2011 Global Data Colombia Gas Markets

Col ombia Gas Markets, 2011Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (1) Colombia Gas Markets, 2011 Reference Code: GDGE0169CAR Publication Date: JUN 2011 Table Of Contents Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (2) 1 Table Of Contents 1 Table Of Contents 2 1.1 List of Tables 7 1.2 List of Figures 9 2 Colombia Energy Sector 10 2.1 Colombia Energy Sector, Market Overview 10 2.2 Colombia Energy Sector, Natural Gas 10 2.2.1 Colombia Natural Gas, Overview 10 2.2.2 Colombia Natural Gas, Supply and Demand Balance 11 2.2.3 Colombia Natural Gas, Regulatory Structure 14 2.2.4 Colombia Natural Gas, Infrastructure 14 3 Colombia Gas Upstream Investment Environment Benchmarking 15 3.1 Introduction 15 3.2 The Overall Ranking 15 3.3 Upstream Fiscal Attractiveness 16 3.3.1 Maximum Government Take Index 17 3.3.2 Maximum State Participation Index 17 3.3.3 Domestic Market Obligation Index 17 3.4 Gas Sector Performance 18 3.4.1 Exploration Activity 20 3.4.2 Gas Production 21 3.4.3 Gas Reserves 21 3.4.4 Gas Consumption 22 3.5 Economic Performance 22 3.5.1 GDP Growth Index 24 3.5.2 FDI Confidence Index 24 3.6 Socio-Political Performance 24 3.6.1 Democracy Index 26 3.6.2 Governance Index 26 4 Colombia Exploration and Production Sector 27 4.1 Colombia Exploration and Production Sector, Country Snapshot 27 4.1.1 Colombia Exploration and Production Sector, Key Data 27 Table Of Contents Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (3) 4.1.2 Colombia Exploration and Production Sector, Natural Gas Assets Map 27 4.2 Colombia Exploration and Production Sector, Marketed Natural Gas Production 28 4.2.1 Colombia Exploration and Production Sector, Total Marketed Natural Gas-Historical Production 28 4.2.2 Colombia Exploration and Production Sector, Marketed Natural Gas Production by Type 29 4.2.3 Colombia Exploration and Production Sector, Marketed Natural Gas Production by Assets 30 4.2.4 Colombia Exploration and Production Sector, Marketed Equity Weighted Natural Gas Production by Company 31 4.2.5 Colombia Exploration and Production Sector, Market Share based on Marketed Equity Weighted Natural Gas Production 32 4.3 Colombia Exploration and Production Sector, Marketed Natural Gas Forecasts 33 4.3.1 Colombia Exploration and Production Sector, Marketed Natural Gas Forecasted Production 33 4.4 Colombia Exploration And Production Sector, Natural Gas Asset Details 34 4.4.1 Colombia Exploration And Production Sector, Active Natural Gas Asset Details 34 4.5 Colombia, Major Natural Gas Discoveries, 2005-2010 35 4.5.1 Colombia, Natural Gas Discoveries by Year, 2005-2010 35 4.5.2 Colombia, Natural Gas Discovery Details, 2005-2010 36 4.6 Colombia Exploration and Production Sector, Recent Discoveries 37 4.6.1 May 17, 2011: Ecopetrol Announces Oil Discovery At Mito-1 Well In Meta Province, Colombia 37 4.6.2 May 09, 2011: Suroco Energy Encounters Oil At Cohembi-3 Well In Colombia 37 4.6.3 Apr 25, 2011: Ecopetrol Finds Hydrocarbons At Nunda-1 Well In Huila Province 39 4.6.4 Feb 28, 2011: Pacific Rubiales Energy Discovers Gas At Apamate-1X Well In La Creciente Block, Colombia 40 4.6.5 Feb 07, 2011: Ecopetrol Discovers Hydrocarbons At Tinkhana-1 Well In Colombia 41 4.7 Colombia Exploration and Production Sector, Drilling and Production Updates 41 4.7.1 May 11, 2011: InterOil Produces 5,813bopd In April 2011 41 4.7.2 May 09, 2011: Brownstone Energy Puts Canaguay #1 Well On Production In Colombia 42 4.7.3 Apr 29, 2011: Petroamerica Oil Commences Drilling At Las Maracas-2 Exploration Well In Llanos Basin, Colombia 43 4.7.4 Apr 28, 2011: Canacol Energy Provides Production Update 43 4.7.5 Apr 14, 2011: PetroLatina Energy Provides Q1 2011 Production Update 43 5 Colombia Pipeline Sector 45 5.1 Colombia Pipeline Sector, Key Data 45 5.2 Colombia Pipeline Sector, An Overview 45 5.3 Colombia Pipeline Sector, Comparison of Key Natural Gas Pipeline Companies 45 5.4 Colombia Pipeline Sector, Natural Gas Pipelines 47 6 Profile of ECOPETROL S.A. 48 Table Of Contents Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (4) 6.1 ECOPETROL S.A., Key Information 48 6.2 ECOPETROL S.A., Company Overview 48 6.3 ECOPETROL S.A., Business Description 48 6.3.1 Business Overview 48 6.3.2 Marketing and Supply 49 6.3.3 Refining and Petrochemicals 49 6.3.4 Transportation 50 6.4 ECOPETROL S.A., SWOT Analysis 50 6.4.1 Overview 50 6.4.2 ECOPETROL S.A. Strengths 51 6.4.3 ECOPETROL S.A. Weaknesses 52 6.4.4 ECOPETROL S.A. Opportunities 53 6.4.5 ECOPETROL S.A. Threats 54 7 Profile of Occidental Petroleum Corporation 56 7.1 Occidental Petroleum Corporation, Key Information 56 7.2 Occidental Petroleum Corporation, Company Overview 56 7.3 Occidental Petroleum Corporation, Business Description 56 7.3.1 Business Overview 56 7.3.2 Chemical 57 7.3.3 Midstream, Marketing and Other 58 7.3.4 Oil and Gas 58 7.4 Occidental Petrol eum Corporation, SWOT Analysis 60 7.4.1 Overview 60 7.4.2 Occidental Petroleum Corporation Strengths 60 7.4.3 Occidental Petroleum Corporation Weaknesses 61 7.4.4 Occidental Petroleum Corporation Opportunities 62 7.4.5 Occidental Petroleum Corporation Threats 63 8 Profile of Petroleo Brasileiro S.A. 64 8.1 Petroleo Brasileiro S.A., Key Information 64 8.2 Petroleo Brasileiro S.A., Company Overview 64 8.3 Petroleo Brasileiro S.A., Business Descri ption 64 8.3.1 Business Overview 64 8.3.2 Distribution 65 8.3.3 Gas and Power 65 8.3.4 International 66 8.3.5 Refining, Transportation and Marketing 67 Table Of Contents Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (5) 8.4 Petroleo Brasileiro S.A., SWOT Analysis 68 8.4.1 Overview 68 8.4.2 Petroleo Brasileiro S.A. Strengths 69 8.4.3 Petroleo Brasileiro S.A. Weaknesses 70 8.4.4 Petroleo Brasileiro S.A. Opportunities 70 8.4.5 Petroleo Brasileiro S.A. Threats 72 9 Financial Deals Landscape 74 9.1 Detailed Deal Summary 74 9.1.1 Acquisition 74 9.1.2 Equity Offerings 81 9.1.3 Debt Offerings 81 9.1.4 Partnerships 82 9.1.5 Asset Transactions 83 10 Recent Developments 95 10.1 License Awards 95 10.1.1 May 18, 2011: InterOil Signs Two New Exploration Blocks In Colombia 95 10.1.2 Apr 20, 2011: Vast Exploration Wins Oil And Gas Block In Colombia 95 10.1.3 Apr 08, 2011: Ecopetrol Signs Eight E&P Contracts Resulting From Colombia Round 2010 96 10.2 Strategy and Business Expansion 96 10.2.1 Mar 31, 2011: Ecopetrol And Pacific Rubiales Energy Announce Agreement To Start Pilot Project Of Star Technology 96 10.2.2 Mar 07, 2011: Petroamerica Oil Withdraws From Two Colombian Blocks 97 10.3 Other Significant Developments 98 10.3.1 May 15, 2011: Ecopetrol To Modernize Barrancabermeja Refinery In Colombia 98 10.3.2 May 11, 2011: InterOil Re-Completes Altair-1 Well In Llanos Basin, Colombia 98 10.3.3 May 09, 2011: Petroamerica Oil Announces Balay-2 ST1 Well Test Results Confirming Significance Of Balay Discovery, Llanos Basin, Colombia 98 10.3.4 Apr 19, 2011: Global Energy Plans New 3D Seismic Acquisition At Bolivar Association Contract Area 99 10.3.5 Apr 18, 2011: Loon Energy Updates On Tuqueque-1X Well At Buganviles Block In Upper Magdalena Valley Basin, Colombia 99 10.3.6 Apr 15, 2011: Parex Resources Provides Update On Colombia Operations 100 10.3.7 Apr 13, 2011: Petro Vista Energy To Test Morichito-5b Exploration/Appraisal Well In Llanos Basin, Colombia 102 11 Appendix 103 11.1 Abbreviations 103 11.2 Methodology 103 11.2.1 Coverage 103 Table Of Contents Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (6) 11.2.2 Secondary Research 104 11.2.3 Primary Research 104 11.2.4 Expert Panel Validation 104 11.3 Contact Us 105 11.4 Disclaimer 105 Table Of Contents Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (7) 1.1 List of Tables Table 1: Colombia, Historic and Forecast Production and Consumption of Natural Gas, Billion Cubic Feet, 2000-2020 11 Table 2: Colombia, Historic Reserves of Natural Gas, Billion Cubic Feet, 2000-2010 13 Table 3: South and Central America, Investment Benchmarking, Overall Country Rankings, May 2011 15 Table 4: South and Central America, Investment Benchmarking, Upstream Fiscal Attractiveness, May 2011 16 Table 5: South and Central America, Investment Benchmarking, Gas Sector Performance, May 2011 18 Table 6: South and Central America, Investment Benchmarking, Economic Performance, May 2011 22 Table 7: South and Central America, Country Standings, Economic Performance, May 2011 23 Table 8: South and Central America, Investment Benchmarking, Socio-Political Performance, May 2011 24 Table 9: South and Central America, Country Standings, Socio-Political Performance, May 2011 25 Table 10: Colombia, Natural Gas Key Statistics, 2010 27 Table 11: Colombia, Total Marketed Natural Gas Production (MMcf), 2003- 2010 28 Table 12: Colombia, Marketed Natural Gas Production by Type (MMcf), 2003- 2010 29 Table 13: Colombia, Marketed Natural Gas Production (MMcf), by Assets, 2003- 2010 30 Table 14: Colombia, Marketed Equity Weighted Natural Gas Production (MMcf), by Company, 2003- 2010 31 Table 15: Colombia, Market Share (%) of Key Companies based on Marketed Equity Weighted Natural Gas Production, 2003-2010 32 Table 16: Colombia, Marketed Natural Gas Production (MMcf), Forecast by Assets, 2011-2015 33 Table 17: Colombia, Active Gas Field Asset Details 34 Table 18: Colombia, Number of Gas Discoveries, 2005-2010 35 Table 19: Colombia, Natural Gas Discovery Details, 2005-2010 36 Table 20: Colombia, Pipeline Key Statistics, May 2011 45 Table 21: Colombia, Natural Gas Pipeline Length by Company (Km), May 2011 45 Table 22: Colombia, Natural Gas Pipelines, May 2011 47 Table 23: ECOPETROL S.A., Key Facts 48 Table 24: ECOPETROL S.A., SWOT Analysis 51 Table 25: Occidental Petroleum Corporation, Key Facts 56 Table 26: Occidental Petroleum Corporation, SWOT Analysis 60 Table 27: Petroleo Brasileiro S.A., Key Facts 64 Table 28: Petroleo Brasileiro S.A., SWOT Analysis 68 Table 29: West Isle Energy To Acquire Reto Petroleum In Reverse Takeover Transaction 74 Table 30: Alange Energy Acquires J aguar E&P CPR Consultants 74 Table 31: AEI Services To Sell Its Interest In Operating Companies 76 Table 32: Houston American Completes The Sale Of Hupecol Llanos and Hupecol Dorotea 78 Table 33: Talisman Energy And Ecopetrol Acquires BP Exploration Company Colombia 79 Table 34: Ecopetrol Plans To Issue Shares 81 Table 35: Ecopetrol Announces Public Offering Of Bonds For $18,094 Million 81 Table 36: Ecopetrol To Form J oint Venture With Six Partners 82 Table 37: Parex Resources To Acquire Remaining 50% Interest In Four Blocks In Llanos Basin 83 Table 38: Sagres Energy Acquires 90% Participating Interest In Llanos 11 Block 84 Table 39: Sagres Energy Acquires 90% Participating Interest In Putumayo 3 Block 85 Table 40: Reto Petroleum To Acquire 30% Undivided Working Interest In Fenix Exploration And Production Contract86 Table Of Contents Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (8) Table 41: Repsol To Acquire 50% Stake In Two Caribbean Offshore Blocks From Ecopetrol 87 Table 42: Bolivar Energy To Acquire Additional 17.5% Interest In LLA-24 Block In Colombia 88 Table 43: Azabache Energy To Acquire 30% Working Interest In Antares Block From Petromar 89 Table 44: Assam Company To Acquire 70% Interest In Colombian Oil Block 90 Table 45: Ecopetrol To Acquire 100% Stake In Cano Sur Block From Shell Exploration 91 Table 46: Life Sciences To Acquire 35% Interest In Exploration Block, Colombia 92 Table 47: Bolivar Energy To Acquire 32.5% Interest In Arrendajo Block, Colombia 93 Table 48: Repsol Exploracion To Acquire 30% Stake In Tayrona Block 94 Table Of Contents Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (9) 1.2 List of Figures Figure 1: Colombia, Energy Consumption break-up (%), 2010 10 Figure 2: Colombia, Natural Gas Production And Consumption, Billion Cubic Feet, 2000-2020 12 Figure 3: Colombia, Natural Gas Reserves, Billion Cubic Feet, 2000-2010 14 Figure 4: South and Central America, Country Standings, Upstream Fiscal Attractiveness, May 2011 17 Figure 5: South and Central America, Country Standings, Gas Sector Performance, by Reserves-Exploration & Production, May 2011 19 Figure 6: South and Central America, Country Standings, Gas Sector Performance, by Production & Consumption, May 2011 20 Figure 7: South and Central America, Country Standings, Number of Exploration Blocks Awarded, May 2011 21 Figure 8: South and Central America, Country Standings, Economic Performance, May 2011 23 Figure 9: South and Central America, Country Standings, Socio-Political Performance, May 2011 25 Figure 10: Colombia, Natural Gas Assets Map, May 2011 27 Figure 11: Colombia, Total Marketed Natural Gas Production (MMcf), 2003- 2010 28 Figure 12: Colombia, Marketed Natural Gas Production by Type (MMcf), 2003- 2010 29 Figure 13: Colombia, Marketed Equity Weighted Natural Gas Production (MMcf), by Key Companies, 2003-2010 31 Figure 14: Colombia, Market Share (%) of Key Companies based on Marketed Equity Weighted Natural Gas Production, 2010 32 Figure 15: Colombia, Number of Gas Discoveries, 2005- 2010 35 Figure 16: Colombia, Natural Gas Pipeline Length by Company (Km), May 2011 46 Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (10) 2 Col ombi a Energy Sector 2.1 Colombia Energy Sector, Market Overview Colombia has significant energy resources and potential for future development. The country is a net exporter of petroleum and an important producer of high quality coal. Colombia relies on hydroelectricity for bulk of its electricity needs, thus, enabling the country to export the produced coal. The country is one of the largest coal exporters in the world. Oil is the largest source of primary energy in Colombia accounting for about 50.4% of the energy consumption respectively during 2010. Natural gas accounts for about 24.8% while coal accounts for nearly 13.6% of the energy consumption in the country. Figure below details the energy consumption break-up for Colombia during 2010. Figure 1: Colombia, Energy Consumption break-up (%), 2010 Oi l 50.4% Gas 24.8% Electri ci ty 11.2% Coal 13.6% Source: GlobalData / EIA 2.2 Colombia Energy Sector, Natural Gas 2.2.1 Colombia Natural Gas, Overview Colombia’s natural gas reserves stood at 3,955 billion cubic feet during 2010. The country has the seventh largest reserves in Latin America. During 2010, Colombia’s natural gas production was 397 billion cubic feet and consumption was 324.8 billion cubic feet. Colombian government has developed a mass natural gas consumption plan (Plan de Masificación de Gas Natural) to increase natural gas consumption in the country. The government wants to establish Colombia as a “gas hub” in South America. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (11) 2.2.2 Colombia Natural Gas, Supply and Demand Balance 2.2.2.1 Colombia Natural Gas, Production and Consumption Natural gas production in Colombia has increased from 211.0 billion cubic feet in 2000 to 397 billion cubic feet in 2010, at an AAGR of 6.3%. During 2010-2020, natural gas production in Colombia is expected to increase at an AAGR 4.1%. Natural gas consumption in Colombia increased from 2008.6 billion cubic feet in 2000 to 324.8 billion cubic feet in 2010, at an AAGR of 4.4%. During 2010-2020, natural gas consumption in Colombia will increase at an AAGR of 3.8%. Table below details historic and forecast figures for natural gas production and consumption in Colombia from 2000 to 2020. Table 1: Colombia, Historic and Forecast Production and Consumption of Natural Gas, Billion Cubic Feet, 2000-2020 Year Producti on (Billi on Cubi c Feet) Consumption (Bi lli on Cubi c Feet) 2000 211.0 208.6 2001 219.1 214.6 2002 220.2 217.0 2003 216.8 212.8 2004 226.2 221.9 2005 242.1 236.5 2006 248.0 248.2 2007 266.0 262.8 2008 319.0 266.2 2009 371.0 307.4 2010 397.0 324.8 2011 411.6 343.8 2012 435.0 357.6 2013 471.4 370.2 2014 499.9 390.0 2015 521.2 406.0 2016 543.6 415.4 2017 561.3 436.3 2018 574.4 450.2 2019 590.0 461.2 2020 600.2 474.9 Source: GlobalData / EIA Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (12) Figure below details the natural gas production and consumption in Colombia from 2000 to 2020. Figure 2: Colombia, Natural Gas Production And Consumption, Billion Cubic Feet, 2000-2020 0 100 200 300 400 500 600 700 2 0 0 0 2 0 0 1 2 0 0 2 2 0 0 3 2 0 0 4 2 0 0 5 2 0 0 6 2 0 0 7 2 0 0 8 2 0 0 9 2 0 1 0 2 0 1 1 2 0 1 2 2 0 1 3 2 0 1 4 2 0 1 5 2 0 1 6 2 0 1 7 2 0 1 8 2 0 1 9 2 0 2 0 N a t u r a l G a s P r o d u c t i o n ( B i l l i o n C u b i c F e e t ) 0 50 100 150 200 250 300 350 400 450 500 N a t u r a l G a s P r o d u c t i o n ( B i l l i o n C u b i c F e e t ) Production Consumption Source: GlobalData / EIA Natural gas consumption and production of Colombia increased till 2010. During the forecast period, the production and consumption are expected to show a steadily increasing trend. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (13) 2.2.2.2 Colombia Natural Gas, Reserves Natural gas reserves in Colombia decreased from 6,937.0 billion cubic feet in 2000 to 3,955.0 billion cubic feet in 2010, at a negative AAGR of 5.6%. Table below details historic figures for natural gas reserves in Colombia from 2000 to 2010. Table 2: Col ombi a, Hi stori c Reserves of Natural Gas, Bi ll i on Cubic Feet, 2000-2010 Year Reserves (Bill ion Cubic Feet) 2000 6,937.0 2001 6,937.0 2002 4,322.0 2003 4,507.0 2004 4,507.0 2005 4,040.0 2006 4,040.0 2007 3,996.0 2008 4,342.0 2009 3,739.0 2010 3,955.0 Source: GlobalData / EIA Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (14) Figure below details the natural gas reserves in Colombia from 2000 to 2010. Figure 3: Colombia, Natural Gas Reserves, Billion Cubic Feet, 2000-2010 0 1,000 2,000 3,000 4,000 5,000 6,000 7,000 8,000 2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 N a t u r a l G a s R e s e r v e s ( B i l l i o n C u b i c F e e t ) Source: GlobalData / EIA Colombia’s natural gas reserves decreased in the last decade. 2.2.3 Colombia Natural Gas, Regulatory Structure Commission of Regulation of Energy and Gas (CREG) regulates the natural gas sector in the country. It also defines basic framework for activates associated with transportation, distribution and commercialization of natural gas. 2.2.4 Colombia Natural Gas, Infrastructure Colombia has a natural gas reserve of 3,955.0 billion cubic feet in 2010. Colombia has natural gas reserves spread across 18 basins, seven of which have active production. The majority of the reserves are located in Llanos basin while the majority of the production comes from Guajira basin. Chevron is the largest natural gas producer in Colombia. 2.2.4.1 Colombia Natural Gas, Exploration and Production  Major fields: GUAJ IRA, Cusiana and La Creciente  Major players: Ecopetrol, Chevron Corporation and Pacific Stratus Energy Ltd. 2.2.4.2 Colombia Natural Gas, Pipelines  Major pipelines: Centro- Oriente Pipeline (1,005.0 Km), Promigas Colombia Gas Pipeline (673.3 Km) and Ballena- Barrancabermeja Pipeline (578.8 Km).  Major Companies: Promigas S.A. E.S.P, TGI S.A ESP and Transgas de Occidente S.A. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (15) 3 Col ombi a Gas Upstream Investment Environment Benchmarking 3.1 Introduction Colombia Gas Upstream Investment Benchmarking compares the attractiveness of upstream investment environment in the gas sector of Colombia vis-à-vis other countries in South and Central America. Four major pillars have been used to analyze the upstream environment attractiveness. These are fiscal attractiveness, upstream industry performance, economic performance of the country and socio-political performance. Each of these pillars are sub-divided into indicators and sub-indicators based on which the country’s overall score is calculated. 3.2 The Overall Ranking Colombia scored fourth among the South and Central American countries in terms of upstream investment environment attractiveness in the gas sector. On an overall basis the rankings of various countries in South and Central America are as follows. Table 3: South and Central America, Investment Benchmarking, Overall Country Rankings, May 2011 Country Upstream Fiscal Attract iveness O & G Sector Performance Economic Performance Soci o-Politi cal Performance Total Score Rank Brazil 9.7 6.6 7.9 8.6 8.3 1 Argentina 9.3 2.9 3.0 8.1 6.0 2 Venezuela 6.4 6.0 2.9 7.9 5.7 3 Colombi a 9.5 1.2 2.9 8.5 5.6 4 Peru 10.0 0.5 2.5 7.8 5.4 5 Ecuador 7.9 0.8 1.2 7.2 4.4 6 Guatemala 8.1 0.1 1.2 7.7 4.3 7 Suriname 8.1 0.0 1.2 7.4 4.2 8 Trinidad and Tobago 6.6 0.8 1.8 9.9 4.2 9 Cuba 7.4 0.4 1.2 6.8 4.0 10 Source: GlobalData Colombia has good upstream fiscal attractiveness, the country scored well in economic performance and socio-political performance indices among the South and Central American countries. The country has a poor score in gas sector performance. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (16) 3.3 Upstream Fiscal Attractiveness Upstream fiscal attractiveness index draws the comparison related to gas fiscal regimes between the countries of South and Central America. The major indicators contributing to this pillar are the government take, state participation, fiscal flexibility, the domestic market obligation and the risk reward dynamics. The following sections envisage these indicators in detail. Colombia is ranked third among South and Central American countries in the upstream fiscal attractiveness index; it scored 9.5 points. Colombia is one of the region’s averagely exploited regions for gas. In order to attract further investment, the upstream fiscal attractiveness of Colombia has to be further improved. Table 4: South and Central America, Investment Benchmarking, Upstream Fiscal Attractiveness, May 2011 Country Max. Govt Take Index Fiscal Flexibility Max. Stat e Parti cipation Max. Domestic Market Obligation Total Score Pi ll ar Ranking Brazil 9.4 10.0 10.0 10.0 9.7 2 Argentina 8.7 2.0 10.0 10.0 9.3 4 Venezuela 4.3 3.3 8.5 7.5 6.4 10 Colombia 9.0 7.5 10.0 10.0 9.5 3 Peru 10.0 3.3 10.0 10.0 10.0 1 Ecuador 5.7 6.7 10.0 10.0 7.9 7 Guatemala 6.2 0.0 10.0 10.0 8.1 6 Suriname 6.2 0.0 10.0 10.0 8.1 5 Trinidad and Tobago 3.2 3.3 10.0 10.0 6.6 9 Cuba 4.7 0.0 10.0 10.0 7.4 8 Source: GlobalData Colombia scored well in the maximum government take index among the countries of the South and Central American region. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (17) Figure 4: South and Central America, Country Standings, Upstream Fiscal Attractiveness, May 2011 Source: GlobalData 3.3.1 Maximum Government Take Index Colombia is ranked third in maximum government take index. In Colombia, the government take of 43.2% is below the region’s average of 67.1% but above the world’s average of 50%. A downward trend of government take will make the sector more attractive and invite better technologies. 3.3.2 Maximum State Participation Index Except Venezuela, no country in the region has lower state participation. Lower state participation would be an incentive to the investor or operator. However, at times state participation can be a relief to the operator exploring in the deep offshore, as the government also shares the risk. 3.3.3 Domestic Market Obligation Index Except Venezuela, no country in the region has domestic market obligation. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (18) 3.4 Gas Sector Performance Gas sector performance index draws the comparison related to upstream performance between the countries of South and Central America. The major contributors to this pillar score are the scores derived after analyzing the exploration activity, gas reserves, production and consumption from respective regimes of South and Central America. Colombia ranks fourth among South and Central American countries in gas sector performance index. Table 5: South and Central America, Investment Benchmarking, Gas Sector Performance, May 2011 Country Expl orat ion Activity Crude Producti on Reserves Consumption Total Score Pi ll ar Ranking Brazil 10.0 5.3 1.2 10.0 6.6 1 Argentina 2.9 6.1 0.4 2.3 2.9 3 Venezuela 0.3 10.0 10.0 3.7 6.0 2 Colombi a 1.0 2.0 0.2 1.5 1.2 4 Peru 0.5 0.5 0.2 0.9 0.5 7 Ecuador 0.4 1.4 0.5 1.0 0.8 5 Guatemala 0.2 0.0 0.0 0.4 0.1 9 Suriname 0.1 0.0 0.0 0.1 0.0 10 Trinidad and Tobago 0.5 2.2 0.3 0.2 0.8 6 Cuba 0.3 0.2 0.0 0.9 0.4 8 Source: GlobalData Colombia is one of the averagely explored areas in South and Central America. The government has been promoting policies towards expanding exploration activity in order to increase the recoverable reserves and the levels of production. The country has significant levels of production of natural gas in the region. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (19) Figure 5: South and Central America, Country Standings, Gas Sector Performance, by Reserves- Exploration & Production, May 2011 Suriname Venezuela Brazil Colombia Argentina Trinidad and Tobago Ecuador Guatemala Peru Cuba -2 0 2 4 6 8 10 12 -2 0 2 4 6 8 10 12 Reserves Index E x p l o r a t i o n A c t i v i t y I n d e x *Size Of The Bubble Indicates Production Index Source: GlobalData The above figure highlights the upstream gas sector performance of South and Central American countries. Colombia with significant exploration activity and substantial reserves has significant levels of production. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (20) The following figure compares the countries’ production against their consumption. Figure 6: South and Central America, Country Standings, Gas Sector Performance, by Production & Consumption, May 2011 Brazil Colombia Trinidad and Tobago Cuba Peru Suriname Venezuela Argentina Guatemala Ecuador -2 0 2 4 6 8 10 12 -2 0 2 4 6 8 10 12 Crude Production Index C o n s u m p t i o n I n d e x Source: GlobalData 3.4.1 Exploration Activity Colombia has the third highest exploration activity among the South and Central American countries. It accounted for 11.5% of the total new exploration in South and Central America. During 2010, the country awarded 65 of the total 564 new exploration blocks awarded in South and Central America. Exploration activity in Colombia has shown a highly increasing trend in the last few years. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (21) The following figure compares the exploration activity across various countries in the South and Central American region. Figure 7: South and Central America, Country Standings, Number of Exploration Blocks Awarded, May 2011 0 200 400 600 800 1000 1200 Brazil Argentina Venezuela Colombia Peru Ecuador Guatemala Trinidad and Tobago Suriname N u m b e r O f E x p l o r a t i o n B l o c k s 2006 2007 2008 2009 2010 Source: GlobalData 3.4.2 Gas Production Colombia is ranked fifth in the production of natural gas in South and Central American region. In recent years the country has shown a downward trend in gas production. Natural gas production in Colombia has increased from 211.0 billion cubic feet in 2000 to 397 billion cubic feet in 2010, at an AAGR of 6.3%. During 2010-2020, natural gas production in Colombia is expected to increase at an AAGR 4.1%. 3.4.3 Gas Reserves Colombia is ranked seventh in South and Central American region in gas reserves. Natural gas reserves in Colombia decreased from 6,937.0 billion cubic feet in 2000 to 3,955.0 billion cubic feet in 2010, at a negative AAGR of 5.6%. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (22) 3.4.4 Gas Consumption Colombia is ranked fourth in the consumption index. Natural gas consumption in Colombia increased from 2008.6 billion cubic feet in 2000 to 324.8 billion cubic feet in 2010, at an AAGR of 4.4%. During 2010-2020, natural gas consumption in Colombia will increase at an AAGR of 3.8%. 