1 libertad y orden agencia nacional de hidrocarburos agencia nacional de hidrocarburos a new era in...

Agencia Nacional de Hidrocarburos 1

Libertad y Orden

Agencia Nacional de Hidrocarburos

A new era in the Colombian oil and gas industry

Armando Zamora Reyes Director General

January 2005

Libertad y Orden


Libertad y Orden

Agenda

New Institutional Structure

New E&P contract

E&P Opportunities

Colombia at a glance

Improved business environment

Security issues


Libertad y Orden

New institutional structure

Association contract New E&P contract

Ecopetrol Inc.Operator

ANHResource administrator

EcopetrolOperator & regulator


Libertad y Orden

Functions

Hydrocarbon potential

Exploration opportunities

E&P information

systems

Policy & planningE&P

Policy & planningE&P

Knowledgeof resource base

Knowledgeof resource base

Licensing E&P

Licensing E&P

Oil & gas policies

Security of supply

Design E&P contracts

Promotion and negotiation

Assignment of areas

Contract administration

Integral Integral administrationadministration of the nation's hydrocarbons resource of the nation's hydrocarbons resourceIntegral Integral administrationadministration of the nation's hydrocarbons resource of the nation's hydrocarbons resource

Realizingthe benefitsRealizing

the benefits

Royalty collection

Collection of other economic

rights

Communityparticipation


Libertad y Orden

Agenda


New E&P contract

E&P Opportunities



Security issues


Libertad y Orden

New E&P contract basic elements

100% production to the contractor, after royalty paymentSliding scale royalty + TaxEventual payment of 30% of surplus income over trigger price of~ US$ 27/bbl WTI for light crude.Natural gas and heavy oil with a very high trigger price and other incentivesAssets belong to contractor

100% production to the contractor, after royalty paymentSliding scale royalty + TaxEventual payment of 30% of surplus income over trigger price of~ US$ 27/bbl WTI for light crude.Natural gas and heavy oil with a very high trigger price and other incentivesAssets belong to contractor

Autonomy and flexibility to the contractorFollow up by ANHAutonomy and flexibility to the contractorFollow up by ANH

Exploration Minimum program, per phase, adjustableEvaluation At contractor's discretionExploitation Plan accepted by ANH, with updates

Annual work programs

Exploration Minimum program, per phase, adjustableEvaluation At contractor's discretionExploitation Plan accepted by ANH, with updates

Annual work programs

Exploration 6 yrs + 4yrs extensionEvaluation 1-2 yrs + 3 yrs extensionExploitation 24 yrs + Life of Field extension, per fieldExtensions by default on fulfillment of pre-established conditions

Exploration 6 yrs + 4yrs extensionEvaluation 1-2 yrs + 3 yrs extensionExploitation 24 yrs + Life of Field extension, per fieldExtensions by default on fulfillment of pre-established conditions

Royalty / Tax + High price participation100% WI to contractor through contract lifeRoyalty / Tax + High price participation100% WI to contractor through contract life

Type of contract

Duration

Work Programs

Operations

Economic Terms


Libertad y Orden

New E&P contract - elements• Contract type: royalties + taxes (+ ANH high price participation

rights)

• Phases’ length:- Exploration 6 years + 4 years extension- Evaluation 1-2 years + 3 years extension- Exploitation 24 years + extension to final depletion

• Assignment: though modern, transparent, and efficient procedures

• Follow-up: with high international standards


Libertad y Orden

Economic terms

(mboed)

% production

10%

0 5 125 400

20%

12%

16%

8%

4.8%

Discount

20%

Production(mboed)

Light crudeGas OnshoreHeavy OilGas Offshore(>1000 ft)

-- 20%- 25%- 40%

0 5 125 600400

Per field

20%

12%

16%

8%

4.8%

Sliding scale royalty

30% of surplus income over trigger priceAs a % of actual field realizationprice

Trigger price Light crude: ~ US$ 27/bbl WTIHeavy crude: US$ 40/bbl WTIGas: agreed (Henry Hub)

