Colombia’s energy security is eroding faster than most investors realize. According to the Informe de Recursos y Reservas (Resources and Reserves Report, IRR) 2025, published June 23, 2026 by the Agencia Nacional de Hidrocarburos (National Hydrocarbons Agency, ANH), the country’s proven natural gas reserves — technically designated Category 1P — have fallen to 1,717 billion cubic feet (Bcf), known in Colombia as Giga pies cúbicos (billion cubic feet, Gpc). That figure represents a 54% collapse from the 3,782 Bcf held at the end of 2018. It is not a cyclical dip. It is a structural deterioration that is accelerating, driven in significant part by a government that has made halting hydrocarbon development an explicit policy objective.

For investors and analysts tracking Colombia’s fiscal position, industrial competitiveness, and household energy costs, the IRR 2025 is a report that demands careful reading. What it shows is a country consuming its own energy inheritance — and doing so at a pace it is no longer replenishing.

Seven Years of Losses

In 2018, Colombia held 3,782 Bcf of proven natural gas reserves. By the end of 2025, that figure had been cut nearly in half, to 1,717 Bcf. The 2025 result alone represents a drop of 347 Bcf compared to the 2,064 Bcf recorded at end-2024 — a single-year decline of 16.8%. Against the ten-year average of 3,259 Bcf, the current level is 47.3% lower.

What is striking about the annual trajectory is that the steepest declines have occurred since August 7, 2022 — the date President Gustavo Petro took office. Between 2018 and 2022, reserves moved within a range of 2,817 Bcf to 3,782 Bcf, fluctuating as production and new additions roughly balanced. Beginning in 2022, the trend turned sharply and consistently downward: 2,817 Bcf at end-2022, 2,373 Bcf at end-2023, 2,064 Bcf at end-2024, and 1,717 Bcf today. That is a loss of 1,100 Bcf in just three years.

The reserves-to-production (R/P) ratio — the industry’s standard measure of how many years of supply remain at current extraction rates — stood at 5.9 years as of December 31, 2025. Context: in 2007, when Colombia’s gas reserves reached their historical peak, the R/P ratio was 14.1 years. The current figure is 8.2 years below that peak, and 2.2 years below the ten-year average of 8.2 years. Put simply, at today’s production rate, Colombia would exhaust its proven gas reserves in under six years.

Graphic 1: Colombia proven natural gas reserves (1P, Bcf) 2018–2025.

The Reserve Replacement Crisis

Reserves decline when production exceeds new additions. In 2025, Colombia’s total annual gas reserve additions reached negative 58 Bcf — meaning the country certified less gas than it extracted from the ground. This compares to positive additions of 42 Bcf in 2024, and a ten-year historical average of 146 Bcf per year in new additions. The 2025 figure is the worst annual result in the dataset.

The ANH’s reserve balance formula is straightforward: ending reserves equal starting reserves, minus production, plus total annual additions. With additions at -58 Bcf and production at 290 Bcf, the combined drain on reserves was 348 Bcf in a single year. The reserve replacement rate — which expresses additions as a percentage of production — stood at negative 20%, 32 percentage points worse than the replacement rate recorded in 2024.

“In 2024, Colombia lost its self-sufficiency and became dependent on foreign liquefied natural gas (LNG).” — El Colombiano, June 2026

A reserve replacement rate of negative 20% means that for every 100 cubic feet of gas Colombia produced in 2025, it certified negative 20 cubic feet of new supply. The industry considers a rate below 100% a warning sign. Colombia is now operating at negative territory.

The ANH identifies “technical revisions” — downward reinterpretations of existing field data — as the primary driver of the negative additions figure. Specifically, a downward revision of 125 Bcf from technical reassessments erased 60 Bcf in new discoveries and 5 Bcf in enhanced recovery additions, producing the net negative result. The revision reflects how mature Colombia’s major gas-producing fields have become. Over the last four years, the ANH notes, negative technical revisions have become a consistent pattern, “evidencing the high degree of maturity of the most representative gas fields in Colombia.”

The counterweight — new exploration discoveries — contributed 60 Bcf in 2025, a 62% increase over 2024 and the report’s most encouraging data point. In October 2024, Colombia announced its biggest gas discovery in four decades — a genuinely important find, though its contribution to 2025 additions illustrates that even large individual discoveries cannot compensate for the suppression of systematic exploration activity. It underscores that the remaining path to reserve growth runs through exploration, precisely the activity the Petro government has chosen to suppress.

Graphic 2: Annual gas reserve additions vs. production 2018–2025.

Production in Structural Decline

Gas production in 2025 came in at 290 Bcf — 61 Bcf less than the 351 Bcf commercialized in 2024, a reduction of 17.4%. Against the ten-year average of 385 Bcf per year, 2025 production was 95 Bcf below the historical norm.

The decline is not a one-year event. It is a trend line, and independent analysts say it will steepen. According to Luis David Pachón, energy and gas analyst and consultant quoted by El Colombiano in June 2026, Colombia’s average gas production potential in May 2026 was 789 Giga BTU por día (billion BTU per day, GBTUD). That represents a 7% drop from 848 GBTUD the previous year. Pachón’s estimates project a continued descent: 759 GBTUD in 2027, 706 GBTUD in 2028, 612 GBTUD in 2029, and just 542 GBTUD by 2030. That is a 31% decline from today’s already-reduced production level over five years.

These are not projections built on pessimistic assumptions. They are field-level extrapolations of what happens when existing reservoirs mature and no new supply is added. Without new exploration and development, this trajectory is, according to Pachón’s analysis, essentially locked in.

Graphic 3: Colombia gas production forecast 2026–2030 in GBTUD with SPEC import capacity reference line.

Geographic Concentration: A Portfolio with No Diversification

Colombia’s gas reserves are not only shrinking — they are dangerously concentrated. More than 95% of the country’s proven 1P gas reserves are held in just five sedimentary basins. The Cordillera Oriental leads with 714 Bcf, or 41.6% of the national total. The Valle Inferior del Magdalena holds 337 Bcf (19.6%), offshore Guajira contributes 292 Bcf (17%), the Llanos Orientales account for 157 Bcf (9.1%), and the Valle Medio del Magdalena adds 134 Bcf (7.8%). Together, these five basins hold 95.1% of Colombia’s proven gas reserves.

This concentration creates compounding risk. As the ANH’s own technical revisions confirm, the most mature fields driving those downward adjustments are concentrated in precisely these basins. A major operational disruption, regulatory interference, or accelerated depletion in any one of them would hit the national supply balance hard. Offshore Guajira’s 17% share is particularly relevant to watch, as it represents the primary frontier for future offshore development — development that the government’s moratorium on new contracts has deferred indefinitely.

Graphic 4: Colombia gas reserves 1P by sedimentary basin.

Oil Reserves: Stable on the Surface, Hollowed Out Below

Colombia’s proven oil reserves present a more stable picture at first glance. The country held 2,020 million barrels (Mbl) of 1P oil reserves at December 31, 2025, essentially unchanged from the 2,035 Mbl recorded in 2024 — a variation of -0.7%. The oil R/P ratio actually improved slightly, from 7.2 years in 2024 to 7.4 years in 2025, reflecting both effective field management through planes de producción incrementales (incremental production plans, PPI) and enhanced oil recovery (EOR) programs.

The ANH notes that between 2024 and 2025, PPI-EOR programs incorporated 58 Mbl into 1P reserves — 97% of the volume achieved the prior year, demonstrating that intensive management of existing fields is compensating, for now, for the near-complete absence of new exploration success.

But the stability in headline reserves conceals a critical vulnerability: the exploration pipeline is effectively empty. New oil reserve additions associated with discoveries — new wells finding new oil — reached only 4 million barrels in 2025. Between 2012 and 2018, the average was 85 million barrels per year in discovery-driven additions. That is a 95.3% collapse in exploratory success. When PPI-EOR programs exhaust their incremental potential in the medium term, there will be nothing in the exploration queue to replace them.

Colombia has 2,404 Mbl of contingent petroleum resources at the 3C level — discovered but not yet commercially viable — with 56% (1,358 Mbl) held back by environmental and social contingencies, and 20% (475 Mbl) blocked by unfavorable economics at current prices. The contingent resource base is real, but converting it to production requires investment, permitting, and a government that is not actively discouraging the industry. As Finance Colombia has reported, the Petro administration’s relationship with the hydrocarbon sector has been defined by hostility rather than partnership — a dynamic visible in Shell’s April 2025 exit from Colombian offshore gas projects, joining a parade of majors that have reduced or eliminated their Colombian footprint.

Graphic 5: New oil reserve additions from discoveries (Mbl) 2012–2025.

The Petro Factor: Policy as Accelerant

President Gustavo Petro has made the energy transition a defining banner of his administration. Within that framework, he has chosen not to sign new hydrocarbon exploration contracts — a policy decision with consequences that are now quantifiable in the IRR 2025 data.

The causal logic is not complicated: exploration today yields reserves in five to fifteen years. When exploration stops, the reserve pipeline runs dry on a predictable schedule. Colombia’s gas fields are mature. The industry has known for years that sustaining supply required either deepening work in existing concessions or opening new ones. Petro’s government has constrained both paths — by refusing new contracts and by creating a regulatory and political environment that has chilled investment in existing operations.

The ANH’s own report acknowledges the dynamic indirectly. It highlights that EOR project filings increased 82% comparing the 2020–2022 period to 2023–2025, which it presents as evidence of productive government measures. But this increase reflects the industry pushing harder on existing fields precisely because new exploration is not an available avenue — a compensatory reaction to policy constraint, not evidence that the policy is working. Even Ecopetrol (BVC: ECOPETROL, NYSE: EC), the state-controlled oil company whose board the Petro administration increasingly controls, has had to navigate the tension between engineering reality and the government’s anti-hydrocarbon posture; as far back as 2023, Ecopetrol’s then-new president was publicly advocating for more exploration in direct opposition to Petro’s stated goals.

The Asociación Colombiana del Petróleo y Gas (ACP) has consistently warned that without new exploration contracts, Colombia’s hydrocarbon production would follow a predictable decline curve. The IRR 2025 confirms those warnings with data. The reserves trajectory under Petro — from 2,817 Bcf at end-2022 to 1,717 Bcf today — is the most direct measure available of what a no-new-contracts policy costs in energy security terms.

Import Dependency: An Avoidable Humiliation

The practical consequence of reserve depletion is playing out in real time at Colombia’s gas import terminals — and in consumers’ utility bills. Finance Colombia reported in March 2025 that Bogotá’s Vanti had already raised gas rates 36% and Medellín’s EPM by 21%, with the deficit cited as the direct cause. In 2024, Colombia lost its natural gas self-sufficiency for the first time and began depending on imported liquefied natural gas (LNG) to meet domestic demand — a fact reported by El Colombiano in June 2026. The situation deteriorated further: in the first week of June 2026, 32% of all gas consumed in Colombia came from imports through the regasification plant in Cartagena, operated by Sociedad Portuaria el Cayao (SPEC). That is the highest import share in the country’s history, according to data from the Sistema Electrónico de Gas (Electronic Gas System).

SPEC’s Cartagena facility has an import capacity of 465 GBTUD. Approximately two-thirds of that capacity is already being utilized to serve national demand, leaving a shrinking fraction available to absorb any additional supply shortfall. Given the production decline trajectory outlined by Pachón — down to 542 GBTUD by 2030 — Colombia will require significantly more import capacity than it currently has, or it will face supply rationing.

Additional regasification projects are under development — in Buenaventura, Coveñas (Sucre), and Ballena (La Guajira), in addition to the operating Cartagena facility. These are necessary investments. But they are investments in the infrastructure of dependency: Colombia building the capacity to pay other countries for gas it has in its own subsoil but has chosen not to extract.

The distributional consequence deserves to be stated directly. Over the past two decades, access to natural gas transformed household energy use for millions of lower-income Colombians, displacing wood combustion in cooking and heating. Wood burning accelerates deforestation, degrades air quality, and imposes a disproportionate burden on households that cannot afford cleaner alternatives. A policy that drives Colombia back toward LNG import dependency — at premium prices — is a policy that will price gas out of reach for those same households, potentially reversing one of the country’s most concrete environmental gains. Cheaper domestic gas served the poor. Expensive imported LNG will not.

Graphic 6: Gas production decline vs. growing import share / SPEC capacity.

Contingent Resources: The Potential That Policy Cannot Unlock

There is one genuinely encouraging number in the IRR 2025: Colombia holds 10,540 Bcf of contingent gas resources at the 3C level — discovered, potentially recoverable volumes that are not yet classified as commercial reserves. Of that total, 7,855 Bcf (74.5%) sits offshore, with the remaining 2,685 Bcf onshore. Offshore resources are more than twice the onshore total, consolidating the offshore Caribbean as Colombia’s primary future supply option.

