EMIS Insights - Colombia Oil and Gas Sector 2019 - 2020

COLOMBIA
OIL & GAS SECTOR

2019/2020
An EMIS Insights Industry Report
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ABBREVIATIONS
ACP Colombian Oil Association
ANH National Hydrocarbons Agency
ANLA National Environmental Licensing Authority
BTU British Thermal Unit
BP British Petroleum
CAMPETROL Colombian Chamber of Oil Goods and Services
COP Colombian Peso
CREG Regulatory Commission for Energy and Gas
DANE National Administrative Department of Statistics
LPG Liquefied Petroleum Gas
MADS Ministry of Environment and Sustainable Development
MME Ministry of Mines and Energy
Naturgas Colombia Natural Gas Association
OPEC Organization of Petroleum Exporting Countries
UPME Mining and Energy Planning Unit
bbl Barrel
boe Barrels of Oil Equivalent
bpd Barrels per Day


CONTENTS 01 EXECUTIVE SUMMARY
Sector in Numbers
Sector Overview
Sector Snapshot
p.5
Sector Outlook
Driving Forces
Restraining Forces
02 SECTOR IN FOCUS p.13

Main Economic Indicators
Main Sector Indicators
Gross Value Added
Exploration Activity
Colombia in Global Oil Market
Colombia in Global Natural Gas Market
External Trade
Foreign Direct Investment
03 COMPETITIVE LANDSCAPE p.23

Timeline Colombia’s Oil and Gas Sector
Highlights
Market Shares
Top M&A Deals
M&A Activity, 2016 – H1 2018
04 COMPANIES IN FOCUS p.29

Ecopetrol SA
Frontera Energy Corp., Sucursal Colombia
Gas Natural SA, ESP
Hocol SA
Canacol Energy Ltd

CONTENTS 05 REGULATORY ENVIRONMENT
Government Policy
06 OIL
p.41
p.47
Highlights
Main Events
Reserves
Focus Point – Proven Reserves by Department
Production
Focus Point – Crude Oil Production by Department
Refining
Consumption
Hydrocarbons Transport Infrastructure
07 NATURAL GAS p.58

Highlights
Main Events
Reserves
Focus Point – Natural Gas Reserves by Department
Production
Consumption
Transportation
08 RETAIL CHANNELS p. 66
Oil Derivatives
Natural Gas Distribution Grid
Natural Gas Vehicles

COLOMBIA OIL & GAS SECTOR 2019/2020
An EMIS Insights Industry Report CONTENTS
01
EXECUTIVE
SUMMARY

Copyright © 2019 EMIS, all rights reserved. 5
01 EXECUTIVE SUMMARY CONTENTS
Sector in Numbers
Fourth Seventh -3%

Largest Crude Oil Largest Natural Gas Crude Oil
Producer in Latin Producer in Latin Production CAGR
America America 2013-2018
1.96Bbbl 6.20 3.8tcf

Proven Oil Oil Reserves to Proven Natural
Reserves Production Ratio Gas Reserves
USD USD
2.5bn 13.3bn 40%
FDI Inflow in Oil and Trade Surplus in Share in Total
Crude Oil, Natural Exports
Gas Extraction Gas and Oil
Derivatives
Note: Data for 2018.

Source: ACP, ANH, Central Bank of Colombia, DANE, BP/Statistical Review of World Energy 2019
COLOMBIA OIL & GAS SECTOR 2019/2020 6

Sector Overview
The oil and gas sector is important to Colombia’s economy, representing 40% of the country’s total
export value and 22.3% of total FDI inflow as of 2018. The sector is dominated by state-run company
Ecopetrol, which, along with its subsidiaries, was responsible for more than 60% of crude oil output
and 79% of natural gas output during 2018. As more than half of Ecopetrol’s revenues come from
outside Colombia (52% of 2018 sales), the sector is highly reliant on international trends. As a result,
the slump in global mineral commodity prices between 2014 and 2016 led to a fall in investments,
which caused reductions of both proven reserves and output in the crude oil and natural gas
segments. However, in 2017 and more acutely in 2018, the sector started to recover on the back of
higher crude oil prices and increased economic activity in Colombia.
Entry Modes
The main entry modes into the sector are through concession contracts for oil and gas exploration,
granted by ANH after participation in a bidding process, and through M&A. After holding its last
auction in 2014, the country was unable to offer new blocks, due in part to the international price
slump, and also due to the elaboration of a new, more attractive bidding system introduced in
February 2019, known as the Permanent Procedure for Areas Assignment (PPAA), implemented by the
ANH. Instead of calling rounds of tenders, ANH is now open to receive offers from interested
companies at any time, based on a group of pre-selected blocks defined by ANH. When several offers
are received, ANH calls all the companies in the sector to counterbid, and, if this happens, the offer
with the most additional exploration activities or a higher rate of shared production wins the block.
Segment Opportunities
The main opportunities for the hydrocarbon sector are linked to the exploration of offshore reserves
as well as unconventional deposits. In May 2017, Ecopetrol announced the discovery of a large gas
deposit at the Gorgon-1 well, located within the offshore Purple Angel block, considered one of the
most significant findings in Colombia’s oil and gas sector in three decades. Regarding unconventional
deposits, no exploration wells have been drilled yet, but according to a May 2019 estimate from ANH,
between five and ten billion barrels of crude oil could be waiting in unconventional deposits, meaning
that proven reserves could be tripled if these are exploited.
Government Policy
Given the importance of the sector to the domestic economy, the country’s new administration looks
committed to introduce a more supportive regulatory framework for hydrocarbon exploration in an
attempt to attract much needed investment in E&P. Among the most relevant changes adopted
recently was the implementation, in February 2019, of a new concession regime that allows for
permanent bidding for exploration fields. The first 11 blocks tendered under this methodology were
awarded in June 2019. However, one major obstacle for the growth of the sector – the regulation
regarding the exploration of unconventional reserves – still awaits an adequate decision by
policymakers to serve both the interests of society and the protection of the environment.
Source: ANH, ACP, DANE, Reuters

Sector Snapshot
Colombia Oil & Gas
Sector
PRODUCTION
Crude Oil: 865 mbbl/d
Natural Gas: 386bcf
EXPORTS Refinery throughput: 382 mbbl/d
USD 16,756mn
Crude Oil, Natural Gas,
Oil Derivatives
USD 13,735mn
Crude Oil & Natural Gas
DOMESTIC MARKET
IMPORTS Oil Consumption: 342 mbbl/d
Gas Consumption: 987 mmcf/d
USD 3,409mn
Crude Oil, Natural Gas,
Oil Derivatives
USD 3,313mn
Oil Derivatives LIQUID FUELS NATURAL GAS
CONSUMPTION CONSUMPTION
Diesel: 152 mbbl/d Interior of the Country:
Gasoline: 113 mbbl/d 542 mmcf/f
Jet Fuel JP-A: 21 mbbl/d Coastal Areas:
LPG: 16 mbbl/d 388 mmcf/d
Isolated Areas:
57 mmcf/d
KEY PLAYERS REVENUES

1. Ecopetrol SA: COP 67,820bn
2. Chevron: COP 3,576bn
3. Frontera Energy: COP 3,490bn
4. Gran Tierra Energy: COP 1,716bn
5. Verano Energy: COP 1,671bn
Note: Data for 2018.
Source: ACP, ANH, DANE, BP/Statistical Review of World Energy 2019, EMIS DealWatch

Sector Snapshot
Colombia Oil and Gas Sector
In 2018, Colombia’s crude output increased for the first time since 2015, by 1.3% y/y to 865,200 bbl/d.
In spite of incipient recovery, it remains 12.4% lower than its 2012-2015 average of 987,600 bbl/d, and
14.3% below its peak in 2013 (1,009,700 bbl/d), just before the crash of international crude oil prices.
Between 2013 and 2016, crude oil proven reserves fell at a CAGR of 12%, before returning to growth in
2017 and 2018.
The output of natural gas also recovered in 2018, growing by 16.3% to 386 bcf, mainly due to higher
investments in production by the leading company of the sector, the state-run Ecopetrol, which
accounted for 74% of total output during the period. In contrast to oil, natural gas reserves continued
their downward trend throughout 2017 and 2018, achieving a negative CAGR of 6.7% during the 2012-
2018 period, due to the depletion of deposits at its mature fields that represent more than 90% of
total production. Ecopetrol’s focus on oil exploration also added to the unfavourable performance of
gas reserves.
Thanks to hydrocarbon’s higher output in 2018, the sector was once again the country’s leading
exporter, accounting for 40% of total export value. However, the value of crude oil, natural gas and oil
derivatives exports remained much below its peak of USD 32.5bn, registered in 2013, when the oil and
gas sector accounted for more than half (55.2%) of total Colombian exports. After recording three
consecutive years of slowdown in 2014, 2015 and 2016, in 2017 the value of sector exports expanded by
22% y/y to USD 13bn, and a further 27% y/y in 2018. Crude oil and natural gas are the main export
products of the sector, accounting for 82% of total sector earnings from foreign sales. On the other
hand, oil derivatives dominated almost all imports in the sector, with a share of 97.2%.
In 2018, domestic consumption of oil rose by 0.6% y/y to 342 mbbl/d. For its part, refinery throughput
grew by 7.6% y/y, thanks to production increases in the Barrancabermeja and Reficar refineries, the
two leading refineries in the country. Just as in 2017, diesel dominated liquid fuel sales in Colombia
with a share of 50% in volume terms, followed by regular gasoline (37%), jet fuel (7%) and LPG (5%).
After three consecutive years of decrease, natural gas demand increased by 1.9% y/y, due mainly to
higher consumption by power generation plants, which had a reduced consumption in 2017. The
interior areas of the country accounted for more than half of all gas consumed through the grid in
2018 (54.9%), while the coastal region accounted for 39.4%. Isolated areas without connection to the
national network consumed only 5.7% of the gas.
Thanks to continuing government subsidies, the number of vehicles running on natural gas in
Colombia continues to rise and in 2018 an additional 15,424 cars were converted to reach a total of
583,688. According to local energy consultancy Concentra, as of end-2018, 2.8% of all vehicles in
Colombia were converted to run on natural gas, accounting for around 7% of the country’s total
natural gas consumption.
Source: UPME, ACP, ANH, Naturgas, DANE, BP/Statistical Review of World Energy 2019, Concentra

Sector Outlook
Comments
In its 2018 Indicative Plan of Liquid Fuels Supply, Colombia’s Mining and Energy Planning Unit
presented three different forecasts for crude production for the period 2018-2038, where the main
variable is the price of oil. In the scenario where global crude prices range from USD 45/bbl to USD
65/bbl, the entity expects production to fall to 54 mbbl/d at the end of the forecast period, supported
by improved recovery and currently undeveloped fields. The best-case scenario, where the average
price of oil is USD 70/bbl, features the development of non-conventional and offshore reserves in
addition to improving the recovery rate of mature fields, which will support a production volume of
225 mbbl/d at the end of the forecast period, after reaching a peak of 1,417 mbbl/d in 2024. This would
represent a CAGR of 8.5% between 2019 and 2023, which contrasts with Fitch Solutions’ May 2019
forecast of a 0.4% CAGR over the same period. Fitch’s outlook is supported by the instability of
international crude oil prices, which will constraint investment, as well as the natural decline of
Colombia’s mature fields, which represent the bulk of current output. In both forecasts, state-run
Ecopetrol will play a key role in production increases. According to its 2019-2021 Business Plan
published in May 2019, the company expects to increase investment in E&P in order to reach a
production of between 750 mbbl/d and 770 mbbl/d by 2021. This would represent a 3% CAGR over the
2019-2021 period.
Crude Oil Production Forecast, bbl/d
1,600,000
1,400,000
1,200,000
1,000,000
800,000
600,000
400,000
200,000
0
2018f 2019f 2020f 2021f 2022f 2023f 2024f 2025f 2026f 2027f 2028f 2029f 2030f 2031f 2032f 2033f 2034f 2035f 2036f 2037f 2038f
Low-Price Scenario, USD 45/bbl - USD 55/bbl Middle- Price Scenario, USD 55/bbl - USD 65/bbl High- Price Scenario, USD 70/bbl
Source: UPME, MME, Concentra

Driving Forces
According to a poll conducted among CEOs and high executives of 27 companies of the sector,
published in December 2018 by the ACP, the Association of Crude oil Producers, the main driving force
of the country is its prospective resources, especially those lying in offshore and unconventional
fields. The country is estimated to have vast and untapped resources in these types of fields,
according to ANH, and the national government is taking measures to encourage private investment
in exploration and production. Both the country’s president, Ivan Duque, and its energy minister,
Maria Suarez, have voiced their concerns over the current reserve levels and their decaying trend,
caused by the natural depletion of mature fields. They have committed to improve the regulatory
framework and enable the development of these resources to stimulate investment and increase both
total reserves and production.
External
Since taking office in August 2018, the national government has been implementing measures to
support the oil and gas sector, which it considers a vital industry for Colombia’s economy. In
particular, the government has accelerated the assignment of new areas through the implementation
of a new system known as the Permanent Procedure for Areas Assignment (PPAA). Under the new
methodology, companies are allowed to present offers for blocks without the need to wait for a
tender to be called by ANH, hence turning the assignment of blocks into a continual process. The
agency expects to end 2019 with more than 60 exploration and production contracts signed, with the
first ten contracts already signed as of end-July 2019. This is positive news, considering that the
previous auction of blocks was in 2014. Other measures include the reformulation of contracts for
offshore E&P, extending the time for exploration activities, as well as setting an impartial
international arbitration court to settle disputes.
Internal
One of the main drivers of the sector in the coming years is expected to be the development of
unconventional hydrocarbon deposits. According to May 2019 estimates from ANH, the country could
triple its proven reserves of crude oil and increase its average production by around 50% by 2028 if
unconventional deposits are exploited. According to a March 2019 article by Reuters, at least five
companies – including domestic leader Ecopetrol as well as US-based multinationals such as Exxon
Mobil and Conoco Phillips – are interested in conducting exploration activities through fracking
technology at six blocks in Colombia. Another driver is likely to be the exploration of offshore areas,
led by Ecopetrol efforts in the basins of the Caribbean, where important discoveries have already
been made, and new exploratory wells are scheduled for drilling in 2020 and 2021.
Source: ANH, ACP, Reuters, Valora Analitika, Ecopetrol