Adjusted with US inflation

US$/bbl WTI

0

10

20

30

40

50

Monthly

US$/bbl WTI

0

10

20

30

40

50

Monthly

Payment to ANHcontingent to

high pricesand when

cumulative production >

5 mmbls


Libertad y Orden

International competitiveness

0%

10%

20%

30%

40%

50%

60%

10% 20% 30% 40% 50%

Profitability

Co

ntr

acto

r T

ake

(1 -

Sta

te T

ake)

Malaysia

United Kingdom

Venezuela

PakistanPeru

Gabon

ColombiaAssociation contractThailand

Norway

Indonesia

Angola China

Australia

India

ArgentinaEcuador

Trinidad & Tob.

Sudan

Bolivia

Egypt

Turkmenistan

KazakhistanBrazil

100%

90%

80%

70%

60%

50%

40%

StateTake

Source: PEPS-USGS and calculations ANH

ColombiaNew Model


Libertad y Orden

Summary of new E&P contract

Top quartileFull materiality, 100% of prize to exploration riskNo need to commit in advance re. cost oil, reserves, or profitability

Time enough to discover, make it feasible and realize the rewardStandard or better than industryEvaluation: grace period to make feasible a discoveryExploitation period per individual discovery / fieldExtensions w/o negotiations until field depletion

Autonomy and flexibilityRight to monetize discoveriesNon intrusive follow up – easy contract administration

Top quartileStake take (50%) and profitabilityRobustness, lower downside - better upside potential100% cost effectiveness / incentive (before tax)Simplicity – easy mathematics, known crude marker, no cost controlIncentives for gas and heavy oil

Type of contract

Economic Terms

Work programsand operations

Duration


Libertad y Orden

Agenda


New E&P contract

E&P Opportunities



Security issues


Libertad y Orden

Diverse portfolio for all players

fromHigh risk exploration in frontier basinse.g. Caribean deepwater, Los Cayos, Caguan, foothills

toLow risk re-entry to drilled wells that have tested hydrocarbons with a P/L nearby

in betweenheavy oil gasupgradescompanies wanting to share risk

E&P Opportunities

~ 100 million hectares in sedimentary basins with unkown potential and exciting exploration opportunities

95% under-explored 5 giant discoveries Only ~2000 wildcats All services available


Libertad y Orden

Opportunities in Colombia

DiversityDiversity

RiskRisk

Various ModelsVarious Models

GeologistGeologist

ComplexityComplexity

MultidimensionalMultidimensional

Unknown potentialUnknown potential

Exciting exploration Exciting exploration

Under explored countryUnder explored country


Libertad y Orden

Modern E&P Information System

new EPIS

website


Libertad y Orden

Agenda


New E&P contract

E&P Opportunities



Security issues


Libertad y Orden

Colombia's Location


Libertad y Orden

Colombia at a Glance

A Few facts about Colombia

• Total Area: 1,138,910 sq km.

• Roughly twice the size of Alberta. It is the only South American country with coastlines on both North Pacific Ocean and Caribbean Sea.

• Population: 42,310,775

• Median age total: 25.8 years. Male: 24.9 years. Female: 26.7 years.

• Life expectancy total population: 71.43 years, Male: 67.58 years, Female: 75.41 years

• Multicultural population: Mestizo 58%, White 20%, Mulato 14%, Black 4%, Black Amerindian 3%, Amerindian 1%

• Literacy Rate Total Population: 92.5% male: 92.4% female: 92.6%


Libertad y Orden


A Few facts about Colombia

• Labor force: 18.3 million (1999 est.)

• Labor force - by occupation: services 46%, agriculture 30%, industry 24%

• GDP 2003 USD$78,600 MM (At purchasing power parity $262,000 MM)

• Real growth rate: 3.95% for 2003 and 4.00% for 2004.

• Natural Resources: petroleum, natural gas, coal, iron ore, nickel, gold, copper, emeralds, hydropower.

• Industries: textiles, food processing, oil, clothing and footwear, beverages, chemicals, cement; gold, coal, emeralds

• Exports: $12.96 billion f.o.b. (2003 est.)

