The Expansion of Ecopetrol
Ecopetrol is the top company in Colombia as regards billing, profit, assets and net equity.
It is the only vertically integrated crude oil and natural gas company in Colombia with operations in Colombia, Brazil, Peru and offshore in the Gulf of Mexico in the US.
It is also one of the top 40 oil companies in the world and one of the top four oil companies in Latin America.
Its stock is listed on the Colombian Stock Exchange (BVC) as ECOPETROL, on the New York Stock Exchange (NYSE) through its ADR as EC, and the Lima Stock Exchange (BVL) as EC.
The company has divided its operations into five business segments, which include exploration and production, transport, refining and petrochemistry, marketing and oil sales, and corporate center.
Ecopetrol operate the two leading refineries in Colombia, located in Barrancabermeja, Santander, and Cartagena, on the Caribbean coast.
In addition, it has a transport network with nearly 9000 kilometers of pipelines that connect the production fields and the refineries, consumption centers and ports on the Atlantic and Pacific coast.
In 2009, the company carried on with its growth strategy focused on expanding business and consolidating the Corporate Group.
It stepped up its interest in exploratory blocks offshore and production fields located in different parts of the continent.
It acquired 50% of Offshore International Group and its main asset Savia Peru (previously Petro-Tech Peruana). Ecopetrol Brazil was present in three basins on the Atlantic, Ecopetrol America Inc. was awarded 22 blocks in the Gulf of Mexico, US, and Ecopetrol Peru maintained its participation in 5 blocks in the northwestern region of Peru.
In Colombia, it purchased Hocol Petroleum Limited after reaching an agreement with French firm Maurel & Prom, which will play a role in increasing the reserves and production base.
In May 2009, it increased its interest in the Cartagena Refinery with the purchase of 51% of the shares from Glencore, to move forward in the expansion project from 80 thousand bpd to 165 thousand bpd.
After purchasing Enbridge's shareholding in Ocensa, Ecopetrol became the majority shareholder with 60% of the shares, of the main arterial line for crude transport in Colombia. On September 14, 2009, the Eastern Plains Pipeline built by ODL, in which Ecopetrol holds 65%, was inaugurated.
As part of the strategy to increase its participation in the biofuel market, the company carried on with the plan to build an ethanol plant in Meta led by its subsidiary Bioenergy. In Barrancabermeja, work was done on the biodiesel plant by Ecodiesel, which will enable the company to produce more eco-friendly diesel fuel.
In 2009, Propilco increased production capacity by 50,000 tons/year amounting to 455,000 tons/year. The company is currently expanding again, which will lead to an increase to 500 thousand tons/year in 2010.
Finally, Ecopetrol Global Energy SLU was established as an investment subsidiary based in Spain to execute projects abroad.
At present, Ecopetrol has 21 subordinate companies and is the shareholder of another six companies with the following percentages:
* Includes direct and indirect holding
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Refinería de Cartagena S.A. – Reficar (Cartagena Refinery)
Purchasing 51% of the shares in Glencore International AG for a total of US $549 million, Ecopetrol made Ecopetrol the owner of 100% of the company.
In 2009, the basic engineering stages of the Master Development Plan of the Cartagena Refinery came to a close, the company began to seek financing for the project, and the machinery to be delivered in the long term was purchased. The company also continued to prepare the property where the new plants are going to be installed. The refinery will expand processing capacity to 165 thousand barrels per day.
The modernization of the Cartagena Refinery adds up to US$3.7 billion
Polipropileno del Caribe S.A – Propilco
Located in Cartagena, Propilco is the top polypropylene producer in Colombia, covering 95% of the market.
Due to its expansion in production capacity by 50 thousand tons per year in 2009, and management's commercial effort, sales increased by 4.2% going from 374 thousand tons in 2008 to 390 thousand tons in 2009.
Propilco will continue its expansion in 2010, going from 450 thousand tons/year to 500 thousand tons/year in 2010. Expansion of COMAI’S propylene distillation column is expected to be completed in 2011, which will rise from 180 thousand tons/year to 330 thousand tons/year.
Bioenergy S.A.
In November 2008, within the scope of its strategy to improve fuel quality, Ecopetrol acquired 79.9% of the interest in Bioenergy, which will be the top ethanol producer in Meta. At present, the project is in the pre-commissioning stage, developing the first sugarcane crops to find optimum production conditions.
In 2010, the industrial plan will be set in motion and once the construction of the ethanol plant begins, the agricultural plan will be developed by preparing the land. The objective is to produce 350 thousand liters/day of ethanol starting in Q1 2012.
Ecodiesel Colombia S.A.
The company is currently building a biodiesel production plant with a capacity of 100 thousand tons/year in Barrancabermeja. By December 2009, construction was 86% completed. The work is expected to be completed in the first half of 2010.
The refinery will receive biodiesel directly from the plant, and the product will be mixed at a 2% proportion with the diesel produced at the refinery. This mix reduces sulfur content. It will then be distributed to the domestic wholesale market.
Ecopetrol Oleo e Gas Do Brasil Ltda
This company was established in December 2006 to set off Ecopetrol’s internationalization strategy.