Restraining Forces
According to a December 2018 poll conducted by ACP, sector companies believe that heavy taxation,
contract rigidity, regulatory uncertainty and social disapproval of oil exploration and exploitation are
the main restraining forces for the hydrocarbon industry in Colombia. Continued attacks on transport
infrastructure by still-active guerrilla groups constitute an additional restraining factor for the sector,
especially for downstream activities. Besides, the country has been experiencing a steep decline in
reserve levels of crude oil and more patently of natural gas since 2014, when the sector was heavily
impacted by the end of the mineral commodities high price cycle, which had dominated in the
previous years.
External
In spite of reaching a peace agreement with FARC, Colombia’s largest guerrilla group, in November
2016, the country still suffers from constant terrorist attacks from smaller groups, such as ELN.
Downstream oil operations are the most affected activity by such attacks. Notably, Ecopetrol, which
manages most oil pipelines through its subsidiary CENIT, reported more than 100 attacks on its
infrastructure during 2018, a 70% increase against 2017, which led to economic losses of around COP
157bn. Another constraint for the sector is the social and political conflict surrounding the exploration
and production of hydrocarbons, especially regarding the proposed use of the fracking technique to
exploit unconventional deposits. In November 2018, the State Council, Colombia’s highest court of
justice, suspended the regulatory framework on fracking in the country, stopping all related activities
until the tribunal makes a final decision. In June 2019, the State Council called for the creation of a
new experts committee, which will have to present a new report by October 2019, on which the
tribunal will base its decision. Furthermore, in June 2019, the sector’s most prominent union, the
Union of Workers of the Oil Industry (USO) from Ecopetrol, announced its opposition to the use of
fracking in Colombia, claiming that its environmental damages surpass the economic benefits.
Internal
The main challenge facing the oil and gas sector in Colombia continues to be the decreasing volume
of proven reserves. While crude oil proved reserves increased in 2018, it was also the first year in
which the natural gas reserves to production ratio fell below the symbolic ten-year mark. Additional
reserves in both segments over the past decade have come mainly from improved recovery factors,
instead of the addition of significant new discoveries, which is a worrying sign especially in light of
the continuing depletion of Colombia’s largest production fields. Although offshore and
unconventional deposits may solve this problem, such projects usually demand high levels of
investment over long periods, meaning that a solution will not come easily or quickly. According to
ACP estimates from February 2019, Colombia will be forced to import around 130 mbbl/d of oil
derivatives by 2038, a more than 200% increase against 2018, if unconventional resources remain
untapped.
Source: ACP, ANH, Ecopetrol, Reuters, Dinero, RCN Radio

02
SECTOR
IN FOCUS

02 SECTOR IN FOCUS CONTENTS
Main Economic Indicators

2012 2013 2014 2015 2016 2017 2018
GDP, current prices, COP bn 665,884 713,627 762,903 804,692 863,782 920,194 978,477
GDP, constant 2015 prices, y/y change, % 3.9 4.6 4.7 3.0 2.1 1.4 2.6
Crude Oil and Natural Gas Extraction Gross Value Added,

constant 2015 prices, COP bn 31,308 33,967 33,135 32,852 29,705 28,539 28,999

constant 2015 prices, y/y change, % 4.6 8.5 -2.4 -0.9 -9.6 -3.9 1.6

constant 2015 prices, % of GDP 4.4 4.6 4.2 4.1 3.6 3.4 3.4
Coking and Oil Derivatives Production Gross Value Added,

constant 2015 prices, COP bn 8,332 8,859 8,138 7,761 9,223 9,828 10,226

constant 2015 prices, y/y change, % -4.0 6.3 -8.1 -4.6 18.8 6.6 4.1

constant 2015 prices, % of GDP 1.2 1.2 1.0 1.0 1.1 1.2 1.2
Average Annual Producer Price Index: IPP, y/y change % -0.1 -1.3 2.9 3.9 5.4 0.9 5.1
Average Annual Producer Price Index: Oil and Natural Gas

Extraction, y/y change % -5.0 -4.9 6.3 -14.2 -12.5 5.0 32.8
Average Annual Producer Price Index: Oil Derivatives

Production, y/y change % 3.0 -0.9 2.1 -6.7 -5.0 8.7 12.7
Exchange Rate USD/COP, year-end 1,768 1,927 2,393 3,150 3,001 2,984 3,250
Monetary Policy Rate, % pa, year-end 4.25 3.25 4.50 5.75 7.50 4.75 4.25
Crude Oil, Natural Gas and Oil Derivatives Trade Balance, USD
mn 26,052 26,294 21,621 9,325 7,180 9,597 13,347
Crude Oil, Natural Gas and Oil Derivatives Exports, USD mn 31,552 32,479 28,919 14,218 10,780 13,165 16,756
Crude Oil, Natural Gas and Oil Derivatives Exports, % of total 52.5 55.2 52.7 39.5 33.9 34.8 40
Crude Oil, Natural Gas and Oil Derivatives Imports, USD mn 5,500 6,185 7,298 4,893 3,600 3,568 3,409
Crude Oil, Natural Gas and Oil Derivatives Imports, % of total 9.3 10.4 11.4 9.1 8.0 7.7 6.7
FDI Inflow in Oil and Natural Gas Sector, USD mn 5,471 5,112 4,732 2,502 2,386 3,106 2,537
FDI Inflow in Oil and Natural Gas Sector, 5 of total 36.4 31.5 29.3 21.3 17.2 22.4 22.3
Source: Central Bank of Colombia, DANE, CEIC

Main Sector Indicators

2012 2013 2014 2015 2016 2017 2018
Proven Oil Reserves, mmbbl 2,377 2,445 2,308 2,002 1,665 1,782 1,958
Proven Natural Gas Reserves, bcf 5,727 5,508 4,758 4,361 4,024 3,890 3,780
Crude Oil Production, mbbl/d 944.1 1,009.7 990.5 1,006.0 886.0 854.1 865.2
Oil Reserves/Production Ratio, years 6.90 6.63 6.38 5.45 5.12 5.70 6.20
Natural Gas Production, bcf 423 458 453 432 360 332 386
Natural Gas Reserves/Production Ratio, years n/a n/a n/a 10.5 10.3 11.7 9.8
Seismic Survey Area, thou km equivalent 18.2 28.5 40.1 32.2 39.8 1.0 1.1
Number of Drilled Exploration Wells 131 115 113 25 25 43 50
Refining Capacity, mbbl/d 336 336 336 421 421 415 415
Refinery Throughput, mbbl/d 305 284 247 244 339 355 382
Oil Consumption, mbbl/d 295 297 316 332 345 340 342
Natural Gas Consumption, mmcf/d 913.3 1,013.7 1,101.4 1,084.8 1,027.5 968.4 987.0
Number of Gas Grid Users, thou, year-end 6,694 7,166 7,745 8,218 8,628 9,067 9,498
Number of Natural Gas Motor Vehicles, year-end 439,907 476,506 510,562 538,213 556,183 568,264 583,688
Source: ANH, ACP, MME, BP/Statistical Review of World Energy 2019

Gross Value Added
Comments
Between 2013 and 2017, the GVA of the oil and gas sector decreased at a CAGR of 4.3% due to the
slump in international crude oil prices. However, in 2018, the GVA experienced a mild recovery,
growing by 1.6% y/y against 2017, thanks to the rebound in international prices.
In line with this, in 2018, Colombia’s GDP experienced its highest growth rate since 2015, growing at a
2.6% y/y rate in real terms, yet remaining far from the 4.7% average growth rate during the 2012-2014
period. Furthermore, the oil and gas sector was not among the main drivers of growth in 2018.
In 2018, the oil and gas sector remained far from its peak year, 2013, when its GVA reached COP
33,967bn and a 4.6% share of the country’s total. In comparison, in 2018 the sector’s GVA amounted to
15% less than in 2013 (COP 28,999bn), and its share of the country’s total GDP was 25% less than in
2013 (3.4%).
In May 2019, the Central Bank reported that the sector continued its recovery trend in Q1 2019, with
GVA growing by 5.5% in real terms against the same period in 2018. This, coupled with the resumption
of hydrocarbon block tendering in 2019, paint a positive outlook for the sector in 2019, according to
CAMPETROL, the local chamber of oil and gas service companies. Overall, according to May 2019
estimates by CAMPETROL, the sector’s GVA will grow by 2.3% y/y in 2019.
Crude Oil and Natural Gas Extraction Share of Crude Oil & Natural Gas
GVA Extraction GVA in Total Economy
33,967 69.6%
67.6% 68.8% 69.0% 66.7%
33,135 32,852 64.2% 65.5%
31,308
29,705
8.5% 28,999
4.6% 28,539
1.6%
-2.4% -0.9%
-3.9%
-9.6%
4.4% 4.6% 4.2% 4.1% 3.6% 3.4% 3.4%
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Crude Oil & Natural Gas Extraction GVA, constant 2015 prices,
COP bn
y/y change Share in GDP Share in Mining G VA
Source: Central Bank of Colombia

Exploration Activity
Comments
In 2018, the area of seismic surveys in Colombia increased by 10% y/y, albeit coming from its lowest
point since 2000. Moreover, the indicator is still 97% down when compared to 2016. For its part, the
number of exploration wells drilled increased by 16.3% y/y, reaching 50 wells drilled. According to
ANH’s figures, 62% of the wells were drilled in the Llanos basin, in the eastern side of the country,
followed by the Magdalena Valley basin in the north-central region.
MME explains the significant drop in seismic activity in 2017 with the low oil price adding to the rising
social unrest derived from the environmental impact of the sector’s activities and the perception by
local communities that economic benefits are not justly distributed. However, in 2018, the sector
started to recover, and the Ministry expects that in 2019 the rising trend of exploration activity will
strengthen, according to a May 2019 press release. Affected by diminished exploration efforts and the
normal decay of production at mature fields, natural gas reserves decreased by the sixth year in a row
in 2018, leading the reserves/production ratio to fall below the ten-year mark for the first time in
Colombia’s history. The case is largely similar with oil reserves, where the mild recovery reported in
2017 and 2018 was associated with improved recovery, rather than new discoveries, which adds more
weight to the need to increase exploration efforts.
Seismic Survey Area, thou km equivalent Number of Drilled Exploration Wells
40.1 39.8
115 113
32.2
28.5
50
43
25 25
1.0 1.1
2013 2014 2015 2016 2017 2018 2013 2014 2015 2016 2017 2018
Source: ACP, UPME

Colombia in Global Oil Market
Comments Proven Oil Reserves by Country,

In 2018, global oil production increased by 2.4% December 2018
y/y, driven by higher output from the top four Proven Oil Share of
Ranking Country
Reserves, Bbbl Total
producers, especially non-OPEC members the US 1 Venezuela 303.3 17.5%
and Canada, whereas OPEC members continued 2 Saudi Arabia 297.7 17.2%
with the cutbacks in production established in 3 Canada 167.8 9.7%
2017, resulting in a 0.8% y/y fall in output in 2018
4 Iran 155.6 9.0%
for the member countries. In 2018, Colombia
5 Iraq 147.2 8.5%
ranked 24th globally in terms of crude production,
6 Russia 106.2 6.1%
unchanged against 2017. During the year, global
7 Kuwait 101.5 5.9%
oil consumption experienced a 1.5% increase,
8 United Arab Emirates 97.8 5.7%
driven by non-OECD countries of the Asia Pacific
9 United States 61.2 3.5%
region, such as India and China. Regarding
10 Libya 48.4 2.8%
consumption, Colombia occupied the 41st
…
position, down one spot against 2017 in spite of
36 Colombia 1.8 0.1%
increasing its consumption by 0.6% y/y during the
year.
Oil Production by Country,* 2018 Oil Consumption by Country, 2018

Ranking Country Oil Production, mbbl/d Share of Total Oil Consumption,
Ranking Country Share of Total
mbbl/d
1 United States 15,311 16.2%
1 United States 20,456 20.5%
2 Saudi Arabia 12,287 13.0%
2 China 13,525 13.5%
3 Russia 11,438 12.1%
3 India 5,156 5.2%
4 Canada 5,208 5.5%
4 Japan 3,854 3.9%
5 Iran 4,715 5.0%
5 Saudi Arabia 3,724 3.7%
6 Iraq 4,614 4.9%
6 Russia 3,228 3.2%
United Arab
7 3,942 4.2% 7 Brazil 3,081 3.1%
Emirates
8 China 3,798 4.0% 8 South Korea 2,793 2.8%
9 Kuwait 3,049 3.2% 9 Canada 2,447 2.5%
10 Brazil 2,683 2.8% 10 Germany 2,321 2.3%
… …
24 Colombia 866 0.9% 41 Colombia 342 0.3%
* Includes crude oil, shale oil, oil sands and NGLs

Source: BP/Statistical Review of World Energy 2019

Colombia in Global
Natural Gas Market
Comments Proven Natural Gas Reserves, December

Global natural gas production stood at 3.9 tcm in 2018
Proven Natural
2018, up 5% y/y – more than double the average Ranking Country Share of Total
Gas Reserves, tcm
annual growth of 2.3% over 2007-2017. Both OECD 1 Russia 38.9 19.8%
and non-OECD members saw output expansion,
2 Iran 31.9 16.2%
although the former increased by 7.3% y/y, while
3 Qatar 24.7 12.5%
the latter by just 4% y/y. Of the top ten
4 Turkmenistan 19.5 9.9%
producers, the US and Australia showed the most
5 United States 11.9 6.0%
substantial y/y increases in production, by 11.5%
6 Venezuela 6.3 3.2%
y/y and 15% y/y, respectively. In 2018, Colombia
7 China 6.1 3.1%
was the 38th largest gas producer in the world,
8 United Arab Emirates 5.9 3.0%
recovering four positions from its 2017 ranking
when it was 42nd, due to a 4.6% y/y increase in 9 Saudi Arabia 5.9 3.0%
production volumes. In terms of consumption, 10 Nigeria 5.3 2.7%
global natural gas demand rose by 5.3% y/y to …
3.8tcm, whereas Colombia’s gas consumption 46 Colombia 0.1 0.1%

grew by 7.1% y/y to 13bcm.
Natural Gas Production by Country,* Natural Gas Consumption by Country,

2018 2018
Natural Gas Production, Natural Gas
Ranking Country Share of Total Ranking Country Share of Total
bcm Consumption, bcm
1 United States 831.8 21.5% 1 United States 817.1 21.2%
2 Russia 669.5 17.3% 2 Russia 454.5 11.8%
3 Iran 239.5 6.2% 3 China 283.0 7.4%
4 Canada 184.7 4.8% 4 Iran 225.6 5.9%
5 Qatar 175.5 4.5% 5 Canada 115.7 3.0%
6 China 161.5 4.2% 6 Japan 115.7 3.0%
7 Australia 130.1 3.4% 7 Saudi Arabia 112.1 2.9%
8 Norway 120.6 3.1% 8 Mexico 89.5 2.3%
9 Saudi Arabia 112.1 2.9% 9 Germany 88.3 2.3%
10 Algeria 92.3 2.4% 10 United Kingdom 78.9 2.0%
… …
38 Colombia 12.9 0.3% 43 Colombia 13.0 0.3%
* Excludes gas flared or recycled.