• Exports - commodities: petroleum, coffee, coal, apparel, bananas, cut flowers

• More than 400 multinational companies currently work in Colombia.


Libertad y Orden

Multiple Regional Development Areas

Colombia is highly urbanized, with cities and towns throughout the country.

While the population of many Latin American countries is concentrated in one or two major cities, Colombia’s population is well distributed throughout the country, with three of its cities boasting more than two million inhabitants.

There are another 11 cities with population exceeding 500,000 and 22 cities with more than 100,000 inhabitants



Libertad y Orden

Political, Economic and Social Stability

According to the IFC, Colombia together with Slovakia are the countries where the conditions have improved the most for doing business.

Colombia enjoys a very strong democratic tradition. Since 1900, only once has Colombia been ruled by a non democratically elected government (from 1954 to 1958 when the country was ruled by Military Dictatorship).

Colombia has always respected its commitments. Colombia has never defaulted its debt.

Colombia is an active member of all UN related social organizations (ILO. FAO, Unicef).



Libertad y Orden

Agenda


New E&P contract

E&P Opportunities



Security issues


Libertad y Orden

Business environment

GDP Growth: 2.5% avg. last 10 years to 4+% 2003 and 1H04

Unemployment Rate: 15.6% Agu.02 to current 12.9% Fiscal Deficit: from -5% to -2.5% of GDP in 4 years Foreign Investment : +25% in 2003 and +73% 1H04 Stock Exchange Index: +100% last 12 months External Debt : sustained at 50% GDP, never default President Uribe popularity rating 70%

Fiscal Deficit

00 01 02 03

% GDP

-3%

-2%

-1%

-4%

04

00 01 02 03

%

Inflation

6%

7%

8%

9%

04

Dow Jones

Stock Exchange

01 02 03

Colombia

10

15

20

1000

1500

2000

04

2500

3000

Dow Jones

00

00 01 02 03

% GDP growth

1%

2%

3%

4%

04


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Industry status

THE BASIS

Long and relatively rich oil industry – proved

basin

Exciting exploration open to unknown

potential

5 giant discoveries, many skilled professionals,12.000 km plus pipelines

5 giant discoveries, many skilled professionals,12.000 km plus pipelines

Relatively under-explored countryGeological modeling: more questions unresolved than answers

Relatively under-explored countryGeological modeling: more questions unresolved than answers


Libertad y Orden

Agenda


New E&P contract

E&P Opportunities



Security issues


Libertad y Orden

Eliminate drug trafficking

163.289

144.807

102.07186.340

2000 2001 2002 2003

Illicit coca crops

Source: Ministry of Defense


Libertad y Orden

Maintain deterrent capability

1.4122.538

1.042

2.972

2624

68925

2002 2003 2004 Jan 2005

Collective

Individual

Presidential Period:

Total 10,899

Individual demobilization6,308

Collective demobilization4,591

Demobilization

Source: Ministry of Defense


Libertad y Orden

Democratic and Social Security Policy implemented

Financing sources + number of rebels forces weakened

Coca illegal crops from 160.000 (2000) to ca. 50.000 has. today

Circa 11.000 rebels demobilized

Over 65.000 displaced persons have received humanitarian assistance and 17.317 returned home

Attacks against infrastructure - 57%

Only 1 attack against towns during 2004

Illegal road blocks –60%

Kidnapping –52%

Other security numbers

Dramatic turnaround of the security and drugs

trend


Libertad y Orden

Business environment is clearly, rapidly and sustainly improving

Separation of state roles: Ecopetrol as operator – ANH as resource administrator

Top quartile new contractual scheme

Diverse E&P opportunities with unknown potential and exciting exploration

Positive industry response

Conclusions


Libertad y Orden

ColombiaColombia::THIS IS THETHIS IS THE

TIMETIMEAND THEAND THE

PLACEPLACE

ColombiaColombia::THIS IS THETHIS IS THE

TIMETIMEAND THEAND THE

PLACEPLACE

Thanks for your attention

www.anh.gov.co

1 libertad y orden agencia nacional de hidrocarburos agencia nacional de hidrocarburos a new era in...

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