1. TIME PLACE New E&P Contract COLOMBIA Agencia Nacional de Hidrocarburos
ANH
New E&P Contract
COLOMBIA
THIS IS THE
TIME
AND THE
PLACE
Julian García
Technical Director
Dallas, April 19th 2004
Colombia: This is the time and the place

2. Colombia: This is the time and the place
Threefold strategy
New institutional structure
New contract
Improved business environment
COLOMBIA
THIS IS THE
TIME
AND THE
PLACE
Colombia: This is the time and the place

3. New Institutional Structure
ECOPETROL S.A.
Entrepreneur
ANH
Resource Administrator
New
Contract
ECOPETROL
Entrepreneur
+ Regulator
Association
Contract
Colombia: This is the time and the place

4. New Contract Basic Characteristics
Type of contract
Duration
Work Programs
Operations
Economic Terms
Royalty / Tax system
100% WI to contractor through contract life
Exploration 6 yrs yrs extension
Evaluation 1-2 yrs yrs extension
Exploitation 24 yrs yrs extension, per field
Automatic extensions on fulfilment of pre-established conditions
Responsabilidad, Costos y Riesgos
Exploration Minimum program, per phase, adjustable
Evaluation At contractor´s discretion
Exploitation Plan accepted by ANH, with updates
Annual work programs
Autonomy and flexibility to the contractor
Follow up by ANH
100% production to the contractor, after royalty payment
Sliding scale royalty + Tax
Eventual payment of 30% of surplus income over trigger price of
around US$ 27/bbl WTI
Natural gas and heavy oil have no payment and other incentives
Assets belong to contractor
Colombia: This is the time and the place

5. Colombia: This is the time and the place
Economic Terms
(mboed)
% production
10% 5
125
400
20%
12%
16% 8%
4.8%
Discount
Production
Light crude
Gas Onshore
Heavy Oil
Gas Offshore
(>1000 ft) -
- 20%
- 25%
- 40%
600
Per field
Sliding scale
royalty
30% of surplus income
over trigger price
As a % of actual field value
Trigger price
Around US$ 27/bbl WTI
Adjusted with oil industry evolution
Payment to ANH
contingent to high prices and only
for light crude
Colombia: This is the time and the place

6. Colombia: This is the time and the place
International Competitiveness
60%
40%
Colombia
New Model
United Kingdom
50%
Pakistan
50%
Peru
40%
Argentina
60%
Ecuador
Brasil
India
State
Take
Kazahistan
Contractor Take (1 - State Take)
30%
Australia
70%
Trinidad & Tob.
Colombia
Previous model
Thailand
Sudan
20%
80%
China
Angola
Turkemistan
Gabon
Bolivia
10%
Norway
90%
Malaysia
Indonesia
Egypt
Venezuela 0%
100%
10%
20%
30%
40%
50%
Profitability
Source: PEPS-USGS and calculations ANH
Colombia: This is the time and the place

7. Colombia: This is the time and the place
Advantages
Type of contract
Duration
Work Programs
and Operations
Economic Terms
Top quartile
Full materiality, 100% of prize to exploration risk
No need to commit in advance re. cost oil, reserves, or profitability
Time enough to discover, to make it feasible and to realize the reward
Standard or better than industry
Evaluation: grace period to make feasible any discovery
Exploitation period per individual discovery / field
Extensions w/o negotiations
Autonomy and flexibility
Right to monetize discoveries
Non intrusive follow up – easy contract administration
Stake take (50%) and profitability
Robustness, lower downside - higher upside potential
100% cost effectiveness / incentive (before tax)
Simplicity – easy mathematics, known crude marker, no cost control
Incentives for gas and heavy oil
Colombia: This is the time and the place

8. Colombia: This is the time and the place
Business Environment
GDP growth (from avg. 2.5% last 10 years to ca 4%)
Unemployment rate (from 18% in 2001 to current 15%)
Fiscal deficit ( from -5% to -2.5% of GDP)
Foreign investment +25%
Stock Exchange Index +100% last 12 months
External debt : sustained at 50% GDP
Country risk rate: spread from to < 300 basic points
President Uribe´s popularity rating 70%
Democratic and Social Security Policy
Financing sources + number of rebel forces weakened
Coca illegal crops from (2000) to ca has. today
Around rebels demobilized
Defense Spending increased from 2% early 90s to 5% of GDP
Attacks against infrastructure - 30%
Attacks against towns - 83%
Illegal road blocks –60%
Kidnapping –28%
Colombia´s Turnaround
Sustained improvement of all socio-economic indicators
Dramatic turnaround of the trend of security and drugs
The basis
Long and relativelly rich oil industry – proved basin
Exciting exploration open to unkown potential
e.g. 5 giant discoveries, many skilled professionals,
km. pipelines
Relatively un-explored country
Geological modelling: more questions unresolved than
answered
Colombia: This is the time and the place

9. Conclusions New institutional structure
Ecopetrol as entrepreneur – ANH as resource administrator
New top quartile contract
R/T system
Time enough to discover, make it feasible and realize the reward
Autonomy and flexibility for work programs and operations
Top quartile economic terms
Simple
Business environment turnaround
Sustained improvement of all socio-economic indicators
Dramatic turnaround of the trend of security and drugs
Long and relatively rich oil industry – proved basin
Exciting exploration open to unkown potential
Colombia: This is the time and the place
Colombia: This is the time and the place

10. Colombia: This is the time and the place
Thank you !
Colombia: This is the time and the place