January 2005

1. Agencia Nacional de HidrocarburosA new era in the Colombian oil and gas industryArmando Zamora ReyesDirectorGeneral Libertad y Orden January 2005 Agencia Nacional de Hidrocarburos

2. Agenda New Institutional Structure New E&P contract E&P Opportunities Colombia at a glance Improved business environment Security issues Agencia Nacional de Hidrocarburos

3. New institutional structure ANH Resource administrator Ecopetrol Operator & regulator Ecopetrol Inc. Operator New E&P contract Association contract Agencia Nacional de Hidrocarburos

4. Functions Integral administration of the nation's hydrocarbons resource Licensing E&P Realizing the benefits Knowledge of resource base Policy & planning E&P Hydrocarbon potential Exploration opportunities E&P information systems Oil & gas policies Security of supply Design E&P contracts Promotion and negotiation Assignment of areas Contract administration Royalty collection Collection of other economic rights Community participation Agencia Nacional de Hidrocarburos

5. Agenda New Institutional Structure New E&P contract E&P Opportunities Colombia at a glance Improved business environment Security issues Agencia Nacional de Hidrocarburos

6. New E&P contract basic elements Royalty / Tax + High price participation 100% WI to contractor through contract life Type of contract Duration Work Programs Operations Economic Terms Exploration 6 yrs + 4yrs extension Evaluation 1-2 yrs + 3 yrs extension Exploitation 24 yrs + Life of Field extension, per field Extensions by default on fulfillment of pre-established conditions 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 ~ US$ 27/bbl WTI for light crude. Natural gas and heavy oil with a very high trigger price and other incentives Assets belong to contractor Agencia Nacional de Hidrocarburos

7. New E&P contract - elements • Contract type: royalties + taxes (+ ANH high price participation rights) • Phases’ length: - Exploration 6 years + 4 years extension - Evaluation 1-2 years + 3 years extension - Exploitation 24 years + extension to final depletion • Assignment: though modern, transparent, and efficient procedures • Follow-up: with high international standards Agencia Nacional de Hidrocarburos

8. Economic terms Per field Sliding scale royalty % production Discount Light crude Gas Onshore Heavy Oil Gas Offshore (>1000 ft) - - 20% - 25% - 40% 20% 20% 20% 16% 16% 12% 12% 10% 8% 8% 4.8% 4.8% Production (mboed) (mboed) 0 0 5 5 125 125 400 400 600 Payment to ANH contingent to high prices and when cumulative production > 5 mmbls 30% of surplus income over trigger price As a % of actual field realization price Trigger price Light crude: ~ US$ 27/bbl WTI Heavy crude: US$ 40/bbl WTI Gas: agreed (Henry Hub) Adjusted with US inflation Agencia Nacional de Hidrocarburos

9. Colombia New Model International competitiveness 40% 60% United Kingdom Pakistan 50% 50% Peru 60% 40% Argentina Ecuador Brazil India State Take Kazakhistan Australia 70% 30% Contractor Take (1 - State Take) Trinidad & Tob. Colombia Association contract Thailand Sudan 80% 20% China Angola Gabon Turkmenistan Bolivia Norway 90% 10% Malaysia Egypt Indonesia Venezuela 100% 0% 10% 20% 30% 40% 50% Profitability Source: PEPS-USGS and calculations ANH Agencia Nacional de Hidrocarburos

10. Type of contract Work programs and operations Economic Terms Duration Summary of new E&P contract 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, make it feasible and realize the reward Standard or better than industry Evaluation: grace period to make feasible a discovery Exploitation period per individual discovery / field Extensions w/o negotiations until field depletion Autonomy and flexibility Right to monetize discoveries Non intrusive follow up – easy contract administration Top quartile Stake take (50%) and profitability Robustness, lower downside - better upside potential 100% cost effectiveness / incentive (before tax) Simplicity – easy mathematics, known crude marker, no cost control Incentives for gas and heavy oil Agencia Nacional de Hidrocarburos

11. Agenda New Institutional Structure New E&P contract E&P Opportunities Colombia at a glance Improved business environment Security issues Agencia Nacional de Hidrocarburos

12. E&P Opportunities Diverse portfolio for all players from High risk exploration in frontier basins e.g. Caribean deepwater, Los Cayos, Caguan, foothills to Low risk re-entry to drilled wells that have tested hydrocarbons with a P/L nearby in between heavy oil gas upgrades companies wanting to share risk ~ 100 million hectares in sedimentary basins with unkown potential and exciting exploration opportunities95% under-explored 5 giant discoveries Only ~2000 wildcats All services available Agencia Nacional de Hidrocarburos

13. Opportunities in Colombia Diversity Complexity Risk Various Models Geologist Multidimensional Under explored country Unknown potential Exciting exploration Agencia Nacional de Hidrocarburos

14. Modern E&P Information System new EPIS website Agencia Nacional de Hidrocarburos

15. Agenda New Institutional Structure New E&P contract E&P Opportunities Colombia at a glance Improved business environment Security issues Agencia Nacional de Hidrocarburos

