THE COMPANY: Ecopetrol is the Colombian national oil company. It is one of the major oil and gas integrated companies in the world and, as a corporate conglomerate of more than 25 enterprises, has operations in exploration, production, transport and refinery of hydrocarbons. It also has subsidiaries in the petrochemical and biofuels industries. Despite the fact that most of its activities are concentrated in Colombia, Ecopetrol also has operations in exploration and production of oil and gas in Brazil, Peru, and in the Gulf of Mexico (US). In terms of market share, Ecopetrol has 40% of the exploration lands in Colombia, 54% of the proven (1P) reserves, around 60% of the oil and gas production, and 100% of the country’s refining capacity. It also owns 77% of the crude pipelines and 99% of the product transport infrastructure. In the past five years (2007-12), the company has been able to almost double its production, multiply its 1P reserves one and a half times and triple its EBITDA. Ecopetrol is currently one of the most profitable oil integrated companies in the world, with a return on capital employed (ROCE) of around 36%, which it has maintained since 2009. In 2011 Ecopetrol achieved revenues of around $37bn, EBITDA of $17bn and a net income of $8.6bn. Currently, Ecopetrol’s major shareholder is the Colombian government, with a participation of around 89%. The remaining 11% is floated and is held by local institutional investors, foreign equity funds, corporations and individuals. The company is listed on the Colombian Stock Exchange (BVC), the New York Stock Exchange (NYSE) through an ADR programme, and the Toronto Stock Exchange (TMX). It is the share with the largest weight on the local indices (20%) and is also part of international indices such as the MSCI Latam, S&P MILA 40 and the Dow Jones Sustainability Index.

DEVELOPMENT STRATEGY: Ecopetrol has laid out a long-term strategy for all its business units ( 2012-20). The main goals in the exploration and production segment are to increase the production of oil and gas to 1000 KBOED in 2015 and to 1300 KBOED in 2020 (currently production is around 760 KBOED), and to reach 1P Reserves of 4413 MMBOE (up from the current number of 1815 MMBOE) by the end of 2020. To do so, the company has established a capital expenditures budget of around $80bn for the next eight years, which is going to be divided as follows: 60% for production activities, 25% for exploration, 7% for refining, 5% for transport and 3% for biofuels and other projects.

Most of the reserve additions are expected to come from extensions and revisions of the current fields in Colombia. Since a large amount of Ecopetrol’s production corresponds to heavy oil, this also means that the company has designed an aggressive strategy based on Enhanced Oil Recovery (EOR) and Improved Oil Recovery (IOR) techniques (using both thermal and non-thermal techniques) that will be implemented in the next eight years.

On the exploration front, which constitutes the second-most important source of reserve additions for the near future, the company will be focusing on the Llanos Orientales basin, the most prolific area in the country, for hydrocarbons potential in the next three to five years. Other exploration assets such as Colombia offshore and international blocks in Brazil, Gulf of Mexico (US) and Peru are set to be part of the company’s long-term development. Nevertheless, exploration activities have been performed in these areas for a few years.

Other major projects include the modernisation and expansion of the two refineries of the country, Cartagena and Barrancabermeja (which are 100% owned by the company), which are already in progress and expected to start operations in 2014 (Cartagena) and 2017 (Barrancabermeja). Expansion of transport capacity and acquisitions are also considered to be part of the company’s strategic plan for the future.