The obstacle is not geology. Of the 10,540 Bcf in contingent gas resources, 55% (5,818 Bcf) is held back by environmental and social contingencies — primarily offshore licensing processes, consulta previa (prior consultation), and community negotiations. Another 29% (3,037 Bcf) is blocked by legal and contractual contingencies, including the unresolved regulatory framework governing connections to the national transport system for offshore production. Only 9% is technically constrained.

The ANH has identified acceleration of environmental licensing for the offshore Sirius project as a priority measure for 2026. That is a constructive step. But accelerating the licensing of a single project does not substitute for the policy framework that would enable the industry to develop this contingent resource base systematically. The government’s refusal to sign new exploration contracts means the 10,540 Bcf of contingent offshore gas will remain contingent for the foreseeable future — a frustration the industry has tracked for years, as Finance Colombia documented as early as 2023 when a second consecutive failed tender for Pacific region gas infrastructure signaled the depth of the supply challenge.

Fiscal Implications for Investors

The royalty trajectory is one of the clearest financial signals in the IRR 2025. Since August 7, 2022, through December 31, 2025 — a 40-month window spanning the Petro administration — cumulative hydrocarbon royalties reached COP 29.6 trillion, averaging COP 0.74 trillion per month. The ANH projects that the existing 1P proven reserves, valued at current prices, will generate an additional COP 36 trillion in royalties over their remaining life.

That COP 36 trillion projection is not a guarantee. It assumes production continues at roughly current rates, that prices hold, and that the reserves are fully extracted. Given the R/P ratio of 5.9 years for gas and 7.4 years for oil, and given the absence of new exploration, the royalty stream is finite in a way it was not five years ago. Colombia’s fiscal planners and subnational governments that depend on hydrocarbon royalty transfers should be building their budgets around a declining baseline, not a stable or growing one.

For international energy investors, the picture is one of attractive geological potential — 10,540 Bcf of contingent gas resources, 2,404 Mbl of contingent oil — combined with a policy and regulatory environment that has made converting that potential into production exceptionally difficult. As the ANH has noted, the EOR and PPI programs within existing contracts are producing results. But those programs work within existing concessions. Without new exploration acreage, they are rearranging deck chairs on a ship whose fuel is running out.

The Petro administration ends in August 2026. What the next government inherits is not a blank slate: it inherits a reserve base that will take a decade of sustained investment to rebuild, import infrastructure sized to a new dependency it did not choose, and a domestic industry that has spent four years under sustained policy pressure. The IRR 2025 is the most comprehensive accounting yet of what that pressure has cost.

Finance Colombia has covered the evolution of Colombia’s hydrocarbon sector, gas supply outlook, and energy transition policy in depth. For related coverage see: Shell Exits Colombian Offshore Gas Projects (April 2025); Colombia Braces for Surging Energy Costs as Natural Gas Deficit Expands (March 2025); and Petro Administration Announces Natural Gas Rationing Despite Abundant Hydrocarbon Resources (October 2024). Additional technical data is available directly from the ANH at anh.gov.co.

Ecopetrol S.A. (NYSE: EC, BVC: ECOPETROL) reported first-quarter 2026 consolidated revenues of 28.6 trillion COP, a decline of 8.7% from 31.4 trillion COP in the year-earlier period, as lower crude oil prices and reduced hydrocarbon production compressed the top line for Colombia’s state-controlled oil and gas company. Against that backdrop, a marked recovery in refining margins and disciplined cost management lifted EBITDA by 1.5% to 13.5 trillion COP, yielding a 47% EBITDA margin and partially offsetting the revenue headwind. At the Q1 2026 average exchange rate of approximately 3,700 COP per USD, the quarter’s revenues translate to roughly $7.73 billion USD and EBITDA to approximately $3.65 billion USD.

Embattled Ecopetrol CEO Ricardo Roa was appointed to the position by Colombian President Gustavo Petro after managing his political campaign. (photo: Ecopetrol)

Net income for the quarter reached 2.9 trillion COP (approximately $784 million USD), down 7.7% year-over-year, reflecting the combined drag of lower revenues, a sharply elevated effective tax rate of 37.1%, and a one-time charge of 1.2 trillion COP for the impuesto al patrimonio — Colombia’s government-mandated wealth levy on large corporations established to fund post-disaster reconstruction measures. The company is also subject to a 10% income tax surcharge applicable for fiscal year 2026, which is embedded in the reported effective rate. The aggregate tax burden absorbed a disproportionate share of operating improvement relative to prior periods, limiting the flow-through of refining gains to the net income line.

Total hydrocarbon production averaged 725.2 thousand barrels of oil equivalent per day (kboed) in Q1 2026, below the 745 kboed recorded in the 2025 annual average cited by management during the March 2026 general shareholders’ meeting. Domestic crude output represented the largest component at approximately 520 thousand barrels per day (kbd). Ecopetrol’s Permian Basin operations in the United States contributed 91.8 kbd, underscoring the continued strategic importance of the international segment. Gas production continued a multi-year declining trend that poses a medium-term domestic supply challenge; management has sought to address this partially through regasification capacity additions at Puerto Bahía and on the Pacific coast, expected to come online in the second half of 2026 with a combined contribution of up to 430 billion BTU per day.

The refining segment delivered the quarter’s most pronounced operational outperformance. Ecopetrol’s domestic refineries, led by Refinería de Cartagena, processed 417.5 kbd of crude throughput. The integrated refining margin rose to $17.3 USD per barrel, a 60% improvement over the same quarter of 2025, driven by favorable differential pricing between domestic crude benchmarks and refined product values alongside ongoing operational efficiency improvements. The Comisión de Regulación de Energía y Gas (CREG) and the Ministerio de Minas y Energía remain central to the regulatory framework governing downstream margins over the medium term.

The balance sheet carries significant structural and contingent risk items of direct relevance to institutional credit and equity holders. Gross debt stood at 108.1 trillion COP (approximately $29.2 billion USD), representing a leverage ratio of 2.3 times trailing EBITDA — a level that leaves limited room for further deterioration before debt covenants or rating agency thresholds become binding. Ecopetrol holds a receivable of 4.2 trillion COP (approximately $1.14 billion USD) from the Fondo de Estabilización de Precios de los Combustibles (FEPC), a government fuel price stabilization mechanism that represents a claim on the Colombian treasury with timing and recovery risk. A dispute with the Dirección de Impuestos y Aduanas Nacionales (DIAN) over value-added tax assessments totals 12.26 trillion COP (approximately $3.31 billion USD) in aggregate, of which 10.22 trillion COP relates to Ecopetrol’s consolidated operations and 2.04 trillion COP to Refinería de Cartagena. Both cases are under administrative and judicial review; no provisions have been recognized in the financial statements pending resolution, but the potential liability represents a material contingency relative to the company’s quarterly net income.

On the corporate development front, Ecopetrol disclosed three significant transactions during or following the quarter. The company agreed to acquire producing assets from Gran Tierra Energy (NYSE: GTE, TSX: GTE) for $92.4 million USD, adding Colombian upstream production inventory in basins where both companies have operated. In Brazil, Ecopetrol launched a tender offer for shares of Brava Energia (BVMF: BRAV3) at 23 BRL per share, seeking to expand its footprint in that country’s oil and gas sector. And in a transaction that would reshape the mid-size independent landscape in Colombia, the company reached an agreement to acquire Parex Resources (TSX: PXT) for $250 million USD; Parex is a Colombia-focused producer with a complementary asset base across the Llanos and other producing basins. Collectively, the three transactions signal that Ecopetrol’s capital allocation strategy under the current government continues to favor upstream consolidation despite the elevated leverage profile.

The exploration portfolio generated positive news announcements. The Copoazú-1 exploratory well, drilled in Colombia’s Llanos foothills region, was confirmed as a commercial discovery, adding to the domestic reserve base. The Sirius offshore project advanced through the Consulta Previa process — a legally mandated prior consultation with indigenous and Afro-Colombian communities required before development of projects in or near their territories — reaching a milestone in community engagement that brings the project closer to formal development sanction. The Agencia Nacional de Hidrocarburos (ANH) oversees the licensing framework within which both projects operate.

“Ecopetrol is listed on the New York Stock Exchange; we are governed by the strict regulations of US federal agencies. Agencies like OFAC and the SEC could intervene in the company and could even accelerate the payment of financial obligations, which would be extremely grave for Ecopetrol.” — Martín Ravelo, President, Unión Sindical Obrera (USO)

The ISA transmission segment, managed through Ecopetrol’s majority stake in ISA — Interconexión Eléctrica S.A., contributed stable regulated cash flows during the quarter. ISA completed 46 transmission reinforcement works across its Latin American concession portfolio. The segment also completed the acquisition of 100% of IE Madeira in Brazil, consolidating its position in that country’s power grid interconnection infrastructure. ISA further submitted a competitive bid for the Río Bueno–Puerto Montt high-voltage transmission line concession in Chile, demonstrating the group’s appetite for long-duration, inflation-linked infrastructure assets across the Andes region. For institutional investors evaluating Ecopetrol as a blended hydrocarbons-and-infrastructure holding, ISA’s consistent cash generation provides partial diversification from crude price volatility, though it does not insulate the consolidated entity from headline governance risk.

The most consequential variable for the investment thesis over the near term is Ecopetrol’s prolonged governance crisis. At the company’s general shareholders’ meeting on March 27, 2026, held at the Corferias convention center in Bogotá, minority shareholders loudly heckled president Ricardo Roa — with audible shouts of “¡Fuera, fuera!” reverberating through the hall — as debate over his leadership erupted into open confrontation. The meeting approved a dividend of 121 COP per share for minority holders and a 4 trillion COP distribution to the Colombian government as majority shareholder, payable in two installments by June 30, 2026. Despite the financial business conducted, governance overshadowed the proceedings.

Roa faces two separate judicial proceedings. The Fiscalía General de la Nación formally charged him in connection with alleged influence peddling related to the purchase of an apartment in northern Bogotá — charges he has denied. Separately, the Consejo Nacional Electoral (CNE) is examining whether campaign spending limits were violated during President Gustavo Petro’s 2022 presidential campaign, which Roa managed — an investigation that Finance Colombia has covered in detail. Angela Maria Robledo, Chair of the Board of Directors, defended the board’s decision to retain Roa at the March assembly, citing the constitutional presumption of innocence. However, four of the nine board members had already formally recorded their support for his removal at that point, exposing a divided governance structure at a time when strategic and operational decisions require unified leadership.

The Unión Sindical Obrera (USO), which represents approximately one-third of Ecopetrol’s workforce, issued a production strike ultimatum timed to a March 30 board meeting. Martín Ravelo, president of the USO, framed the leadership crisis explicitly in terms of US regulatory risk: “Ecopetrol is listed on the New York Stock Exchange; we are governed by the strict regulations of US federal agencies. Agencies like OFAC and the SEC could intervene in the company and could even accelerate the payment of financial obligations, which would be extremely grave for Ecopetrol.” Ravelo further warned that the company’s outstanding international debt — which he placed at approximately $30 billion USD and which is exacerbated by elevated interest rates — left Ecopetrol exposed to potential covenant triggers or early repayment demands in a scenario where the Securities and Exchange Commission (SEC) or the Office of Foreign Assets Control were to take enforcement action.

Following sustained pressure from the USO, minority shareholders, and opposition political figures, Ecopetrol’s board approved an extended leave of absence for Roa beginning April 7, 2026. Under the arrangement, Roa used accrued vacation through May 27, followed by 30 calendar days of unpaid leave beginning May 28, extending his absence through the end of June — a period encompassing Colombia’s presidential first round on May 31 and a potential runoff on June 21. Juan Carlos Hurtado Parra, the company’s executive vice president of hydrocarbons and designated first alternate to the presidency since November 2025, was appointed acting president. Hurtado Parra holds an MBA in International Oil and Gas and brings more than 28 years of energy sector experience to the acting role, having previously served as vice president of exploration, development, and production.

The political calendar creates a structural transition risk that sits above the operational and financial results as the primary concern for long-duration investors. Colombia’s incoming government, to be inaugurated August 7, 2026, is widely expected to appoint a new Ecopetrol board and select a new company president. That transition may bring material shifts in strategic priorities — including the pace of upstream investment, the approach to the FEPC receivable recovery, the trajectory of energy transition spending, and the capital allocation balance between the hydrocarbons segment and the ISA infrastructure platform. The Ministerio de Hacienda y Crédito Público and the Ministerio de Minas y Energía will both play key roles in establishing the post-election policy framework under which Ecopetrol operates. Institutional investors holding exposure to Ecopetrol via NYSE: EC or BVC: ECOPETROL must weigh Q1’s genuine operational improvement — most visibly in refining margins and EBITDA stability — against a governance and policy transition risk profile that is unlikely to be resolved before the August handover.