3.5 Economic Performance Economic performance index draws the comparison related to economic performance between the countries of South and Central America. The major contributors to this pillar score are the scores derived after analyzing the GDP growth, FDI confidence and balance of trade from respective regimes of South and Central America. Colombia ranked third among South and Central American countries in the economic performance index. The economy of Colombia is export-oriented mostly consisting of agriculture and benefits from its diverse industries and rich natural resources. Colombia is one of the top performers in FDI confidence and balance of trade indices. Table 6: South and Central America, Investment Benchmarking, Economic Performance, May 2011 Country GDP Growth Index FDI Confidence Index Trade Index Total Point s Pi ll ar Ranking Brazil 10.0 10.0 1.4 7.9 1 Argentina 3.1 2.1 4.6 3.0 2 Venezuela 1.5 0.0 10.0 2.9 4 Colombi a 1.3 3.3 3.7 2.9 3 Peru 1.7 2.5 3.4 2.5 5 Ecuador 0.3 1.0 2.7 1.2 7 Guatemala 0.3 1.1 2.3 1.2 9 Trinidad and Tobago 0.1 1.1 4.8 1.8 6 Suriname 0.0 0.9 3.1 1.2 8 Cuba 0.5 0.9 2.5 1.2 10 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (23) Table 7: South and Central America, Country Standings, Economic Performance, May 2011 Country GDP Growth Index FDI Confidence Index Producti on Index Brazil 10.0 10.0 5.3 Argentina 3.1 2.1 6.1 Venezuela 1.5 0.0 10.0 Colombi a 1.3 3.3 2.0 Peru 1.7 2.5 0.5 Ecuador 0.3 1.0 1.4 Guatemala 0.3 1.1 0.0 Trinidad and Tobago 0.1 1.1 2.2 Suriname 0.0 0.9 0.0 Cuba 0.5 0.9 0.2 Source: GlobalData Figure 8: South and Central America, Country Standings, Economic Performance, May 2011 Ecuador Brazil Venezuela Argentina Trinidad and Tobago Colombia Cuba Guatemala Peru Suriname -2 0 2 4 6 8 10 12 -2 0 2 4 6 8 10 12 GDP Growth Index F D I C o n f i d e n c e I n d e x *Size Of The Bubble Indicates Production Source: GlobalData From the above graph, Colombia has high production levels of gas and performs well in FDI confidence. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (24) 3.5.1 GDP Growth Index Colombia ranked fifth among the South and Central American countries in GDP growth index. The GDP of the country has been slowly increasing in the last few years. The GDP of the country has increased from $100.4 billion in 2000 to $283.1 billion in 2010, at an AAGR of 10.4%. 3.5.2 FDI Confidence Index Colombia ranked second in FDI confidence index. FDI inflows into Colombia have shown an increasing trend in the last few years. FDI inflows into Colombia have increased from $2.4 billion in 2000 to $7.2 billion in 2009, at an AAGR of 12.2%. FDI stocks in the country have shown an increasing trend. FDI stocks in Colombia have increased from $11.2 billion in 2000 to $74.1 billion in 2010, at an AAGR of 21.0%. M&A sales deals have shown an increasing trend in the last few years. 3.6 Socio-Political Performance Socio-Political performance index draws the comparison related to social and political situation and performance between the countries of South and Central America. The major contributors to this pillar score are the scores derived after analyzing the democracy, corruption, political stability, regulatory quality and governance levels from respective countries of South and Central America. Colombia stands at third position in socio-political performance. The political and social situation in Colombia is averagely matured as most of the countries in the South and Central American region. Colombia is characterized by high corruption, positive and fair election policy, average regulatory quality, government’s effectiveness in executing policies and average levels of voice and accountability. Table 8: South and Central America, Investment Benchmarking, Socio-Political Performance, May 2011 Country Democracy Index Governance Index Total Point s Pi ll ar Ranking Brazil 10.0 8.4 8.6 2 Argentina 8.9 7.9 8.1 4 Venezuela 6.1 8.2 7.9 5 Colombi a 8.6 8.5 8.5 3 Peru 7.9 7.8 7.8 6 Ecuador 6.6 7.4 7.2 9 Guatemala 7.3 7.8 7.7 7 Trinidad and Tobago 9.5 10.0 9.9 1 Suriname 8.7 7.1 7.4 8 Cuba 4.0 7.3 6.8 10 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (25) Table 9: South and Central America, Country Standings, Socio-Political Performance, May 2011 Country Expl orat ion Growth Index FDI Confidence Index Governance Index Brazil 10.0 10.0 8.4 Argentina 2.9 2.1 7.9 Venezuela 0.3 0.0 8.2 Colombi a 1.0 3.3 8.5 Peru 0.5 2.5 7.8 Ecuador 0.4 1.0 7.4 Guatemala 0.2 1.1 7.8 Trinidad and Tobago 0.5 1.1 10.0 Suriname 0.1 0.9 7.1 Cuba 0.3 0.9 7.3 Source: GlobalData Figure 9: South and Central America, Country Standings, Socio-Political Performance, May 2011 Brazil Peru Colombia Suriname Cuba Guatemala Argentina Ecuador Venezuela Trinidad and Tobago -2 0 2 4 6 8 10 12 -2 0 2 4 6 8 10 12 Expl oration Growth Index F D I C o n f i d e n c e i n c e x *Size Of The Bubble Indicates Goverance Index Source: GlobalData From the above figure, almost all the countries of the region have the same level of governance. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (26) 3.6.1 Democracy Index Most of the South and Central American countries score averagely in the world democracy index. Colombia ranks fifth in the democracy index among the South and Central American countries. Colombia which is considered as a “Flawed Democracy” is characterized by good electoral procedures, high provision for basic human rights. 3.6.2 Governance Index Colombia ranked second in the South and Central American region in terms of governance. Colombia has high levels of corruption and low political stability. Average voice and accountability and rule of law show the effectiveness of the governance in the country. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (27) 4 Col ombi a Expl orati on and Producti on Sector 4.1 Colombia Exploration and Production Sector, Country Snapshot 4.1.1 Colombia Exploration and Production Sector, Key Data Table 10: Colombia, Natural Gas Key Statistics, 2010 Population 44,725,543 Capital Bogota GDP Per Capita ($) 9,800 Natural Gas Production (MMcf) 397,000.0 Source: GlobalData 4.1.2 Colombia Exploration and Production Sector, Natural Gas Assets Map Figure 10: Colombia, Natural Gas Assets Map, May 2011 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (28) 4.2 Colombia Exploration and Production Sector, Marketed Natural Gas Production 4.2.1 Colombia Exploration and Production Sector, Total Marketed Natural Gas-Historical Production Figure 11: Colombia, Total Marketed Natural Gas Production (MMcf), 2003- 2010 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 2003 2004 2005 2006 2007 2008 2009 2010 N a t u r a l G a s P r o d u c t i o n ( M M c f ) Source: GlobalData Table 11: Colombia, Total Marketed Natural Gas Production (MMcf), 2003- 2010 2003 2004 2005 2006 2007 2008 2009 2010 Natural Gas Production 216,843.0 226,170.5 242,115.6 248,000.0 266,000.0 319,000.0 371,000.0 397,000.0 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (29) 4.2.2 Colombia Exploration and Production Sector, Marketed Natural Gas Production by Type Figure 12: Colombia, Marketed Natural Gas Production by Type (MMcf), 2003- 2010 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 2003 2004 2005 2006 2007 2008 2009 2010 N a t u r a l G a s P r o d u c t i o n ( M M c f ) Onshore Production Offshore Production Source: GlobalData Table 12: Colombia, Marketed Natural Gas Production by Type (MMcf), 2003- 2010 2003 2004 2005 2006 2007 2008 2009 2010 Onshore Production 44,869.9 55,659.5 72,294.7 140,550.1 148,694.3 185,938.3 216,248.0 231,402.9 Offshore Production 171,973.1 170,511.1 169,820.9 107,450.0 117,305.7 133,061.7 154,752.0 165,597.2 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (30) 4.2.3 Colombia Exploration and Production Sector, Marketed Natural Gas Production by Assets Table 13: Colombia, Marketed Natural Gas Production (MMcf), by Assets, 2003- 2010 Asset Name 2003 2004 2005 2006 2007 2008 2009 2010 GUAJ IRA 171,973.1 170,511.1 169,820.9 107,450.0 117,305.7 133,061.7 154,752.0 165,597.2 Other fields 75,977.0 78,419.4 92,664.4 107,769.5 147,968.1 Cusiana 17,924.5 29,021.6 44,669.2 42,248.1 48,102.5 54,563.4 63,457.8 35,259.0 La Creciente 12,030.0 13,991.0 14,971.5 PAUTO - FLOREÑA 1,056.4 3,105.6 3,253.0 4,151.0 4,708.5 5,476.0 5,859.8 CENTRO ORIENTE (EL CENTRO) 2,196.0 2,156.7 2,263.1 3,307.5 3,567.9 4,047.2 4,706.9 5,036.8 Payoa 5,256.8 5,576.6 5,973.4 2,627.0 3,074.0 3,486.9 4,055.3 4,339.5 Bonanza 3,999.6 3,948.0 3,968.3 3,670.8 2,718.7 3,083.8 3,586.5 3,837.9 Apiay 2,809.8 3,122.7 3,060.1 3,057.5 2,686.4 3,047.2 3,543.9 3,792.3 Cantagallo 656.0 691.2 1,000.0 1,317.2 1,235.6 1,401.6 1,630.1 1,744.3 Ortega 1,380.0 1,605.0 1,717.4 Montanuelo 2,649.4 2,604.3 2,560.8 1,526.4 1,179.7 1,338.1 1,556.2 1,665.3 Rancho Hermoso 263.0 885.8 941.9 1,068.4 1,242.5 1,329.6 Guepaje 2,434.3 1,843.9 1,593.7 755.7 836.9 949.3 1,104.1 1,181.4 Llanito 355.5 405.6 391.3 494.7 700.9 795.1 924.7 989.5 OPON 2,752.6 1,943.4 2,061.1 986.7 515.6 584.8 680.2 727.8 TOQUI-TOQUI 106.2 221.9 335.1 380.1 442.0 473.0 CERRITO1 (1) 393.1 590.4 385.2 150.0 174.5 186.7 GAM (DISTRITO ALTO MAGDALENA) 58.2 117.1 131.5 129.4 146.7 170.7 182.6 Rio Ceibas 3,167.0 2,436.0 657.5 82.7 96.1 109.0 126.8 135.6 Abanico 3.4 3.9 4.5 4.8 EL PIÑAL 42.0 72.0 GAS CASANARE 169.2 162.3 153.4 6.3 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (31) 4.2.4 Colombia Exploration and Production Sector, Marketed Equity Weighted Natural Gas Production by Company Table 14: Colombia, Marketed Equity Weighted Natural Gas Production (MMcf), by Company, 2003- 2010 Company Name 2003 2004 2005 2006 2007 2008 2009 2010 Ecopetrol 124,225.5 129,705.8 138,906.8 101,393.8 109,851.7 125,034.4 145,281.0 139,139.5 Chevron Corporation 73,948.4 73,319.8 73,023.0 46,203.5 50,441.4 57,216.5 66,543.4 71,206.8 Pacific Stratus Energy Ltd 863.6 664.3 179.3 22.6 26.2 12,059.7 14,025.6 15,008.5 EQUION ENERGIA LIMITED 0.0 0.0 0.0 0.0 0.0 0.0 0.0 10,930.3 Total S.A. 3,405.7 5,514.1 8,487.2 8,027.1 9,139.5 10,367.1 12,057.0 6,699.2 Petro Santander, Inc 3,679.8 3,903.6 4,181.4 1,838.9 2,151.8 2,440.8 2,838.7 3,037.6 Rancho Hermoso S.A. 0.0 0.0 0.0 0.0 0.0 0.0 1,242.5 1,329.6 COPP 2,752.6 1,943.4 2,061.1 986.7 515.6 584.8 680.2 727.8 Solana Petroleum Corporation 920.2 697.0 602.4 285.7 316.4 358.8 417.3 446.6 Interoil Exploration And Production 0.0 0.0 0.0 111.0 167.5 190.0 221.0 236.5 Others 7,047.2 10,422.6 14,674.5 89,130.8 93,389.9 110,747.8 127,693.3 148,237.6 Source: GlobalData Figure 13: Colombia, Marketed Equity Weighted Natural Gas Production (MMcf), by Key Companies, 2003-2010 0 50,000 100,000 150,000 200,000 250,000 300,000 350,000 400,000 450,000 2003 2004 2005 2006 2007 2008 2009 2010 N a t u r a l G a s P r o d u c t i o n ( M M c f ) Ecopetrol Chevron Corporation Pacific Stratus Energy Ltd EQUION ENERGIA LIMITED Total S.A. Others Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (32) 4.2.5 Colombia Exploration and Production Sector, Market Share based on Marketed Equity Weighted Natural Gas Production Table 15: Colombia, Market Share (%) of Key Companies based on Marketed Equity Weighted Natural Gas Production, 2003-2010 Company Name 2003 2004 2005 2006 2007 2008 2009 2010 Ecopetrol 57.3 57.3 57.4 40.9 41.3 39.2 39.2 35.0 Chevron Corporation 34.1 32.4 30.2 18.6 19.0 17.9 17.9 17.9 Pacific Stratus Energy Ltd 0.4 0.3 0.1 0.0 0.0 3.8 3.8 3.8 EQUION ENERGIA LIMITED 0.0 0.0 0.0 0.0 0.0 0.0 0.0 2.8 Total S.A. 1.6 2.4 3.5 3.2 3.4 3.2 3.2 1.7 Others 6.6 7.5 8.9 37.2 36.3 35.8 35.9 38.8 Source: GlobalData Figure 14: Colombia, Market Share (%) of Key Companies based on Marketed Equity Weighted Natural Gas Production, 2010 35.0% 17.9% 3.8% 2.8% 1.7% 38.8% Ecopetrol Chevron Corporation Pacific Stratus Energy Ltd EQUION ENERGIA LIMITED Total S.A. Others Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (33) 4.3 Colombia Exploration and Production Sector, Marketed Natural Gas Forecasts 4.3.1 Colombia Exploration and Production Sector, Marketed Natural Gas Forecasted Production Table 16: Colombia, Marketed Natural Gas Production (MMcf), Forecast by Assets, 2011-2015 Asset Name 2011 2012 2013 2014 2015 Bonanza 3,914.6 3,992.9 4,072.8 3,991.3 3,911.5 GUAJ IRA 168,909.1 172,287.3 175,733.0 172,218.4 168,774.0 Llanito 1,009.3 1,029.4 1,050.0 1,029.0 1,008.4 Montanuelo 1,698.6 1,732.6 1,767.2 1,731.9 1,697.3 Ortega 1,751.8 1,786.8 1,822.6 1,786.1 1,750.4 OPON 742.4 757.2 772.4 756.9 741.8 Cusiana 69,263.0 70,648.3 72,061.3 70,620.0 69,207.6 GAM (DISTRITO ALTO MAGDALENA) 186.3 190.0 193.8 189.9 186.1 Guepaje 1,205.1 1,229.2 1,253.7 1,228.7 1,204.1 Cantagallo 1,779.2 1,814.8 1,851.1 1,814.0 1,777.8 CERRITO1 (1) 190.4 194.2 198.1 194.1 190.3 Rio Ceibas 138.4 141.1 143.9 141.1 138.2 PAUTO - FLOREÑA 5,977.0 6,096.6 6,218.5 6,094.1 5,972.2 CENTRO ORIENTE (EL CENTRO) 5,137.5 5,240.2 5,345.0 5,238.1 5,133.4 La Creciente 15,270.9 15,576.4 15,887.9 15,570.1 15,258.7 Payoa 4,426.3 4,514.8 4,605.1 4,513.0 4,422.7 Rancho Hermoso 1,356.2 1,383.3 1,411.0 1,382.8 1,355.1 Apiay 3,868.1 3,945.5 4,024.4 3,943.9 3,865.0 TOQUI-TOQUI 482.4 492.1 501.9 491.9 482.1 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (34) 4.4 Colombia Exploration And Production Sector, Natural Gas Asset Details 4.4.1 Colombia Exploration And Production Sector, Active Natural Gas Asset Details Table 17: Colombia, Active Gas Field Asset Details Asset Name Area Operat or/Company Equity Partners Reserve Volume (MMcf) Fenix Colombia Onshore Amerisur Resources Plc Amerisur Resources Plc , Reto Petroleum Limited 2,500,000.0 Payoa Colombia Onshore Payoa Ecopetrol (30%), Petro Santander, Inc (70%) 710,227.3 La Creciente Colombia Onshore La Creciente Pacific Stratus Energy Ltd (100%) 411,100.0 Guepaje Colombia Onshore Guepaje Ecopetrol (58%), Solana Petroleum Corporation (37.8%), TechnoPetrol Inc (4.2%) 132,000.0 Abanico Colombia Onshore Abanico Ecopetrol (50%), Kappa Energy Company Inc (25%), Maral (15%), WOGSA (10%) Cicuco Colombia Onshore Cicuco Ecopetrol (100%) CERRITO1 (1) Colombia Onshore CERRITO1 (1) Kappa Energy Company Inc (81%), Others (19%) Rio Ceibas Colombia Offshore Rio Ceibas Ecopetrol (50%), Pacific Stratus Energy Ltd (27.27%), Petroleo Brasileiro S.A. (22.73%) Ortega Colombia Onshore Ortega Ecopetrol (100%) Other fields Colombia Offshore Other fields Others (100%) GAM (DISTRITO ALTO MAGDALENA) Colombia Onshore GAM (DISTRITO ALTO MAGDALENA) Ecopetrol (100%) OPON Colombia Onshore OPON COPP GAS CASANARE Colombia Onshore GAS CASANARE Ecopetrol , HOCOL S.A. , Perenco Llanito Colombia Onshore Llanito Ecopetrol (100%) Apiay Colombia Onshore Apiay Ecopetrol (100%) CENTRO ORIENTE (EL CENTRO) Colombia Onshore CENTRO ORIENTE (EL CENTRO) Ecopetrol (100%) Bonanza Colombia Onshore Bonanza Ecopetrol (100%) Rancho Hermoso Colombia Onshore Rancho Hermoso Rancho Hermoso S.A. (100%) Cusiana Colombia Onshore Cusiana Ecopetrol (50%), EQUION ENERGIA LIMITED (31%), Others (7.4%), Total S.A. (11.6%) Montanuelo Colombia Onshore Montanuelo Ecopetrol PAUTO - FLOREÑA Colombia Onshore PAUTO - FLOREÑA Ecopetrol EL PIÑAL Colombia Onshore EL PIÑAL Ecopetrol , Petrosantander Inc Cantagallo Colombia Onshore Cantagallo Ecopetrol (100%) TOQUI-TOQUI Colombia Onshore TOQUI-TOQUI Ecopetrol (50.00%), Interoil Exploration And Production (50.00%) GUAJ IRA Colombia Onshore and Offshore Chevron Corporation Chevron Corporation (43%), Ecopetrol (57%) Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (35) 4.5 Colombia, Major Natural Gas Discoveries, 2005-2010 4.5.1 Colombia, Natural Gas Discoveries by Year, 2005-2010 Table 18: Colombia, Number of Gas Discoveries, 2005-2010 Country 2005 2006 2007 2008 2009 2010 Colombia 1 3 2 8 8 7 Source: GlobalData Figure 15: Colombia, Number of Gas Discoveries, 2005- 2010 0 1 2 3 4 5 6 7 8 9 2005 2006 2007 2008 2009 2010 N u m b e r o f G a s D i s c o v e r i e s Colombia Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (36) 4.5.2 Colombia, Natural Gas Discovery Details, 2005-2010 Table 19: Colombia, Natural Gas Discovery Details, 2005-2010 Di scovery Year Di scovery Name Bl ock Name Bl ock Operat or Basi n 2010 El Verdal-1X Talora Petrodorado Ltd. Valle Superior Del Magdalena 2010 Visure-1X Buganviles Pacific Stratus Energy Ltd Valle Inferior Del Magdalena 2010 Pedernalito-1X Guama Pacific Stratus Energy Ltd Valle Inferior Del Magdalena 2010 Oripaya 1 Uribante Ecopetrol Catatumbo 2010 Moqueta-1 Chaza Gran Tierra Energy Inc Putumayo 2010 Brillante SE-1X Sierra Nevada I Petrolifera Petroleum Limited Valle Inferior Del Magdalena 2010 Tempranillo North-1 Pijao Potrerillo Ecopetrol Valle Superior Del Magdalena 2009 Vireo 1 Oropendola Columbus Energy Sucursal Colombia Llanos 2009 Rancho Hermoso-5 2009 Mirto 1 Maranta Emerald Energy Plc Putumayo 2009 Chuira 1 Midas PetroLatina Energy Plc Middle Magdalena Valley 2009 Huron 1 Niscota HOCOL S.A. Llanos 2009 Capella No.6 Ombu Emerald Energy Plc CAG-VAU 2009 Colon 1 La Paloma Apex Energy, LLC. Valle Medio Del Magdalena 2009 Mirasol 1 Guatiquia Petrominerales Colombia Ltd Llanos 2008 Lisama North-1 Valle Medio Del Magdalena 2008 Capella No.1 Ombu Emerald Energy Plc CAG-VAU 2008 Arrayan 1 Potrerillo Ecopetrol Valle Superior Del Magdalena 2008 Popa 2 Rio Magdalena Gran Tierra Energy Inc Valle Medio Del Magdalena 2008 Corcel C J oropo Petrominerales Colombia Ltd Llanos 2008 Los Aceites 1 Guachiria Solana Petroleum Corporation Llanos 2008 Palmera 1 Azar Gran Tierra Energy Inc Putumayo 2008 La Creciente D-1 La Creciente Pacific Stratus Energy Ltd Valle Inferior Del Magdalena 2007 LCA-3 La Creciente Pacific Stratus Energy Ltd Valle Inferior Del Magdalena 2007 Mauritia Norte 1 Moriche Pacific Rubiales Energy Corporation Llanos 2006 Creciente 1 La Creciente Pacific Stratus Energy Ltd Valle Inferior Del Magdalena 2006 Don Pedro 1 Doima HOCOL S.A. Valle Superior Del Magdalena 2006 Guariquies 1 DE Mares Ecopetrol Valle Medio Del Magdalena 2005 Los Hatos 1 Los Hatos Harken de Colombia Limited. Llanos Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (37) 4.6 Colombia Exploration and Production Sector, Recent Discoveries 4.6.1 May 17, 2011: Ecopetrol Announces Oil Discovery At Mito-1 Well In Meta Province, Colombia Ecopetrol S.A. (Ecopetrol) announced the discovery of crude oil in the Mito-1 exploratory well located in the municipality of Puerto Gaitan, in the Meta province. The exploratory well (A-3) comprises part of the exploration campaign in the Cano Sur block in the Llanos Orientales, where the presence of hydrocarbons had already been reported at stratigraphic wells in 2010 (Mago-1 and Draco-1). Ecopetrol is the operator and owner of all the rights of the Cano Sur Contract for Exploration and Exploitation signed with the National Hydrocarbon Agency (ANH – Agencia Nacional de Hidrocarburos). The Mito-1 exploratory well is located in the Eastern sector of the Cano Sur Contract contiguous to the Quifa field, in which Ecopetrol also has a participation. The Mito-1 well was drilled vertically to a depth of 3,310ft, equivalent to more than 1km. It was then completed with an artificial lift system using a progressive cavity pump (PCP). The accumulation of hydrocarbons has been proven in the basal sands of the Carbonera formation. The production testing conducted to date brings up a production of crude oil of 13.5o API, with an average flow of 225bpd, a water cut on the order of 10%, and a daily average production of 200 barrels of crude. In coming weeks the evaluation of the conditions for production and the behavior of the deposit discovered with the Mito-1 well will continue. Additionally, Ecopetrol will proceed with the drilling campaign within the Cano Sur block, which will encompass more than 10 exploratory wells, and additional stratigraphic wells in coming months. This new finding reaffirms the importance of the Llanos Orientales in Ecopetrol's growth strategy. The Meta province represents about 40% of the company's crude production, and is one of the focal points of the exploratory campaign in its strategy leading up to 2020. 4.6.2 May 09, 2011: Suroco Energy Encounters Oil At Cohembi-3 Well In Colombia Suroco Energy Inc. (Suroco Energy) said that the second appraisal well of the Cohembi field in the Suroriente block, Cohembi-3, has been successfully drilled and has encountered the thickest oil pay section drilled to date in the Cohembi oil field. Alastair Hill, president and CEO of Suroco Energy, said, "The Cohembi-3 results have exceeded our expectation, by encountering 23ft of continuous oil pay, the thickest oil pay interval in the field to date. With this result we have so far proven up an oil column of 64 feet and have still not observed any indication of an oil-water contact. The results of the Cohembi-2 and Cohembi-3 wells provide supporting evidence for our reservoir simulation and material balance calculations which indicate the potential for a material increase to the currently booked proven and probable reserves assigned to this accumulation. Subsurface work on the Cohembi field will now focus on assimilating the information we have gathered to progress a full field development program, which will include further stepout drilling to locate the field boundary and define water injection well Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (38) locations for future pressure maintenance. In addition, the Cohembi surface facilities have recently been expanded to allow over 5,000 barrels per day of oil production. "Cohembi-3 is the third successful well in our multi-well appraisal and development drilling program in the Pinuna and Cohembi fields and the drilling rig will now immediately move to the Pinuna-4 location, where we are targeting both the Villeta 'U' and 'T' reservoirs in an undrilled structural feature located between the Pinuna and Frontera oil fields." Cohembi-3 Well Results The Cohembi-3 well was spud on April 14, 2011 and reached a total depth of 8,870ft on April 30, 2011, and has encountered the thickest N sand oil section to date in Cohembi. Total depth was reached in 17 days, nine days faster than the initial projected drilling time of 26 days. Openhole logs show that Cohembi-3 encountered 23ft of high quality net oil pay with no indication of an oil- water contact. Porosity in the interval is approximately 25% and petrophysics indicates a low water saturation. The Cohembi-3 reservoir interval represents the thickest oil pay section of the three wells in the field to date. For comparison purposes, the Cohembi-2 well encountered 17ft of oil pay and is currently producing approximately 1,537bopd (224bopd net to the corporation after royalties) with no water production. The Cohembi-3 well offsets the closest well, Cohembi-1, by 1km and confirms the orientation and presence of an extensive reservoir fairway that Suroco Energy and the operator had identified prior to drilling using 3D seismic. Cohembi-3 will now be completed and tested within the next two weeks, and then tied in for permanent production. The production facilities at Cohembi have recently been expanded and are now capable of handling over 5,000bpd of production (728bpd net to the corporation after royalties). The corporation's internally generated reservoir simulation and material balance work indicates that the reservoir drive in the Cohembi N field is primarily expansion of the relatively low- compressibility 19 API gravity oil, and has no aquifer pressure support. The recovery factor in oil fields of this nature benefit greatly from pressure maintenance by water injection and the corporation and its partner are in the process of defining a field development plan that will target initiation of pressure maintenance by water injection in 2012. GLJ Petroleum Consultants, in its independent evaluation of the corporation's reserves effective December 31, 2010 have assigned reserves to the Cohembi field on the basis of 8% recovery for total 1P, 9% recovery for total 2P, and 15% recovery for total 3P reserves. Operations Update Suroriente Block Production And Well Workover Program The corporation holds a 15.8% working interest in the Suroriente block, where production has averaged 930bopd net to the corporation (after royalties) for the 24 days from April 13, 2011 when the Pinuna-5 well was returned to production, to May 5, 2011. Pinuna-4 Well Upon being released from the Cohembi-3 well, the drilling rig is expected to move immediately to the Pinuna area to a newly constructed multi-well pad to target unrisked "prospective resources" which have been evaluated on a "best estimate" basis to be approximately 2.3 MMbo (approximately 0.4 MMbo to the corporation based upon its 15.8% working interest and before royalties) in Villeta U and T sands in an undrilled structural feature located between the existing Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (39) Pinuna production and the Frontera field in Ecuador. The Frontera field has produced 14 MMbo from the Villeta U and T sands (independent source: IHS Energy reporting as of April 2011). Evaluation of unrisked prospective resources pursuant to the evaluation conducted by David Monroe, the vice-president, engineering of Suroco Energy, and Richard Harris, manager of geology of Suroco Energy, both qualified reserves evaluators, effective December 31, 2010. The prospective resources estimated in that evaluation have not been risked for the chance of discovery or the chance of development. There is no certainty that any portion of the resources will be discovered. If discovered, there is no certainty that it will be commercially viable to produce any portion of the resources. If a discovery is made there is no certainty it will be developed or, if it is developed, there is no certainty as to the timing of such development. Pinuna Field Workovers • The Pinuna-5 well was returned to production on April 12, 2011 after reperforating all of the Villeta U perforated intervals with high performance charges and installing a repaired electric submersible pump. As of May 5, 2011 the well is producing approximately 1,453bopd (212bopd net to the corporation after royalties) with a watercut of 40%. • A workover to repair a suspected tubing leak in the Curiquinga-1 Villeta T oil well (with the anticipated result of regaining approximately 80bopd of production, which would mean approximately 12bopd net to the corporation after royalties), reperforate and retest the potentially oil-bearing Villeta Middle U sand (which is calculated to have 9ft of net oil), and configure the well to produce selectively from either the currently producing Villeta T or Villeta U has been completed. The well is expected to commence production within the next few weeks, and the long term producing configuration of the well will be decided after each zone is evaluated individually. •On April 30, 2011, workover operations commenced in the Pinuna-2 well to perforate and test the oil-bearing Villeta U-Inferior sand (which is calculated to have 23ft of untested net oil pay) and configure the well to produce selectively from either the currently producing Villeta T or Villeta U, depending on test results. Exploration Activity In Putumayo Basin Blocks A 3D seismic survey in the Alea 1848A block (in which the corporation holds a 50% working interest) has been completed, with good quality data results and is now being interpreted in order to define several exploration leads that have been identified on previously acquired 2D infill seismic. Once a prospect has been matured for drilling, an exploration well is expected to be drilled in this block in the second half of 2011. A 3D seismic survey in the northern part of the Suroriente block (in which the corporation holds a 15.8% working interest) has been completed, with good quality data results and is now being interpreted. The objective of the program is to define exploration drilling opportunities along a structural trend that includes the Quinde oil pool, where there is a suspended oil well. If results are positive, it is anticipated that exploration and stepout drilling could occur in this area of the Suroriente block in late 2011. 4.6.3 Apr 25, 2011: Ecopetrol Finds Hydrocarbons At Nunda-1 Well In Huila Province Ecopetrol S.A. (Ecopetrol) has found the presence of hydrocarbons in the Nunda-1 well, located in the municipality of Tello in Huila province. The well is part of the Cuisinde Exploration and Exploitation agreement of 2006 between Ecopetrol and the National Hydrocarbons Agency, ANH Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (40) in which the company holds a 100% stake. Drilling at the well began on J anuary 27, 2011, reaching a total depth of 7,371ft three weeks later, the equivalent of 2.25km from the surface. Preliminary testing on the Honda formation showed a flow volume of 318 barrels, with a 71% water cut, yielding an average of 92bopd. The quality of the crude is 30 degrees API. Ecopetrol will begin appraising the find in the weeks ahead, with extensive tests planned in order to determine the production potential of the Honda formation and the volume of recoverable hydrocarbons. The discovery opens up a new era for Ecopetrol by branching out to new types of exploration activities involving stratigraphic traps (those in which hydrocarbons accumulate due to variations in the deposit environment) in the Valle Superior del Magdalena and helps increase reserve inventories in this area of the country. 