16. Colombia's Location Agencia Nacional de Hidrocarburos

17. Colombia at a Glance • A Few facts about Colombia • Total Area: 1,138,910 sq km. • Roughly twice the size of Alberta. It is the only South American country with coastlines on both North Pacific Ocean and Caribbean Sea. • Population: 42,310,775 • Median age total: 25.8 years. Male: 24.9 years. Female: 26.7 years. • Life expectancy total population: 71.43 years, Male: 67.58 years, Female: 75.41 years • Multicultural population: Mestizo 58%, White 20%, Mulato 14%, Black 4%, Black Amerindian 3%, Amerindian 1% • Literacy Rate Total Population: 92.5% male: 92.4% female: 92.6% Agencia Nacional de Hidrocarburos

18. Colombia at a Glance • A Few facts about Colombia • Labor force: 18.3 million (1999 est.) • Labor force - by occupation: services 46%, agriculture 30%, industry 24% • GDP 2003 USD$78,600 MM (At purchasing power parity $262,000 MM) • Real growth rate: 3.95% for 2003 and 4.00% for 2004. • Natural Resources: petroleum, natural gas, coal, iron ore, nickel, gold, copper, emeralds, hydropower. • Industries: textiles, food processing, oil, clothing and footwear, beverages, chemicals, cement; gold, coal, emeralds • Exports: $12.96 billion f.o.b. (2003 est.) • Exports - commodities: petroleum, coffee, coal, apparel, bananas, cut flowers • More than 400 multinational companies currently work in Colombia. Agencia Nacional de Hidrocarburos

19. Colombia at a Glance • Multiple Regional Development Areas • Colombia is highly urbanized, with cities and towns throughout the country. • While the population of many Latin American countries is concentrated in one or two major cities, Colombia’s population is well distributed throughout the country, with three of its cities boasting more than two million inhabitants. • There are another 11 cities with population exceeding 500,000 and 22 cities with more than 100,000 inhabitants Agencia Nacional de Hidrocarburos

20. Colombia at a Glance • Political, Economic and Social Stability • According to the IFC, Colombia together with Slovakia are the countries where the conditions have improved the most for doing business. • Colombia enjoys a very strong democratic tradition. Since 1900, only once has Colombia been ruled by a non democratically elected government (from 1954 to 1958 when the country was ruled by Military Dictatorship). • Colombia has always respected its commitments. Colombia has never defaulted its debt. • Colombia is an active member of all UN related social organizations (ILO. FAO, Unicef). Agencia Nacional de Hidrocarburos

21. Agenda New Institutional Structure New E&P contract E&P Opportunities Colombia at a glance Improved business environment Security issues Agencia Nacional de Hidrocarburos

22. GDP growth % 4% 3% 2% Stock Exchange 1% Dow Jones Dow Jones Colombia 3000 Fiscal Deficit 04 00 01 02 03 2500 Inflation 20 2000 % GDP 15 % 1500 00 01 02 03 04 10 1000 - 1% 9% 0 0 - 2% 8% 04 01 02 03 - 3% 7% - 4% 6% 00 01 02 03 04 Business environment • GDP Growth: 2.5% avg. last 10 years to 4+% 2003 and 1H04 • Unemployment Rate: 15.6% Agu.02 to current 12.9% • Fiscal Deficit: from -5% to -2.5% of GDP in 4 years • Foreign Investment : +25% in 2003 and +73% 1H04 • Stock Exchange Index: +100% last 12 months • External Debt : sustained at 50% GDP, never default • President Uribe popularity rating 70% Agencia Nacional de Hidrocarburos

23. Industry status THE BASIS Long and relatively rich oil industry – proved basin Exciting exploration open to unknown potential 5 giant discoveries, many skilled professionals, 12.000 km plus pipelines Relatively under-explored country Geological modeling: more questions unresolved than answers Agencia Nacional de Hidrocarburos

24. Agenda New Institutional Structure New E&P contract E&P Opportunities Colombia at a glance Improved business environment Security issues Agencia Nacional de Hidrocarburos

25. Eliminate drug trafficking Illicit coca crops Source: Ministry of Defense Agencia Nacional de Hidrocarburos

26. Maintain deterrent capability Demobilization Presidential Period: Total 10,899 Individual demobilization 6,308 Collective demobilization 4,591 Source: Ministry of Defense Agencia Nacional de Hidrocarburos

27. Other security numbers • Democratic and Social Security Policy implemented • Financing sources + number of rebels forces weakened • Coca illegal crops from 160.000 (2000) to ca. 50.000 has. today • Circa 11.000 rebels demobilized • Over 65.000 displaced persons have received humanitarian assistance and 17.317 returned home • Attacks against infrastructure - 57% • Only 1 attack against towns during 2004 • Illegal road blocks –60% • Kidnapping –52% Dramatic turnaround of the security and drugs trend Agencia Nacional de Hidrocarburos

28. Conclusions • Business environment is clearly, rapidly and sustainly improving • Separation of state roles: Ecopetrol as operator – ANH as resource administrator • Top quartile new contractual scheme • Diverse E&P opportunities with unknown potential and exciting exploration • Positive industry response Agencia Nacional de Hidrocarburos

29. Thanks for your attention www.anh.gov.co Colombia: THIS IS THE TIME AND THE PLACE Agencia Nacional de Hidrocarburos