Ecopetrol’s Cartagena refinery (photo courtesy Ecopetrol)

Colombia is a tough call in terms of impact. Many of its exports to the US are inelastic in terms of demand, but it is a good moment to look around for new markets. According to the press, Colombia is in the 10% bracket, and US negotiators will arrive in May to thrash out the details. The political skirmish with the US from last weekend already appears to have blown over, which suggests there may have been a lot of exaggeration involved.

Forex traders are suffering, as are those with international trade. The Peso jumped above $4400, then fell back – where it will be next work is a guesstimate at best. There was good news from Departamento Administrativo Nacional de Estadística – DANE Colombia on the inflation front for March with a 0.52% reading, which translated into 5.09% on a 12m basis. Consensus expectation from Fedesarrollo was 5.17%. This surely now gives Banco de la República – Colombia the space to lower rates in a couple of weeks.

One area where Colombia is caught in a trap is on gas. Local production has struggled, and whilst recent offshore discoveries will help the situation moving forward, there is work to do. The 2024 gas reserves data was published and has dropped to just 6 years, and there is a shortfall to be covered. Initially, the plan was to look for cheap imports from Venezuela; however, Trump’s hostility towards Caracas and the threat of sanctions for those trading with Nicolás Maduro have complicated the situation. To contextualize the situation in 2012, reserves were above 13 years; however, those at the ANH are hoping that we have now reached the bottom, and that increases due to discoveries will change the trend.

Moody’s was again discussing the fiscal rule, and despite some easing, feels that it won’t be achieved in 2025 due to a shortfall in government revenues. Again, we come back to the global chaos, which has seen oil prices collapse to $60. Gas-guzzling Americans will be ecstatic as the driving season approaches, but it is no help to Colombia.

Have a great day.

Roops.

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Natural gas well. Photo credit: Ken Doerr.

Gisela Cardozo: Good afternoon, I am Gisela Guijarro Cardozo. I am currently the coordinator of the Medio Magdalena group of the National Environmental Licensing Authority (ANLA). I am a chemist specializing in laboratory management, financial management, and organizational development. I have a master’s degree in leadership design and project management.

Finance Colombia: And Mr César.

César Zárate: Good afternoon. My name is César Zárate, and I am vice president of development for Wattle Petroleum. I thank you for the time you are giving me here. I am a business administrator with an emphasis in marketing management and a master’s degree in senior management from the University of Disney. I am a project structure for commodities. Whether it is oil, gas, or any mineral. We are now focused on natural gas in Colombia.

Finance Colombia: Thank you, and we must give thanks to the support of the Ministry of Mines and Energy, the National Agency for Hydrocarbons (ANH), as well as the gold sponsor in the event, OCP Ecuador. Well, then I think we have, if I am not wrong, in the presentations. No? Well, then let’s get started. Ah, yes, okay. Okay, to make it more interesting, we are going to make it more interactive, so with our speakers and also with you guys, with questions about the talks. So I want to start with César. And my question is, what do you think can be done in the short term to improve the charging factor in the gas fields here in Colombia?

César Zárate: Well, basically, it is to allow access to marginal fields or minor fields that companies like Ecopetrol have, which are not operating because they have them there without putting them into production. It is no secret that the operating cost of large companies can, not can, but it does impact the management of small fields. So, what the big companies do is simply: “Oh, it’s a small little field, leave it there.” For a small or medium-sized company, it may already be interesting. So, allowing access to those fields. But in the short term means the short term. What for? So that we can access and be able to manage any form of business that is interesting to the owner of the field too, to access and be able to start working those fields to generate not large quantities of natural gas, but it can impact production if there are plenty of them.

“We are talking about a very good quality crude. But in both places, something very important happens. The communities open the door to the companies.” – César Zárate

Finance Colombia: Gisela, is environmental management an investment or an expense for hydrocarbon projects?

Gisela Cardozo: That is a question where I have the ideal audience here to answer it, but well, I would like to give a general outline in this sense: How do we, as the National Environmental Licensing Authority, see the investment made in environmental management? Everyone here has talked about many very interesting lines, about clean production, about reducing CO2 emissions. All this is excellent for the environment. But why? Companies do it because it is beneficial for their accounting and financial balance, right? Of course, tax regulations benefit them, excellent, and then the company says, “Yes, we are going to make cleaner production”, but because it is profitable for the business. But they do not see environmental management that way. They see environmental management as “Oh, that’s what we have to do to comply with the authorities. That thing we have to do because it is an obligation.”

And it’s a nuisance. “Oh, they’re coming to follow up on us again this year. What a drag.” No. Environmental management has to be seen by the companies… and well, please help your CEO, your executives see it; it is an investment. An investment because every peso that you put into your environmental management, if you look at it carefully, is a peso that you are going to avoid spending on socio-environmental events that will bring you much more serious consequences in terms of investment. Every peso that you invest in knowing your environment and your context and managing it is a saving for the company in all its operations.

But sometimes it is not comprehensible to us why it is not seen that way within the companies. It is seen as if the operation is completely disconnected, environmental investment is something, and complying with environmental regulations is a nuisance. No. If you look at it, all your licenses and all your environmental control and monitoring tools give you the guidelines to be more and more operationally efficient. They give you the guidelines to avoid social conflicts and environmental conflicts. That can stop a project, and it can make you lose an investment.

It has happened with many projects. For example, you sometimes, when you are going to do a workover in your wells you say, you deceive yourselves, I think, you say, “Oh, no, this is going to be a very short-term thing. So we are not going to temporarily relocate a community that lives very close, or it is not necessary to have the equipment in case there is a spill. No, no, that’s all under control.” It should not be like that. You have some management and control measures that tell you that you have to follow them; however, you ignore them, sometimes because of costs, I think. But the worst saving that a company can make is the saving in its environmental management, that’s the wake-up call we make to you.

Finance Colombia: It’s true. It makes me think of Deepwater Horizon. Right? So if you do it, it’s cheaper to do it correctly. It’s cheaper to do it right, okay, and if not, you’ll pay.

Gisela Cardozo: Twice, thrice, and much more.

Finance Colombia: Yes, right, it’s true. Well, César, what medium-term policy do you think the government should implement?

César Zárate: The government could help the industry from a tax point of view and improve conditions, especially in the area of recovery. Why? Because that discovery has already been made, it has already been produced, it has already been paid for, right? And if an additional investment is made, more crude can be produced, more gas, without the need for having such high additional investments in exploration, in environmental licenses, in general, in the costs of an initial project. If there is a recovery, I, as a government, encourage the recovery of that crude and gas from the tax point of view or the point of view of return on investment. We are going to struggle with these years of natural gas shortage that we are experiencing. Because there is no shortage of crude oil, but with natural gas, the price is already showing a shortage.

We see that the Henry Hub in Alabama is at $2.15 USD, $2.20 USD, and has gone down to $1.80 USD. Here we have gas contracts of $8, $9, and $10 USD. That impacts the country’s finances and impacts the families because of the high costs. But if there are a series of tax benefits in the medium term by the government, many companies will be interested in working on recovery and production will increase.

Gisela Cardozo: Loren, if I may? César had said something in the previous question that I found very interesting, regarding the small fields, and that this could be an economy. And I was thinking about it from ANLA’s point of view; there are many of those small fields where we’ve asked the owners 5 years after they obtained the environmental license, and they have not started operations.

We ask them because the regulation says that the license may expire in a certain sense, right? And we ask the companies and we say to the owner, “Well, let us know if you want to continue if you are interested,” and most of them say, “Yes, but I am raising investment, I am doing something else.” Look, they are fields that already have an advanced process, an environmental knowledge of the territory, and they have already invested. It seems to me that the way to encourage, precisely, to increase this hydrocarbon production would be that. It would be very good. But bear in mind that after several years, the information must be updated, right?

Finance Colombia: Speaking of which, how to optimize. Or did you want to answer?

César Zárate: No, what Gisela says is something that would complement this process. We are wasting a lot of resources in the country, as you said yourself, there are many minor fields that the companies have abandoned. Now, are they economically viable for small companies? We have to evaluate it, but now is not the time to think, “Are they economically viable? Are they not economically viable?” No, we have to encourage that increment in production.

Finance Colombia: You talk about something very interesting. I’m from Ohio, and in the United States, the oil industry started in Pennsylvania, where the oil is very much like.

Gisela Cardozo: Shallow.

Finance Colombia: Yes, yes, and well, and also Ohio and Pennsylvania are neighbors. Standard Oil and the Rockefellers that was all in Ohio and Pennsylvania. And when they discovered oil in Oklahoma and Texas, which was like much better quality because we have a lot of sulfur, and it’s also a bit heavy. And when they had that light crude there, everybody left and left Ohio with corn and cows. But the industry almost died in its birthplace, where it was born, in Ohio and Pennsylvania. But something interesting happened, using technology and mostly small producers.

The structure is a little different here; the State owns the subsoil resources. In the United States, for example, it’s like Mom and Dad who have two avocados and two wells. Not avocados, but basically, you own the oil, and so then there are many producers, micro-producers. Like I have a friend who has an estate and they have four wells there, and every two weeks the tank truck comes, and it’s like it is here with the cows. I live in Antioquia, and there, those Colanta trucks always pass by.

Gisela Cardozo: Instead of milk, they take oil.

Finance Colombia: I understand that the legal structure is different here, but basically, I understand that in the short term, there is not going to be fracking here in Colombia. I understand that there is no desire from the government for that. But basically, what happened there? It was reborn by using that technology, and now that it has the technology that removes sulfur, the oil sector has been reborn in states such as Ohio, Pennsylvania, and West Virginia.

But not with Chevron, but with small producers. And so adapting to those things. Okay, if there is no fracking in the short term, there is no fracking, but there are many things that can be learned to make the small fields viable, not micro fields, but small fields here in Colombia. It is interesting and it’s worth looking into, not only the mega fields, right?

César Zárate: Correct. Because in the American case, and allow me to go a bit deeper, it’s the type of formations. The Utica Formation, which is the one in Pennsylvania, is a formation of heavy crude oil with sulfides, where not necessarily, but fracking kills, even if they are small producers.

The Eagle Ford formation in Texas is completely different. We are talking about a very good quality crude. But in both places, something very important happens. The communities open the door to the companies. What happens here in Colombia? No matter where you go, the community sees the operator as an enemy, right? Because they go, “Here come these guys, they take, and how does it benefit me?” Over there, it is the opposite, there it’s, “Come over, I welcome you because I am the owner of this farm and this subsoil is mine, and the money is for me, and the company is going to pay taxes.”

Here, the community sees the company as, “What are we going to get out of the company?” And so the company is strangled between, obviously, the taxes, between the royalties that have to be paid to the ANH for factories, that have to be paid to the ANH for the visits, right? All that economic burden is very heavy.

And the risk increases. Besides, when you drill and you make a mistake, 3 or 4 million are thrown away in the wells. Right? And if you hit a well, whatever it may be, a thousand, ten thousand barrels, whatever, then it’s, “Oh no, those bastards, of course they are taking it all.” So the issue is we have to change that paradigm, we have to look at how the communities can benefit more, but all this has to go hand in hand with a series of tax benefits for small companies, those that take the risk, and not all of them. For midstream and downstream, the risk is nothing. I already have something that I transport, or there is already something, so I set up the compression if it is natural gas. But upstream is: find, drill, have that frustration of if it was good, if it was bad, tell a story to the investors. That big factor, I would think that if we want to increase the production of both gas and crude oil, it is necessary to give more opportunities in terms of tax benefits, and opportunities in general, to small companies.

Finance Colombia: You talk about something important, it’s like the importance of safety for drilling technicians, and to do it, taking the environment into account, lowering the risks. And in that aspect, Gisela, how does uncertainty affect the knowledge of the physical, biotic, and social context for an environmental procedure, or in the productive stage of a project?

Gisela Cardozo: Very relevant to what we have been talking about, right? What is uncertainty? It is a lack of knowledge. When I do not know, the less knowledge I have, the more uncertainty I have, and uncertainty is a hidden cost. Uncertainty is error, so how do we remedy that? Uncertainty is always remedied with knowledge. What happens, and why do they fail? Many, or well, not many, fortunately, only some environmental procedures here, from the licenses, from the modifications requested by the sector, fail. Because even though there are some terms of reference that, as the authority we consider, are very clear, and are already well-known by the companies in the sector, they submit the minimum information possible.

The shortest. Careful, if it says scale 1 to 100,000, and we, and I mean, you, have information, you must have much more information at smaller scales, but you are not going to present it. It only says 1 to 100,000, and we are not going to have it ready either. So, what happens? They present insufficient information if we value the impacts of the zones. Understand that the contexts, due to anthropic interventions, especially now, have changed a lot and change very easily.

You may have done an environmental impact study two years ago, and now you submit it, and that context is already changing. We go to the field, we encounter different things, and as a rule, there is a time for the gathering of additional information, you are asked for that additional information, and you do not have time to present it. Why? Because you had planned that it would be easier to spare that environmental cost. For what? So always think about that, that the investment you are making in information in the context of your projects is not only environmental, it is operational, because it is information on geology, hydrogeology, geochemistry, animal habitat context, forestry, etc., where you are going to have to intervene.