Source: BP/Statistical Review of World Energy 2019

External Trade
Comments
The oil and natural gas sector is one of the leading domestic exporters, accounting for 40% of
national exports in 2018, and playing a vital role in Colombia’s external surplus. The 2014 slump in
international crude oil prices severely affected the sector’s exports, cutting its value by 62.7% from
2014 to 2016. However, the sector’s foreign sales started to recover in 2017, rising by 22.1% y/y, and
continued in 2018, growing by 27.3% against 2017, as crude oil prices on the international market
started to rise. However, the total value of exports in 2018 remained about half of their pre-crisis
levels in 2013. The main driver of growth in 2018 was the 24% y/y expansion of crude oil and natural
gas export value, although exports of crude oil derivatives also experienced a 44% y/y increase
against 2017. As a result of this, the share of crude oil derivatives in total sectoral export value rose to
18% in 2018, compared to 16% in 2017. In spite of the growth of Asian markets as destinations for the
sector’s exports, the US continues to be the leading destination for Colombia’s oil and gas exports,
accounting for 31.2% of total crude export value and for 31.5% of foreign sales volume.
Imports consist almost entirely of crude oil derivatives, with natural gas and crude oil accounting for
only 3%. Sectoral imports decreased once again in 2018, down by 4% y/y to USD 3.4bn, driven by a 10%
y/y slump in the purchase of oil derivatives on the back of increased output from Ecopetrol’s
refineries, partly offset by higher natural gas imports. As a result, the trade deficit of the crude oil
derivatives segment reached a historic low of USD 292mn in 2018. For its part, the sector’s surplus was
twice that of 2016 but is still far below 2013 levels.
External Trade in Crude Oil, Natural Gas External Trade in Crude Oil, Natural Gas
and Oil Derivatives, USD mn and Oil Derivative, share of total
55.2%
52.5% 52.7%
26,052 26,294
39.5% 40.0%
16,756
21,621 34.8%
14,218
33.9%
10,780
13,165
32,479
31,552
28,919
13,347
7,180
9,325 9,597
10.4% 11.4%
9.3%
5,500
6,185
7,298
4,893
3,600
3,568
3,409
9.1% 8.0% 7.7% 6.7%
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Exports Imports Trade Balance Share in Total Export Value Share in Total Import Value
Source: DANE

External Trade (cont’d)
External Trade in Crude Oil and Natural External Trade in Oil Derivatives, USD mn
Gas, USD mn
7,298
6,185
5,493
28,057
4,893
26,826 26,041
3,685
3,583
3,313
3,021
2,099
2,037
1,288
12,930
4,719
4,422
13,735
2,878
11,066
28,057
26,833
26,041
8,743
12,930 13,532
-292
11,054 -774
-1,763 -1,546 -1,586
8,726
-3,605
-4,420
203
17
12
7
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Exports Imports Trade Balance Exports Imports Trade Balance
Share of Crude Oil and Natural Gas in Share of Oil Derivatives in Total Sector
Total Sector External Trade External Trade
90.0% 90.9%
85.0% 86.4% 84.1% 103.3%
81.1% 82.0% 99.9% 100.0% 100.0% 100.0% 99.5% 97.2%
18.9% 15.9% 18.0%

15.0% 13.6%
6.0% 10.0% 9.1%
0.1% 0.0% 0.0% 0.0% 0.5% 0.3%
2012 2013 2014 2015 2016 2017 2018 2012 2013 2014 2015 2016 2017 2018
Share in Total Export Value Share in Total Export Value

Share in Total Import Value Share in Total Import Value
Source: DANE

Foreign Direct Investment
Comments
In 2018, foreign direct investment (FDI) in Colombia’s oil and gas sector fell by 18.3% y/y to USD 2.5bn,
in line with an 18% drop in the country’s total FDI. As a result of this, the sector’s share of total FDI in
Colombia remained almost unchanged in 2018 at 22.3% (22.4% in 2017). In spite of a mild recovery in
2017, sector FDI has experienced continued decline over the past few years, falling at a CAGR of 12%
over the 2012-2018 period. Its value in 2018 was less than half that of 2013.
In 2018, investments in E&P started to recover, increasing by 28% y/y to USD 4.3bn according to ACP,
supported by the recovery in international crude prices. Furthermore, the Association believes that
investments will increase by 14% y/y in 2019, reaching USD 4.9bn, driven by higher global prices. ACP
believes the sector’s companies will continue to see opportunities in the country thanks to its vast
resources, in spite of what it called “slow progress” in the granting of new blocks. Other risks for
foreign investment cited by ACP remain judicial uncertainty and environmental concerns of the local
communities. Of the expected investment, the natural gas segment will receive USD 490mn, according
to ACP, doubling its 2018 total, while the rest will be destined to the oil segment. In terms of region,
88% of the investment will be focused on the Llanos, Middle Magdalena Valley, Lower Magdalena
Valley, and Caribe basins.
FDI Inflow in the Oil and Gas Sector, USD FDI Inflow in the Oil and Gas Sector,
mn share of total
5,471
5,112 36.4%
4,700 4,732
32.1% 31.5%
29.3%
3,106 22.4% 22.3%

21.3%
2,502 2,537
2,386
17.2%
2011 2012 2013 2014 2015 2016 2017 2018 2011 2012 2013 2014 2015 2016 2017 2018
Source: Central Bank of Colombia, ACP

03
COMPETITIVE
LANDSCAPE

03 COMPETITIVE LANDSCAPE CONTENTS
Timeline Colombia 1948 Development Milestones
Oil & Gas Law 165 establishes Ecopetrol. The company

starts oil exploration in 1951.
1961 Market Players
Ecopetrol assumes the direct management 1969 Market Players
of the Barrancabermeja refinery. Ecopetrol inaugurates the 305km

Transandine pipeline that links
Putumayo and Narino departments.
Law 20 mandates that the state is the

1974 Market Players
Market Players
owner of the subsoil.
Ecopetrol acquires the Cartagena refinery, Development Milestones
built by Intercol in 1956.
1977 Market Players
1982 Development Milestones Chevron starts gas production at the

Chuchupa field, Guajira department, currently the
Launch of the government Gas Programme for Change largest gas production field in Colombia and the only
(Programa de Gas para el Cambio) focused on the offshore in operation.
substitution of expensive energy sources with those
with lower costs.
1983 Market Players
Ecopetrol and its US-based peer OXY

1986 Development Milestones
announce the discovery of the Cano Limon
The 780km crude oil pipeline that links the Cano Limon field with estimated reserves of 1.1 Bbbl.
oil filed to the Covenas oil terminal is inaugurated.
1989-1993
1991 Development Milestones Discovery of the Cusiana and Cupiagua oil
fields, in the Llanos Orientales region.
The National Council for Economic and Social Policy Development Milestones
approves a government programme for the
massification of gas consumption.
2003 Development Milestones
Decree-Law 1,760 creates ANH, which assumes the
2007 Market Players administrative and regulatory responsibilities on
the oil and gas sector from Ecopetrol.
Partial privatisation of Ecopetrol through an
IPO on the Colombia Stock Exchange.
2019 DevelopmentMilestones
Development Milestones
2017 Market Players
Introduction of a permanent bidding concession Ecopetrol and its US-based partner Anadarko announce
regime through ANH’s Resolution 078. a large offshore natural gas discovery within the Purple
Angel block, with an estimate reserves of 1.2 Bboe.
Source: ACP, Ecopetrol, Sectorial

Highlights
Overview
In spite of opening its oil and gas sector as early as 2003, as of 2018 Colombia’s national government
is still the leading incumbent in the sector, thanks to its 88.49% stake in the dominant player,
Ecopetrol. The state-owned company continues to lead the sector across all segments, from the
upstream where it is directly responsible for 53.3% of the crude oil produced in the country as of 2018,
to the downstream where it owns all the major pipelines through its subsidiary Cenit. The oil and gas
sector is composed of more than 50 companies, of which 27 account for 96% of the hydrocarbon
production and 70% of the exploratory activities in the country as of end-2018, according to ACP, the
Colombian Oil Association.
Market Structure
The oil and gas sector has a significant level of concentration, derived from the monopolistic role that
the government played up to the early 2000s. Exploration and production activities continue in the
hands of a small number of players, which, besides Ecopetrol, include local subsidiaries of notable
multinationals as well as some independent players. Natural gas extraction is the most concentrated
segment, with three companies controlling 87.6% of output in 2018, due to the limited number of
active gas production fields in the country. The crude oil segment is slightly more competitive, with
the top three players controlling 68.8% of production in 2018. Ecopetrol’s net revenues in 2018 (COP
67.8tn) were 19 times higher than that of the second largest company by earnings, Chevron Petroleum
Company.
Main Players
In 2018, Ecopetrol, the leading player of the sector, was directly responsible for 53.3% of the country’s
crude oil output, although if subsidiaries are taken into account, this figure reaches 60.3%.
Furthermore, according to Portafolio, if joint ventures and partnerships are also measured, the
company is responsible for 76% of Colombia’s crude oil output. One of Ecopetrol’s main partners is
Chevron, the US-based multinational, which operates the oil production fields of La Guajira (Chuchupa
and Ballena). Ecopetrol’s dominance comes from its ownership of the Rubiales, Castilla and
Chichimene oil fields, which together accounted for 52% of its total crude output. In 2018, the largest
foreign companies in the hydrocarbon sector in terms of revenues were US-based Chevron, the second
largest gas producer, and Canadian company Frontera Energy, the second largest crude oil producer
responsible for 8.5% of total 2018 oil output.
Market Entries
According to ACP, as of end-2018, more than 50 companies from 15 countries were present in
Colombia’s oil and gas sector. In spite of a recent hydrocarbon auction taking place in June 2019, the
main entryway to the sector remains brownfield investments, with Canadian companies being the
most active players in M&A deals linked to oil and gas exploration and exploitation in Colombia
during the 2018 and H1 2019 period. However, this might change in H2 2019 and onwards, as Ecopetrol
looks for international partners to develop its unconventional sources, especially among US
companies with experience in fracking.
Source: ACP, ANH, Portafolio, La Republica, Valora Analitika

Market Shares
Top Ten Oil and Natural Gas Producers by Net Sales,* 2018
Ranking Company Net Sales Revenue, COP bn y/y change
1 Ecopetrol SA 67,819.94 22.8%
2 Chevron Petroleum Company 3,576.04 8.6%
3 Frontera Energy Colombia Corp., Sucursal Colombia 3,489.74 -1.7%
4 Gran Tierra Energy Colombia Ltd 1,715.84 46.0%
5 Verano Energy (Barbados) Limited Sucursal 1,670.92 958.9%
6 Occidental Andina Llc 1,615.27 15.7%
7 Parex Resources Colombia Ltd Sucursal 1,559.74 -13.7%
8 Equion Energia Limited 1,500.19 27.2%
9 Geopark Colombia Sas 1,471.12 90.7%
10 Hocol SA 1,430.13 20.8%
* NAICS code: 211
Top Crude Oil Producers by Output, Top Natural Gas Producers by Output,
2018 2018
Geopark Occidental Equion
Equion
Frontera Colombia de Colombia Energia
Energia
Energy 8.5% 6.9% 5.4% 26.1%
4.8%
Gran Tierra
Energy 3.9%
Chevron
Mansarovar
10.6%
Energy
Colombia
3.3%
Geoproduc
tion Oil &
Hocol 2.2%
Gas 3.4%
Hocol 1.8%
Others
Ecopetrol 11.6% Ecopetrol CNE Oil &
53.3% 51.0% Gas 1.4%
Frontera
Energy 1.2%
Source: EMIS Company Database, ANH, ACP

Top M&A Deals

Top 15 M&A Deals in Colombia’s oil and Gas Sector,* 2018 – H1 2019
Country of Deal Value,
Date Target Company Deal Type Buyer Stake, %
Buyer USD mn
Operations and
Nov 2018 subsidiaries of GeoPark in Acquisition GeoPark Ltd Bermuda 111.0 (Official) n/a
Colombia and Chile
May 2018 Vetra Energia SL Acquisition New Stratus Energy Inc Canada 88.5 (Official) 100.0
Suroriente Block; Llanos-5