Ecopetrol Oleo e Gas do Brasil is participating in new exploration blocks located in four basins on the Atlantic coast: Para Maranao, Espirito Santo, Campos and Santos. In 2010, it expects to invest some US $138 million in exploration.
Ecopetrol del Perú S.A.
In 2007, Ecopetrol founded Ecopetrol del Peru to carry on with its international strategy. It now has four blocks in the Marañon basin and one more in the Ucayali basin, where it is a non-operating partner of companies Talisman and Petrobras.
Investments of US $30 million have been estimated for 2010, where the main activities will include the drilling of an exploratory well in Block 101 and the acquisition of 400 km2 of 3D seismic data in Blocks 134 and 158.
Ecopetrol America Inc.
Ecopetrol America Inc. (EAI) was created in 2007 to oversee the growth strategy in the Gulf of Mexico (GoM). Participation in the GoM is focused on deep sea projects, which have a high hydrocarbon potential.
In 2009, in addition to participating in the production of K2 and the increase in 1P reserves to 35.1 million barrels of oil equivalent, Mboe, EAI placed the best bid on 22 blocks, which will allow it to carry out deep sea hydrocarbon exploration over 400 meters deep for an 8 to 10-year period.
Offshore International Group Inc.
In February 2009, 50% of the shares were acquired in Offshore International Group (OIG) in association with the firm Korea National Oil Corporation (KNOC).
OIG’S main asset is Savia Peru (formerly Petro Tech Peruana S.A.) a company devoted to hydrocarbon exploration, development, production and processing in Peru. It has 11 blocks in the country (1 production and 10 exploration), which represents one of the largest offshore surfaces in South America. From the time it was purchased up to the end of the year, the company had a 30% increase in crude production, going from 12.2 Kboed to 15.8 Kboed.
The company’s strategic plan envisages investments for over US $2.5 billion over the next eight years to increase current production to 50 Kboed by 2016.
Hocol S.A.
Hocol is an oil exploration and production company operating in fields in the Upper Magdalena Valley and in the Plains region.
In May 2009, Ecopetrol and French firm Maurel & Prom agreed to purchase 100% of the shares from Hocol Petroleum Limited for US $580 million and US $162 million for working capital.
Hocol had a net production of nearly 15 thousand barrels of oil per day in 2008, and in 2009, production reached 22 thousand barrels per day, which represents a 47% increase. Most production comes from the Palermo and Ocelote fields, located in the Departments of Huila and Meta, respectively.
Ecopetrol Global Energy S.L.U.
In 2009, Ecopetrol S.A. embarked on a process to reorganize its subsidiaries abroad, reason for which it created Ecopetrol Global Energy S.L., a foreign security holding company (ETVE) whose head office is located in Spain.
As part of the reorganization, it transferred its shareholding in US subsidiary Ecopetrol America Inc. to its investment subsidiary in June. The transfer of assets was carried out for a book value of US $610.1 million.
Black Gold Re
Black Gold Re was founded to run all businesses associated with the total, partial, direct or indirect subscriptions of the risk insurance and reinsurance policies of Ecopetrol and its subordinated companies. The main risks in which the captive company participates include material damage, sabotage and terrorism; as well as the bonds (policies) that Ecopetrol is required to provide third parties with.
In January 2009, a power of attorney contract was constituted with Ecopetrol to handle the investment portfolio for US $95 million. New business opportunities are being explored, which include the consolidation of the strategy for the material damage insurance policy for all subsidiaries, and participation in performance bonds and guaranties.
Oleoducto de los Llanos S.A - ODL
In September 2009, the Eastern Plains Pipeline built by ODL, in which Ecopetrol holds 65% and Pacific Rubiales holds 35%, was inaugurated.
The pipeline’s capacity is 60 thousand barrels/day, which will increase to 160,000 barrels/day in 2010. The system will take crude from the Rubiales field to the Monterrey Station in Casanare.
In October 2009, after placing the Credit securities on the Colombian capital market, ODL guaranteed its long-term financing for $500 billion.
The Oleoducto de los Llanos will reinforce Ecopetrol’s strategy
to increase its heavy crude production
Oleoducto Central S.A - Ocensa
Oleoducto Central S.A. (OCENSA) transports 47% of the oil in Colombia. With an extension of 829 kilometers, it connects the Cusiana and Cupiagua fields in Casanare and the Port of Coveñas. Its maximum transport capacity is 525,000 barrels per day.
In March 2009, Ecopetrol S.A. increased its shareholding after acquiring 24.7% from Canadian firm Enbridge Inc. for US $417.8 billion. Ocensa has planned US $240 million in investments in 2010 for the maintenance and increase in pipeline capacity to 560,000 barrels per day.
Oleoducto de Colombia S.A – ODC
ODC is a crude transport company that connects the Vasconia Station and the Port of Coveñas through a 481-km pipeline.
After purchasing Hocol, Ecopetrol’s shareholding in ODC went from 43.85% to 65.57%. In 2009, ODC increased the average volume transported by 47%, going from 107 Kbpd to 159 Kbpd.
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