A real-life case, as we call it, right? What happens? Well, a company has its environmental license, has its environmental management zoning, and says, “Done, the authority told me that I could put my platform on this site, it is within my permitted zoning.” And they go there and start building it, when the obligation, as you know, is to have a specific EMP when the platform’s intervention is going to be made. What is the objective of that specific EMP? To land on the current context and to a much greater level of detail. It is not a scale of 1 to 100,000 or 1 to 50,000. You already have it, because you should have gone to see where to build, what the land is like, “Is it geotechnically stable? What do I have nearby?” And you didn’t identify that some of the rivers that we have are very meandering.

Especially in the plains, in the valleys, the river moved its course, from when it was assessed, to the time when they were going to build the platform. And before they were outside the river’s course, when they started to build the rails, the platform, they were already drilling the well, with how much it cost to move the drills. All of us understand the high costs of the sector. And we get complaints, environmental complaints, we go to the area, no, the river changed its course, and now they were already in the area, in the protected zone. How can such a crass investment error be possible? All the lost investment, why? Because it cannot be allowed in our environmental regulations, they are resources.

It means continuously exposing yourselves to flooding on that platform, to contamination of a river, of an environment, and to social conflict. So, notice why I told you at the beginning, look at it as an investment. Environmental management is an investment. It saves costs, and all that waste of resources just because someone did not pay attention to something that, well, you could say was obvious, right? But no, look, and we miss it.

Finance Colombia: Right. And César, in the case of security in the areas, what could be improved?

César Zárate: Well. A few years ago, specifically three years ago, in our case and the case of the majority, the operators had agreements with the army for the protection of course of the workers’, of the infrastructure in general. Two years ago, we tried, not tried, it was time to renew that agreement with the army, and the army said, “No, the agreements are over.”

And they put us in a pretty difficult position. Especially the operators that are in areas that. Almost 99% of the operators are in difficult areas, in complex areas such as Catatumbo, it is pretty special because of the type of social conflict as all the outlaw groups are in that area. Having this type of contract with the army is key to being able to protect the investment, protect the workers, and protect the communities themselves.

We had a very sui generis case, where the army was passing through our lot, and there was fighting with the outlaw groups. And these groups decided to put dynamite where the army was going to pass. They did not care. Next to a gas pipeline.

You can imagine the kind of catastrophe that would have occurred if those fights had exploded at any moment. Think of a house, in your house, those who cook with natural gas, I think most of you here, right? You open the natural gas a little bit, and if you take too long to put a match… if it is automatic, well, it’s on, but if you take a little too long to put the match, it goes boom, and it explodes. And we are only at 120 PSI pressure. Do you know what a truck at 3600 PSI is like? Or a gas pipeline at 1200 PSI if you put something in it? So this type of protection in the case of hydrocarbons is key.

The government has to understand that this private investment must be protected, but more so that it is an investment in the life of the communities as well as of the workers. So, in my opinion, these types of agreements have to return; the government must understand that this is a key part of developing the industry. Added to the fact that nobody wants to put their money at risk in an area where the outlaw groups are putting pressure.

Finance Colombia: Wow. I imagine that risk, what that explosion would be like, about 3600 from here to Bogotá.

César Zárate: Exactly. The gas pipeline goes at more or less 1200 PSI. But let’s say, let’s put it at 800, 1000, but in the time the valve closes, that is a catastrophe. We have to solve the issue here in Colombia ourselves as a country, right? Solve this problem. But until that happens, the protection of the state, especially the military forces, is important.

Finance Colombia: Right. Well, another little story. In the same estate of my friend that I told you about, once a friend of mine came, she was Dominican, but well she was born in Manhattan, in New York. Many of you who have visited New York know that there is not a single tree.

César Zárate: Rich girls.

Finance Colombia: Exactly, basically Washington and all that. And there isn’t a single tree in New York. I couldn’t live there because there’s no green, nobody has a garden, or anything like that. So what happened? She won a scholarship or something to study at Ohio State, in my state. And then we went to southern Ohio, where the farms and all that are. And that was all exotic for her, because there like you have to go to a park to see a tree, like going to a zoo for us. And I was showing her, “Look, here that tree is a walnut tree and that’s a maple tree, and so on.” But she was like somebody super-very much an activist, very anti-oil, those people who are always doing shows in front of the bombs and stuff. And she’s like, “No, you have to do away with oil because look, it’s going to damage all of that.” And I set a trap. We are walking on the trail, on the estate, okay? It’s all forest because my friend didn’t plant anything; he only earned it through the oil, and they used the farm to escape from the city. So we are walking. She was telling me all about how if there is oil, we are not going to have any of the forest that we have. And I set up a trap very well.

So, walking and walking, we get to the first well. And that well the problem was that it was flooded by all the like, plants and bushes, and almost nobody came, because the forest was assaulting the well, not vice versa, and there were rabbits, raccoons, and things there. And I said, “Such as this one?” And, if she hadn’t seen a tree, it was her first time seeing an oil well. Okay, so I was like, “Tell me what you were saying?” and well, obviously she went quiet.

But my point is that there is a deficit, that there is a failure in education. You are from the industry, you understand the good and also the bad, the good and also the challenges. But I think, and I have noticed here, well, everywhere, when there is an emotional reaction about oil issues. And very few of the people have any direct experience or understanding of how the industry works. They only see it like once every 10 years, when there’s a big tragedy like Deepwater Horizon, or yesterday, a ship went down in a cyclone that’s happening now in the Philippines. So my question, Gisela, is, talking about education, okay, how to optimize the generation of environmental knowledge in the development of the projects? That doesn’t mean being “Oh, you have to be 100% pro-oil in all cases,” but having a balance and not letting fear and ignorance manage everything. What is the role, the part that education plays in this aspect?

Gisela Cardozo: Very much about this part you were mentioning, knowledge, and I say that the sector has the responsibility not only to consolidate that knowledge in the three basic components that, well, at least from the authority we handle: the abiotic, biotic, and social components, which are the main identified ones. They have to be reinforced. How can this knowledge also be strengthened? Look, when we talk about science, technology, and innovation, we have always identified three basic pillars to support it, which are the state, the companies, and the academy.

I mean, the academy, well, here it’s you, Loren, let’s say, right? Here are the three pillars that support this knowledge, and the three pillars that can help you reach the communities. Look, if there is a good environmental management group in a company, I insist again that it is an investment; it should not work as that accessory group that they have there, because the norm requires it, and then we must have it. No, it must be a group that must interact permanently with the operational part.

The operational part has to be nourished by what the environmental parts gather from monitoring and making decisions as well. Because investment decisions, as we were saying, if it is not viable environmentally, they stop them in time. But if nobody tells the environmental group, the environmental group is isolated, and so on. If you do not interact with the academy, the academy is an independent actor that the communities believe in.

We see many conflicts in the territory, and we see very responsible companies in the hydrocarbon sector. I would say that it is one of the sectors. Well, ANLA changed it to regions. And we had to take on in each region all the other sectors: infrastructure, energy, and we even manage zoo-breeding. So, if you compare the sectors, the hydrocarbon sector is one of the most organized in mining in general. There are some black sheep, right? But in general, they do a good job, they are responsible for the environment, and with the communities.

But I don’t know, it is as if they aren’t preoccupied with taking this knowledge to the communities. What we talk about, man, partner with the academy, reach out to them, explain to them. The communities, well, we go with you, and they say, “Oh no, right, you are from X company, you are going to defend your company.” Whereas if you take someone from the academy who is independent and objective, and most of them can be environmentalists, let them be objective and reasonable, and convey the reality, the truth. Do that exercise.

I was listening here to some of the previous speakers talking about their corporate social responsibility programs, environmental issues, and so on. But it seems that these communities never speak out. When does one hear this positive news? I don’t know if the sector is lacking, I don’t know if it needs more unity to, well, make a better use of joint resources and tell the communities the reality. Loren is right, someone who is here in Bogota, I remember because we also have a small farm, and once we took the children from my son’s kindergarten. Many years ago, right? And they arrived and saw a cow and those children: “Ah!” They had seen them in photos, but you don’t believe it. I was like, but what? The chickens ran away, scared of seeing the chickens, the chickens were chasing the little boy, and they were all like this.

They had never seen it; they are very much city kids. That’s what happens to us. And where is the public opinion, which carries more weight? Also in the cities. In the rural communities, anyone who comes along gives them false news. Or they think it is true that because you have an oil well next to you, you are going to get sick, you are going to contaminate everything you grow around you. Disprove that. With what? With knowledge, with science, with education. Invest in that, it will be more profitable.

It is something that, many years ago, I visited Panaca for the first time, there in the Coffee Axis, with my daughter, who is now 22 years old, but at that time she was 14 years old, and she spent 2 years here in Colombia. And I loved the purpose that Panaca has, and that is to teach people from the city about the importance of the countryside. And I don’t know if it’s very feasible to put an oil amusement park, that would be something. But that was something. Because it was entertainment, but also didactic.

Finance Colombia: Like okay, families who go to the coffee parks come and also visit Panaca, and people, like your son’s classmate, know nothing about the countryside. I am also from a big city, but I was lucky enough to spend summers working on a farm in the countryside, so it is so important to start with young people.

Gisela Cardozo: Exactly.

Finance Colombia: Okay? To have… my point isn’t one side or the other. I think of myself as an environmentalist, but I am not an extremist. I understand the importance of Colombia having self-sufficiency in its resources. Ok? Yes, we need to preserve, we need to advance, to evolve, but that doesn’t mean that tomorrow we cut everything.

And who is going to suffer the most? The people with fewer resources, if we do that. Yesterday I took a picture and sent it to my wife and about 20 of my best friends here. Because the EPM guy came over, and I am an EPM customer, he told me that the price of natural gas is going up by 100%, okay? And I already pay for EPM, I pay for gas, and I thought, wow. I said to my wife, “Look, we are going to complain and be angry, but either way, we are going to pay the bill.” But there are people in Comuna 13, in Tricentenario, in Santo Domingo, there in Medellín or in Soacha or Usme or here, where it is a struggle, where if they raise the prices 100% because of shortages, okay, for an idea up in the clouds, they are the ones that are going to suffer the most. And what is going to happen? What happened in the Dominican Republic and Haiti? In Haiti, where they do not have natural gas distribution in the tanks like here in the Caribbean, people continue burning firewood, ok? Talking about deforestation, talking about the loss of the Amazon and the forests here, if people don’t have access to natural gas, they are going to go back to burning.

César Zárate: The forests.

Finance Colombia: Exactly, something we are fighting against. So, you have to think about the effects and the consequences beyond the next step. That is one reason why I think education is so key. I understand if, in Colombia, you as a country say, “We don’t want fracking.” Super, that’s fine. But what I don’t agree with is, like, about 3 years ago, this was in the news, in the last administration, and there were protests and such. And I said I’m going to do a survey. I asked five people, my wife and a few others, “Okay, are you for or against fracking?”, “Against.”, “Okay. What is it?”, “Something gringo.” “Well, I’m something gringo, but.” But really, they had no idea what it was. But we’re against that because they heard, I don’t know, over protests, that it’s something bad. And, well, I don’t take a position like should have it or shouldn’t have it. But when you are making decisions from a point of ignorance, from a point of fear of not knowing, at least. Make your decision, be against fracking, but be against fracking because you know what it is. You already know what it is. But with the people who vote, people like the public, it’s important to have democracy; it doesn’t work like that. The people are ignorant. So, talking about the processes, on the environmental aspect, how do those processes influence the development that you do?

César Zárate: Well, the environmental issue it’s as far as it is wide. But usually, the people who are involved in making the environmental laws are well prepared, while others we consider lack a little bit of knowledge to be able to make this regulation.
The topic of fracking, for example, is something that the country needs. And the decision is very simple. How do we want the gallon of gasoline? Do we want it at 40 or 50 thousand pesos? And I don’t know any environmentalist who doesn’t love to fly in an airplane. They all love to fly in an airplane. Everybody loves to travel, don’t they? From what the price of JP54 is, 80 or 90 dollars a barrel, to how we want it? Do we want it at 200 a barrel? So that the ticket to Medellin costs (unintelligible) pesos? The decision is in our hands.

The issue that Loren and Gisela brought up, we just have to teach them. You have to take the children and show them the reality. Of course. Hydrocarbons produce CO2, the molecule. well, I have the best solution of all. Nature itself invented the most beautiful machine to capture CO2. They are called trees. It is simple. We are going to compensate for the emissions with trees until a definitive solution comes out.