Feb 2019 Acquisition Gran Tierra Energy Inc Canada 85.1 (Official) n/a
Block
Jun 2018 Arrow Exploration Ltd Acquisition Front Range Resources Ltd Canada 71.4 (Official) 100.0
Jun 2018 Carrao Energy Ltd Acquisition Arrow Exploration Ltd Canada 40.0 (Official) 100.0
Occidental Andina LLC; United States;

Jun 2019 Putumayo-8 Block Minority stake 19.1 (Official) 50.0
Occidental Petroleum Corp Colombia
Mar 2019 Putumayo-8 Block Acquisition Amerisur Resources Plc United Kingdom 19.1 (Official) 50.0
Inversiones Glp SAS ESP

Apr 2018 Minority stake Gasco SA Chile 15.98 (Official) 30.0
(Vidagas)
Jun 2018 Tapir oil block Acquisition Arrow Exploration Ltd Canada 10.0 (Official) 50.0
Nov 2018 VMM 18 oil block Acquisition New Stratus Energy Inc Canada 3.0 (Official) 100.0
Surcolombiana de Gas
Jul 2018 Acquisition Empresas Lipigas SA Chile 3.0 (Market Est.) 51.1
SAESP (Surgas)
E&P contracts for Col-3

Mar 2019 Minority stake Noble Energy Inc United States n/a 40.0
and Gua Off-3 oil blocks
Wholesale, retail assets of

Jan 2019 Acquisition Rednova SAS ESP Colombia n/a 100.0
Edalgas
Nov 2018 Integra Oil & Gas Acquisition Ceibo Energy Corp Panama n/a n/a
Nov 2018 Eight oil and gas licences Acquisition Buyer(s) unknown n/a n/a 70.0
* NAICS Codes: 211, 2212
Source: EMIS DealWatch

M&A Activity, 2018 – H1 2019
Number and Value of Deals in Colombia’s Number of Deals by Deal Type

Oil and Gas Sector*
5
4 4
Acquisition
80.0% Minority
226
Stake
1 1 Purchase
0 20.0%
114 104
0 3 19
Q1 Q2 Q3 Q4 Q1 Q2
2018 2019
Value of Deals, USD mn Number of Deals

* NAICS Codes: 211, 2212
Number of Deals by Deal Value, USD Number of Deals by Region of Investor
Latin
Undisclosed; America
26.7% 26.7%
50.1-100mn;
20.0%
Europe 6.7%
Undisclosed
6.7%
100.1-
North
500mn; 6.7%
America
53.3%
0-50mn;
46.7% Colombia
6.7%
Source: EMIS DealWatch

04
COMPANIES
IN FOCUS

04 COMPANIES IN FOCUS CONTENTS
Ecopetrol SA
Highlights Income Statement, Consolidated, COP bn

Ecopetrol was established in 1948 as a state-
68,604
owned company in charge of the exploration,
55,954
52,347
48,486
exploitation and trade of Colombia’s hydrocarbon
resources. Ecopetrol was also responsible for the
43.7% 44.0%
administrative and regulatory control of the 34.1%
country’s oil and gas sector. After a slowdown in
12,355
17.0%
output volume in the 1990s, the company decided
7,969
30,163
3,247
24,453
16,512
8,901
to go public in order to raise capital. In 2003, the

government established the ANH through Law
-6,289
1,760 and transferred to it Ecopetrol’s

administrative and regulatory responsibilities,
2015 2016 2017 2018
while in 2007 the company held an IPO on the
Colombian Stock Exchange. However, the state Net Revenues EBITDA
continues to be the main shareholder of the Net Pr ofit EBITDA Margin
company, controlling 88.49% of its shares as of

end-2018. At the end of H1 2019, Ecopetrol’s
market capitalisation was COP 120.1tn. Ecopetrol Balance Sheet, Consolidated, COP bn
divides its operations into three main segments –
123,588
124,643
118,959
117,847
exploration and production (51% of FY 2018 net

revenues), transport and logistics (37.5%), and 5.2
refining and production (11.5%). Ecopetrol
operates four refineries – Barrancabermeja and 2.7
Reficar, which account for more than 95% of total 1.5
1.1
refining capacity in Colombia, and two minor
31,751
refineries for self-supply, Apiay and Orito

57,108
48,216
46,674
43,560
43,812
43,101
35,602
refineries. As of end-2018, the company had

12,228 employees, most of whom are located in
Colombia. Outside the country, the company is 2015 2016 2017 2018
active in Peru, Brazil, Mexico and the US. As of Total Assets Shareholders' Equity
2018, 97.6% of its total production was Net Debt Net Debt/EBITDA
concentrated in Colombia. Meanwhile, Colombia
accounts for 48.1% of 2018 net revenues, followed
by the US with 21.5%, and Asia with 17.9%.
Source: Company Data

Ecopetrol SA
(cont’d)
Highlights Shareholder Structure, 2018, year-end

In 2018, Ecopetrol’s net revenues stood at COP
68.6tn, an increase of 22.6% y/y. The rise was felt
across the company’s three segments and was
mainly driven by higher international prices Colombian
resulting in a 32.2% increase in the company’s State*
88.49%
average crude oil basket price. Furthermore, the
average price of refined products sold by the
company increased by 23.3% y/y, mainly driven by
Free Float
better diesel prices. These positive developments 11.51%
were partially offset by lower sales volume,
especially of crude oil, caused by a larger
allocation of output to supply the local refineries,
in order to reduce input imports.
The company’s investment plan for 2019 is in the * 99.996% held by the Ministry of Finance and Public
range of USD 3.5bn to USD 4bn. Credit, the remainder by other state entities
Net Revenues by Segment Investment Plan, 2019

Exploration
12%
16.5% 16.7% 14.0% 11.5%
Transportation &
Logistics 7%
37.8% 37.5%
35.3% 39.0%
48.2% 44.3% 48.2% 51.0%

Refining,
Production Petrochemicals
68% & Biofuels 11%
2015 2016 2017 2018
Explor ation & Production Refining & Petrochemicals Others 2%

Transportation & Logistics

Ecopetrol SA
(cont’d)
Highlights Production, mboe/d

In 2018, Ecopetrol’s production increased by 0.7%
y/y to 720.4 mboe/d, mainly due to a sharp 3% y/y
134.2
increase in natural gas output, coupled with a 125.8 124.2 127.9
mild rise of 0.3% y/y in crude oil production.
Notably, domestic production in 2018 stood at
703.4 mboe/d, up by 0.6% y/y, while output from
fields outside the country rose by 4.9% y/y to 17
626.5
mboe/d. In 2018, Ecopetrol’s crude production was 592.1 590.9 592.5
dominated by heavy oil that had a 64.4% share of

total output, followed by medium (28.1%) and
light (7.4%), with shares remaining virtually
unchanged over the past two years. In 2018,
2015 2016 2017 2018
Ecopetrol’s net proven reserves grew by 1.2% y/y
Oil Natural Gas
to 1.4 Bboe, mainly thanks to new development
projects in the Rubiales, Chichimene and Quifa
fields, as well as improved recovery.
Production by Origin Net Proved Developed Reserves by

Origin, mmboe, year-end
7
5
1.5% 1.7%
2.3% 2.4%
7
8 14
1,457 11
98.5% 10
98.3%
8 1,368
97.7% 97.6% 1,353
1,311
2015 2016 2017 2018 2015 2016 2017 2018
Colombia International Colombia Nor th Amer ica South Amer ica, excl. Colombia

Frontera Energy Corp.,

Sucursal Colombia
Highlights Income Statement, Individual, COP bn

Frontera Energy was established in 2003 under
4,046
3,549
3,490
the name Meta Petroleum, as an oil exploration
company. In 2009, the company became a full 34.1%
1,691
subsidiary of the Canadian oil group Pacific 5.9%
1,191
210
Exploration and Production Corp., which focused
22
0
on the exploration and production of
-492
-37
hydrocarbons in Peru and Colombia. After filing
-882
-4,859
for bankruptcy in 2016, driven by the fall in

international hydrocarbon prices in June 2017, the
company emerged with a new structure and
name, Frontera Energy Corporation. As a result of
2015 2016 2017 2018
the new corporate structure, Meta Petroleum
absorbed all the operations of the parent holding Net Revenues EBITDA
in Colombia, including Petrominerales Colombia Net Pr ofit EBITDA Margin
and Pacific Stratus Energy, and adopted the name

Frontera Energy Colombia. Frontera’s main assets
in the country are the Quifa and Guatiquia blocks. Balance Sheet, Individual, COP bn
Within the former, in partnership with local giant
4,752
Ecopetrol, Frontera has two developed fields,

4,570
Quifa SW (with 388 producing wells) and Cajua

3,476
(with 44 producing wells), whereas the Guatiquia

2,850
2,608
2,282
block, located in the Llanos Basin, is an

1,703
exploration block wholly owned by the company,

1,047
which as of December 2018 had 31 oil-producing

1.41
wells. Other assets include the Cubiro block, also

0.00
in the Llanos Basin, where 54 oil-producing wells

-764
-100
-31
-52
are active.
In addition to hydrocarbon exploration and 2015 2016 2017 2018

exploitation, Frontera is also active in the
Total Assets Shareholders' Equity Net Debt Net Debt/EBITDA
transportation segment, controlling 26.4% of the
capital of Oleoducto Bicentenario de Colombia
SAS as of the end of 2018.
Source: EMIS Company Database, Company Data, Dinero

Frontera Energy Corp.,

Sucursal Colombia (cont’d)
Highlights Crude Oil Production
After five consecutive years of declining sales, in
2018 the company fell one position against 267,648
Chevron, ranking third in the sector by net sales, 241,957
although it maintained its second position 224,642 223,981
regarding crude output, after only Ecopetrol. In
19.1%
the years between 2014 and 2018, Frontera 11.2%
reported a significant decrease in production
volumes, mainly associated with the culmination, 121,955
-7.4% -6.6%
in March 2016, of its cooperation agreement with -9.6%
Ecopetrol for the operation of the largest 76,048 71,032
domestic oil field Rubiales, in Meta department.
In 2018, the company experienced a 6.6% y/y
decline in crude oil production, which fell to
-45.6%
71,032 bbl/d. For 2019, reductions are expected to
2012 2013 2014 2015 2016 2017 2018
continue, with overall production expected to fall
in the range of 65 mbbl/d to 70 mbbl/d. In Volume, bbl/d y/y change
February 2019, Frontera Energy acquired a 50%
stake in the VIM-1 oil block located in the Valle
del Bajo Magdalena area, from local peer Parex Profitability Evolution
Resources. The company will invest USD 10mn
into the drilling, test and completion of the first 51.8% 1.0%
exploration well of the block, La Belleza-1. After -10.4% 0.5%
-33.8%
that, production costs will be split 50/50 between -17.3%
the two companies. In October 2018, Frontera
-139.8%
announced the discovery of light crude oil in the
exploration well Acorazado-1. In August 2018,
Frontera announced it would start testing the
Acorazado-1 well in its wholly-owned Llanos 25
block after receiving positive results from its
-464.0%
drilling. The company said that two exploratory
2015 2016 2017 2018
drillings were performed in 2018 with positive
results. This discovery adds to the other three Return on Assets Return on Equity
producing wells confirmed by Frontera during
2018 – Alligator and Coralillo in the Guatiquia
block, and the Jaspe field in the Quifa block.
Source: EMIS Company Database, La Republica, Valor Futuro

Gas Natural SA, ESP
Highlights Income Statement, Consolidated, COP bn

Gas Natural SA, ESP was established in 1987 as a
2,678 2,710
subsidiary of state-owned Ecopetrol, in order to 22.3% 2,515
build and operate the infrastructure needed for 2,169 19.9%
the gasification of Colombia’s capital city, 16.9% 17.1%
Bogota.
In 1997, the Spanish gas distributor Gas Natural

Fenosa acquired the controlling stake in Gas
Natural SA. At the end of 2017, the Spanish group 483 532 458 430
271 301 254 244
had a 41.89% share in the capital of Gas Natural
SA, through its full subsidiary Gas Natural
Distribucion Latinoamericana SA. 2015 2016 2017 2018
Net Revenues EBITDA

However, in November 2017, Gas Natural Fenosa
Net Pr ofit EBITDA Margin
announced it had reached an agreement with
Canadian investment fund Brookfield for the sale
of its stake in Gas Natural SA for USD 568mn. The
deal was completed in June 2018, after which the Balance Sheet, Consolidated, COP bn
company changed its name to Vanti Gas Natural.
1,596
Other assets of the Canadian fund in Colombia 1,554 1,526 1,533
include the power generation company Isagen 0.84
0.78
and the utilities provider Empresa de Energia de
0.52
Boyaca SA. As of end-2018, Brookfield controlled 0.45
54.9% of the stocks in Vanti Gas Natural, followed 648

623 611
by Grupo de Energia de Bogota with 25%, while 542
385
the rest is free-floating. 274
335
219
The company’s operations are focused on natural

gas distribution in the city of Bogota and the 2015 2016 2017 2018
municipalities of Soacha, Sibate, La Calera, El
Total Assets Shareholders' Equity
Rosal, La Mesa and Anapoima, all in the
Net Debt Net Debt/EBITDA
Cundinamarca department.
As of end-2018, the company had 627 employees,

up 10.8% y/y from 566 in 2017.
Source: Company Data, Reuters

Gas Natural SA, ESP

(cont’d)
Highlights Natural Gas Sales

In 2018, Gas Natural’s net revenues amounted to 2,657
COP 2.5tn, a steep decline of 7.2% y/y, mainly
triggered by the lower price of gas during the
period, partially offset by an increase in the
volume of sales of 18.4% y/y to 2.7 bcm. EBITDA
2,367
and the net profit of Vanti also decreased by 6.2%
y/y and 3.9% y/y, respectively.
2,229 2,245 18.4%
For 2019, the company expects to achieve a 6% 10.5%
growth in revenues, whereas for 2020 onwards 6.2%
Vanti expects to achieve double-digit growth in

-5.2%
its net revenues.
2015 2016 2017 2018
In 2018, the company invested COP 76.3bn, 1.9%
Volume, mmcm y/y change
more than 2017. A large proportion of the funds
(55%) were funnelled into distribution network
expansion. The company revealed in its FY 2018
Annual Report that it would double its Natural Gas Sales by Type of Consumer,
investment in 2019 to COP 150mn in order to
2018
continue growing in Colombia. Residential
22.9% Natural Gas
Distributors
In 2018, Vanti added 104,459 new clients,
17.7%
increasing its total customer base to 3,080,556.
The distribution network of the company was
expanded by 518km to a total of 22,862km. The
company expects to add another 100,000 clients Trade 8.6%
in 2019 by reaching out to customers with
insufficient coverage in the Boyaca and
Cundinamarca departments, especially those at Natural Gas
industrial parks in the aforementioned areas. Industry
Stations
5.3%
45.6%

Hocol SA
Highlights Income Statement, Individual, COP bn

Hocol SA was established in 1956 as Inercol. In
1,430
the same year, the company won exploration
rights for the Campo Dina field, Huila 1,199 1,184
45.6%
department. 908 39.6%
The current name of the company was coined in 16.6%

652
469
1979, when Brazil’s state-run energy giant
Petrobras, the owner of the company at that 151
time, sold the entity to its US peer, Houston Oil 0 217
and Minerals and the newly acquired subsidiary -263 -7 -62
was renamed Houston Oil Colombia – Hocol.
Subsequently, Hocol’s ownership changed several 2015 2016 2017 2018
times. In 2005, it was acquired by the French oil
Net Revenues EBITDA
and gas exploration group Maurel et Prom, which
Net Pr ofit EBITDA Margin
sold the company to its current owner – Ecopetrol
– for USD 748mn in May 2009. The deal was part
of Ecopetrol’s expansion plan during that period.
Balance Sheet, Individual, COP bn
The company has crude oil and natural gas
3,274
exploration and production operations in the

Valle del Magdalena, Los Llanos and La Guajira 0.41
2,573
0.41
2,380
2,336
areas. As of December 2018, Hocol had 221

2,281
1,754
employees, an increase of 7.8% y/y against 2017.