4.6.4 Feb 28, 2011: Pacific Rubiales Energy Discovers Gas At Apamate-1X Well In La Creciente Block, Colombia Pacific Rubiales Energy Corp. (Pacific Rubiales Energy) has announced the successful results of the Apamate-1X exploration well in the La Creciente block, lower Magdalena basin, Colombia. The Apamate-1X well was drilled in the LCA - South prospect, located south of La Creciente A and La Creciente D gas fields. The well targeted gas in the Cienaga de Oro formation and was spudded on December 1, 2010, reaching total depth (TD) of 12,012ft of measured depth (MD) in the pre-Oligocene basement on February 3, 2011. Ronald Pantin, CEO of Pacific Rubiales Energy, said, "The positive results of this well not only will add to our natural gas reserve base, but also reinforce the potential of the La Creciente block, opening the window to further exploration in the area." The well found what was initially correlated as Cienaga de Oro at 11,135ft MD (10,611ft TVDSS) in an 8 1/2" hole, which showed 53ft of a sandstone package with some interlayered siltstones that gas-kicked while conditioning for logging, which required gas flare. Open hole logs could not be run due to the hole instability and high pressure from the offending basal units. The prospective interval is defined in what is now interpreted to be a sequence of on-lapping, gas- bearing sands, at the base of the lower Porquero formation. The petrophysical evaluation based on cased-hole logs, LWD, ditch cuttings and mud-logging data, shows average porosity and water saturation of 17% and 23% respectively, in a gross interval of 53ft with a net-to-gross ratio around 70%. During the initial test the well achieved a gas production in excess of 24 MMscfd with a well head flowing pressure of 3,730psig, restricted by the flow capacity of the test facilities. The results are very similar to the behavior of the La Creciente A and D reservoirs and indicate that the size of the reservoir is very promising. Preparations are now being conducted to perform the extended test of the well. At the same time, the company is making all the arrangements to begin the production facilities and the connecting line to the central facilities at La Creciente. These findings at the well also confirm the stratigraphic nature of the prospect, and the post-drill maps associated with the gas sandstones from the seismic inversion show an acreage that goes from 1,124 acres as a minimum to a maximum upside around 5,266 acres and a gas-water contact Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (41) that is yet to be established. During 2011, Pacific Rubiales Energy plans to drill two additional appraisal wells 500ft downdip of the Apamate-1 well where the seismic inversion exhibited the strongest anomalies. Pacific Rubiales Energy has already begun the work to expand the facilities at La Creciente to process up to 150 MMscfd in three modules of 50 MMscfd each, with a total investment for these expansion facilities of $42m. The company is also well advanced in the gas-export project to the Caribbean where a potential market of 330–380 MMscfd has been identified. For that, two different transport technologies are being analyzed: small scale LNG and CNG. 4.6.5 Feb 07, 2011: Ecopetrol Discovers Hydrocarbons At Tinkhana-1 Well In Colombia Ecopetrol S.A. (Ecopetrol) said that it has proven the presence of hydrocarbons at the exploratory well Tinkhana-1, located in the block known as western area (Area Occidental) in Putumayo. The well is part of exploratory work being carried out pursuant to the western area production agreement entered into with the National Hydrocarbon Agency, in which Ecopetrol holds a 100% interest. The well is located within the jurisdiction of the municipality of Orito, 4.8km northeast of the Quriyana field, where on April 6, 2009 Ecopetrol announced the presence of hydrocarbons at another well. Tinkhana-1 commenced drilling operations on November 17, 2010, reaching a final depth of 6,812ft, the equivalent of more than 2km. Ecopetrol is currently moving ahead with initial well testing on the lower Caballos formation, which, with original discovery pressure at a thickness of 16ft, is producing an average oil flow of 140 bopd of 25 degree API gravity. J avier Gutierrez Pemberthy, CEO of Ecopetrol, said: "It is satisfying to have this first find of 2011 recorded in the Putumayo basin, an area of major hydrocarbon potential. In our favor also is the production and transport infrastructure already in place, which could allow Tinkhana-1's production to move at a faster pace, as well as that of other projects which have proven successful in that region of the country." Ecopetrol will continue running tests on the Caballos formation in the weeks to come. A following evaluation will be used to determine the well's size and production potential. 4.7 Colombia Exploration and Production Sector, Drilling and Production Updates 4.7.1 May 11, 2011: InterOil Produces 5,813bopd In April 2011 InterOil Exploration & Production ASA (InterOil) has produced 5,813bopd in April 2011, compared to 6,361bopd in the previous month. During April 2011, production from Peru and Colombia was 4,191bopd and 1,622bopd respectively. Production for March 2011 from Peru and Colombia was 4,669bopd and 1,692bopd respectively. InterOil has experienced high depletion on the San Luis field in Peru during April 2011. The company is working actively to reduce the depletion and plans to start the drilling on the San Luis field during third week of May 2011. The Altair-1 well in Colombia was re-completed and put in production last week. The drilling campaign in Colombia is expected to start in late J une 2011. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (42) Oil has been sold at average sales price of $118.52 in Peru and $116.27 in Colombia per barrel during April 2011. 4.7.2 May 09, 2011: Brownstone Energy Puts Canaguay #1 Well On Production In Colombia Brownstone Energy Inc. (Brownstone Energy) has provided an update on operations in Colombia. The company has been advised by the operator of the Canaguaro block that installation of long term production testing equipment at the Canaguay #1 well has been completed and that long term production testing of the well has commenced. During commissioning, the well produced oil at various rates, and most recently, the Canaguay #1 well produced from the Mirador formation through the new facilities at a rate in excess of 2,000bopd with a 0.2% water cut. The optimal production rate for the Mirador reservoir and facilities will be determined by the results of the long term production test. Long term trucking and sale agreements have been signed for oil produced at Canaguay #1. Brownstone Energy has met its obligations to earn its 25% working interest in the Canaguaro block. Block 27 Brownstone Energy and its partners have defined drilling locations on the first two of five separate structures, based on the interpretation of the previously completed 3D seismic survey. An additional follow-up development location has been selected on one of the structures dependant on success. Brownstone Energy and its partners continue to wait on required environmental permits before construction of the locations can commenceand anticipates commencing construction and drilling in the third quarter of 2011. The wells have a planned depth of approximately 10,000ft and will test prospective oil bearing intervals in the Carbonera, Mirador and Une formations. A follow-up 54sq km 3D seismic acquisition program has commenced in the south eastern portion of the block to further define additional potential drilling locations. The 3D seismic acquisition program is expected to be completed in the second quarter of 2011, with the drilling of an additional 10,000 foot well before year-end, dependent on the results of the follow-up 3D seismic. Brownstone Energy has a 50% paying interest (45.275% working interest before pay out, 34.25% working interest after payout) in block 27. Block 21 Brownstone Energy and its partners have also completed 75% of the 83sq km 3D seismic survey on block 21. After processing and interpretation, the partners plan to drill two wells by the first quarter of 2012. Brownstone Energy is the operator of the block and has a 50% paying interest (45.5% working interest before pay out, 35% working interest after payout) in block 21. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (43) Block 36 The acquisition of 109sq km of 3D seismic on block 36 is approximately 75% completethis program was delayed by weather and environmental difficulties. Drilling of one 15,000 foot well remains scheduled to occur by the end of 2011. Brownstone Energy has a 20% paying interest (18.2% working interest before pay out, 14% working interest after payout) in block 36. 4.7.3 Apr 29, 2011: Petroamerica Oil Commences Drilling At Las Maracas-2 Exploration Well In Llanos Basin, Colombia Petroamerica Oil Corp. (Petroamerica Oil) has spud the Las Maracas-2 exploration well in the Los Ocarros block, situated in the Llanos basin of Colombia. The Las Maracas-2 well which was spud on April 27, 2011, is targeting the Carbonera C7, Mirador and Une reservoir formations in a fault trap defined by 3D seismic. The well will be directionally drilled by the Parker 268 drilling rig and is expected to reach its total depth of 13,100ft (measured depth) by end J une, 2011. Petroamerica Oil, pursuant to a farmin agreement with Talisman Oil & Gas Colombia Limited, is entitled to a 50% participating interest in the Los Ocarros block, subject to the approval of the National Hydrocarbon Agency (ANH) and the operator of the block, Cepsa Colombia S.A., a subsidiary of the Cepsa Group. 4.7.4 Apr 28, 2011: Canacol Energy Provides Production Update Canacol Energy Ltd. (Canacol Energy) has provided an update on production and an upward revision in production guidance for 2011. The corporation operates the Rancho Hermoso and Entrerrios fields in Colombia, and has a non-operated interest in the Capella field in Colombia and four producing oil fields in Brazil. Net corporate production for the period J anuary 1, 2011 through to March 31, 2011 averaged 10,187bopd, which consisted of 3,164bopd of net production after royalties, and 7,023bopd of tariff production. Net corporate production for the period April 1–25, 2011 averaged 11,512bopd, which consisted of 3,850bopd of net production after royalty, and 7,662bopd of tariff production. Canacol Energy is revising its production guidance for calendar 2011 upwards from the previously disclosed yearly average of 10,000–11,000bopd to a new target of 10,500–11,500bopd based primarily on stronger than anticipated performance from the recently drilled wells at its operated Rancho Hermoso field in Colombia. Gross production from the Rancho Hermoso field averaged 23,639bopd for the period April 1–April 25, 2011. 4.7.5 Apr 14, 2011: PetroLatina Energy Provides Q1 2011 Production Update PetroLatina Energy Plc (PetroLatina Energy) has provided an update on its first quarter of 2011 production. PetroLatina Energy achieved total gross production from its Tisquirama, La Paloma and Midas licence blocks located in the Middle Magdelana Valley, Colombia, in the three months to March 31, 2011 of 193,790bbls (2010 equivalent period: 155,323bbls) and total net production of 90,536bbls (2010 equivalent period: 72,465bbls) at an average gross production rate of 2,154bopd (2010 Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (44) equivalent period: 1,726bopd) and an average net production rate of 1,006bopd (2010 equivalent period: 805bopd). As announced previously, the Serafin-1 gas well located in the company's Tisquirama licence block is currently on an extended six month production test at a flow rate of 5.5 MMscf/d of gas and a well pressure of 1,850 pounds per square inch (psi). The well has, during the test period to date, achieved total gross production of 95.98 MMscf of gas (15,997boe) and total net production of 44.15 MMscf (7,359boe). Gas produced during the six month extended test period is being sold to Ecopetrol S.A. at 90% of the regulated price for Texaco for Barranca-Ballena's gas (as regulated by CREG, the Regulatory Commission of Energy and Gas of Colombia). The regulated price is currently $4.2562/million British thermal unit (BTU). The Serafin-1 well is jointly owned by PetroLatina Energy (50%) and PetroSantander Corporation (50%). The Company expects to release the results of an updated independent reserves report commissioned from Ryder Scott Company, L.P. and various geological and petrophysical studies during the current quarter. J uan Carlos Rodriguez, Chief Executive of PetroLatina, commented: "Our first quarter average production rates and the initial results to date from the Serafin-1 gas well have been very encouraging and in line with our expectations. We continue to pursue our strategy of seeking to increase production and reserves and expect to resume our development drilling in a more effective and low risk manner later this year." Mr Menno Wiebe, a Non-executive director of the Company, has reviewed and approved the technical information contained within this announcement in his capacity as a qualified person, as required under the AIM rules. Mr Wiebe is a Petroleum Geologist and has been a Member of the American Association of Petroleum Geologists for more than 30 years and a Member of the Geological Society for more than 7 years. