingdom
50%
Pakistan
50%
Peru
40%
Argentina
60%
Ecuador
Brazil
India
State
Take
Kazakhistan
Contractor Take (1 - State Take)
30%
Australia
70%
Trinidad & Tob.
Colombia
Association contract
Thailand
Sudan
20%
80%
China
Angola
Turkmenistan
Gabon
Bolivia
10%
Norway
90%
Malaysia
Indonesia
Egypt
Venezuela 0%
100%
10%
20%
30%
40%
50%
Profitability
Source: PEPS-USGS and calculations ANH
Agencia Nacional de Hidrocarburos

10. Summary of new E&P contract
Type of contract
Economic Terms
Work programs
and operations
Duration
Top quartile
Full materiality, 100% of prize to exploration risk
No need to commit in advance re. cost oil, reserves, or profitability
Time enough to discover, make it feasible and realize the reward
Standard or better than industry
Evaluation: grace period to make feasible a discovery
Exploitation period per individual discovery / field
Extensions w/o negotiations until field depletion
Autonomy and flexibility
Right to monetize discoveries
Non intrusive follow up – easy contract administration
Stake take (50%) and profitability
Robustness, lower downside - better upside potential
100% cost effectiveness / incentive (before tax)
Simplicity – easy mathematics, known crude marker, no cost control
Incentives for gas and heavy oil
Agencia Nacional de Hidrocarburos

11. Agencia Nacional de Hidrocarburos
Agenda
New Institutional Structure
New E&P contract
E&P Opportunities
Colombia at a glance
Improved business environment
Security issues
Agencia Nacional de Hidrocarburos

12. Diverse portfolio for all players Agencia Nacional de Hidrocarburos
E&P Opportunities
Diverse portfolio for all players
from
High risk exploration in frontier basins
e.g. Caribean deepwater, Los Cayos, Caguan, foothills to
Low risk re-entry to drilled wells that have
tested hydrocarbons with a P/L nearby
in between
heavy oil
gas
upgrades
companies wanting to share risk
~ 100 million hectares in sedimentary basins with unkown potential and exciting exploration opportunities 95% under-explored giant discoveries Only ~2000 wildcats All services available
Agencia Nacional de Hidrocarburos

13. Under explored country Agencia Nacional de Hidrocarburos
Opportunities in Colombia
Diversity
Complexity
Risk
Various Models
Geologist
Multidimensional
Under explored country
Unknown potential
Exciting exploration
Agencia Nacional de Hidrocarburos

14. Agencia Nacional de Hidrocarburos
Modern E&P Information System
new
EPIS
website
Agencia Nacional de Hidrocarburos

15. Agencia Nacional de Hidrocarburos
Agenda
New Institutional Structure
New E&P contract
E&P Opportunities
Colombia at a glance
Improved business environment
Security issues
Agencia Nacional de Hidrocarburos

16. Agencia Nacional de Hidrocarburos
Colombia's Location
Agencia Nacional de Hidrocarburos

17. A Few facts about Colombia Agencia Nacional de Hidrocarburos
Colombia at a Glance
A Few facts about Colombia
Total Area: 1,138,910 sq km.
Roughly twice the size of Alberta. It is the only South American country with coastlines on both North Pacific Ocean and Caribbean Sea.
Population: 42,310,775
Median age total: 25.8 years. Male: 24.9 years. Female: 26.7 years.
Life expectancy total population: years, Male: years, Female: years
Multicultural population: Mestizo 58%, White 20%, Mulato 14%, Black 4%, Black Amerindian 3%, Amerindian 1%
Literacy Rate Total Population: 92.5% male: 92.4% female: 92.6%
Agencia Nacional de Hidrocarburos

18. Agencia Nacional de Hidrocarburos
Colombia at a Glance
A Few facts about Colombia
Labor force: 18.3 million (1999 est.)
Labor force - by occupation: services 46%, agriculture 30%, industry 24%
GDP 2003 USD$78,600 MM (At purchasing power parity $262,000 MM)
Real growth rate: 3.95% for 2003 and 4.00% for 2004.
Natural Resources: petroleum, natural gas, coal, iron ore, nickel, gold, copper, emeralds, hydropower.
Industries: textiles, food processing, oil, clothing and footwear, beverages, chemicals, cement; gold, coal, emeralds
Exports: $12.96 billion f.o.b. (2003 est.)
Exports - commodities: petroleum, coffee, coal, apparel, bananas, cut flowers
More than 400 multinational companies currently work in Colombia.
Agencia Nacional de Hidrocarburos