1,474
1,450
In 2018, Hocol’s net revenues amounted to COP

1.4tn, an increase of 20.8% compared to 2017. The
190
rise was mainly driven by better prices and an

59
62
0.09
increase in the level of gas output.
-101
During 2018, average daily crude oil output 2015 2016 2017 2018
decreased to 20.7 mbbl, down by 20.6% y/y, while Total Assets Shareholders' Equity
the production of natural gas expanded 29% y/y
to 7.5 mboe. The decrease in crude oil output
related to the natural decline of the company’s
mature oil fields.
Source: EMIS Company Database, Company Data, Ecopetrol SA

Hocol SA
(cont’d)
Highlights Crude Oil Production

During ANH’s last bidding round in June 2019,
Hocol, in partnership with local peer GeoPark 21.4 21.7
20.7
Limited, was awarded three blocks in the Llanos
18.0
basin, Llanos-86, Llanos-87, and Llanos-104.
GeoPark will be the operator of the blocks. Over
20.6%
the next three years, total investment is expected
to reach between USD 80mn and USD 110mn, with
the first phase consisting of six exploratory wells
0.5%
and around 550 km2 of 3D seismic.
-4.6%
In the same tender, Hocol won another two

-15.9%
blocks, Llanos-105 and Cordillera-9, becoming the
primary winner of the bidding round, where a 2015 2016 2017 2018
total of 11 blocks were tendered. Volume, mbbl/d y/y change
In April 2019, Hocol announced the discovery of

natural gas at its onshore Arrecife-1ST well, in the
northeast of Colombia. According to the company, Natural Gas Production
initial tests gave an average output of 283 mcm/d 7.5
of natural gas, at a final depth of 3,020m. The
field is part of the VIM-8 block in the Cordoba 5.8
department. More tests will be performed before
625.0%
starting commercial production.
According to Ecopetrol’s 2018 annual report,

300.0%
around USD 55mn will be invested in Hocol’s
exploration activities in 2019, whereas 100.0%
29.3%
approximately USD 127mn will be dedicated to the 0.8
0.2
development of existing fields.
2015 2016 2017 2018
Volume, mboe/d y/y change
Source: Company Data, Ecopetrol SA

Canacol Energy Ltd
Highlights Income Statement, Consolidated, USD mn

Canacol Energy was established in 2008 in Canada as 222
an oil and gas exploration company with a focus on
Colombia and Ecuador. Canacol’s shares are listed on 148 159 49.4%
the Toronto Stock Exchange, on the OTCQX 93
28.4% 110
International Premier Market in the United States, on
42
the Colombian Stock Exchange and on Mexico’s Stock 24
Exchange. Its market capitalisation stood at COP 1.9tn
at the end of H1 2019. -65
-106 -22
-177
The company’s main assets are the natural gas fields
of Esperanza E&E contract, as well as the VIM 5, VIM 19
and VIM 21 E&P contracts, all located in the Lower and -148
Middle Magdalena Valley basin in northern Colombia. 2015 2016 2017 2018
The average production of the Esperanza block, the
Net Revenues EBITDA
most important in the company in 2018, was 12.691
boe/d, more than double that of the second most Net Pr ofit EBITDA Margin
significant block, the VIM 5 block whose average

production in the same period was 6,291 boe/d.
Balance Sheet, Consolidated, USD mn
In September 2018, Canacol sold six producing oil fields
and five oil exploration and production contracts to
804
4.52
Canadian peer Arrow Exploration Corp. for USD 40mn.
705
696
668
As of end-2017, the producing fields had an average 3.03

production of 1,375 bbl/d and around 8.6 mmbbl of
proven plus probable reserves. The aim of the deal is to
free cash up for the company’s plan to become the
376
333
303
leader in the Colombian natural gas segment.

239
230
205
197
190
With this sale, the company got rid of most of its oil
assets conserving only the Rancho Hermoso block in
the Llanos basin, as well as VMM 2 and VMM 3 oil
exploration blocks in the Middle Magdalena basin. The 2015 2016 2017 2018
latter two are jointly owned with US multinational
Total Assets Shareholders' Equity
ConocoPhillips and expose Canacol to vast
unconventional shale prospective resources.

Canacol Energy Ltd

(cont’d)
Highlights Proven and Probable Reserves, mboe

In 2018, Canacol’s net revenues rose by 40% y/y
to USD 222mn, driven mainly by a 43% y/y
increase in natural gas output to 112,102 mcf/d 14 0
and the resulting 50% y/y higher sales value,
totalling USD 188.7mn. The Esperanza gas field, in 13
14
the Magdalena basin, continues to be Canacol’s
main field, with output expanding in 2018 by 23%
98
y/y to 12.7 mboe/d. On the other hand, crude oil 89
output decreased as a result of the sale of 65
72
virtually all its oil assets in Colombia. In June
2019, Canacol completed the extension of the
Jobo gas processing facility, which together with
the expansion of Promigas’ Jobo-Sincelejo gas 2015 2016 2017 2018
pipeline (concluded in July 2019), allows the
Natural Gas Oil
company to increase its natural gas sales from
130 bcf/d to 220 bcf/d by July 2019. As a result of
this, the company expects to increase its EBITDA
Natural Gas Reserves by Type, end-2018
from USD 110mn in 2018, to around USD 270mn in
2019. Furthermore, the company plans to Probable
construct a brand new gas pipeline joining the 24.2%
Jobo plant, in the south of the Cordoba
department, to the city of Medellin, to increase
its natural gas sales by an additional 100 bcf/d by Possible
24.4%
2022. The project, which is still in an early stage,
includes the construction of a 280km long gas Total:
USD 80mn
pipeline at an estimated cost of USD 350mn. In
June 2019, after an extensive discovery at the
Acordeon-1 natural gas exploratory well in VIM-5
block, Canacol redesigned its drilling programme Proved
for 2019. The company immediately started the 51.4%
drilling of Ocarina-1, a nearby well that was out
of schedule. Finally, the company is expected to
take part in ANH’s tender at the end of
September 2019, according to Portafolio.

05
REGULATORY
ENVIRONMENT

05 REGULATORY ENVIRONMENT CONTENTS
Government Policy
Regulatory Bodies
The existing regulatory framework for Colombia’s oil and gas sector was defined by Decree 381 of
2012:
Ministry of Mines and Energy (MME): The Ministry supervises all activities related to mineral
extraction, power generation and exploration of hydrocarbons in the country, as well as safeguarding
the safe management of nuclear and radioactive materials on national territory. It oversees the
implementation of government policies related to exploration and exploitation of domestic
hydrocarbon resources and the formulation of guidelines for the integrated production of oil, natural
gas and biofuels. MME draws up plans, programmes and development projects for the sector
following the National Development Plans defined by the government. It also prepares technical
regulations for the exploration, production, transportation, refining, distribution, processing,
marketing and export of oil, gas and biofuels. The Ministry has three affiliated entities that support
its activities related to the domestic hydrocarbon sector:
§ National Hydrocarbons Agency (ANH): ANH was created in 2003 by Decree 1,760. It took from
Ecopetrol the role of administrator and regulator of domestic hydrocarbon resources. Among its
functions are the identification and evaluation of Colombia’s oil and natural gas reserves. It is also
in charge of organising competitive bidding processes for areas for hydrocarbon production and
awarding rights for exploration and production of oil and natural gas. It also determines the
hydrocarbon prices used for the calculation of royalty payments and manages the collection and
subsequent transfer to the national budget of the resultant monetary compensation.
§ Mining and Energy Planning Unit (UPME): The UPME was created by Decree 2,152 of 1999 in order
to evaluate the development and utilisation of domestic mineral and energy resources. It gathers
data on production, import, export, prices and other relevant information for the elaboration of
public policies and plans related to the development of the oil and gas sector.
§ Regulatory Commission for Energy and Gas (CREG): The Commission was established in 1994 by
Laws 142 and 143, in order to regulate activities related to the offer of public services. It is a
technical entity, responsible for regulating the natural gas market, including the transport and
distribution of natural gas to end-users, ensuring the quality and expansion of the service.
Ministry of Environment and Sustainable Development (MADS): This Ministry monitors compliance
with domestic environmental regulations during oil and gas exploration and production, as well as
issuing environmental permits for these activities.
National Environmental Licensing Authority (ANLA): The Authority is responsible for enforcing
projects, works and activities subject to licensing, permitting or environmental processing, to comply
with environmental regulations.
Source: MME, MADS, ANH, CREG, UPME

Government Policy (cont’d)

Concession Regime – Permanent Bidding Process
In July 2018, ANH announced the implementation of a new regime for concessions that grants more
flexible contracts to operators by considering variations in international prices. The new system also
allows companies to propose new areas for exploration, without the need for a bidding process to be
called by the ANH, which actually transforms the concession regime into a continual process. Despite
being scheduled to enter into force in H2 2018, in December 2018 the ANH suspended the
implementation of the new system, together with one auction for fields for 2019, saying it was
discussing some rearrangements with sector companies.
Finally, in February 2019, through ANH’s Resolution 078, the Permanent Procedure for Areas
Assignment (PPAA) was implemented. In contrast to the traditional bidding process, under the PPAA
the ANH will propose certain areas and the interested companies will make a bid for a determined
block. All peers will then be called by the ANH to counterbid if interested, improving the original offer.
Finally, the original bidder will be given the opportunity to enhance its offer, and the ANH picks the
best offer. The main evaluation criteria is additional exploration activities, and in the case of ties, the
offered shared production. Companies are expected to bid for nearby blocks as a result of the new
system, according to local law firm Brigard Urrutia. The reforms came four years after Colombia’s last
auction in 2014, and the government believes that the new concession regime will attract significant
investment and drive growth in the sector.
In February 2019, ANH announced the first 20 blocks to be tendered in June 2019 – 13 onshore blocks in
the Llanos basin, five in the Magdalena Valley basin and two offshore. Of these 20 blocks, 11 blocks
received bids in April 2019, counterbids were introduced in May 2019, and the results were announced
in July 2019. More than 20 companies took part in the process, but local company Hocol was the main
winner with four blocks, three in partnership with GeoPark. The other winning companies were Parex,
Gran Tierra and Frontera, with two blocks each, and Ecopetrol with one offshore block. Official
estimates cited by BNAmericas in June 2019 stated that USD 600mn of investments would come as a
result of this auction, and around 1 Bbbl/d of reserves could be added.
In July 2019, Luis Morelli, ANH’s president, said in an interview with newspaper El Colombiano that the
agency had received 38 proposals for blocks and that it is studying their geographic and economic
viability. According to Reuters, around 23 companies, including global majors such as Royal Dutch
Shell, Noble, ExxonMobile and Repsol, were prequalified to participate in the PPAA system and had
presented dozens of requests to gain access to blocks across the country. Morelli further said that
contracts will start being signed in October 2019 and that the agency expects to end 2019 with around
60 exploration and production contracts signed, and committed investments of about USD 3bn.
According to a September 2018 article by BNAmericas, the principal regions of interest for the
companies are the Llanos basin in the east of Colombia, and the Middle Magdalena Valley basin, in
the northeast.
Source: ANH, ACP, Brigard Urrutia, BNAmericas, Reuters, Portafolio, El Colombiano


Permanent Bidding Process, June 2019 Auction Results
Winner Block Basin Type Department
Hocol + GeoPark Lla-104 Llanos Onshore Meta/Casanare
Hocol + GeoPark Lla-86 Llanos Onshore Meta
Hocol + GeoPark Lla-87 Llanos Onshore Casanare
Hocol Cor99 Cordillera Onshore Tolima
Ecopetrol Gua Off-1 Guajira Offshore Offshore La Guajira
Gran Tierra Lla-85 Llanos Onshore Casanare
Gran Tierra VMM-24 Middle Magdalena Valley Onshore Cesar
Parex Resources Lla-94 Llanos Onshore Casanare
Parex Resources VSM-25 Upper Magdalena Valley Onshore Tolima
Frontera Energy Lla-99 Llanos Onshore Meta/Casanare
Frontera Energy VIM-22 Lower Magdalena Valley Onshore Magdalena
Source: ANH