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (45) 5 Col ombi a Pi peli ne Sector 5.1 Colombia Pipeline Sector, Key Data Table 20: Colombia, Pipeline Key Statistics, May 2011 Number of Active Natural Gas Pipelines 8 Number of Planned Natural Gas Pipelines Nil Total Length of Natural Gas Pipelines (including planned pipelines) in Km 3,231.8 Company with Longest Natural Gas Pipelines Network Promigas S.A. E.S.P Source: GlobalData 5.2 Colombia Pipeline Sector, An Overview The total length of crude oil and natural gas pipeline network in Colombia (including planned pipelines) in May 2011 was 11,786.3 Km, of which, crude oil pipelines constitute 4,985.9 Km, petroleum product pipelines constitute 3,568.6 Km and natural gas pipelines constitute 3,231.9 Km. Colombia's contribution to South and Central America’s total pipeline length is 9.8%. Major pipelines in the country include Ecopetrol Product Pipeline System, Ecopetrol Oil Pipeline System and Centro- Oriente Pipeline. These pipelines have lengths of 3,568.6 Km, 2,074.9 Km and 1,005.0 Km respectively. The top three companies operating in Colombia oil and gas pipeline industry are Ecopetrol, Total S.A. and Promigas S.A. E.S.P. 5.3 Colombia Pipeline Sector, Compari son of Key Natural Gas Pipeline Companies Table 21: Colombia, Natural Gas Pipeline Length by Company (Km), May 2011 Company Name Length (Km) Promigas S.A. E.S.P 1,251.3 TGI S.A ESP 1,228.0 Transgas de Occidente S.A. 340.0 Consorcio TGC Ltda. 310.0 Ecopetrol 88.5 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (46) Figure 16: Colombia, Natural Gas Pipeline Length by Company (Km), May 2011 0 200 400 600 800 1,000 1,200 1,400 Promigas S.A. E.S.P TGI S.A ESP Transgas de Occidente S.A. Consorcio TGC Ltda. Ecopetrol L e n g t h ( K m ) Source: GlobalData  Note – The length of the pipelines indicated in the graph above includes the entire lengths of pipelines in which the companies have equity stakes. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (47) 5.4 Colombia Pipeline Sector, Natural Gas Pipelines Table 22: Colombia, Natural Gas Pipelines, May 2011 Pi peline /Pipeli ne System Name Pi pelines in the System Operat or Start Year Start Point End Point Asset Status Onshore/ Off shore/ Both Pi peline Length (Km) Pi peline Di amet er (Inches) Pi peline Capacity (Bcf) Centro- Oriente Pipeline CentroOriente S.A 1996 Active Onshore 1,005.0 6.0-22.0 27.7 Barrancabermeja- Neiva Pipeline Barrancabermeja Neiva Active Onshore 630.0 Vasconia- Cogua Pipeline Vasconia Cogua Active Onshore 208.7 Dina- Tello- Los Pinos Pipeline Dina Los Pinos Active Onshore 19.9 6.0-12.0 1.5 Montanuelo- Gualanday Pipeline Montanuelo Gualanday Active Onshore 38.0 4.0-6.0 1.5 Promigas Colombia Gas Pipeline Promigas S.A. E.S.P 1960 Active Onshore 673.3 Ballen- Cartagena Pipeline Ballena Cartagena Active Onshore 193.0 Cartagena- J abo Pipeline Cartagena J abo Active Onshore 480.3 Ballena- Barrancabermeja Pipeline Promigas S.A. E.S.P 1996 Ballena Barrancabermeja Active Onshore 578.0 18.0 25.6 Mariquita- Cali Pipeline Transgas de Occidente S.A. 1997 Mariquita Cali Active Onshore 340.0 20.0 20.0 Cusiana- Bogota Pipeline Consorcio TGC Ltda. 1995 Cusiana Bogota Active Onshore 310.0 6.0/12.0 3.5 Cusiana- La Belleza Pipeline TGI S.A ESP 2003 Cusiana La Belleza Active Onshore 223.0 20.0 54.8 Colombia- Venezuela Gas Pipeline "Colombia Section" Petroleos De Venezuela S.A. 2007 Ballena Carreta "BoderPoint", Venezuela Active Onshore 88.5 26.0 54.8 Morichal- Yopal Pipeline Coinobras Ltda 1994 Morichal Yopal Active Onshore 14.0 4.0 0.4 Source: GlobalData The total length of natural gas pipelines in Colombia in May 2011 is 3,231.8 Km. Centro- Oriente Pipeline is the longest natural gas pipeline in the country. It has a length of 1,005.0 Km and a design capacity of 27.7 Bcf. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (48) 6 Profile of ECOPETROL S.A. 6.1 ECOPETROL S.A., Key Information Table 23: ECOPETROL S.A., Key Facts Corporate Address Carrera 7 No. 37 - 69, Bogota, Colombia Ticker Symbol, Exchange ECOPETROL [Colombia Stock Exchange] Telephone +57 1 2344000 No. of Employees 6,695 Fax +57 1 2344099 Fiscal Year End December URL www.ecopetrol.com.coenglish Revenue (in USD Million) 17,313.70 Industry Chemicals, Energy and Utilities Revenue (in COP Million) 30,404,390 Locations Brazil, Colombia, Peru, United States Source: GlobalData 6.2 ECOPETROL S.A., Company Overview Ecopetrol S.A. (Ecopetrol) is one of the largest petroleum companies in Colombia. It is engaged in the exploration, production, transportation, supply and marketing of crude oil and natural gas. The company is amongst the top 40 largest petroleum companies in the world as well as the four major oil companies in Latin America. The company operates through four business units: Exploration and Production; Refining and Petrochemicals; Transportation; and Market and Supply. The company through its subsidiary, Ecodiesel Colombia S.A. is increasing its presence in alternative energy market with expanding operations in biofuel and ethanol. It is headquartered in Bogota, Colombia. 6.3 ECOPETROL S.A., Business Description 6.3.1 Business Overview Ecopetrol is Colombia's largest integrated oil company. The company engages in the exploration and production of oil and gas; refining, transportation, marketing and supply of petrochemicals. It carries out its operations through four reportable business segments, namely, Exploration and Production; Refining and Petrochemicals; Transportation; and Market and Supply. Production For the fiscal year ended 2010, the company’s average daily production of hydrocarbons stood at 579,249 equivalent barrels on average per day, of which 481,812 barrels of crude and 97,438 equivalent barrels of gas. Ecopetrol’s production of heavy crudes reached 210.4 thousand bpd in 2010, a 43.2% increase over 2009. This was primarily due to the development of the Rubiales, and Castilla fields, in the San Fernando Region. Financials In the fiscal year ended 2010, the total revenues from E&P activities amounted to COP22, 703.9 billion. The company reported a net income of COP8,362.5 billion in 2010, which resulted from higher volumes produced and better prices of the product basket compared to the previous year. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (49) Market View Unconventional oil and gas projects such as oil sands or tar sands, heavy oil, coal bed methane are attracting increased attention in the wake of the inevitable production decline in the conventional oil and gas resources. There has been renewed interest in recent times due to the advancement in extraction and processing technologies and a significant rise in the price of oil and gas. Following this there has been considerable investments in the production of oil and gas from unconventional sources. 6.3.2 Marketing and Supply Overview The company under Marketing and Supply segment, markets refined and feed stock products including high-octane gasoline, diesel fuel, jet fuel, natural gas, and petrochemical products. Domestically it sells regular gasoline, LPG, jet fuel, diesel fuel and natural gas and exports crude oil, LPG, butane, high-octane gasoline, naphtha, jet fuel natural gas and fuel oil. It is the sole producer and supplier of refined products in Colombia.The company witnessed increase in the volume of exports delivered at client facilities by the company’s ships chartered. During 2010, the company focused on the development of the production infrastructure to increase the gas supply in Colombia. The company built the LTOII Plant in Cusiana, which expected begin by 2011 that can provide 70 million cubic feet per day (MCFD). The company also developed a project and added about 1.5 MCFD of gas to the domestic transport system from the Dina Field in Neiva. Financials The segment recorded revenues of COP7,849 billion for the fiscal year ended 2010. It recorded operating income of COP509.1 billion and net income of COP224.4 billion in 2010. 6.3.3 Refining and Petrochemicals Overview Ecopetrol through its Refining and Petrochemicals segment is engaged in the refining of crude oil and produces a full range of refined products including gasoline, diesel, LPG, and heavy fuel oils among others. The company owns and operates two refineries in Colombia, namely, the Barrancabermeja and Cartagena. It also owns two minor refineries, namely, Orito and Apiay. The installed capacity of these refineries totals to 335 thousand barrels per day (mbpd). The company produces aromatics, cyclohexane, paraffin waxes, lube base oils and solvents from these facilities.In 2010, the company commenced the new diesel and gasoline hydro-treatment units. The company advanced its Petrochemical Infrastructure Project to increase the production of Ecopetrol’s petrochemical products to 2.7 million tons per year (MTPY). Production During 2010, the utilization factor of the Barrancabermeja refinery was 81.8%, as compared to 80.7% in 2009. Its through-put increased 3.8% that driven by the opening of the hydro-treatment plant in August. The utilization factor of the refinery of Reficar S.A was 77.4% in 2010, as compared to 92.3% in 2009. Its throughput dropped 15% due to maintenance of the crude and visbreaker units in October as well as the technical stoppage of cracking unit in November. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (50) Financials The total sales of the Refining segment were COP15,070 billion for the fiscal year ended 2010. The refining segment reported a net loss of COP783.1 billion in 2010 due to the high cost of raw materials as compared to the revenues as well as non-operating losses regarding subsidiary companies, provisions and taxes. 6.3.4 Transportation Overview The company through its Transportation segment engages in the transportation and supply of crude oil, motor fuels, fuel oil, and other refined products, excluding natural gas. At December 31, 2009, its crude oil and multi-purpose pipelines network was of length approximately 9,164 km. The transportation network consisted of about 5,128 km of main crude oil pipeline networks, connecting fields to the Barrancabermeja refinery and Reficar, and to export facilities. Ecopetrol established Oleoducto Bicentenario de Colombia S.A.S., where it holds 55% interest in it. The company constructed 80 km of a total of 134 km of the Andean Multipurpose Pipeline. In 2010, the company transported 1035.8 KBOD, which include 264.9 KBOD of refined products and 770.9 KBOD of crude. Financials In the fiscal year ended 2010, the total sales of the Transportation segment amounted to COP3,019.3 billion. The transportation segment reported net income of COP542.3 billion in 2010, which resulted from higher crude volumes transported by both pipeline as well as tank cars. 6.4 ECOPETROL S.A., SWOT Analysis 6.4.1 Overview Ecopetrol is one of the largest petroleum companies in Colombia. Its key operations include the exploration, production, refining, transportation of crude oil and natural gas. The business integration of the company enables it maintain its market positions. The company's debt burden accompanied by legal issues may hamper its growth. Strategic expansion accompanied by the developing upstream sector in Colombia will provide an opportunity to gain high market share in near future. However, the company faces challenges due to competition and the fluctuating oil and gas market. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (51) Table 24: ECOPETROL S.A., SWOT Analysis Strengths Weakness Focus on Research and Development Increase in Reserves and Production Vertically Integrated Operations Efficient Use of Resources Substantial Debt Burden Limited Liquidity Position Legal Issues Opportunities Threats Colombian Upstream Sector Brazilian Offshore Pre-Salt Region Expansion Activities Regulatory Controls on Pre-salt areas Fluctuating Oil Market Intense competition Stringent Regulations Source: GlobalData 6.4.2 ECOPETROL S.A. Strengths Focus on Research and Development The company’s focus on research and development (R&D) activities enables it to develop superior offerings. The R&D activities are conducted through Instituto Colombiano del Petroleo (ICP) which focuses on technological development beneficial for the company and the Columbian oil and gas industry as a whole. Every year, the company presents its research and development projects to Instituto Colombiano para el Desarrollo de la Ciencia y la Tecnologia for certification of the research conducted. In 2009 the company developed 24 projects amounting to COP136,696m, as against 19 projects amounting to COP86,695m in the previous year. ICP has 25 demo locations and 20 R&D laboratories. During 2009 the R&D laboratories provided services to other companies as well including Shell, British Petroleum, Exxon Mobil as well as the ANH. Currently Ecopetrol owns 19 patents in Colombia, Venezuela, Brazil, Ecuador Nigeria and the US. In addition, 39 new patents were filed by the company in 2009. One such patent known as the an anti-theft patent enabled the company to reduce fuel oil and crude oil theft by 50% in 2009 compared to the previous year. Increase in Reserves and Production An increase in reserves and production ensures consistent cash flow and hence higher profitability for the company. Consolidated production for 2010 was 615.9 Mboed, as against 520.6 Mboed in 2009, increasing by 18.3%. Ecopetrol’s production was 579.5mboed, an increase of 16.2% compared to the previous year. During the fiscal year 2010, hydrocarbons were discovered in 10 exploratory wells in Columbia and one in Brazil. The reserve replacement ratio was 193% in 2010 while reserves to production ratio was 9.1 years. 72% of proved reserves correspond to crude and 28% to natural gas. The proved net reserves of hydrocarbons for the company at the end of 2010 totaled to 1,714 MMboe, an increase of 11.4% compared to 1,538 MMboe at the end of 2009. There was an increase of 365 MMboe of proved Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (52) reserves and net production was 189 MMboe in 2010 which means that 1.93 barrels were added to proven reserves for each barrel of oil equivalent produced. The net reserves increased by 42% from 1,210 MMboe in 2007 to 1,714 MMboe in 2010. The net production grew by 56% from 121 MMBOE in 2007 to 189 MMBOE in 2010. The reserve replacement ratio for the 3 year period was 197% with an average reserve life of 9 years. Improving reserves ensure higher productivity for the company. Vertically Integrated Operations Ecopetrol is a vertically integrated oil and gas energy company. It is one of the four principal petroleum companies in Latin America and ranks amongst the 40 largest petroleum companies in the world. The company operates across all the areas of the energy value chain including the exploration and production, transportation, refining, and sales and marketing. It is the only vertically integrated crude oil and natural gas company in Columbia operating in Peru, Brazil and the U.S. Gulf Coast as well. Besides, it also holds the largest share in the transportation and refining infrastructure in Colombia. The oil producing fields of the company are present in central, south, west and north of Colombia. It also has two refineries and ports to aid fuel import and export on the coasts and 8,124 km of pipelines and polyducts in Colombia. Strong integration along the value chain bestows significant advantages to the company. Efficient Use of Resources The company's return on equity (ROE) was 19.7% for fiscal year 2010. This was above the Integrated Oil & Gas sector average* of 16.1%. A higher than sector average* ROE may indicate that the company is efficiently using the shareholders' money and that it is generating high returns for its shareholders compared to other companies in the sector. Also, in fiscal year 2010, its Return on Assets, Return on Fixed Assets, and Return on Working Capital were 11.8%, 22.9%, and 497%, respectively, compared to 9.2%, 18.1%, and 169%, respectively, in fiscal year 2009. Additionally, in 2011, Standard & Poor's increased the company's corporate credit and debt rating to BBB- from BB+, with a stable outlook. With this new rating the company reached investment grade. 