Everyone has their own opinion, but on my part, if you are in an electric car, you pollute more. Hydrogen is the way. I think that the countries that are as advanced as Japan and Germany, with the hydrogen issue, will reach a solution very quickly; the United States, too, and that is the final solution. Because hydrogen is the most abundant element in the universe. So, I know that there will come a point when hydrogen will replace hydrocarbons, little by little. Because hydrogen cannot make plastics. The hydrocarbon part is the plastics and many industrial processes. But yes, with hydrogen in 20, 30 years, we are going to get to the point where we’ll say, “Okay, no more exploitation.” In the meantime, we have to be realistic. For one, we have to control climate change, and governments have to commit to a minimum amount of tree planting. We are wiping out our rainforests. What is the biggest polluter? The Chocó mafias take all the trees.

Let me tell you about a specific case. In the Andoas base, in Peru, where one of the largest oil fields in Peru is, the most shocking ecological crimes imaginable were committed. The first one: the operating company at that time would take the contaminated water and dump it into the jungle. We have 500,000 hectares; if we dump 2000, 3000, nobody notices. After a solution was found and the Peruvian government noticed and stopped this type of thing, the communities appeared. It is the communities themselves that pollute. When they were told the same thing, “We are not going to give you a contract,” The contract for the oil pipeline that goes from here, from the jungle to Talara. What happened? They put a pump on the pipeline every two months, every month, why? Because it was the communities who went, cleaned, fixed up, whose business it was. They would put it in a pump.

Then, when the government figured it out, they took it away. But today, a field of 180,000 barrels from here could solve the energy issue in Peru. It produces 8000. The infrastructure is completely disarticulated, and the communities are destroying the jungle. If an operator comes and cuts down a tree, they all go, “You are destroying the jungle”. But they, the communities, cut down the trees, they sell them, they don’t reforest. The operator tells them, “Here I have plastic bricks; let’s use the plastic that has been collected to make houses.” No.

All this is the result of ignorance. I think it is the only way. Education with children from a young age, showing them that it is a resource, that we need the energy, we need to move the ships, so that the global supply chain doesn’t collapse. We saw it with COVID-19. It more or less stopped, and the world collapsed. We need the plastics, we need to live; we need the gasoline; we need the jet fuel; we need that energy. And that comes from oil and gas. The rest is lies. The rest is demagoguery.

Tell me, when have solar panels replaced power generation? They replace a part of it, but look at the problem in Chile, they are stuck with thousands of meters of unusable solar panels. What do they do with that? They pollute. How do you think the electric car works? It works with the worst stabilizer of all. You have to remember when these mobile phones came out in the ’90s, when everyone would say, “Ah, it explodes!” And it was true. You plugged in the phone, and it was a lottery whether it exploded or not. Because lithium vibrates at very high frequencies. Then they figured out, you know what, there are stabilizers, like cobalt. “Ah, cobalt is the solution, yes.” Who takes the cobalt ores? They are this small. I invite you; you can go to Africa and see the disaster the companies left there. Children between 5 and 11 years old take the copper ore.

Finance Colombia: In Congo, yes.

César Zárate: In Congo. Digging out the little ores. At 11 years old, with leukemia. So, that whole tale about ethics and this and that, no. It is action. You have to overcome ignorance. We have to do research. We have to advance on hydrogen, but in fast steps, and we have to overcome ignorance. And children have to be educated so they understand we are in a world where electricity is not free. This is being transmitted by copper, isn’t it? We have to find the copper. Or we can bring a nuclear plant here to generate electricity. The decision is ours as a country, but we have to make it with knowledge, not assumptions. The road to hell is full of good intentions. The road to heaven is full of actions. It is to act. To overcome ignorance. That is what we have to do.

Finance Colombia: You’re right. Yesterday I was walking around the exhibitions, and we had some very, very interesting companies. I saw a company that does like geolocations, using the readers of where the oil pipelines are and things like that; there is one that has the high voltage cables that they need, that are resistant to high temperatures and such, like Distribution Plus, SIS MARCO, Promat, and Target Horizon. There’s another one there where they do like mapping, oh, I didn’t understand very well, I wanted to ask them because they do like very advanced things about what seems like mapping, or saying where we are going to map things. Talking to others like you guys, like my friend Slava, who does testing, non-destructive testing, he has to go over all that high-tech stuff. And the good thing about that is that it’s making the industry more efficient.

I think part of what we’re fighting for, of all this anti-oil sentiment, is because of history. In Cleveland, Ohio, where Standard Oil was for many years, in 1970, the river caught fire. Cuyahoga River, which runs through Cleveland, caught fire twice because of so much pollution. And at that time, when Rockefeller and those started, it was senseless, and all the factories, not just oil, but anything, dumped their stuff in whatever river was closest. We still have problems with PCBs. And they are still debating with General Electric about what happened in the Hudson River, which runs through New York. The debate was like, “Should we dredge and remove them, or should we just leave them alone?” General Electric wanted to leave it alone because they didn’t want to pay like 3 billion dollars. And it was for damages that they did, not now, but like 100 years ago in history, when it was a legacy. But even now, we’re still paying the price. We don’t want to, nor can we, eat oysters from the bay or anything like that. And my question then, Gisela, is what role does technology play? How can we take advantage of technology to enhance the environmental management of the sector?

Gisela Cardozo: We go back to this topic of the academy, innovation, science, and technology. We have to implement it. All of you have been talking here in this congress about having developed more clean technology, new systems for exploration, exploitation, refining, etcetera. But technology is also in the environmental part, please do not forget about us. The monitoring that you do is more effective when… Now the equipment, we have equipment that sends transmissions in real-time. They give you the alerts. The alerts, if they are having some kind of failure in the piezometric wells, tell you, “Hey, my concentration changed, I have hydrocarbons, or at least my conductivity changed.” And you go, “Oh, how come the conductivity changed?” Well, there must be some leakage, of what? Of deeper groundwater that is getting there, right?

But this transmission in real-time is fundamental. Look, ANLA is making a very big effort, it has been doing it for a while, 5, 6 years now, in generating a technological monitoring center that we have, where we are going to ask all of you to please go in. Now, report to us in a more, let’s say, standardized way, so we can feed from that data. That data is going to be available to all of you. Note that it’s going to be cost-saving in knowledge. Somebody has to submit an AI, somebody has to submit something from a region that has data. This tracking monitoring is more extensive than what you do for a license; it’s time data, and it’s multi-temporal. You can look at trends. You can get so much information from that in very large territories, all the ones that you report to us. And not only from the hydrocarbon industry, but we also ask that from the rails, well, the ones that we manage, 4G, hydroelectric plants, thermoelectric plants. We have information on air, emissions, and noise in the regions, and that data.

An institutional base is being consolidated, and it will be accessible – you know that all of ANLA’s data is public, and you will nourish from it. Please present us with the complete environmental compliance reports with good traceability. Not, “Yes, the information is in file X,” and file X never appears; it does not even have the name file X somewhere. You are going to be able to nourish yourselves from that. Knowledge is for everyone to reuse. But technology is very important; we all have to advance. The faster the data transmission, the more agile the media; artificial intelligence allows us to make projections, models, hydrogeological models, geological models, and geotechnical models.

We all nourish from that, and it will give us security, especially in an issue that is fundamental for this industry, to avoid events that give a negative impression of the sector. You can work very well, a single event occurs, and you know that’s when there will be national relevance. That single event already brings negative attention, doesn’t it, to the industry? So, be aware that a company speaks for the whole sector. So, please, let’s appropriately use technology, and it is excellent. Let’s apply it. ANLA is committed to that, we want you to learn that you can always go and see our monitoring center, and our databases, always.

You know that we have modernized a lot, we hold our meetings virtually to save you what? Costs. We no longer ask you to come to us from your headquarters. We do the oral meetings and the follow-up administrative acts virtually. But whenever you want any face-to-face meeting, you are welcome to come to our facilities. If we talk to each other, we understand each other. And I wanted to take a minute to come back to something that César said, which I thought was fundamental. And I agree, the best CO2 recycler factory and taster is the trees. That’s the reason for the environmental compensation; that is why it is logical that the compensation starts as it should.

From the moment the environmental license is issued, you are required to have a compensation plan. Look, we now have cases of companies that drilled, did not find oil, or for x or y reason at the time, public order or something like that, they decided to close operations. 10 years, 15 years, and 20 years later, they have not made the environmental compensation. They even closed their trading house and their Colombian branch, and they want to leave that environmental debt with the country. This speaks very badly of the sector. Look, the communities are asking for this.

They often do not know that if you cut down a tree, you have to pay 5 or 10, depending on the species. They don’t know the important biological corridors that are being generated because now we are looking for eco-connectivity, especially for mammals: tiger cats, leopards, jaguars, and pumas; pumas have been seen again in our areas. A video that was sent to us in the Topocoro reservoir, which is the one in Hidrosogamoso, really caught my attention. A puma swimming. So we are seeing fauna again that we hadn’t seen for many years. Why? Because the authority seeks that these compensations are located in the best sector. But please, environmental responsibility is also about that. It is not only about “Oh, I use clean technology, try to recycle.” No, it is a very important environmental commitment.

Finance Colombia: Of course. Here in Colombia, as you well know, you have something special. In this country, one thing that I love is that a person could spend their life here and still not see all the natural wonders. From the Amazon rainforest, to. I went to Nevado del Ruiz, there in Manizales, now it is rough, but before, when you could go up, it was like another planet. And so many things. Or you are in the Tatacoa desert, or I went to the Guajira one. And it is important to protect that. I don’t think there is anyone who doesn’t believe that. Well, yes, some criminals are destroying with mercury, like in illegal mining and those things. But there are also responsible companies.

One thing I have seen in the mining sector is that there are some companies, well, there are some bad ones, but some very responsible companies, not just on the environmental aspects, but also the social ones. When they arrive in a town and before starting anything, they look at what they need there, and they talk to the local NGOs there. And like they do social and educational programs and things like that. I hope we have time for a couple of questions. I don’t want just us to be talking. I hope this can be interactive. Does anybody have any questions for the panel? For them, they’re the experts, not me.

Well, I have a question for you guys, so I want to ask, well, the same issue, but how can the need to increase oil production be balanced with climate and environmental sustainability commitments? It’s broad, but what are some ideas for that balance?

Gisela Cardozo: You start, César.

César Zárate: I agree with Gisela. The environmental issue is critical for the country. It is simple to comply with the requirements. But that increase in production will only happen if a suitable environment is found. The communities, so that they don’t oppose, I don’t know, these are ideas that we all throw in the air, “Plant a seed.” Because the communities don’t like to be scolded. The royalties come from the central government, and we see where they are going. Just open the newspaper, and we know where our money is going. Why not let the communities manage a part of it, the municipalities? So that in the industry,y they see a friend, not an enemy. And that fact alone, that they open the doors for us, in compliance with environmental requirements, makes a much better climate flourish. The oil is there.

If you notice, all the formations from Colombia, from Ecuador, even, we are talking about Northeast 22 degrees. It is there. If we explore, we are going to find it all there. From Putumayo, passing Cali, Magdalena Medio, upwards, Catatumbo, and obviously Venezuela, and this part of Casanare, yes? Everything. Just past Venezuela, that imaginary division we have as a country, it is possible that the largest oil reserve in the world is there. But it passes the line to Colombia, and they disappear.

A little further, Northeast 22 degrees, are the reserves of Guyana. There, they are fighting and killing each other over it. We are talking about unimaginable reserves of crude oil and gas that bring a lot of progress to a country, money that we need to lift 20 million people out of poverty, right? But everythingis  in that balance. Exploration, production, communities, and environmental compliance.

That balance is very complex. Because speaking of NGOs, I’ll steal a minute, the American NGOs, the Norwegian NGOs, and the Nordic European ones come and tell the indigenous people of the area that the oil companies are taking away the blood of the Earth, of the Pachamama, etc.; the indigenous people oppose. But in northern Europe, those same NGOs say nothing about the production of crude oil in the North Sea. So we produce less oil, and they keep prices high. And who wins? That is why we are the ones who must provide the solution as a country. In that delicate balance that must be in place so that everyone in that chain is well off. The investor, the community, and the environmental side. And the money that must flow to continue investing in education and lift poverty.

I think it is that very delicate balance. And put a large part of that money into research of all kinds of alternative energies. That is the priority.

Gisela Cardozo: Yes, and I would also think that, if we consider what we have at the moment, of course, the sector can try to manage with the State this type of changes in taxation, in benefits. But that is something more in the long term, right? Let’s talk about what we have now and what they can do. You said it, Loren said it; at this moment, what is lowering the hydrocarbon production, simply? The social conflict, the social blockades, and all of this is what we have been talking about. I think the companies can manage it with good social relations. We, as an authority, experience it. Sometimes a company arrives and let’s say they are going to open a well that, yes, they already had it authorized, they have the license, they have the permit, it is within their zoning, but they had thought about it in their plans for three years from now. When they went to that community three years ago, they said, “Oh, done, here, such and such.” And the community, “Ah, well, yes, we know,” and so on. In three years, those people who live there will no longer be the same.