Unconventional Resources
According to BNAmericas, as of March 2019 Colombia was the second most advanced country in terms
of unconventional resources exploration in Latin America, after Argentina. In November 2018,
president Duque created a commission of specialists to determine the positive and negative effects
that fracking could have in Colombia. In February 2019, the committee called for the start of several
pilot exploration projects in the Middle Magdalena Valley and the Cesar-Rancheria basins. However, it
suggested that operators and contractors should meet several conditions to mitigate environmental,
seismic, geological, social and economic risks. These include special environmental and social
licenses, as well as a commitment to maintain a minimum distance from inhabited areas.
In May 2019, Colombia’s MME announced that it had accepted all the recommendations received from
the expert’s committee in February 2019 regarding pilot exploration projects of unconventional oil.
However, the final decision will be taken by Colombia’s highest court, the State Council, which could
permit or forbid fracking activities in the country. In November 2018, the State Council suspended the
regulatory framework as well as all activities related to fracking in the country, until measures to
prevent risks to the environment or people’s health are adopted. For its part, Maria Suarez, the
minister of mining and energy, stated that the government would focus on convincing the local
communities of the advantages of the fracking operations.
Several industry associations, including ACP, CAMPETROL (the local chamber of oil and gas service
companies), and some national think-tanks such as Fedesarrollo, have stated that the country needs
to exploit unconventional resources to counter the current trend of depleting reserves. However, there
is significant social opposition to the use of fracking technology. In June 2019, Colombians of around
100 different cities marched, calling on president Duque to fulfil his election campaign promise and
ban fracking activities.
According to June 2019 estimates by ANH, exploration of unconventional deposits (most of which are
located in the Middle Magdalena Valley Basin) could push up the reserves/production ratio to around
23.7 years, increasing at the same time the output to more than 1,000 mbbl/d, significantly above the
current 858.1 mbbl/d. Meanwhile, according to Promigas, a leading domestic gas transportation
company, Colombia has between 20 tcf and 40 tcf of prospective unconventional natural gas reserves,
which represent another 20 to 30 years of reserves/production levels. Production from these sources
has the capacity to add up to COP 324bn to the public treasury in the next 30 years, according to
estimates by the economy ministry. In light of this, in May 2019 the ministry called on the state
council to give the green light to the pilot projects as soon as possible.
Ecopetrol by itself is planning to invest around USD 500mn in exploring unconventional sources in the
2019-2021 period, but regulatory approval is needed first. In December 2018, Ecopetrol applied to ANLA
for an environmental license for its pilot project of shale gas in the Middle Magdalena Valley Basin.
Source: Portafolio, EMIS Insights, Hydrocarbons Colombia, El Tiempo, Portafolio, La Republica, BNAmericas

Offshore Exploration Promotion

Decree 2,129, issued in November 2015 by the MME, declared offshore areas granted for deep and
ultra-deep oil and gas exploration as free trade zones in order to promote investment. The move came
after drilling of the wells Orca-1, in the Tayrona block, and Kronos-1, in Fuerte Norte block confirmed
there were economically viable reserves of hydrocarbons. The regulation creates favourable
investment conditions for offshore exploration, allowing a 20% reduction in income tax for offshore
operations and a VAT exemption. In addition, companies will benefit from lower import taxes on
machinery and equipment. To benefit from the regulation, the company must request the issuance of
a free trade zone certificate by ANH. Within six years of the issuance of the certificate, the company
must create at least 30 new jobs and present the value of investments made in accordance with the
sum indicated in the exploration contract.
In June 2018, ANH also launched a new contract model for offshore exploration and production
activities, looking to give further impetus to investments in the area. The new contract sets a period
of two years for pre-exploration activities (getting environmental licensing and other permits), a nine-
year exploration period (compared to only six years for onshore blocks), and a 30-year production
term. Furthermore, in February 2019, the ANH further updated the offshore E&P model contract. The
main changes were linked to the designation of an impartial arbitration court to settle disputes. The
Agency also defined an additional shared production rate of at least 5% on the top of the rate defined
in the initial contract in the case of a contract extension and introduced a requirement for higher
social investment in such cases. The first contracts signed under this new methodology were between
the ANH and two partnerships, one consisting of Ecopetrol and Repsol, and the other of Repsol and
ExxonMobil.
Natural Gas Wholesale Market Operator

In July 2019, Colombia initiated a competitive bidding process to select a new operator of the natural
gas wholesale market, as the five-year term of the local exchange company Bolsa Mercantil de
Colombia is due to end in January 2020. The bids will be received in November 2019, and in January
2020 the Regulatory Commission for Energy and Gas (CREG) will select the winner. The responsibilities
of the natural gas market operator include the coordination of supply and demand, monitoring the
wholesale market, and assigning services associated with LNG infrastructure on the pacific coast.
Costs Overruns at Reficar
In June 2019, Colombia’s General Comptroller accused several executives at Ecopetrol and its refinery
subsidiary Reficar of cost overruns related to the modernisation of Reficar’s refinery in Cartagena.
According to the General Comptroller, the total overrun reached USD 2.4bn, as the modernisation was
budgeted at USD 3.8bn but ended up costing USD 8.3bn. Overall, 20 executives, including Ecopetrol’s
and Reficar’s former CEOs as well as several vice presidents and five contractor companies, were
accused.
Source: BNAmericas, Reuters, Fitch Solutions

06
OIL

06 OIL CONTENTS
Highlights
Overview
In 2018, Colombia ranked sixth in terms of proven crude oil reserves and fourth by output in Latin
America. The crude oil and oil derivatives segment is very important to the country, accounting for
40% of total earnings from foreign sales in 2018. The slump in international crude oil prices in 2014,
coupled with some legal uncertainties linked to exploration activities, have negatively affected
investments in E&P in the last few years, resulted in an average annual fall of 15.1% of proven crude
reserves between 2014 and 2016. However, in 2017 and 2018, a mild recovery of reserves occurred
thanks to improved recovery factors. In a similar way, crude production fell at a CAGR of 4.8% during
the 2014-2017 period, before returning to growth in 2018, although at a slow pace of only 1.3% y/y. The
reserves to production ratio reached six years in 2018, from seven years in 2012.
Drivers and Constraints

In order to halt the continued decline in reserves, the sector aims to develop unconventional
hydrocarbon deposits. According to May 2019 estimates by ANH, the Middle Magdalena Valley and
Cesar-Rancheria basins have the largest potential for unconventional resources. ANH has estimated
total crude oil laying on unconventional fields at between five and ten billion barrels, which could
help to triple the current level of reserves. Production from these fields could reach around 450
mbbl/d by 2028, allowing the country to reach a steady self-supply of both crude oil and oil
derivatives. In order to achieve these results, ACP estimated in December 2018 that around USD 5bn of
extra investment will be needed. On the other hand, the segment is still affected by security issues,
despite the peace agreement signed in November 2016 with FARC, the largest domestic guerrilla
group. As of 2018, other smaller insurgent groups, such as the ELN, continue to attack the operations
of crude producing companies, targeting two of the longest pipelines in the country (Cano Limon–
Covenas and Bicentenario) in particular.
Outlook
Driven by the rise in oil prices in 2017 and 2018, investments in Colombia’s oil segment started to
recover, increasing by 28% y/y to USD 4.3bn in 2018, according to ACP. For 2019, the Association
expects investment in E&P to reach USD 4.9bn, a 14% y/y increase. Furthermore, ACP estimates that
crude oil output in 2019 would reach between 880 mbbl/d and 900 mbbl/d, up 3% y/y, mainly thanks
to higher investment in drilling activities, improved recovery and new fields entering commercial
operation. The increase in production will be led mainly by Ecopetrol’s investment in production and
exploration. According to its 2019 Business Strategy, Ecopetrol (including its subsidiaries and
partnerships) expects to reach production levels of between 750 mbbl/d and 770 mbbl/d by 2021,
which represents a 3% CAGR over the 2019-2021 period.
Source: ACP, ANH, UPME, Ecopetrol, Valora Analitika, RCN Radio

06 OIL CONTENTS
Main Events
§ In July 2019, ANLA suspended the environmental licensing process of Ecopetrol’s pilot development
at the Guane-A block, an unconventional oil deposit nearby Barrancabermeja in Santander
department, in the Middle Magdalena Valley basin. The licensing process had been started by
Ecopetrol in March 2018, but after the suspension of all fracking activities by the state council in
November 2018, ANLA was forced to put the approval of the project on hold. The authority said that
once a regulatory framework is confirmed, it will be able to evaluate Ecopetrol’s request.
§ In June 2019, Ecopetrol announced a cost reduction strategy for the 2019-2023 period, upon which it
expects to save around COP 8tn. Most of the savings (71%) will come from the E&P segment, the
company said, whereas the rest will come from downstream (10%), commercial (8%), midstream
(6%), and corporate (5%) areas. Ecopetrol has already successfully implemented a cost
optimisation strategy, saving around COP 10.2tn between 2015 and 2018, with the main
achievement being the reduction of drilling costs from USD 482 per foot perforated in 2014 to USD
258 in 2018. At the same time, the company announced that it is planning to invest USD 3.75bn in
2019, largely in line with 2018’s CAPEX, with a special focus on upstream projects in Colombia.
§ In June 2019, Ecopetrol announced a discovery of light oil at the Andina Norte-1 well, Capachos
block in the Arauca department, developed in partnership with local peer Parex Resources, the
operator of the block. According to Ecopetrol’s statement, an initial production test at the well
gave an average output of 2,785 bbl/d of light crude oil. The partnership between Ecopetrol and
Parex Resources is focused on the exploration of the Capachos block, where production during 2018
averaged 5,100 bbl/d, and test drills will follow at the Andina-3 well nearby.
§ In April 2019, ANH revealed that it had signed two offshore E&P contracts with two large
multinationals and local Ecopetrol, which are estimated to result in a combined investment of USD
700mn. Spanish major Repsol, in a 50/50 partnership with Ecopetrol, will be the operator of the Gua
Off-1 block, 78km off the coast of La Guajira department. Repsol will also operate the Col-4 block,
100km off the coast of the Bolivar department, in a 50/50 partnership with US-based ExxonMobil.
§ In January 2019, the minister of economy, Alberto Carrasquilla, announced that the national
government was considering the sale of an 8.5% share of Ecopetrol’s capital to private investors.
According to Law 1,118 of 2006, the national government’s stake in the company must not fall
below 80%. In 2007, the government successfully offered 11.5% of its stake, which means it can
only sell 8.5% without changing the law. According to the company’s January 2019 market
capitalisation, the stake could earn the national government around COP 10.7tn, according to EMIS
Insights estimates.
Source: EMIS Insights, Ecopetrol, Reuters, Portafolio, La Republica

06 OIL CONTENTS
Reserves
Proven Reserves, mmbbl
2,377 2,445 2,308

2,002 1,958
1,665 1,782
2012 2013 2014 2015 2016 2017 2018
Oil Reserves/Production Ratio, years Comments

In 2018, Colombia’s proven oil reserves stood at
6.90 1.96 Bbbl, up 9.9% y/y, rising for a second
6.63 consecutive year after the slump in international
prices in 2014. The upsurge was driven mainly by
6.38
6.20 better recovery figures at mature wells as no new
major discoveries were exploited. According to
December 2018 figures from ACP, E&P investment
5.70
over the 2008-2018 period allowed the oil
5.45
segment to add a total of 3.6 Bbbl of proven
5.12 reserves. However, the bulk of this volume came
from Ecopetrol’s improved recovery factors at
2012 2013 2014 2015 2016 2017 2018 existing fields, whereas only 20% came from new
discoveries. ACP believes that this is a worrying
trend, and that the segment needs to invest more
in exploration in order to sustain its reserves
level over the medium term.
Source: ANH

06 OIL CONTENTS
FOCUS POINT
Proven Crude Oil Reserves by Department, bbl/d, 2018, year-end
254,682
Santander
13%
67,847
Arauca
3.5%
380,888
Casanare
19.5%
69,919
Putumayo 888,416
3.6% Meta
45.4%
61,421
Boyaca
3.1%
73,167 161,930
Huila
8.3%
3.7%
Others
Source: ANH

06 OIL CONTENTS
Production
Comments Production
Crude output in Colombia returned to growth in
2018, after two consecutive years of decline, 1,010 1,006
990
although at a mild rate of 1.3% y/y. After reaching
a historic high level of 1,010 mbbl/d in 2013, 944
6.9%
output decreased at a CAGR of 3.3% in the
886 865
following years (2014-2018) as lower international 3.1%
1.6% 854 1.3%
prices constrained exploratory and development
investments, while sector companies focused -1.9%
-3.6%
more on cost reduction rather than expansion. In
2018, there were 406 production fields in
Colombia, with the ten largest responsible for
about 52% of overall output. As in previous years, -11.9%
Meta department ranked first in terms of crude
production with 48.7% of the total, followed by 2012 2013 2014 2015 2016 2017 2018
Casanare and Santander departments with 19.7% Volume, mbbl/d y/y change
and 7.4%, respectively.
Number of Production Fields by Output Largest Production Fields, 2018

Level, 2018
Rubiales 13.8%
≥ 20,000.1 bbl/d 10
Castilla 8.2%
10,000.1-20,000 bbl/d 7 Chichimene 5.6%
Quifa 5.1%
1,000- 10,000 bbl/d 97
Castilla Norte 4.9%
La Cir a 3.7%
100.1- 1,000 bbl/d 194
Pauto Sur 3.5%
10.1-100 bbl/d 73 Cano Limon 2.4%
Jacana 2.4%
≤ 10 bbl/d 25
Acordionero 2.2%
Source: UPME, ANH

06 OIL CONTENTS
FOCUS POINT
Crude Oil Production by Department, bbl/d, 2018
22,947
Cesar 63,986
Santander
2.7%
7.4%
47,801
Arauca
16,429 5.5%
Antioquia
1.9%
170,107
Casanare
14,848 19.7%
Tolima
1.7%
421,474
Meta
48.7%
33,226
Putumayo
3.8%
34,033
Boyaca
3.9%
24,127 16,209
Huila
1.9%
2.8%
Others
Source: UPME

