ECOPETROL: TARGETING ON ITS OWN NEW ROLE

Having reserves of 1,056 million barrels of oil, a daily production of 307,000 barrels of crude and 288 million cubic feet of gas; owning the operation of 90 oilfields and having assets in 22 exploratory fields; and besides, having available infrastructure and supported by an unprecedented investment for exploration during the present year, Ecopetrol is now facing the challenge of consolidating its position as an efficient operating company.
If we were to classify Ecopetrol in the ranking of world oil companies on account of volume of reserves and own production, it would actually be positioned in place 45 among the 100 biggest oil companies, according to the listing of the prestigious agency Petroleum Intelligence Weekly.
This means that the Colombian company would be comparable to world recognized companies such as the Norwegian Norsk Hydro, the Americans Anadarko and Oxy or the Canadian Encana Corporation. As a matter of fact, starting this year Ecopetrol S. A. faces the challenge of consolidating its position and trying to position itself on an equal footing with its competitors, both nationally and internationally, for the exploration and exploitation of the main non renewable resource.
The clock pointers welcoming year 2004 also brought about the end of the term of six months given to Ecopetrol to define the lands it would keep for its operations and to give up the rest to the newly created Agencia Nacional de Hidrocarburos.
The bet to show that as a public corporation Ecopetrol is able to succeed the way Petrobras, Statoil and other State companies - which were transformed - did, is just beginning; and all the efforts will focus towards searching for new reserves and maximizing the recovery factor in its production oilfields.

AFTER THE PROMISED LAND

Counting on its inventory of assets, the company has focused its initial strategy to take advantage of the 22 exploratory blocks directly owned, both onshore and offshore. This is equivalent to an area of 6,343,000 hectares capable of holding 10,065 million barrels of oil, accounting for 1/4 of the exploratory potential in the country.
In addition, it must be added a vast land extension of 1,734,000 hectares where Ecopetrol currently carries on exploitation of hydrocarbons both directly and in association with nearly twenty companies; and Ecopetrol participates in the exploration of 4,604,000 additional hectares along with 30 more associated companies.
The geological potential derived from the above will be accompanied by the most strategic investment portfolio of the last few years. Just for the exploratory part it counts on a budget of US$117 million, the highest of the last 20 years. The instruction not to put all the eggs in the same basket and the diversification of investments is beginning to show results: in mature oilfields (whether by itself or in association), in small oilfields (taking advantage of the successful tender made on 13 oilfields by the en of 2003) and in searching for new oilfields (always insisting on prospecting studies, in seismic and in new drilling).
However, the exercise of consolidating the strategy is just beginning. “As of now, Ecopetrol is playing a double role: playing as a private company intending to be competitive and playing the role of the State, with goals and responsibilities which differ for each particular case”, says Pedro Restrepo Pace, vice-president of Exploration.

This has meant “to set anchors in our exploratory reality”, points out Restrepo, who adds that this kind of work involves refining of the portfolio inherited by Ecopetrol in order to clearly identify which projects are worth and which are not worth, make the maps of the exploratory corridors – this means, identifying the trains possibly holding an accumulation of hydrocarbons- and cross checking with nearby infrastructure in order to reduce operating costs. Finally, we will have to define strategic alliances with other companies, to go out in the international market for exploration.
All of the above steps will contribute to define the final strategy pointing to the reduction of the reserves deficit in the short, medium and long term. (See Figure on Exploratory Strategy).

GOOD POINT OF REFERENCE

The results for 2003 showed that success in the exploratory drilling relationship was about 66%, much higher than achievements by any other company in the country, since out of the three exploratory wells directly drilled by Ecopetrol, two of them carried hydrocarbons (Gibraltar and La Cira 1625).
If we take a look at the history of the last 33 years, between 1970 and 2003, the success relationship of ECOPETROL has been of 30% as against 17% achieved by other associated companies in their exploratory campaigns.
The above figures are a good sample of the knowledge by Ecopetrol’s technicians of the Colombian geology (geologists and petroleum engineers). However, things have drastically changed today. “The easy to find oilfields have become part of the inventory of reserves of the country; now, we have to go deeper which means higher risk and higher cost.” explains Patricia Amaya, a geologist working for the vice-presidency of Exploration.
The exploratory outlook is now concentrating on the foothills, on the subtrush, in the offshore and in the deep plays, which calls for more advanced technology, for seismic of better resolution and for other series of studies to improve the geological knowledge of the zones which only now are to be developed in a more aggressive manner.

PLAY WITH ALL THE TOYS AVAILABLE

Being competitive in the national environment and being able to enter the international arena are two rather ambitious challenges. In defining what to do, the exploratory needle points towards three important niches: First, the Colombian Caribbean coast, where an equivalent potential of 3,700,000 barrels of oil has been identified.
Even though, the largest discovery in the zone is gas in Chuchupa-Ballena, with reserves of seven TCF, there is evidence of light oil in the Cartagena wells which were drilled about 20 years ago. In this area, Ecopetrol has a block of 4,4 million hectares, called Tayrona.
The second niche is the Llanos Foothills, one with high prospecting, where the Gibraltar well proved the existence of hydrocarbons in the northern part of the train extending along about 700 kilometers. Ten blocks have been identified there, with five prospects capable of holding around 3,400 million barrels of equivalent crude oil.
The third exploratory focus will concentrate on the drilling of those prospective areas closer to the hydrocarbon production oilfields, aimed at extracting from the subsoil a potential greater than 1,500 million barrels which would take advantage of the infrastructure already available in those places.

THE MENÚ FOR 2004

For the time being, 2004 presents itself as the year with greater exploratory investment budget ever. Ecopetrol has within the exploratory budget, 9 projects for direct drilling of three wells and drilling of six more wells in association with third parties, the business being defjned by Ecopetrol. Among the names of these projects are Zeus, Álamo, Guayabillas, Guariquíes, Pachaquiaro, Puma, González, Águila and Laureles.
Notwithstanding, the goal of the country for the present year is to drill 25 exploratory wells, out of which 19 correspond to exploratory commitments already engaged under present contracts of association.
Equally, prospecting studies will take place in most of the assigned blocks. The country’s objective in relation to seismic is to acquire 3,400 kilometer equivalent, out of which Ecopetrol is committed to execute 50%.
Additionally, ECOPETROL included in the budget a Fund for US$25 million to meet the commitment of President Alvaro Uribe last November during the Seminary on Oil Contracting in Cartagena, to encourage smaller companies interested in developing smaller oilfields, namely those holding between two and ten million barrels of oil reserves.
Currently, work is being made to develop a framework where ECOPETROL will contribute part of the investment in exchange for a percentage of the production to be obtained form the small fields which economy appears feasible for companies with low administrative and operating expenses. It is intended to have this new business profile ready for the coming month of June, as well as the inventory of opportunities and the technical information available.
This is how the outlook for the new ECOPETROL S. A. is shaping up, to allow a company in transition from a State company to position itself as a leading competitive company having its own budget, reserves, facilities and human resources with a wide knowledge of all basins in the country and with long established relationships with communities and government institutions throughout Colombia.