19. Multiple Regional Development Areas Agencia Nacional de Hidrocarburos
Colombia at a Glance
Multiple Regional Development Areas
Colombia is highly urbanized, with cities and towns throughout the country.
While the population of many Latin American countries is concentrated in one or two major cities, Colombia’s population is well distributed throughout the country, with three of its cities boasting more than two million inhabitants.
There are another 11 cities with population exceeding 500,000 and 22 cities with more than 100,000 inhabitants
Agencia Nacional de Hidrocarburos

20. Colombia at a Glance Political, Economic and Social Stability
According to the IFC, Colombia together with Slovakia are the countries where the conditions have improved the most for doing business.
Colombia enjoys a very strong democratic tradition. Since 1900, only once has Colombia been ruled by a non democratically elected government (from 1954 to 1958 when the country was ruled by Military Dictatorship).
Colombia has always respected its commitments. Colombia has never defaulted its debt.
Colombia is an active member of all UN related social organizations (ILO. FAO, Unicef).
Agencia Nacional de Hidrocarburos

21. Agencia Nacional de Hidrocarburos
Agenda
New Institutional Structure
New E&P contract
E&P Opportunities
Colombia at a glance
Improved business environment
Security issues
Agencia Nacional de Hidrocarburos

22. Agencia Nacional de Hidrocarburos
Business environment
GDP Growth: 2.5% avg. last 10 years to 4+% 2003 and 1H04
Unemployment Rate: 15.6% Agu.02 to current 12.9%
Fiscal Deficit: from -5% to -2.5% of GDP in 4 years
Foreign Investment : +25% in 2003 and +73% 1H04
Stock Exchange Index: +100% last 12 months
External Debt : sustained at 50% GDP, never default
President Uribe popularity rating 70% 00 01 02 03 %
GDP growth 1% 2% 3% 4% 04
Dow Jones
Stock Exchange 01 02 03
Colombia 10 15 20
1000
1500
2000 04
2500
3000
Fiscal Deficit 00 01 02 03
% GDP - 3% 2% 1% 4% 04 00 01 02 03 %
Inflation 6% 7% 8% 9% 04
Agencia Nacional de Hidrocarburos

23. Agencia Nacional de Hidrocarburos
Industry status
THE BASIS
Long and relatively rich oil industry – proved basin
Exciting exploration open to unknown potential
5 giant discoveries,
many skilled professionals,
km plus pipelines
Relatively under-explored country
Geological modeling: more questions unresolved
than answers
Agencia Nacional de Hidrocarburos

24. Agencia Nacional de Hidrocarburos
Agenda
New Institutional Structure
New E&P contract
E&P Opportunities
Colombia at a glance
Improved business environment
Security issues
Agencia Nacional de Hidrocarburos

25. Eliminate drug trafficking
Illicit coca crops
Source: Ministry of Defense
Agencia Nacional de Hidrocarburos

26. Maintain deterrent capability
Demobilization
Presidential Period:
Total 10,899
Individual demobilization
6,308
Collective demobilization
4,591
Source: Ministry of Defense
Agencia Nacional de Hidrocarburos

27. Other security numbers
Democratic and Social Security Policy implemented
Financing sources + number of rebels forces weakened
Coca illegal crops from (2000) to ca has. today
Circa rebels demobilized
Over displaced persons have received humanitarian assistance and returned home
Attacks against infrastructure - 57%
Only 1 attack against towns during 2004
Illegal road blocks –60%
Kidnapping –52%
Dramatic turnaround of
the security and drugs trend
Agencia Nacional de Hidrocarburos

28. Agencia Nacional de Hidrocarburos
Conclusions
Business environment is clearly, rapidly and sustainly improving
Separation of state roles: Ecopetrol as operator – ANH as resource administrator
Top quartile new contractual scheme
Diverse E&P opportunities with unknown potential and exciting exploration
Positive industry response
Agencia Nacional de Hidrocarburos

29. Agencia Nacional de Hidrocarburos
Thanks for your attention
Colombia:
THIS IS THE
TIME
AND THE
PLACE
Agencia Nacional de Hidrocarburos