06 OIL CONTENTS
Refining
Comments
There were five oil refineries in Colombia as of end-2018 with a combined capacity of 415 mbbl/d.
About 98% of total capacity is in the hands of Ecopetrol, which operates four refineries including the
two largest plants – Barrancabermeja in Santander department with a capacity of 250 mbbl/d, and
Reficar in Bolivar department with a capacity of 150 mbbl/d. In addition, Ecopetrol also owns two
smaller plants for self-supply – Apiay and Orito, with a capacity of 2.5 mbbl/d and 2.5 mbbl/d,
respectively. The last refinery – Hidrocasanare – is located in the Casanare department, and is under
the control of a group of investors, according to UPME. Barrancabermeja refinery supplies 48% of
fuels consumed in Colombia in 2018, according to April 2019 estimates by Ecopetrol.
Starting in 2015, the Reficar facility went through an expansion, ended in H2 2017, which increased its
capacity from 80 mbbl/d in 2014 to 150 mbbl/d. Furthermore, Ecopetrol announced in May 2019 that it
was considering a further expansion of the refinery by connecting the new facility with the old plant,
decommissioned after the expansion. The company is looking to expand the complex refining capacity
from 150 mbbl/d to 250 mbbl/d, with works starting in 2020 and expected to be finished by 2024.
Ecopetrol did not disclose any financials, but Portafolio stated in May 2019 that total investment
could reach around USD 100mn. According to a May 2019 report by Fitch Solutions, a new facility is
also being considered by the local independent company Petroleos del Llano (Llanopetrol), which
could add 260,000 bbl/d of refining capacity to the country.
In 2018, Reficar’s average daily throughput increased by 11.5% y/y against 2017, reaching 151,331 bbl/d,
at a capacity usage of 100%, the highest of any of the company’s refineries in the past three years.
For its part, Barrancabermeja experienced a 5.8% y/y increase in its average daily throughput,
reaching 221,946 bbl/d and capacity usage of 89%, up from 85% in 2017.
Refining Capacity, mbbl/d Refinery Throughput, mbbl/d

421 421 415 415 339.1 382.5
39.0% 355.5
336 336 336 304.6
283.7
246.6 244.0
7.6%
4.8%
-0.4% -1.1%
-6.9%
-13.1%
2012 2013 2014 2015 2016 2017 2018
2012 2013 2014 2015 2016 2017 2018 Volume, mbbl/d y/y change
Source: OPEC, UPME, Ecopetrol, Portafolio, Fitch Solutions

06 OIL CONTENTS
Refining (cont’d)
Production of Refined Products from the Barrancabermeja Refinery, bbl/d
Product 2016 2017 2018
LPG, Propylene and Butane 11,956 10,712 11,813
Gasoline Fuels and Naphtha 59,305 56,047 58,623
Diesel 48,233 56,090 58,305
Jet Fuel and Kerosene 20,435 20,421 23,604
Fuel Oil 55,730 38,217 36,636
Lube Base Oils and Waxes 668 609 729
Aromatics and Solvents 2,879 2,847 3,106
Asphalts and Aromatic Tar 14,092 26,468 31,104
Polyethylene, Sulfur, and Sulfuric

Acid 1,541 1,509 1,479
Total 214,839 212,920 225,399
Production of Refined Products from the Cartagena Refinery, bbl/d
Product 2016 2017 2018
LPG, Propylene and Butane 4,227 6,791 6,080
Gasoline Fuels and Naphtha 51,703 43,728 35,012
Diesel 76,833 60,467 40,950
Jet Fuel and Kerosene 8,057 6,700 5,768
Fuel Oil 4,671 10,150 24,602
Sulfur 581 446 241
Total 112,653 128,282 146,072
Source: Ecopetrol

06 OIL CONTENTS
Consumption
Comments
Between 2012 and 2018, oil consumption in Colombia increased at a CAGR of 2.5%, driven mainly by
rising demand from the transportation sector. Domestic sales of oil and oil derivatives are mainly
dominated by mid-distillates, with 19% of sales value in 2018, followed by gasoline and turbo fuel
with 13%, according to Ecopetrol’s FY 2018 Annual Report. Fitch Solutions expects diesel to remain the
largest source of demand, with up to 45% in 2019. Over the long term, Fitch Solutions expects fuel
consumption to grow at a CAGR of 3.2% over the 2018-2028 period.
According to UPME’s July 2018 Supply and Demand study, local demand for liquid fuels will continue
growing in the coming years, in spite of increased use of more efficient technologies and new
alternatives such as electric power or LNG. In the base scenario considered by UPME, demand for
gasoline and diesel is expected to grow at a CAGR of 1% over the next 20 years, whereas jet fuel’s
CAGR is likely to grow by 3% on average. Considering the current capacity of the country’s refineries,
UPME expects that imports of these fuels will reach around 100,000 bbl/d in 2038.
According to a June 2019 article by Portafolio, imports of liquid fuels such as gasoline, diesel and jet
fuel continued to rise in 2018 in volume terms, despite decreasing by 10% in value terms. The gap
between local supply and demand is particularly worrying for gasoline, according to Portafolio.
However, it is important to note that the trade deficit of the oil derivatives sub-segment has been
decreasing since 2014.
Oil Consumption Refined Products Demand by Type,* 2018
345
340 342
6.4% Gasoline 37%
332
5.1%
4.1% 316
3.9%
295 297
Jet Fuel 7%
0.7% 0.6%
-1.4%
LPG 5%
Diesel 50%
2012 2013 2014 2015 2016 2017 2018
Volume, mbbl/d y/y change

* June 2019 estimates by Cenit
Source: OPEC, UPME, ACP, Cenit, Portafolio, Fitch Solutions

06 OIL CONTENTS
Hydrocarbons Transport
Infrastructure
Pipelines for Hydrocarbons Transportation, 2018, year-end
Pipeline Length, km Capacity, mbbl/d
Limon-Covenas 771 220
Alto Magdalena 400 110
Ocensa 837 622
Colombia 483 236
Transandino 312 50
Los Llanos 260 340
Bicentenario 230 600
Comments
According to Ecopetrol’s 2018 Annual Report, Cenit, its oil and gas transport subsidiary, is directly
responsible for 45% of the total crude oil transport capacity by pipelines in Colombia, and through
indirect participation controls 82% of the hydrocarbon transport capacity of the country. According to
Ecopetrol, its network of crude oil and oil derivatives pipelines has a total length of 9,071km, with
5,362km of crude oil pipelines connecting its main fields with its two main refineries, as well as other
export centres. Another 3,709km of the network consist of multipurpose pipelines transporting refined
products from the company’s refineries to the main distribution centres.
One of the main threats to the downstream sector in Colombia is insecurity, which still troubles the
country, with several guerrilla groups continuing to attack and steal fuel from pipelines. According to
Ecopetrol, 1,160 bbl/d were pumped illegally from the company’s pipelines in 2018. Ecopetrol’s pipeline
infrastructure suffered 107 attacks during the year, a 70% increase against 2017, which caused
economic losses of COP 157bn for the company. However, estimates from the local economic journal,
Dinero, in February 2019, show that deferred production (the amount of oil that was not produced due
to factors such as attacks) reached 30 bbl/d in 2018, compared to previous decade averages of 7,000
bbl/d. According to Dinero, this is the result of investments in new technologies, to monitor and
redirect crude oil to different pipelines in the event of an attack.
Source: Cenit, Dinero, La Republica, El Espectador

07
NATURAL GAS

07 NATURAL GAS CONTENTS
Highlights
Overview
In 2018, total natural gas output in Colombia stood at 2,252 mmcf/d. Of that total, 42% was reinjected
to enhance the productivity of the wells, another 2% was flared or sent to plants producing natural
gas liquids, and 33% was delivered to gas pipelines. Hence, the volume of production excluding
reinjection and losses amounted to 386 bcf, up by 16.3% y/y, according to domestic energy
consultancy Concentra. This rebound came after four years of continued decline, between 2014 and
2017, caused by the slump in international prices. The segment is largely dominated by state-run
Ecopetrol, which, together with its subsidiaries, accounted for about 78.9% of total output in 2018. The
main fields in the country – Chuchupa, Cupiagua, Pauto Sur, Cusiana and Cusiana Norte – are located
in the Casanare and Guajira departments, which together comprised 74% of 2018’s output. Only 3% of
the natural gas consumed in Colombia during 2018 came from imports.
Drivers and Constraints

The main concern for Colombia’s natural gas segment is the continued decline in reserves at its main
fields, especially at a time when the government is actively trying to increase consumption of inputs,
particularly to diversify the country’s electric power generation matrix. The main hope for the
segment to increase its reserves is through the exploration of the offshore deposits that were
discovered along the country’s coast, at the Orca, Kronos, Gorgon and Purple Angel blocks. In 2017 and
2018, Ecopetrol invested more than USD 600mn in the development of its offshore fields and expects
that the Orca-1 well, off the coast of the Guajira department, could start commercial production by
2024. However, development of the area will require substantial investments due to its location in
deep waters. According to ANH, a new round of auctions of natural gas areas is expected before the
end of 2019. According to the agency, around 35 blocks will be tendered, with an expected investment
of USD 3bn.
Outlooks
According to a May 2019 report by Fitch Solutions, Colombia’s natural gas output will remain
depressed over the 2019-2029 period, due to price volatility and insufficient investment. The
consultancy believes that Ecopetrol’s focus on oil will continue to negatively affect investment in
natural gas. Overall, natural gas output is expected to grow at a CAGR of 1.3% between 2019 and 2023.
For its part, the EIU forecasted in May 2019 that gas consumption would follow a similar path,
growing at a CAGR of 1.2% over the 2019-2023 period, driven by government initiatives to boost
consumption. According to Concentra, natural gas demand from the non-regulated sector will grow at
a CAGR of 1.9% between 2019 and 2023, driven by the commercial and vehicles sector, whereas the
rate for the regulated sector will be around 2.8% over the same period.
Source: ANH, Sectorial, Concentra, Fitch Solutions, Economist Intelligence Unit, Valora Analitika, El Heraldo

Main Events
§ In July 2019, Colombia was looking to build an LNG port facility at Buenaventura, on the pacific
coast of the Valle del Cauca department. The project, scheduled to be awarded through a public
tender in early 2020, is expected to have a processing capacity of 400 mmcf/d, 170,000m3 of
storage capacity, and demand around USD 400mn in investment. In July 2019, BNAmericas referred
to an unnamed high official from the government who has reportedly stated that funding for the
project will be approved before launching the public tender. The Buenaventura LNG facility is part
of the government’s efforts to diversify its electric power matrix, which is currently heavily
dependent on hydropower plants. Natural gas will be mainly destined to supply a thermal power
plant in Valle del Cauca department, while the rest will be sold on the wholesale market. For this, a
new gas pipeline connecting the port with the city of Cali needs to be built. The pipe itself will
require an investment of around USD 200mn. The facility would be the second LNG project in
Colombia, the other being at the Cartagena port on the Atlantic coast, which started operating in
2016 and also serves thermal power plants. The government will receive letters of intentions up to
the end of 2019, in order to select a project by early 2020 and have it online by 2023. By May 2019,
local gas transport company, Transportadora de Gas Internacional (TGI), announced that it would
submit a proposal in partnership with an undisclosed international company. In March 2019, ANLA
requested several changes to the LNG project, including a new access road to the delta of the
Dagua river in the zone, and more information regarding how the natural gas would be
transported.
§ In July 2019, Canacol, a Canada-based natural gas company with its operations centred in
Colombia, finished the expansion of the Jobo-Cartagena gas pipeline. The works comprised the
installation of 85km of 20-inch tubes, as well as more compression capacity at the Jobo fields in
the Sucre and Cordoba departments, owned by the company. As a result, 100 mmcf/d of transport
capacity were added to the pipeline, which is expected to transport 215 mmcf/d starting in August
2019, and turn Canacol into the second largest natural gas producer in Colombia.
§ In April 2019, Ecopetrol and its Spanish peer Repsol signed a contract for the exploration and
production of natural gas at a 400,000 hectare block off the coast of the Guajira department. The
two companies will own 50% each of the Gua Off-1 block, but the operator will be Repsol. The block
is near the Tyrona block, where Ecopetrol found gas in 2017.
§ In June 2018, the US-based oil and gas company Anadarko returned several blocks, won in the 2014
ANH auction, to state-owned Ecopetrol, which had partnered with Anadarko in their development.
The blocks – Purple Angel, Fuerte Norte and Fuerte Sur – will be developed by Ecopetrol in
partnerships, such as the aforementioned with Repsol. As well as the blocks returned to Ecopetrol,
Anadarko also sold four offshore blocks to Occidental Petroleum (Col-1, Col-2, Col-6 and Col-7) in
June 2018.
Source: Efe, Company Data, Portafolio

Reserves
Comments Proven Reserves

In 2018, Colombia’s proven natural gas reserves
decreased for the sixth consecutive year, falling
5,727
to 3,780 bcf. However, the 2.8% y/y decrease 5,508
against 2017 is the lowest reduction rate over the 4,758

4.8% 4,361
2013-2018 period, which could mean that the 4,024 3,890 3,780
decaying trend is slowly ending. As production
grew and reserves continued to fall during 2018, -3.3% -2.8%
-3.8%
the reserves/production ratio fell below the 10-
year mark for the first time in history, announced -8.3% -7.7%
MME. According to the ministry, imports will be

needed to cover domestic demand, if no new -13.6%
sources of natural gas are found in the medium-
2012 2013 2014 2015 2016 2017 2018
term.
Volume, bcf y/y change
Most proven natural gas reserves are located in
the Casanare department, which accounted for
58.6% of all reserves in 2018, followed by Guajira Reserves/Production Ratio, years
(15.4%) and Sucre (8.1%).
According to a May 2019 report by consultancy 11.7

