Ecopetrol declared the commercial viability of the Caño Sur Este Block
- The initial declaration may incorporate 1P reserves estimated at 22.4 million barrels of oil (including royalties).
- The development plan establishes increasing production from 1,727 to 25,000 barrels per day by mid-2016, drilling 135 development wells, and investing US$ 656 million.
- Production is 100% owned by the Company.
Ecopetrol S.A. (BVC: ECOPETROL; NYSE: EC; TSX: ECP) reports that it declared the commercial viability of the Caño Sur Este block to the National Hydrocarbons Agency (ANH), a block in which the Company has a 100% stake. The block is located in the municipality of Puerto Gaitán in the east of the department of Meta (Colombia). 1P reserves (proven) initially declared totaled 22.4 million barrels of oil (including 1.5 million barrels for royalties). The original oil in place is estimated at 492 million barrels.
Once this declaration of commercial viability is made, the commercial operation phase of the block begins, with the block covering an area of 54,211 hectares. The area of Caño Sur corresponds to 9% of the Caño Sur Block´s total (611,000 hectares), which continues to be explored by Ecopetrol.
The Caño Sur Block contract was signed with the ANH on June 20, 2005. It has a term of 24 years after the declaration of commercial viability and falls under the variable royalties payment scheme for heavy crudes of between 6 and 18.75%, depending on the levels of production.
"We are very pleased to announce this commercial viability, which contributes towards the achievement of Ecopetrol´s target of producing 1 million clean barrels in 2015 and which is one of the exploratory campaign´s outcomes regarding which we have been working hard for the past decade. The results obtained in Caño Sur confirm the potential of this area in heavy crudes, which is a focus of the Company´s strategy", said the president of Ecopetrol, Javier Gutiérrez Pemberthy .
The declaration of commercial viability means that after 6 years of exploration, it was possible to verify that reserves exist in sufficient quantities to initiate a stage of development under profitable conditions. In practice, it is the birth of a new oil production area, which could be expanded with the additional information provided by the continued exploratory work being carried out in West area of the same block.
The reserves of 22.4 million barrels within the declaration of commercial viability, will become part of the Ecopetrol´s total reserves in late December once certification is completed by the independent firms that are responsible for this process. It should be clarified that the volume of audited reserves will be officially presented in the Resources and Reserves Report (IRR for its acronym in Spanish) to the ANH in the first quarter of 2014.
At November 30 last year, 61 wells had been drilled in the Caño Sur block, among exploratory, stratigraphic and delimiter wells. Cumulative production since May 2011, when the first discovery was made, totals 516,881 barrels of oil with 13.5 API gravity.
For the development of this Caño Sur Este block, Ecopetrol plans to invest US$ 656 million in the next 5 years, which includes the drilling of 135 wells, construction of surface facilities, as well as environmental and social investments, among others. Production is expected to increase from 1,727 bpd (daily production with a cut-off at November 30, 2013) to 25,000 bpd in mid-2016.
The activities planned for the development of the block will be carried out under the highest environmental and social standards, in line with the Company´s commitment to produce clean barrels: this means with no accidents, no environmental incidents, under labor normality, in harmony with stakeholders and with profitability.
Bogotá D.C., December 5, 2013
Ecopetrol is the largest company in Colombia and is a company that is integrated into the petroleum chain, ranked among the 40 largest oil companies in the world and among the top four in Latin America. In addition to Colombia, where it accounts for 60% of national production, it has a presence in exploration and production activities in Brazil, Peru and the United States (Gulf of Mexico). Ecopetrol possesses the largest refinery in Colombia, the majority of the country´s oil and multiple purpose pipelines, and is significantly increasing its participation in biofuels.
This press release contains statements relating to the prospects of the business, estimates for operating and financial results, and statements related to Ecopetrol´s growth prospects. These are merely projections and, as such, are based exclusively on the expectations of management concerning the future of the business and its continued access to capital to fund the company´s business plan. The realization of such estimates in the future depends on changes in market conditions, regulations, competition, the performance of the Colombian economy and industry, among other factors, and therefore are subject to change without notice.
For more information please contact:
Media Relations (Colombia)
Jorge Mauricio Tellez
Telephone: + 571-234-4329
Director of Investor Relations