Or there are more already, but the company doesn’t put in the work. How hard is it to hire some professionals, please, who know how to manage communities? And before the community sees the drill coming, and sees all the people raising dust, making noise, putting out emissions. Environmental management is not a big investment, but please, the advances should always be on this level. We have seen that the communities are receptive, there are communities and communities, I agree. Some are also manipulated, but that should also be perceived by their relations group. From what side do we approach them?

There are some we can talk to, and there are some we cannot. Let’s reach out to the most reasonable people, have friends there, and listen to them. Sometimes it is simply a matter of having a post or giving them a channel where they can put their requests, petitions, complaints, requests, etcetera, etc., etcetera, etcetera. This social relationship, just from the social conflict in the country, a change in perspective towards the hydrocarbons sector? You are already going to improve production by at least 10%, I tell you.

The second point is that there is a law on science and technology in the country, on innovation, science, and technology, which allows you to be exempt from your taxes 100% of what you invest there. This gives you proximity with the academy and developments, developments that you can use in your operational part, and so on, and it gives you the proximity with the academy, so that the academy gets involved with the sector, feels more involved, and educates the generations it is already educating the way it should be. I don’t know if you know much about science and technology law, but it has some impressive tax benefits. Check them out and see that it is profitable, I would say, from what is available at the moment, right?

Finance Colombia: Yes, and I think, listening to the entire talk, it seems to me that the key is not to be, like, antagonists, like ‘The government versus the private sector.’

Gisela Cardozo: Let’s be synergistic.

Finance Colombia: That, that. And also, it’s very important to involve the town, the people. Like, everyone here is from within the industry, so you already understand what the sector is like and the importance of oil. But some people haven’t thought much about that, and public opinion is very easily swayed by a controversial article or something like that, or when a tragedy or an accident happens. However, it is like in the airlines, that 10,000 days can go by with nothing happening. But when there is a first accident, everybody is afraid to fly, okay? But when they go in their car, where there are crashes, they can’t even leave the house without seeing a crash in Rio Negro. But people are like, I don’t know, it’s fascinating how the mind works.

So, the important thing is that we need to work together. It’s not that we always agree, like there’s always going to be disagreement on issues like what should, I don’t know, the government policy should be, or fracking or no fracking, or more drilling or not… But to not be enemies, but working; “Look, we have the same goal, we work together even when we disagree, we are civil and think more in the long term.” So this has been very fascinating for me to listen to the opinions of you, the experts. And well, so now I invite you to take half an hour, a break, here with coffee and everything. Ah, we have a question. I don’t know if we have time for a few moments. I hope so.

Marielita Miga: Hello, good afternoon. This is Marielita Legardes Miga, an oil and gas lawyer from the Mompos Oil Company. I have a question for the panel. All three of you have an interesting view of the country and outside of it. And it is that, as a lawyer, well, what I notice, which I believe may affect production a lot, at least the investment in the country, is excessive regulation. Of course, it is necessary to regulate this sector, to avoid the tragedies of the past, to be more and more strict in what the best practices of the hydrocarbon sector are, and to bring them to the economy. However, I believe that many times we sin by wanting to replicate models from other places, where perhaps here we do not have sufficient technology, and we have not yet reached a level of progress that allows us to make radical decisions.

For example, in the case of the non-conventional, non-conventional resources. So I would like to ask you to tell us a little bit ab is your vision of this regulation. And I do not mean for you to tell it to us as lawyers, independent of your profession; what do you think can be done about regulating, and regulating with more and more restrictions, a sector that needs wings to fly in innovation? Because we are one of the sectors with the most innovation, with the most resources to be able to, with science, as the doctor said, overcome uncertainties.

So, what strategies do you think can be taken? I mean from a point of view, beyond the legal aspect, if those roundtables could not only be work roundtables with the communities but also with those who make the decisions in the country, with those who generate the regulations. And how willing are they? That is where government policies come in, right? Because the executive is the government. The one who generates the regulation is the government; the laws are from congress, but our regulation comes from the ministries. So I wanted to ask you about that. So sorry if I went on too long.

Gisela Cardozo: Well, yes, indeed, I am not as strong legally as you said, but perhaps from my point of view, it does not seem to me that the current environmental regulation is very complex, or very complicated to comply with. It is clear. It has been updated on some issues where the very knowledge from them has led us to it. Because, especially on the topic of emissions, the regulation has been evolving, and it is restrictive in certain aspects, but it is not so much about that. I don’t know, I insist that the sector should be underpinned much more by the academy.

Because you know that regulations always go out for public consultation. At this moment, Decree 10-76 is in a revision process. It is made available to all to receive feedback, and such. In the same way, the ANH and the ANM have also recently put forward different regulations for discussion. If you look, what do you see is of deep relevance in the country? The opinion is also of the scientific experts, of the experts from the universities. They move the thinking of our youth, of those who take to the streets to protest or support, they are the ones who convince them even. Their teachers, in the sense of the guru of an environmental issue, are the super-experts in something.

And they are the ones who give the most opinions when regulations are put out and such. Most of the comments come from experts from the universities because they are also the ones who provide the best basis for their comments. I would say that there should be more interaction between the sector and these academic groups. If they understand better… because it is very different to have a professor in the theoretical field at the university than for them to experience the reality with you, to go and get to know what it is, and apply their knowledge there.

I mean, science must be applied to become technology, to become innovation. But I see a lot of this distancing. The Academy is over there at their desks, in their laboratories, but not as a pilot plant, but very isolated. So, when they give their opinion on regulations, they are very theoretical. So we want to have Norwegian regulations, we want to have something that is not in our context, not our environment, and that is why we make mistakes that have been made in the environmental area. As you know, 30, 40 years ago, the very corporations and the nation said, “We are going to reforest with eucalyptus and pine.” Because they are the ones that successfully reproduce the fastest, right?

And what did we see, “Let’s harvest trout in our rivers,” and the intentions were very good, but it is this detachment, let’s say, in the regulations. We contribute from the authority, we have very competent people who have worked with you many times. Sometimes they move from one sector to another, and that is good because they get to know the sector, which lets us work as you said, in synergy. Let’s work together. When those norms go out for consultation, please also speak out, but in a well-founded manner, get your opinion, and give it. I do think that you are being listened to. I believe that society, the Colombian authorities, has usually been very democratic; they have listened. Let’s keep trusting that this will be so, let’s do our part.

Finance Colombia: Thank you. Well, that was very interesting, and thank you for the question. I felt bad, like “Ah, we’re boring people because nobody’s asking anything.” But that was very interesting. Thank you so much. If there’s anything else, we’ll be around to talk more about this. Thank you.

Gisela Cardozo: Thank you.

These new awards bring the total to 69 petroleum drilling concessions issued under the Duque Administration.

“In August 2018 we received a sector with almost five years without awarding or signing new hydrocarbon contracts and so far during President Duque’s government, we have awarded 69 areas that will continue to position the sector as one of the main engines of economic reactivation and of the country’s development,” said Minister of Mines and Energy, Diego Mesa.

The winning energy companies are Ecopetrol, Parex Resources, Lewis Energy, Frontera Energy, CNE Oil & Gas (Canacol), Hocol, and Maurel & Prom Amérique Latine.

The awarded concessions are located in the Colombian departments of Santander, Norte de Santander, Bolívar, Meta, Casanare, Córdoba, Sucre, Vichada, Cundinamarca, Arauca, Atlántico, Antioquia, Magdalena, Cesar, Boyacá, Huila, Cauca and Tolima.

“In the Colombia 2021 Round (of concession solicitations), 53 areas were offered between those proposed by the ANH and those nominated by the companies, for a total of 30 awarded areas and a success rate of 56%. This demonstrates a great commitment from the industry and a sector committed to the economic and sustainable reactivation of the country. Our mission as administrators of hydrocarbon resources commits us to continue working and generating favorable conditions to attract the investment that Colombia so badly needs for national energy security in the coming years,” said the president of the National Hydrocarbons Agency, Armando Zamora Reyes.

 Date: 21-25 June 2021

Organizer: Vostock Capital

Web site: https://bit.ly/3xhxHBS

The 3rd Colombia Oil & Gas Online Business Congress and 1-2-1 meetings is an international business platform, bringing together flagship oil and gas companies from Latin America and world suppliers for the industry. The Colombia Oil & Gas 2021 Online Business Congress enables executives to continue networking, share ideas and experience, & work out anti-crisis solutions in a safe virtual format.

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Congress Highlights:

 250+ decision-makers of Oil and Gas industry from Colombia and all-over Latin America

Colombia, Ecuador, Brazil, Peru, Argentina, etc., as well as government officials, regulatory bodies, project owners, technology and service providers, international and local investors

 Strategic Opening Session – Government Plans to Strengthen the Oil and Gas Industry in Colombia in the Post-Pandemic Times

New governments strategies, plans of projects initiators, operators, and investors

 Major Oil and Gas Projects of Colombia and LATAM: Status and Updates in Current Economic Situation

Upcoming, ongoing, and planned projects in the region; identification of the new strategies of the key companies to survive in this new economic situation?

• Breakthrough Innovations for Oil and Gas Industry in the region

Innovative technologies, equipment, and services, discussions on what technology is needed for the optimization of the projects.

• Attracting Potential Investors and Financial Opportunities to the Oil and Gas Industry in Colombia and LATAM.
• Hotline with business experts!

Ask your burning questions, call for advice, and share your experience during and after sessions!

 Online 1-2-1 Meetings and Business Networking

Connect with industry leaders while working from home

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 Among the regular participants: EcoPetrol, Biomax, ANH, Campetrol, CEPSA, Emerald Energy, ConocoPhillips, CleanEnergy Resources, Canacol, Trafigura, GranTierra Energy, TGI, InterOil, ProGasur, PromiGas, Equion, Hupecol, Mompos Oil, PDVSA, Refineria Sebastopol, Proma, Chevron, Repsol, Terpel, NGEC, Tenaris, MCDERMOTT, Frontera, Shell, Petrobras, Interoil, Garrido, AECOM, Montagas, ABC, CruzSur, Siemens, Wattle, Petro Colombia, Halliburton, Sacyr, Mansarovar, Spiecapag, Bridgemaster, Tracerco, TPC, IBM, Posneft, Honeywell, Tecpetrol and many more.

Organizing Committee Contact:
Catalina Velasco,

LatAm Marketing Manager
cvelasco@vostockcapital.com

Official website: https://bit.ly/3xhxHBS 

Sponsored content

Ecopetrol reports sales down 23.6% year-on-year for the 4^th quarter of 2020, to 14,190 trillion Colombian pesos, or 3.95 billion USD. Full year sales are down 29.4% to 13.8 billion. The company was able to report net income of 1.7 trillion pesos, or $471 million USD.

The financial summary income statement follows below

“2020 was a challenging year for the industry, due to the collapse in oil prices stemming from the oversupply caused by disagreements within OPEC+ and later due to the challenges associated with the Covid-19 pandemic. This pandemic was a health emergency at global and local level that was accompanied by a sharp contraction in demand for crude oil and products with multiple social and economic challenges,” said Ecopetrol CEO Felipe Bayón Pardo (above).

Ecopetrol was able to face this unprecedented challenge demonstrating its resilience and capacity to adapt to an adverse and volatile environment, always prioritizing life and the care of our employees.”

“Our financial results prove it: we closed the year with a COP 16.8 trillion EBITDA and net income of COP 1.7 trillion, being Ecopetrol one of the few companies of the global oil industry with profit for the year. The crisis response plan, which assured operational continuity and led to decisive interventions in costs, prioritization of investments, maximizing revenue and timely financing, allowed to benefit from the recovery of supply and demand of crude oil worldwide in the second half of the year. Thus, leveraged in the business strategy of the Ecopetrol Group (EG) focused on diversifying export destinations and anticipating sales of our crude, we managed to achieve recuperation of realization prices in our export portfolio, which increased 6% between the Q3 and Q4 2020, from 38.4 USD/bl to 40.7 USD/bl.,” Bayón continued.

Some investors fear that Ecopetrol is being pressured by the cash strapped Colombian government to purchase ISA, benefitting the Duque administration at the expense of investors. Bayón defends the pending purchase saying: “The eventual acquisition of the stake in ISA responds to Ecopetrol’s strategic interest of entering into new businesses aligned with the opportunities for electrification and decarbonization, dictated by the energy transition, and which in turn leverage the Group’s profitable growth and improve its business risk profile.”

Bayón’s full comments follow:

2020 was a challenging year for the industry, due to the collapse in oil prices stemming from the oversupply caused by disagreements within OPEC+ and later due to the challenges associated with the Covid-19 pandemic. This pandemic was a health emergency at global and local level that was accompanied by a sharp contraction in demand for crude oil and products with multiple social and economic challenges.

Ecopetrol was able to face this unprecedented challenge demonstrating its resilience and capacity to adapt to an adverse and volatile environment, always prioritizing life and the care of our employees.

