An increase in production and exploration

Aside from heightened international prices, the WTI indicator, a reference point for Colombia, registered an average of US$72.3 per barrel in 2007, resulting in a
direct impact on exports. This year Ecopetrol’s performance evidences an increased hydrocarbon production raising its percentage of production by the 399 thousand barrels of oil equivalent (oil and gas) against the 385 thousand barrels produced in 2006.

The company’s hydrocarbon reserves closed at 1,456 million barrels of oil equivalent, after changing the valuation methodology and obtaining certification form international specialized companies.

In 2007 the recovery of exploration continued being directly executed as much by Ecopetrol as by other oil companies within the ANH new contracting model.

Ecopetrol directly tripled the number of exploratory wells (A3) in 2007, from four wells in 2006 to 12 in 2007. Two of them, Plantillo and Tenay, produced oil on surface and by the end of the year they were confirming the potential reserves associated to each of them.

The higher production volumes obtained by Ecopetrol and the ANH, deterred for the second consecutive year a fall registered since 1999 in the domestic production of crude. By the end of 2007, production reached 531 thousand barrels per day (Kbd) versus 529 Kbd produced the previous year. The agency contracts where Ecopetrol did not participate represented nearly 6 Kbd of the domestic production.

New business

The recovery of exploration and production came with the consolidation of new international business deals, which contributed to diversify the risk factors and raised the probabilities of increasing the reserves.

Ecopetrol signed deals to participate in 16 exploration blocks in Peru, Brazil and in the Gulf of Mexico, USA. The introduction to these countries was realized through commercial contracts with stature companies such as Shell, Petrobras, Talisman, and Repsol, among others.

Ecopetrol’s new business endeavors are not limited to exploration and production activities, but also encompass the areas of refining, petrochemicals, natural gas, transportation and marketing.

Ecopetrol’s venture in biofuels also marked a milestone with the establishment of Ecodiesel S.A. along with seven new palmculture firms. The company has taken on the construction of a plant for the production of biodiesels in the Middle Magdalena region, with a capacity for production of 100 thousand tons per year,
as well as promoting agricultural development in the area and advancing energy diversification. This implies environmental benefits derived from the characteristics
of a product that has low sulphur content.

During the year, a fuel improvement plan was consolidated in accordance with the commitment that Ecopetrol acquired as part of the national plan to improve the air quality. While the company invested over US$4,000 million dollars to improve the quality of diesel and gasoline products, the national and regional authorities rati- fied their commitment to advance in critical areas such as the scrapping and ageing of the automotive fleet, monitoring of fixed sources, namely the industry, the mobility and the promotion of biofuels and clean fuels such as natural gas in the massive transport system.

One of the major commitments that Ecopetrol undertook in 2007 was the onset of operations in the Refinery Association of Cartagena S.A. and the disbursement of US$172 million for the construction of a hydro-treatment plant in Barrancamermeja. Both projects permit fuels produced in the principal refineries of the country to comply with international quality standards in the amount of sulfur content, to compete at the levels of industrialized countries and in more improved conditions than the majority of Latin American countries.

The most significant decision made in the petrochemical area was the agreement to purchase Propilco for US$690 million. This acquisition will promote synergies produced by petrochemical trends generated by the refining process. In this way, the integration opens the door to the future promotion of new projects in the petrochemical chain in Colombia, in line with the world’s oil industry tendencies.

Towards the end of 2007 tests were conducted for exporting gas to Venezuela via the gas pipe that connects the fields in Guajira with the Maracaibo region and which, according to the contract signed, will begin with the sale of at least 50 million cubic feet in 2008.

The memorandum agreement for an international negotiation was signed with Petro Rubiales for the construction of a 230 kilometer pipeline. This will transport
the crude extracted from the Rubiales and Piriri fields, in the Meta province. This project will cost over US$300 million and becomes a landmark in the heavy crudes
project Ecopetrol is spearheading, which includes the development of the Castilla field, the increase in exports from Castilla Blend and the new explorations in the Llanos, jointly consolidated with Shell in the Caño South block.

Business management and human talent

The challenges presented by Ecopetrol´s new condition after privatization, together with its growth portfolio for the next years, places demands for creating a new model of excellence in the company´s management.

Such a model places human resources as its prime component. In 2007 advances were made in a salary policy with reference to the market competitiveness, which implied salary adjustments for over 2,300 employees.

Add to this previous figure the policy of adjustable compensations that covered 741 staff members for their work in 2006, and 1470 staff for their better performance in 2007.

These actions were accompanied by a revision of the organizational structure with the objective of adjusting these to the corporate strategy and the growth plan envisioned for Ecopetrol’s coming years.

Within the company’s management system the control structures were also secured to monthly indicators, and the implementation of a more efficient model for the completion of projects and a system for the strategic guarantee of services in a timely fashion to fill the demands of a growing company.

Operational growth demonstrated advances in areas such as health, physical, industrial as well as environmental security. A reduced frequency of accidents and environmental incidents was highlighted.

To complete business management, Ecopetrol can demonstrate the results in science, technology and know how that allows for reinforcing advances in its main business transactions. The work in the key fields accomplished by the Colombian Petrol Institute establishes a future for the company, in the transport of heavy crude and the control of loses.