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The State
to meet all obligations
to government institutions.
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For Ecopetrol the Colombian government is a shareholder to whom it must respond by maximizing its value and attaining a reasonable level of profit.
The State also governs hydrocarbon policies and manages the nation’s hydrocarbons through the Ministry of Mines and Energy and the National Hydrocarbons Agency. In fact, the company is still tied to that Ministry even now as a mixed economy corporation, according to the provisions of its Corporate Bylaws.
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The State is also the recipient of revenues transferred from Ecopetrol, in volumes incomparable to any other company in the country. The royalties, the dividends, the national and regional direct and indirect taxes, and the tax revenues coming from contractors and the different subsidies the company has assumed over time, make a macroeconomic difference in Colombia.
In addition to the communities in its areas of influence, one of the company’s key partners is The State. The State partners with Ecopetrol in terms of social and environmental investments and in the management of the variables of industrial safety and installations, contingency plans, and all the issues in the company’s larger context, so that the operative managements and projects can function properly.
Ecopetrol not only abides by the law in terms of delivering to The State what belongs to The State, but it also promotes the same conduct for Colombian society as a whole. It also calls on communities to get organized so that they might gain access, through associations and cooperatives, to all types of government social services.
With this purpose, Ecopetrol and its oil partners made investments in 2007 on the order of $17,700 million pesos in the category of “Institutional and Community Strengthening.”
Macroeconomic Impact
Ecopetrol’s first great responsibility to the State is to do increasingly better at what it was created to do and to ensure its organizational longevity, with the resulting benefits for the national economy. In response to this commitment, in recent years the company has increased production on the wells it owns and has improved its operational indicators as described in Volume I of this annual report.
The development over time of crude oil and natural gas production owned by Ecopetrol has translated into an increase in the company’s participation in the gross domestic product (GDP) for petroleum over the last six years. The oil sector’s contribution to the economy’s total product, which in 2002 was 2.4%, is estimated to have decreased to 1.6% in 2007. However, the part corresponding to Ecopetrol, which in 2002 was 57%, is estimated to have increased to 68% in 2007.
The oil sector is responsible for close to a fourth of the country’s income from exports. The weighting of exports is similar today to the averages recorded in the nineties, when crude production reached its maximum level recorded in history. This is due in part to the high price of oil on the international market.
The oil sector therefore continues to be the largest line item among the country’s traditional exports, despite the fact that other products, such as coal, have made percentage gains.
Payments to the Nation
In 2007, the State collected $10.3 trillion pesos in revenue from Ecopetrol, a figure representing close to 16% of the total revenues forecast by the central government for the year. And that figure does not include complementary taxes and sales taxes, which, as indirect taxes, have a distributive effect for the Colombian people. State revenues coming from Ecopetrol grew 40% nominally, especially due to the larger dividends paid to the Nation. When sales and complementary taxes are included, the revenues increase to $12.4 trillion pesos, some US$6,16 billion*.
*Dec 31, 2007 exchange rate $2,014.76
Only key figures in this Report are in
thousands dollars, using convenience translation.
Royalties
The figure of $3.9 trillion in royalties corresponds to the entire country because Ecopetrol collects the royalties for the entire national production, thanks to an agreement with the National Hydrocarbons Agency (ANH), using its transportation and storage infrastructure for the purpose of collecting royalties.
Thanks to a commercial agreement with the ANH in 2006, last year the company bought 85 thousand barrels per day of crude and 148 million cubic feet of natural gas in royalties at a price in dollars per barrel established by Resolution 171809 of 2003.
Ecopetrol invested $342.3 million to support the following agreements related to the use of royalties:
- An agreement with the International Finance Corporation (IFC), from the World Bank group, to study past use of royalties and make recommendations for improvements.
- A framework agreement with the IFC, the Colombian Petroleum Association (ACP), the National Hydrocarbons Agency (ANH) and the Presidential Program Against Corruption, to promote better allocation of royalty resources.
- An agreement with the IFC and the ACP to give tools to royalties investment follow-up committees (CSIR for the Spanish) that will allow them to properly carry out their work.
Dividends
The Shareholders Assembly approved in its regular meeting on March 26, 2007 the distribution of dividends from earnings from 2006. The approved dividend per share was $70,671.68. As the majority shareholder, the Nation received the reserve resources in compliance with the provisions of the Budget Law, as shown in the table to the left.
Matched Funds
The National Budget Law that ordered Ecopetrol to fund fuel subsidy payments, allocated $2.9 trillion pesos for the Ministry of Mines and Energy to pay that subsidy in 2007 and 2008 to the two producers, Ecopetrol and the Cartagena Refinery. This decision was necessary in light of the search for a investing partner to help carry out the Cartagena Refinery Master Plan.
The higher prices of WTI and product during 2007 increased the amount of subsidies paid. The total amount was $2.1 trillion pesos, of which 84% corresponded to Ecopetrol.
Of the amount paid to Ecopetrol, 64% ($1.15 trillion) was for the diesel subsidy.
Taxes
Within the taxes paid directly by Ecopetrol to local administrations in its areas of influence, the most significant is the industry and commerce tax.
Industry and Commerce Tax (ICA)
During 2007 Ecopetrol paid $106,818 million pesos to regional entities in the form of the industry and commerce tax (ICA).
The $90,468 million pesos paid to the municipality of Barrancabermeja represent 88% of the value of that municipality’s general budget for income and expenditures from tax revenue for the year 2007, according to the provisions of Decree No. 308 of December 19, 2006.
Property Tax
The second highest regional tax in terms of amount paid is the property tax. In 2007 Ecopetrol paid a total of $9,351 million in property tax.
Transportation Tax
For the tax on the transportation of crude oil, Ecopetrol paid $7,063 million to municipalities through which the national pipeline network passes, over $7,303 paid in 2006. The lower value of an average of $60 million pesos per quarter is due mainly to the revaluation of the exchange rate.
In addition to the mentioned tax, Ecopetrol pays other national and regional taxes such as streetlight taxes, vehicle taxes, and a surcharge on ACPM.
*Dec 31, 2007 exchange rate $2,014.76
Only key figures in this Report are in
thousands dollars, using convenience translation. |