Our financial results prove it: we closed the year with a COP 16.8 trillion EBITDA and net income of COP 1.7 trillion, being Ecopetrol one of the few companies of the global oil industry with profit for the year. The crisis response plan, which assured operational continuity and led to decisive interventions in costs, prioritization of investments, maximizing revenue and timely financing, allowed to benefit from the recovery of supply and demand of crude oil worldwide in the second half of the year. Thus, leveraged in the business strategy of the Ecopetrol Group (EG) focused on diversifying export destinations and anticipating sales of our crude, we managed to achieve recuperation of realization prices in our export portfolio, which increased 6% between the Q3 and Q4 2020, from 38.4 USD/bl to 40.7 USD/bl.

Ecopetrol conducted a disciplined monitoring on its costs and expenses, achieving a balance between optimizations and the availability of resources to guarantee a safe and reliable reactivation of the operation. Thus, the total unit cost for the year 2020 was close to 27 USD/bl, a 23% decrease as compared to the previous year, and cost savings of around COP 700 billion.

In the middle of this challenging environment, during 2020 Ecopetrol Group’s maintained a steadfast commitment to the well-being of Colombians and the strengthening of the local economy, in the framework of the health emergency caused by COVID-19. Over COP 88 billion were committed through our social investment program “Apoyo País” (Countrywide Support), of which we allocated 86% as of year-end, benefiting about 252,000 families and 250 institutions. We have supported the strengthening of the health system with medical equipment, personal protection and cleaning items; we have delivered humanitarian and solidarity aid at the national level, promoted innovation and research initiatives and provided technological support to the National Government. Furthermore, Ecopetrol Group has joined Governmental programs such as “Comparto mi Energía” (Sharing my Energy) and “Ayudar nos hace bien” (Helping does us good). Similarly, the Group designed and implemented different commercial flexibility and liquidity programs for suppliers and customers.

Reserves balance reached 1,770 million barrels of oil equivalent (mboe) reflecting a 6.5% reduction, a lower outcome than the initial forecast of a decrease in the range of 15% to 20%, due to fall in prices and less activity during the period. The result reflects the addition of new drilling projects, positive revisions due to good performance in production, recovery, and the optimization of technical-economic variables.  Gas reserves represented 29% of the total balance.

In exploration, Ecopetrol completed the drilling of 18 wells, 3 of which were successful, 9 ended the year under evaluation and 6 were dry. The commercial viability for discoveries Andina (in Colombia) and Esox (in the Gulf of Mexico) was approved in 4Q20. The National Hydrocarbons Agency, ANH, approved the transfer of Ecopetrol’s 50% stake to Shell in three blocks in which the Gorgon and Kronos gas discoveries are located. This association will allow progress the development of these discoveries in the offshore gas province of the Colombian Caribbean.

In regard to production, a cumulative average of 697 mboed was reached in 2020, in line with the goal of achieving levels close to 700 mboed. Compared to 3Q20, production in 4Q20 increased thanks to higher sales of LPG and gas, as well as to better performance at Chichimene and Piedemonte fields, despite the impacts by public order and the closure of Castilla’s water discharge in December.

With respect to natural gas, a strategic priority for Ecopetrol Group, represented 17 % of the total equivalent production. The EBITDA margin for the year was north of 50% and had a contribution by over 30 % of the segment’s EBITDA. The foregoing is supported by the stability of prices in dollars and the good commercial dynamics observed during the period.

In turn, the production of unconventional hydrocarbons in Permian contributed an average of 5.2 Mboed in 2020, increasing its share in the total EG’s production. We closed the year with 22 wells in production and 22 additional wells drilled, which are expected to be completed and put to work during 1Q21.

Regarding the execution of the Comprehensive Research Pilot Projects – PPII for unconventional hydrocarbons, the first Special Contract for Research Projects – CEPI , was signed with the ANH on December 24, for the Kalé project. This enables the start of the licensing and preparation stage for the execution of Ecopetrol’s PPII’s in Colombia. In 2021, we will be focused on obtaining environmental licenses and complying with other requirements as established in the robust regulations in force before starting to operate, always informing, and including our stakeholders and highlighting the scientific and technical nature of the project.

The annual EBITDA of the upstream segment was COP 6.7 trillion, equivalent to an 18% margin. The midstream segment obtained results in line with our expectations, with volumes transported in the amount of1,017 mbd, according to the country’s production. Also noteworthy are the lower maintenance times for repairing the Caño Limón-Coveñas pipeline, which allowed it to operate more days and without any reversal cycles being necessary in Bicentenario pipeline. The segment reported an EBITDA in the amount of COP 9.3 trillion, equivalent to a 76 % margin.

The downstream segment reached a consolidated throughput load of 355 mbd in 4Q20, the highest of the year. Advancing on the path of fuel quality, in December gasoline production with an average sulfur content of maximum 50 ppm, was achieved, which is lower than the levels requited under current regulations. The operational and commercial performance of the refineries enabled competitive margins in a negative environment for the sector. Likewise, Esenttia records in production and sales, stood-out in 2020. The segment reported an EBITDA of COP 0.9 trillion, equivalent to a 3.3% margin.

Despite the challenges faced in 2020, our commitment to TESG was strengthened on different fronts. Accumulated reductions of 1.8 MtCO2e were achieved in energy transition, resulting from the implementation of projects which have been running since 2010, thus achieving in advance the goal that was initially set for 2022. On the front of renewable energy, an agreement was signed for the construction of the San Fernando Solar Eco Park, which will have a capacity up to 59 MW and is expected to start operations in 2Q21. In turn, Castilla Solar Eco Park reported savings in operating costs close to COP 3.8 billion in 2020. On the other hand, GHE emissions produced by routine gas flaring were reduced by 19 % as compared to 2019, thus contributing to the commitment to reduce CO2e emissions.

Digital transformation was a fundamental pillar in the operational continuity during the pandemic. It ensured remote connections for more than 15,000 employees, and to hold more than 8,000 virtual meetings, per day, during the year.

Regarding the commitment of strengthening corporate governance, we adhered to the World Economic Forum’s Stakeholder Capitalism Metrics (SCM) coalition, a global group of more than 61 companies seeking to harmonize sustainability metrics to facilitate comparisons across companies and industries, on various key issues related to people, environment, prosperity, and governance.

In November, Ecopetrol received a 66-point rating on the Dow Jones Sustainability Index (DJSI) scale, ranking 13th in the global integrated oil and gas industry. This score allowed the company to enter the DJSI Latin American Integrated Market – MILA, being the only company in the sector in Latin America to achieve it. In addition, the company received a rating from the CDP Climate Change report in December with a C rating, ranking above the region’s overall average performance.

Reflecting our ability to adapt and to react to the changing conditions of a particularly complex market, we updated our 2021-2023 Organic Business Plan, which aims at ensuring a profitable growth for Ecopetrol on a Brent price path of USD 45 per barrel by 2021, and USD 50 per barrel onwards. The plan also seeks to increase competitiveness, to strengthen the energy transition agenda and to deepen TESG as one of the strategic pillars for our operation.

The following elements stand out within the organic component of the new plan: i) an investment ranging from USD 12,000 to USD 15,000 million, funded mainly with internal cash generation; ii) profitable production levels close to 750 Mboed by 2023 maintaining focus on the development of fields with the greatest impact on our value chain in Colombia, the growth of Permian, the drilling of more than 40 exploratory wells and the continuity of our successful enhanced recovery program; iii) volumes transported in excess of one million barrels per day reflecting positive expectations of economic growth; iv) joint throughput of refineries ranging from 340 to 365 thousand barrels per day in 2021, seeking to reach around 420 thousand barrels per day in 2023, with the IPCC ; v) reduction of 3 MtCO2 as of 2023 and redefining  medium and long term emission reduction goals during 2021; vi) increasing generation capacity with renewable energies  around 400 MW by 2023; and vii) social and environmental investments for COP 1.7 trillion between 2020 and 2024. Similarly, we will invest between USD 100 and USD 150 million in innovation and technology to accelerate the digital transformation. This plan is aligned with our cultural principles: life first, ethics, passion for excellence, making the impossible possible, leadership and inclusion, as well as teamwork. Similarly, it responds to the challenges of the environment with a focus on sustainability and ensures a strategy that adds value to EG and the country.

On the other hand, on January the 27, 2021, the Company announced its interest in acquiring 51.4% of the outstanding shares of ISA, currently owned by the Ministry of Finance and Public Credit.

The eventual acquisition of the stake in ISA responds to Ecopetrol’s strategic interest of entering into new businesses aligned with the opportunities for electrification and decarbonization, dictated by the energy transition, and which in turn leverage the Group’s profitable growth and improve its business risk profile.

The stake in ISA would allow Ecopetrol’s stockholders to achieve a material position in an established company, leader in a strategic sector for the energy transition, with a world-class portfolio, a first-rate leadership team, and proven corporate governance. Through a single transaction, Ecopetrol would position itself in a key link in the electricity business with clear prospects for future growth. Furthermore, a business with similar characteristics to the oil infrastructure one, in which Ecopetrol already participates through its subsidiary Cenit, could also be added to EG’s portfolio.  These businesses are capital intensive, regulated, with significant entry barriers, and margins and competitive capital returns that provide stability to the cash flow, relative to hydrocarbons price volatility.

The acquisition would be partially financed with a stock issuance whose specific purpose is to fund this opportunity of growth and consolidation. This would allow Ecopetrol to undertake a transformational opportunity without changing the investment plans in its core oil & gas business, and without impacting the debt ratios that support its investment grade.

Moving forward, in case of succeeding in the transaction, we envision a more robust Ecopetrol, with a solid position in oil, gas, energy infrastructure and low-emission energy. The Company will continue to focus on the hydrocarbons business, with a growing share of gas. Renewable generation for self-consumption will continue to be key for reducing operating costs and emissions footprint. We will increase our level of ambition in decarbonization in terms of reducing emissions, and we will move forward with the evaluation of new technologies and business models, such as natural climate solutions, CCUS (Carbon Capture, Use and Storage) and green hydrogen.

That said, we have started 2021 with a solid financial position, strengthened after the crisis, with expectations of profitable and sustainable growth on all fronts of the business, and with the clear aspiration to materialize a transformational opportunity for the Company through the potential acquisition of the stake in ISA. This plan addresses the challenges and opportunities of the environment, keeping our promise to create value for our shareholders and stakeholders, leveraged on the pillars of growth, capital discipline and cash protection, all supported on TESG.

Felipe Bayón Pardo

CEO

Ecopetrol SA

* Excluding the effect of expenses associated to the Voluntary Retirement Plan, EBITDA amounts to COP 4,629 billion in 4Q20 and COP 17,471 billion as of year-end.

Parex Resources and CNE Oil & Gas, a subsidiary of Canacol Energy, were awarded four areas, with associated investments estimated at approximately US$ 40 million.

“The signing of these four contracts, which represent an associated investment of approximately 40 million dollars, are a sample of how the government’s policies for the reactivation of the hydrocarbon sector have worked, because after 5 years without signing new exploration and production contracts, we will close 2020 with 30 new contracts thanks to the Continuous Area Nomination Process. This sector will continue to be the core of the sustainable reactivation as a gateway to investment and employment generation, as well as the fundamental axis of our energy self-sufficiency,” said Minister of Mines and Energy, Diego Mesa Puyo.

Above photo: Rafael Pinto of Parex Resources signs contracts for the third cycle of the PPAA in ANH offices. Photo: ANH

“The result of the third cycle of the PPAA is the reflection of a sector that has remained active and in force, despite the challenges posed by the pandemic and the price crisis and also of the stake that companies like Parex and Canacol have made in the Colombian industry. We already have great expectations for the fourth cycle, the Colombia Round 2021, which will present an attractive offer of opportunities, the revision of the contractual terms and the simplification of the processes,” added Armando Zamora Reyes, President of the ANH.

The first two cycles of the PPAA awarded 26 areas with investment commitments of $950 million dollars. A total of 70 areas were offered, with an award success rate of 37%.

The third cycle completes 30 awarded areas with associated investments of nearly one billion dollars.

The fourth cycle of the PPAA, the Colombia 2021 Round is expected to present an attractive offer of opportunities based on geological knowledge, the redefinition and release of the land map, the simplification of the terms of reference, a more efficient selection process of contractors, done in a joint construction with the industry and other stakeholders.

Click here for more information or to register.

Online Forum participants will benefit from

• Prescheduled One-on-One meetings in virtual rooms
• Prescheduled brief presentations and meetings
• Online platform that allows to ask, comment, discuss in a chat room or by video call
• Closed One-on-One chat rooms with all participants available
• Closed Online VIP-club for C-suite
• Enlarged delegations from Latin America Oil & Gas companies
• ZOOM-cocktail party and other options for informal networking!