Concentra, exploration activities decreased by
10% y/y in 2018, with the number of drilled wells
falling from 50 in 2017 to 45 in 2018, much below
10.5
the historical peak of 2012 when 131 wells were 10.3
drilled.
9.8
According to ANH’s figures, 62% of the 2018
exploratory wells were drilled in the Llanos basin,
13% in the Lower Magdalena Valley, 11% in the
Middle Magdalena Valley, 7% in the Caguan- 2015 2016 2017 2018
Putumayo basin, and the other 6% spread among
the Guajira, Upper Magdalena Valley and Sinu-
San Jacinto basins.
Source: MME, Concentra, BNAmericas

FOCUS POINT
Proven Natural Gas Reserves by Department, 2018, year-end
17,356 583,846
Cesar Guajira
0.5% 15.4%
305,715 200,646
Sucre Santander
8.1% 5.3%
2,216,125
Casanare
58.6%
176,382
Boyaca
4.7%
281,773
7.5%
Others
Source: Concentra

Production
Comments Natural Gas Production

After four years of declining natural gas
458 453
production, mainly caused by the depletion of 432
423 16.3%
existing mature fields, in 2018 output posted a
386
notable rebound, growing by 16.3% y/y to 386 bcf. 360
The growth was driven by output increases at the 9.3% 332
8.3%
Cusiana-Cupiagua field, which experienced an
overall 10% increase against 2017, thanks to
higher investment in production. Other important -1.1%
fields such as Gibraltar, Guajira and La Creciente,
-4.6%
saw 26.4%, 15%, and 3% declines, respectively, on
-7.8%
a year-on-year basis.
-16.7%
2012 2013 2014 2015 2016 2017 2018
Volume, bcf y/y change
Natural Gas Production by Department, Top Ten Natural Gas Production Fields,
2018 2018
Casanare 72.3% Pauto Sur 19.0%

Guajir a 10.6% Cupiagua 15.4%
Sucre 3.8% Chuchupa 9.2%
Cor doba 3.7% Cupiagua Sur 8.3%
Santander 2.1% Cusiana Norte 7.3%
Cesar 0.8% Cupiagua Liria 6.7%
Meta 0.8% Cusiana 5.1%
Boyaca 0.8% Florena 4.7%
Huila 0.6% Nelson 2.4%
Others 4.6% Gibraltar 1.7%
Source: MME, Concentra, ACP, Sectorial

Consumption
Comments Natural Gas Consumption

In 2018, natural gas demand in Colombia grew by
1,101 1,085
1.9% y/y to 987 mmcf/d, driven by the non- 1,014 1,027
968 987
regulated segment in which consumption 913
increased by 5.8% against 2017. The main driver 10.9% 11.0%
behind the growth in the non-regulated segment 8.7%
was the thermal power generation sector, in
which demand increased by 20% y/y thanks to its
higher contribution to Colombia’s electric energy 1.9%
matrix. Demand from the regulated market also
-1.5%
grew, by 3% y/y, thanks to its broader coverage,
with 21 new cities with around 100,000 new -5.3% -5.8%
clients being added to the gas transportation
2012 2013 2014 2015 2016 2017 2018
network. Regionally, demand from the interior
Volume, mmcf/d y/y change
increased by 1.9% y/y in 2018, in the coastal area
by 7.2% y/y, and from isolated areas by 1% y/y.
Natural Gas Consumption by Region, Natural Gas Consumption by Market,**

2018 2018
Coastal
Areas 39.4%
Regulated
Market
19.3%
Non-
Regulated
Market
80.7%
Isolated
Interior of the Areas* 5.7%
Country
54.9%
* Areas not connected to the national gas transportation network.

** Non-regulated market includes users with consumption higher than 100 mcf/d, mainly gas-fuelled power plants and large
industrial users.
Source: Concentra, UPME, Fitch Solutions

Transportation
Capacity of Natural Gas Pipelines, Interior Comments

of the Country, 2018, mmcf/d
Colombia’s natural gas transportation network is
El Porvenir-La Belleza 415 divided into two systems that cover the interior
and coastal areas. The first is served by domestic
Cusiana-El Porvenir 412
company TGI SA, a subsidiary of state-run Bogota
Sebastopol-Vasconia 338 Energy Group, whose pipelines connect the most
Sebastopol-Barrancabermeja 307 important fields of the country (Cusiana and
Cupiagua) with the interior. The second is served
Ballena-Barrancabermeja 260.0
by domestic company Promigas and its
La Belleza-Vasconia 255
subsidiaries – Promioriente, Transmetano and
Barranquilla-Sebastopol 230 Transoccidente – through a network of pipelines
La Belleza-Cogua 218
totalling around 3,000km. The most used pipes in
2018 were Cusiana-El Porvenir in the interior area
Gasoducto De La Sabana 215.0
with a capacity usage of more than 80%, and
Vasconia-Mariquita 192 Sincelejo-Cartagena in the coastal area, with a
Mariquita-Pereir a 168 capacity usage rate of 77%.
Pereir a-Armenia 158
Ar menia- Cali 148 Capacity of Natural Gas Pipelines,

Coastal Areas, 2018, mmcf/d
Vasconia-Sebastopol 137.0
Cusiana-Apiay 64.2 Ballena-La Mami 317

Boyaca-Santander 64
La Mami-Bar ranquilla 279
Vasconia-La Belleza 30
Barranquilla-Cartagena 200
Mariquita-Gualanday 25
SRT Mamonal 174.8
Apiay- Villavicencio-Ocoa 22.0
Sincelejo-Cartagena 166
Apiay- Usme 17.8
Barranquilla-La Mami 45
Gualanday-Neiva 13
Car tagena-Barranquilla 45
Gualanday-Mariquita 6.95
Car tagena-Sincelejo 18.0
La Belleza-El Porvenir 2.5
Neiva-Gualanday Sincelejo-Jobo 10.0

1.9
Source: Concentra, TGI, Promigas, EMIS Insights

08
RETAIL
CHANNELS

08 RETAIL CHANNELS CONTENTS
Oil Derivatives
Number of Petrol Stations by Comments

Department, 2018, year-end As of end-2018, there were 7,598 petrol stations in
Colombia, according to the MME. The liquid fuel
Antioquia 736
distribution segment is highly concentrated, with
Nar ino 667 four companies supplying more than 90% of
Valle del Cauca 666 Colombia’s fuel consumption. Domestic company
Bogota District 665 Organizacion Terpel is the segment leader with
2,221 stations, and is responsible for 40% of the
Santander 320
country’s sales volume, or around 2,028mn gallons
Bolivar 276 of fuels. For its part, the Uruguay-based Latin
Boyaca 273 American Petroleum International Company,
Meta 272 through its local subsidiary Uno Colombia,
acquired a 99% stake in Biomax in June 2018, for
Cauca 267
COP 55bn, becoming the second largest player in
Atlantico 263
the market with 1,086 gas stations and a 23%
Others 3,193 share of fuels sales volume in the country. Primax,
the fuel distribution division of Peruvian
conglomerate Grupo Romero, is the newest player
Petrol Stations by Company, 2018, year- in the segment. The company entered Colombia
end through the acquisition of its ExxonMobil stations
in November 2018 for USD 232mn. This
Organizacion Terpel 29.2%
transformed Primax into the leading fuel retailer
Biomax 14.3% by sales volume with a 22% market share as of
ExxonMobil de Colombia 12.4%
end-2018. The fourth company in terms of volume
sold and number of stations is the local
Chevr on 8.0%
subsidiary of US-based Chevron with 475 stations
Petromil 5.8% and a 15% market share. The company operates in
Cooper ativa Ayatawacoop 2.4% Colombia through the Texaco brand. According to
a June 2019 article by domestic news outlet El
Puma Energy 1.7%
Pais, Chevron bought several gas stations and two
CI Ecospetroleo 1.1%
production facilities in the Valle del Cauca
Casamotor 0.7% department from competitor Primax, with which
Others 24.3%
Chevron expects to increase its fuel sales by 10%
y/y.
Source: MME, Portafolio, La Republica

Natural Gas Distribution Grid
Comments Gas Grid Users by Distribution Company,

2018, year-end
At the end of 2018 there were 9.5mn natural gas
users in Colombia. More than 40 gas distribution Gas Natural 25.0%
companies participate in the segment, but Empr esas Publicas de Medellin 12.0%
concentration is high, with the leading ten
Gases de Occidente 12.0%
companies serving 91% of all users in the country.
Gases del Caribe 10.0%
The presence of local companies is significant,
Alcanos de Colombia 9.0%
with EPM, the utilities company in the
Surtidora de Gas del Car ibe 8.0%
municipality of Medellin, and Gases de Occidente,
subsidiary of domestic gas transporting company Efigas Gas Natural 6.0%
Promigas, being the second and third companies Gas Natural Cundiboyacense 4.0%
by the number of users served. Nevertheless, the Gas Natural del O riente 3.0%
top spot is occupied by Grupo Vanti, formerly Gas Gases del Llano 2.0%
Natural, controlled by the Canadian investment Others 6.0%
fund Brookfield.
Gas Grid Users by Department, 2018, Gas Grid Users Evolution

year-end
9,498
9,067
8,628
Bogota 22.0% 8,218
7,745
Antioquia 13.0% 7,166
6,694
Valle del Cauca 12.0%
Cundinamarca 6.0%
Atlantico 6.0% 8.1%
7.4% 7.1%
Santander 5.0% 6.1%
Bolivar 4.0% 5.0% 5.1% 4.8%
Tolima 3.0%
Magdalena 3.0%
Risaralda 3.0% 2012 2013 2014 2015 2016 2017 2018
Others 18.0%
Number of Users, thou y/y change
Source: MME, Naturgas

Natural Gas Vehicles
Comments Natural Gas Fueling Stations by

Department, 2018, year-end
The use of natural gas as a vehicle fuel is subject
to a government incentive scheme, established in
Bogota District 160
2002 by Law 788, which aims to limit the use of
liquid fuels, as they are more expensive and Valle del Cauca 112
polluting. In 2018, the number of natural gas-
powered vehicles reached 583,688, a 2.7% Antioquia 65
increase against 2017, with a share of 2.8% of the
Atlantico 59
total vehicles in Colombia. This is supported by a
network of more than 717 gas stations as of 2018,
Huila 46
up 11.8% y/y against 2017, the bulk of which are in
the Bogota district. According to Concentra, total Cundinamarca 45
consumption of the segment in 2018 amounted to
around 7% of the country’s total. Others 231
Number of Natural Gas Vehicles Natural Gas Vehicles by Department,

2018, year-end
568,264 583,688 Cundinamarca 35.0%

538,213 556,183
439,907 476,506 510,562 Valle del Cauca 16.1%
20.5% Antioquia 10.6%
Atlantico 8.6%
Santander 4.5%
Risaralda 4.2%
8.3%
7.1%
5.4% Bolivar 3.4%
3.3% 2.7%
2.2% Caldas 2.7%
Meta 2.4%
2012 2013 2014 2015 2016 2017 2018
Others 12.6%
Number of Vehicles, year -end y/y change
Source: MME, Naturgas, Concentra

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EMIS Insights - Colombia Oil and Gas Sector 2019 - 2020

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COLOMBIA

OIL & GAS SECTOR

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ACP Colombian Oil Association

ANH National Hydrocarbons Agency

ANLA National Environmental Licensing Authority

BTU British Thermal Unit

CAMPETROL Colombian Chamber of Oil Goods and Services

COP Colombian Peso

CREG Regulatory Commission for Energy and Gas

DANE National Administrative Department of Statistics

LPG Liquefied Petroleum Gas

MADS Ministry of Environment and Sustainable Development

MME Ministry of Mines and Energy

Naturgas Colombia Natural Gas Association

OPEC Organization of Petroleum Exporting Countries

UPME Mining and Energy Planning Unit

boe Barrels of Oil Equivalent

bpd Barrels per Day

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02 SECTOR IN FOCUS p.13

03 COMPETITIVE LANDSCAPE p.23

04 COMPANIES IN FOCUS p.29

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07 NATURAL GAS p.58

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Fourth Seventh -3%

1.96Bbbl 6.20 3.8tcf

Note: Data for 2018.

COLOMBIA OIL & GAS SECTOR 2019/2020 6

Source: ANH, ACP, DANE, Reuters

COLOMBIA OIL & GAS SECTOR 2019/2020 7

KEY PLAYERS REVENUES

COLOMBIA OIL & GAS SECTOR 2019/2020 8

COLOMBIA OIL & GAS SECTOR 2019/2020 9

Crude Oil Production Forecast, bbl/d

Source: UPME, MME, Concentra

COLOMBIA OIL & GAS SECTOR 2019/2020 10

Source: ANH, ACP, Reuters, Valora Analitika, Ecopetrol

COLOMBIA OIL & GAS SECTOR 2019/2020 11

Source: ACP, ANH, Ecopetrol, Reuters, Dinero, RCN Radio

COLOMBIA OIL & GAS SECTOR 2019/2020 12

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Main Economic Indicators

Crude Oil and Natural Gas Extraction Gross Value Added,

Crude Oil and Natural Gas Extraction Gross Value Added,

Crude Oil and Natural Gas Extraction Gross Value Added,

Coking and Oil Derivatives Production Gross Value Added,

Coking and Oil Derivatives Production Gross Value Added,

Coking and Oil Derivatives Production Gross Value Added,

Average Annual Producer Price Index: Oil and Natural Gas

Average Annual Producer Price Index: Oil Derivatives

Source: Central Bank of Colombia, DANE, CEIC

COLOMBIA OIL & GAS SECTOR 2019/2020 14

Main Sector Indicators

Number of Drilled Exploration Wells 131 115 113 25 25 43 50

Source: ANH, ACP, MME, BP/Statistical Review of World Energy 2019

COLOMBIA OIL & GAS SECTOR 2019/2020 15

Gross Value Added

Source: Central Bank of Colombia