Forum highlights:

• Online One-on-One Meetings and Business Networking – connect with industry leaders while working from home.
• Online networking, virtual bar and zoom-cocktail party, online VIP-club for C-suite, and a lot more.
• Hotline with business experts: Ask your burning questions, call for advice, and share your experience during and after sessions.
• 400+ senior executives of growth and major Oil and Gas companies from Colombia and the rest of Latin America, investment projects, technological leaders, and industry experts
• Strategic plenary session and discussion: Colombia´s oil and gas industry revival. What are the most effective short-term and long-term anti-crisis and risk management strategies? What is the best strategy in the time of uncertainty and turbulence?
• Special focus: interactive parallel technical discussions – pose your burning questions about geological exploration, uncapping unconventional resources and monetizing oil and gas to your peers from Oil and Gas companies from Colombia and Latin America
• Innovation for Colombia´s Oil and Gas Industry: How to optimize costs and improve efficiency in current market situation?
• Case Studies. Success formulas and candid tips from industry leaders: productivity growth, optimization of production processes, and much more

A safe online platform: Stay connected with colleagues and experts from your home office

Among the regular participants: EcoPetrol, Biomax, ANH, Campetrol, CEPSA, Emerald Energy, ConocoPhillips, CleanEnergy Resources, Canacol, Trafigura, GranTierra Energy, TGI, InterOil, ProGasur, PromiGas, Equion, Hupecol, Mompos Oil, PDVSA, Refineria Sebastopol, Proma, Chevron, Repsol, Terpel, NGEC, Tenaris, MCDERMOTT, Frontera, Shell, Petrobras, Interoil, Garrido, AECOM, Montagas, ABC, CruzSur, Siemens, Wattle, Petro Colombia, Halliburton, Sacyr, Mansarovar, Spiecapag, Bridgemaster, Tracerco, TPC, IBM, Posneft, Honeywell, Tecpetrol and many more.

Organizing Committee:
Vostock Capital Team,
Tel:     +7 495 109 9 509
Fax:    +44 207 231 1600
Email: events@vostockcapital.com
Web:  https://colombiaoilandgas.co/

Key Highlights

• Average Production During the Quarter: Was 29,527 BOE per day, down 10% from fourth quarter 2019; during the Quarter, volumes were impacted by suspended production at the Suroriente and PUT-7 Blocks in the southern Putumayo region due to a local farmers’ blockade, deferred development drilling, shut-in of higher cost production and wells that were off-line awaiting routine mechanical workovers; these wells are expected to remain off-line during the low-price environment
• Decisive Action To Swiftly Shut-In Uneconomic Production: Gran Tierra has temporarily suspended fields with zero or negative netbacks at current oil prices and taken precautions to minimize restart costs  across all assets; Gran Tierra remains focused on the ongoing production and waterflooding of the Company’s core assets at Acordionero, Costayaco and Moqueta, which represent 81% of Gran Tierra’s WI Total Proved Reserves as of December 31, 2019*
• Deferral of Capital Expenditures: The Quarter’s capital expenditures totaled $44.3 million; following the advent of the COVID-19 outbreak and the resulting large decrease in oil demand and prices, the Company has elected to defer the majority of capital expenditures for the remainder of 2020, by stacking all drilling and workover rigs and suspending development activities
• Proactive Measures Taken During Downturn: Gran Tierra has rapidly implemented cost saving initiatives throughout the Company; furthermore, internal initiatives during this downturn are focused on portfolio optimization, deferring short-cycle investments, and pacing projects to allow the Company to properly resume operations when oil prices recover
• Colombian Government Initiatives to Assist the Oil Industry: Gran Tierra plans to make use of new regulations that the Colombian government has issued to support the oil industry in response to the recent drop in oil prices:
  • On April 10, 2020, the Ministry of Finance issued Decree 535 which is designed to expedite the recovery of value-added and income tax receivables from the tax authorities, to ensure that such funds are received by companies in the short-term
  • On March 27, 2020, the National Hydrocarbons Agency (ANH) issued Agreement 01, which grants companies the option to transfer certain commitments among exploration, evaluation or development acreage, providing that certain criteria are met
  • On April 7, 2020, the ANH also issued Agreement 02, which allows oil companies to reduce substantially the amounts covered by letters of credit for block commitments; this new agreement also grants oil companies the option to request 12 months of additional time for the execution of exploration, evaluation and certain exploitation commitments

• Focus on Balance Sheet Protection and Long-Term Value Preservation: During the Quarter, Gran Tierra quickly shifted its focus from production growth and free cash flow generation to protecting the Company’s balance sheet and long-term value; this shift in focus was accomplished through adjusting oil production volumes, deferring capital investments and further optimizing and lowering operating and general and administrative (“G&A“) costs:
  • Significant progress has been made on lowering operating costs through the renegotiation of vendor contracts, with significant discounts achieved to date; additional operating cost initiatives include personnel and rental equipment optimization; in addition to reducing operating costs, the Company is also benefiting from the recent depreciation of the Canadian dollar and Colombian peso; the Colombian peso has declined 18% versus the U.S. dollar from the Company’s original budget estimate; the majority of Gran Tierra’s operating costs (approximately 80%) and G&A costs within Colombia are denominated in Colombian pesos; all G&A costs in Canada are denominated in Canadian dollars
  • Gran Tierra’s Executive Team and Board of Directors have taken 20 percent reductions in salaries and retainer fees, respectively; in addition, a number of cost optimization and efficiency measures are being implemented that will further reduce the Company’s G&A costs to levels consistent with lower anticipated activity levels; Gran Tierra expects these changes to result in a reduction of 30 to 35 percent in G&A costs compared to the Company’s original budget
  • Due to the uncertainty of the financial and operational impact of COVID-19 and the significant decline in world oil prices, the Company is not providing any fiscal or operational outlook at this time

• 2019 Sustainability Report Published: Gran Tierra’s Environmental, Social and Governance (ESG) report for 2019 is now available on the Company’s website; the Company recognizes the importance that many stakeholders attach to its approach to managing the ESG factors that relate to its business;  Gran Tierra’s 2019 Sustainability Report uses data, stories, and images to show how responsible management of these factors is fundamental to the Company’s corporate values

• Key Financial Metrics for the Quarter:
  • Net loss was $252 million compared with net income of $27 million in the Prior Quarter, due to lower revenues primarily from the collapse in oil price and significant non-cash items including unrealized loss on valuation of investments ($65 million) and goodwill impairment ($103 million)
  • Adjusted EBITDA⁽¹⁾ was $35 million, compared with $66 million in the Prior Quarter
  • Funds flow from operations⁽¹⁾ of $22 million ($0.06 per share, basic) decreased by 55% compared with the Prior Quarter, as a result of lower production and a 19% decrease in the Brent oil price
  • At March 31, 2020, net debt⁽¹⁾ to Adjusted EBITDA⁽¹⁾ was 2.75 times on a trailing 12 month basis (on a trailing 12 month basis, net loss was $215 million and Adjusted EBITDA⁽¹⁾ was $272 million)
  • Entered into additional 2020 oil price hedges during the Quarter to provide further downside protection against a near-term, low price environment; currently, approximately 50 percent of production is hedged for the remainder of the second quarter of 2020, with 7,000 bbl of oil per day (“bopd“) hedged for the second half of 2020
  • Oil and gas sales were $86 million, down 33% from $128 million in the Prior Quarter due to the decreases in production and the Brent oil price
  • Operating netback⁽¹⁾ decreased to $14.13 per BOE, which was caused mostly by the drop in the Brent oil price, while other cost components such as operating and transportation expenses and the quality and transportation discount remained relatively unchanged; the drop in the Quarter’s royalties to $5.61 per BOE, down from the Prior Quarter’s $8.11 per BOE, partially offset the negative impact of the crash in oil prices
  • Operating expenses of $12.17 per BOE were down slightly from $12.44 per BOE in the Prior Quarter due to lower power generation costs, reduction in rental equipment and cost savings attributed to the lower operating activities during the Quarter
  • Workover expenses were $4.64 per BOE, up from $3.63 per BOE in the Prior Quarter as a result of fishing and recompletion work at the Chuira field and three workovers at the Costayaco field
  • Transportation expenses were $1.52 per BOE, down from $2.35 per BOE in the Prior Quarter, due to higher wellhead sales
  • Capital expenditures totaled $44.3 million, a decrease of 36% compared to the Prior Quarter; the remainder of the Company’s 2020 capital program is deferred, with only minimal maintenance expenditures planned for the rest of 2020

Operations Update

Acordionero (100% WI, Operator)

• During the Quarter, five development wells oil (AC-55, AC-56, AC-57, AC-58 and AC-59) were drilled, focusing on an optimized waterflood program to maximize ultimate oil recovery and long-term value
• Drilling efficiencies continue to be achieved, with AC-59 drilled in record low cycle time (drilled, completed and on production) of 15 days and AC-57 drilled and completed for a total capital cost of $1.8 million; wells drilled at Acordionero have been consistently delivered with per well capital costs below $2 million; further price negotiations with vendors are forecast to further lower infill drilling costs by approximately 20% to 30%, with revised contract terms once drilling recommences after future oil price recovery
• At the end of the Quarter, a total of 9 oil wells require workovers to restore production; Gran Tierra has elected to defer the workovers of these wells due to the current low oil price environment; if the Brent oil price were to recover to a level above $30 per bbl, the Company would consider initiating these workovers
• From January 1, 2020 until mid-March 2020, the instantaneous voidage replace ratio in the waterflood at Acordionero was steady at a level of 1.0 for the Lisama A and 1.8 for the Lisama C reservoirs, indicating continued prudent waterflood management

Suroriente (52% WI and Operator)

• The Cohembi oil field in the Suroriente Block was producing at approximately 4,000 bopd (WI) prior to the blockades as the field was continuing to positively respond to increased water injection and pump optimizations
• Since assuming operatorship, Gran Tierra had been able to increase production by over 1,000 bopd without drilling any development wells
• Prior to the blockades in late February 2020, activities were underway to expand the Cohembi water treatment, injection and processing facilities under a two-phased expansion program; the combined phased expansion would be expected to boost gross water injection capacity from 19,000 to 60,000 bbl of water per day

Ayombero-Chuira (100% WI)

• Gran Tierra remains encouraged by early results from the Ayombero-1 well, which continues to show stable production which averaged 177 bopd for the Quarter on natural flow and has total cumulative oil production to date of 108,000 bbl
• Ayombero-2 and -3 remain suspended and ready for the next phase of operations to recover the wellbores; Gran Tierra continues detailed planning for the next phase of operations but plans to await a recovery in oil prices before restarting development activities

Message to Shareholders

Gary Guidry, President and Chief Executive Officer of Gran Tierra, commented: “Gran Tierra has taken decisive action to protect our balance sheet and cash flows by swiftly reducing our 2020 capital program. We believe we have a competitive advantage to withstand the current challenging environment in light of our low base decline, conventional oil asset base, ability to control capital allocation and low cost structure. We forecast that the Company currently has the productive capacity to produce over 30,000 bopd with the future completion of workovers in Acordionero, resumption of production in the Suroriente Block and restart of production from our minor fields, although we have prudently suspended these workovers and restarts at the present time. We continue to prioritize financial strength and liquidity and currently believe we will exit strongly from this period of economic turmoil.”

Financial and Operational Highlights (all amounts in $000s, except per share and BOE amounts)

* Gran Tierra’s 2019 year-end reserves were evaluated, in compliance with Canadian National Instrument 51-101 – Standards of Disclosure for Oil and Gas Activities  and the Canadian Oil and Gas Evaluation Handbook, by the Company’s independent qualified reserves evaluator McDaniel & Associates Consultants Ltd.  in a report with an effective date of December 31, 2019 (the “GTE McDaniel Reserves Report“).

⁽¹⁾ Net debt is defined as face value of debt ($787 million), less cash and cash equivalents ($39 million). Net debt, funds flow from operations, operating netback, return on average capital employed, cash netback, earnings before interest, taxes and depletion, depreciation and accretion (“DD&A”) and adjusted earnings before interest, taxes and depletion, depreciation and accretion (“EBITDA”) and EBITDA adjusted for loss on redemption of Convertible Notes and loss or gain on investment (“Adjusted EBITDA”) are non-GAAP measures and do not have standardized meanings under generally accepted accounting principles in the United States of America (“GAAP”). Refer to “Non-GAAP Measures” in this press release for descriptions of these non-GAAP measures and reconciliations to the most directly comparable measures calculated and presented in accordance with GAAP.

⁽²⁾ Operating netback is a non-GAAP measure and does not have a standardized meaning under GAAP. Refer to “Non-GAAP Measures” in this press release for a description. The closest related GAAP measure is oil and gas sales price. Operating netback as presented is defined as oil and gas sales less operating, workover and transportation expenses. See the table entitled Financial and Operational Highlights above for the components of consolidated operating netback and corresponding reconciliation.

Gran Tierra’s Corporate Presentation has been updated and is available on the company website at www.grantierra.com.