6.4.3 ECOPETROL S.A. Weaknesses Substantial Debt Burden The company’s huge debt could have a major impact on its operational performance since a major portion of the earnings would have to be diverted to service its debt obligations. This could concern the investors as well as make it difficult for the company to raise funds on favorable terms from the market. For fiscal year ended 2008, 2009 and 2010, the company’s debt to equity ratio was 0.80%, 18.8% and 21.5%, respectively. The huge amount of debt to equity ratio could result in volatile earnings as the company has to bear additional interest expense. Ecopetrol reported huge total debt component in the past, COP286,499m in fiscal year ended 2008, followed by COP6,151,435m in fiscal year ended 2009 increased to COP8,912,884m in fiscal year ended 2010. This substantial amount of debt requires the company to dedicate a significant portion of its cash flow from operations to service interest and principal payments on debt. Any reduction in revenue and operating cash flow could hinder the company’s ability to repay interest and principal, Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (53) resulting in defaults. With such huge debt burden, Ecopetrol could face credit crunch in future and that would affect the financial health of the company. Limited Liquidity Position The company's current ratio was 1.2 at the end of fiscal year 2010, as compared to 1.6 in 2009. The current ration in 2010 was below the Integrated Oil & Gas sector average* of 1.45. A lower than sector average* current ratio indicates that the company is in a weaker financial position than other companies in the sector. Further, the company's quick ratio and cash ratio were 1.2 and 0.4, respectively in 2009, compared to 1.3 and 0.5, respectively in the fiscal year 2008. A decrease in liquidity position of the company implies limitations for meeting short term liquidations. This could affect the operational functioning of the company and that hampers the performance of the company in terms of generating revenues and also cost effectiveness, as the company could depend more on external sources to fuel its operational flow. Legal Issues A lawsuit was filed against Ecopetrol in The Hague (Netherlands) by Llanos Oil Exploration Ltd. as a consequence of the termination of the Guatapuri partnership contract on J uly 23, 2003. The Court of The Hague has issued a court order in J uly 2010 granting Llanos Oil to attach up to seven billion Euros on any assets of Ecopetrol that fall under Dutch jurisdiction. The company is a part of 2,428 legal proceedings relating to civil, administrative, environmental, tax and labor claims filed against it in the Colombian courts and arbitration tribunals. It is subject to labor-related lawsuits filed by the existing and former employees in connection with pension plans and retirement benefits affecting the plaintiffs. A former employee association by name Foncoeco has brought an action against the company in connection with the profit-sharing plan offered in 1962 that expired in 1975, which required the company to pay COP541,833m. The company had appealed the decision by the first instance judge to the Bogota Higher Tribunal. As of December 31, 2009, the company has increased its provision for legal proceedings by 24.12% over 2008. Legal issues like this can affect the company's goodwill and image hence its profitability. 6.4.4 ECOPETROL S.A. Opportunities Colombian Upstream Sector Colombia has emerged as one of the most attractive upstream investment destinations with the largest number of discoveries in the first half of 2010. The company can expand and strengthen its operations in the region to take advantage of the current scenario. Colombia is rich in hydrocarbon reserves with proven reserves of 1.4 billion barrels of oil and 4.4 Tcf of gas. The Majority of Colombia's crude oil production comes from the Andes foothills and the eastern Amazonian jungles. The Meta department in central Colombia is also emerging as an important production area. Colombia’s natural gas deposits are spread across 18 basins. Only seven of the 18 basins account for 100% of the current gas production. Though the majority of the current natural gas production comes from Guajira and the Guajira Offshore basin, a large chunk of reserves are located in the Llanos basin. The continuous efforts of the Colombian Government to explore the offshore and onshore basins have resulted in a growing number of oil and gas discoveries. The number of new oil and gas Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (54) discoveries in Colombia increased from 12 in 2006 to 28 in 2009. Such strong growth in discoveries is mainly due to the increasing investments from foreign investors and Colombia’s national oil company, Ecopetrol S.A. Between 2003 and 2010, more than 200 million hectares were explored and another 47 million hectares of land is open in 2010. Of the 200 million hectares of exploration area, production area is around 12 million hectares; 130 million hectares are under an E&P license and the remaining 60 million hectares are under a TEA (Technical Evaluation Agreements) license. Brazilian Offshore Pre-Salt Region The deepwater exploration and production market in Brazil offers a unique opportunity for the growth of oilfield services companies such as this. With easily accessible areas for oil finds becoming scarce, the ultra-deep, Brazilian pre-salt area has emerged as one of the global oil and gas industry's few areas of growth. Pre-salt discoveries in Brazil have transformed the country into one of the highest potential investment acreages globally. Service companies that provide deepwater drilling rigs, subsea production systems, directional drilling and offshore engineering and construction services will benefit from spending on pre-salt development. According to in- house research, the total number of rigs required in the Brazilian offshore area during 2009–2018 is expected to be 58, of which 30 rigs have been contracted and 28 more are to be leased up to 2018. Oil and gas reserves in Brazil are expected to increase from 14.2 billion barrels of oil equivalent (boe) in 2009 to 30-35 billion boe over the next few years. According to Brazil’s ANP (Agencia Nacional do Petroleo), in total, Brazil's pre-salt oil area could hold between 50 billion boe and 80 billion boe of high-quality light crude. The announced recoverable pre-salt reserves in the Santos and Campos basin are expected to more than double Brazil’s reserves in the coming years. Expansion Activities In 2011, Ecopetrol and Talisman Energy finalized an agreement to acquire BP Exploration Company (Colombia) Limited. The new company would be called Equion Energia Limited, in which Ecopetrol will hold 51% while Talisman will hold 49%. This acquisition would strengthen the company’s operations in Colombia especially in the Piedemonte Llanero region. Currently, 90 thousand boed are currently being produced in the region of which 27 thousand boed are under direct operation. In 2011, the company also incorporated Ecopetrol Global Capital SL in Madrid, Spain, in which it owns 100% interest. Ecopetrol Capital AG was also established in Switzerland, as a wholly owned subsidiary in order to improve the utilization of financial resources of the company. These strategic expansion activities provide strong growth prospects for the company in the coming years. 6.4.5 ECOPETROL S.A. Threats Regulatory Controls on Pre-salt areas Huge oil and gas finds in the pre-salt areas have made the Brazilian Government evaluate necessary changes in the regulatory framework for the region. The government aims to develop a new petroleum regime for the pre-salt basins. According to the proposed legislation, Brazil will adopt a production-sharing model for the unlicensed pre-salt blocks and other "strategic" areas as defined by the National Energy Policy Council (CNPE). Thus, the new regime will abandon the concession system, which was more lucrative for international contractors. Instead of royalty Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (55) payments, the government reportedly wants a minimum of a 50% share of the profit oil, which is the oil produced after discounting expenses from the development of a field. Through the new legislation, Petrobras will be granted full ownership of some pre-salt acreage and will be guaranteed a minimum 30% share of any pre-salt areas that the government decides to tender in licensing rounds. In all cases, the state-controlled oil company will be the sole operator overseen by a newly created regulator for the pre-salt areas, Petro-sal (the ANP will continue to oversee other parts of the upstream sector). These legislative changes will diminish the attractiveness of Brazil's upstream sector for international oil companies. For companies without pre-salt acreage, the changes to the law significantly diminish chances of entering the region, especially in areas that the government decides have a high chance of exploration success or that might produce large discoveries. Fluctuating Oil Market The company faces the threat of operating in volatile market environment. Volatile market environment coupled with concerns from geopolitical environment and demand for oil in emerging economies including China, India and other non-OECD countries have resulted in tighter oil supplies. Further, events in Egypt, Libya, Venezuela, Iran and Iraq have resulted in uncertainty of crude oil supply in recent times. Lack of balance between OPEC and non-OPEC production discipline has resulted in the volatility. Prices of crude oil and natural gas are dependent on a number of factors including, supply and demand for crude oil, natural gas, and natural gas liquids, weather conditions, political and economical stability, costs of exploring, developing, producing, and transporting crude oil, natural gas and natural gas liquids, domestic and foreign government regulations and taxes and a host of other factors. Major changes in the environmental aspects would impact the company’s operations. Intense competition Ecopetrol faces intense competition from various energy players. Some of the competitors of the company include only downstream players while some are present all across the energy value chain and have significant LNG handling capacity. Even though the company is an integrated oil company, it does not have a significant share in the international markets. The company’s retail activities are very weak in comparison with the global integrated companies. The intense competition poses a threat to the company's existing market share. The high competition level could limit the company’s market share and shows negative impact on the company’s operations as well as financial position. Stringent Regulations Ecopetrol's business operations are subject to environmental regulation and its costs to comply are significant. Any changes in existing environmental regulation could affect the results of operations and financial condition. Its current costs to comply with these laws and regulations are significant to results of operations and financial condition. Failure to comply with these laws and regulations would adversely impact its business. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (56) 7 Profile of Occi dental Petroleum Corporati on 7.1 Occidental Petroleum Corporation, Key Information Table 25: Occidental Petroleum Corporation, Key Facts Corporate Address 10889 Wilshire Boulevard, Los Angeles, CA, 90024, United States Ticker Symbol, Exchange OXY [New York Stock Exchange] Telephone +1 310 2088800 No. of Employees 11,000 Fax +1 310 4436690 Fiscal Year End December URL www.oxy.comPagesdefault.aspx Revenue (in USD Million) 19,157 Industry Chemicals, Energy and Utilities Locations Argentina, Bolivia, Brazil, Canada, Chile, Colombia, Libyan Arab J amahiriya, Oman, Qatar, United Arab Emirates, United States, Yemen Source: GlobalData 7.2 Occidental Petroleum Corporation, Company Overview Occidental Petroleum Corporation (Oxy) is a US-based upstream energy company. It engages in the exploration, production and marketing of crude oil, natural gas, natural gas liquids (NGLs), power and carbon dioxide (CO2). The company also involved in the manufacturing of polyvinyl chloride (PVC) resins, caustic soda and niche specialty chemicals. The company focuses on long lived oil and gas assets in California and the Permian Basin. Oxy carries out business activities through three business segments, namely, Oil and Gas, Chemical and Midstream, Marketing and Other. Occidental operates in three regions: Middle East/North Africa, the US and Latin America. The company is headquartered at Los Angeles, California, the US. 7.3 Occidental Petroleum Corporation, Business Description 7.3.1 Business Overview Occidental Petroleum (Oxy) is one of the leading players in the exploration and production of oil and natural gas in the world. It is one of the major manufactures of chemicals in North America. The company carries out its exploration and production activities in the US, Middle East/ North Africa and Latin America. It engages in gathering, treating, processing, transporting, storing, trading and marketing oil, gas, natural gas liquids, condensate and CO2. In addition, the company generates and markets power. Occidental Petroleum manufactures and markets basic and niche specialty chemicals. It conducts its businesses through three business segments, namely, Oil and Gas; Chemical and Midstream, Marketing and Other.In J anuary 2011, the company entered into an agreement with the Abu Dhabi National Oil Company (ADNOC) to develop Shah sour gas field in the emirate. In which the company owns 40% interest. China Petrochemical Corporation (Sinopec) agreed to acquire 100% interest in Occidental Argentina Exploration & Production Inc., a subsidiary of of the company and certain affiliates. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (57) 7.3.2 Chemical Overview The company, through its chemical segment, engages in the manufacture and marketing of basic chemicals, vinyl and other chemicals. Occidental Chemical Corporation (OxyChem), a subsidiary of Oxy, manufactures several petrochemicals; basic chemicals such as chlorine, caustic soda and ethylene dichloride; vinyls and specialty chemicals. These chemicals are used as raw materials in the manufacture of industrial chemicals, pharmaceuticals, detergents and bleaching agents. The company is also one of the major producers of polyvinyl chloride (PVC) worldwide. Oxy Vinyl, another subsidiary of the company, engages in the manufacture of vinyl derivatives, polyvinyl chloride resins and vinyl chloride monomers. In the US, OxyChem owns and operates chemical manufacturing plants at 22 sites in Alabama, Georgia, Illinois, Kansas, Louisiana, Michigan, New J ersey, New York, Ohio, Pennsylvania and Texas. IN addition, the company has two manufacturing sites in Canada and Chile, and has certain interests in a Brazilian joint venture.OxyChem established two joint ventures, Armand Products Company and Carbocloro S.A. along with Church & Dwight Co., Inc. and UNIPAR, respectively. Armand Products sells potassium carbonate and potassium bicarbonate. Carbocloro involves in manufacturing and selling of chlor-alkali and other products in Brazil. Production Occidental Petroleum manufactures and markets basic chemicals, vinyls and other chemicals. Its basic chemicals consist of chlorine and caustic soda, chlorinated organics, potassium chemicals and ethylene dichloride (EDC), with an annual capacity of 4.0 million tons, 4.2 million tons, 0.9 billion pounds, 0.4 million tons and 2.4 billion pounds, respectively. The company's Vinyls include VCM and PVC, with an annual capacity of 6.2 billion pounds and 3.7 billion pounds, respectively. Other chemicals include chlorinated isocyanurates, resorcinol, sodium silicates and calcium chloride, with an annual capacity of 131 million pounds, 50 million pounds, 0.6 million tons and 0.7 million tons, respectively. For the fiscal year 2010, the Vinyls exports increased 125% as compared to 2009. Financials For the fiscal year ended 2010, this segment accounted for revenues of $4,016m, an increase of 24.52% over that in 2009. Furthermore, the segment earnings totaled $438m in 2010, an increase of 12.6% as compared to previous year. Capital Expenditure During 2010, the company's capital expenditure totaled $237m,as compared to $205m in 2009. Market View The performance of the Chemical segment will depend on the global economic activities, the competitiveness of the US, recovery of the domestic housing and construction markets, and the direction of the unprecedented high levels of feedstock and energy prices along with their impact on margins. Occidental Petroleum anticipates demand for basic chemicals to improve in 2010. Furthermore, the company expects industry-wide PVC operating rates to be higher in 2010 as a result of global economic recovery. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (58) 7.3.3 Midstream, Marketing and Other Overview The Midstream, Marketing and Other segment engages in gathering, processing, transporting, storing and marketing crude oil, natural gas, natural gas liquids and carbon dioxide. Its transportation and storage systems mainly serve US operations, which covers the Permian Basin of southwest Texas and southeast New Mexico to Cushing, Oklahoma. The company has gas plants in California, Colorado and Permian Basin. The company's pipeline in the Permian basin and Oklahoma has a capacity of 365,000 boe per day and 5.8 MMbbl of oil storage. Its CO2 pipelines in Colorado, New Mexico and Texas has a capacity of 1.625 bcf per day. Occidental Petroleum’s Dolphin Pipeline in Qatar has a capacity of 3.2 bcf of natural gas per day. Its Western and Southern United States and Canada pipelines holds 16,000 miles of pipeline and gathering systems and 85 MMbbl of liquid storage. Its power generation plant holds a capacity of 1,800MW per hour and 1.6 million pounds of steam per hour.Occidental Petroleum signed an agreement to purchase Phibro LLC (Phibro) from Citigroup Inc. Phibro is active mainly in the trading of oil and gas. After the acquisition, Phibro will become a part of the company's midstream segment. Financials In 2010, the Midstream, Marketing and Other segment reported revenue of $1,471m, an increase of 44.7% over $1,471m in 2009. Furthermore, the segment earnings amounted to $472m in2010, which increased from $235m in 2009. Capital Expenditure For the fiscal year ended 2010, the capital expenditure for this segment was $501m, as compared to $554m in 2009. Market View The company anticipates pipeline transportation and power generation businesses to remain stable. It expects gas processing plant operations to have volatile results on the basis of NGL prices. In addition, the trading and marketing business is inherently volatile. However, Occidental Petroleum expects the volatility to be insignificant in the company's business. 7.3.4 Oil and Gas Overview The company, through its Oil and Gas segment, engages in the acquisition, exploration, production and marketing of crude oil, natural gas, natural gas liquids (NGLs) and condensate. Oxy carries out oil and gas operations in the US, Middle East/North Africa and Latin America. In the US region, Oxy is engaged in increasing production through strategic acquisitions and additional development in its key US business areas. The company's key business areas are California, California Shales, Elk Hills, Long Beach, Mid-Continent, North Dakota, Permian, South Texas and Vintage. North Dakota and South Texas are two new core producing areas for the company. Under Middle East/North Africa (MENA) region, the company carries energy operations in Bahrain, Dolphin Project, Iraq, Libya, Oman, Qatar and Yemen. In 2010, the company's 38% production of Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (59) its worldwide production came from its energy operations in Bahrain, Iraq, Libya, Oman, Qatar and Yemen. During 2010, the company won a deep gas contract for the Bahrain Field in Behrain. in Oman, Oxy drilled over 1,020 new wells and implemented a major pattern steam flood project for enhanced oil recovery at Mukhaizna Field. In Latin America, Oxy has operational presence in Colombia and Bolivia. The company operates operate five prominent oilfields in Colombia, which includes the Cano Limon Field in the Llanos Norte Basin of the Arauca province; and La Cira-Infantas fField in the Middle-Magdalena Basin of the Santander province. Oxy’s has working interests at the Tarija, Chuquisaca and Santa Cruz regions in the southern and eastern areas in Bolivia. In 2011, the company sold its Argentine oil and gas operations to Sinopec, a subsidiary of China Petrochemical Corporation due to unable to reach the company's financial expectations.In the year 2010, the company's total proved reserves stood at 3,363 millions barrels of oil equivalent (MMboe), out of which, 2,476 million barrels (MMbbl) of oil and 5,320 billion of cubic feet (bcf) of gas. The company's US asset base reported as 2.2 billion boe (barrels of oil equivalent) in proved reserves, represents 66% of the company's total proved reserve base followed by 26% from Middle East/North Africa region and the rest from Latin America. In December 2010, the company entered into an agreement with Sinopec to sell its Argentine oil and gas operations for $2.6 billion. Recently, the company entered into an agreement to purchase oil and gas properties in South Texas and North Dakota for about $3.2 billion. Additionally, it signed an agreement to increase its ownership in Plains All-American to 35%; and it acquired the remaining 50% joint venture interest in the Elk Hills Power Plant for $179m. Production In 2010, Occidental Petroleum’s total production stood at 753 thousand barrels of oil equivalent (Mboe), as compared to 718 Mboe in 2009. In 2010, the company's total production from continuing operations recorded as 711 Mboe, as compared to 677 Mboe in 2009. The increase in total production volume attributed to the new production in Bahrain and higher production in the Mukhaizna field in Oman, and gas production from domestic assets. In 2010, total sales volume of oil and gas from continuing operations stood at 705 Mboe, as compared to 678 Mboe in 2009. Financials For the fiscal year ended 2010, the Oil and Gas segment generated revenue of $14,276m, an increase of 29.68% over that in 2009. Furthermore, the segment earnings totaled $7,151m in 2010, an increase of 40.3% over previous year. Capital Expenditure During 2010, the company's capital expenditure for this segment totaled $3,166m, as compared to $2,448m in 2009. Market View The company views that the petroleum industry will remain highly competitive in the future and is subject to significant volatility due to market forces affecting supply and demand. Occidental anticipates that continued global economic slowdown could have a depressing effect on oil and gas prices. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (60) 7.4 Occidental Petroleum Corporation, SWOT Analysis 7.4.1 Overview Occidental Petroleum is an oil and gas exploration and production company. The company is one of the leading North American manufacturers of basic chemicals, vinyl and performance chemicals. Occidental's strong oil and gas reserves provide a platform for growth in future. Furthermore, the company's expanding operating margin allows the company to pursue growth plans. J oint Venture with ADNOC, Mubadala Development and NOGA and expansion through inorganic growth will enable the company to expand its business. However, intense competition and the US energy policy may pose a threat to the company's operations. Table 26: Occidental Petroleum Corporation, SWOT Analysis Strengths Weakness Leading Market Position Increased Profitability Operational Performance Declining Market Share in Sector Trade Receivables Opportunities Threats Opportunities in Iraq Strategic J oint Venture Expansion through Inorganic Growth Environmental Laws Highly Competitive Environment US Energy Policy Source: GlobalData 7.4.2 Occidental Petroleum Corporation Strengths Leading Market Position Occidental is a leading international oil and gas exploration and production company. It is the fourth largest US oil and gas companies based on market capitalization. The company is an industry leader in applying advanced technology to increase production from mature fields and access hard to reach reserves. Furthermore, it is the largest oil producer in Permian Basin of southwest Texas and southeast New Mexico, and the largest natural gas producer and third largest oil producer in California. It is also one of the leading non-government owned oil companies in Latin America. In Oman and offshore Qatar, the company is the second largest oil producer. Besides, it is a leading holder of exploration acreage in Libya. Additionally, it is a major North American chemical manufacturer. The company's leading market position help it to improve its market base. Increased Profitability Improving profitability ratios indicate the company's operational excellence, besides delivering value as expected by its shareholders. The company reported an operating profit of $7,359m Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (61) during the fiscal year ended 2010, an increase of 46.07% over 2009. The increase in operating profit resulted in the increased net profit levels. It reported net profit of $4,530m during the fiscal year 2010, an increase of 55.40% over 2009. The increased top, operating and bottom line levels resulted in increased profitability ratios. The company reported PBT (profit before tax) margin of 38.41% in 2010, as compared to 33.41% in 2009, followed by return on equity 13.94% (10.02%), return on capital employed 16.49% (13.35%), return on assets 8.64% (6.59%) and return on fixed assets 18.69% (14.98%). Furthermore, the company's operating margin was 38.41% for the fiscal year 2010. This was above the Independent Exploration & Production sector average of 9.41%. A higher than sector average operating margin may indicate efficient cost management or a strong pricing strategy by the company. The operating margin has increased 469 basis points (bps) over 2009 which may indicate management's high focus on improving profitability. Operational Performance Occidental, during 2010, delivered strong financial performance. The company’s total revenue reached $19,157m, an increase of 28.21% as compared to $14,942m in 2009. The Chemical segment contributed $4,016m of the total revenue in 2010, an increase of 24.52% over 2009; The Midstream, Marketing and Other segment recorded revenue of $1,471m, reflecting an increase of 44.7% over 2009 and Oil and Gas segment reported revenue of $14,276m, an increase of 29.6% over 2009. The company’s operational performance improved mainly due to enhanced results from all the three segments and its geographical presence. Strong financial performance and healthy asset growth reflect the company’s operational efficiency. Hence, a healthy financial result enables the company to explore investment opportunities and expand its operations efficiently. 7.4.3 Occidental Petroleum Corporation Weaknesses Declining Market Share in Sector The company’s declining market share indicates its weak performance over the period, which would affect its market share in the sector. The company's compound annual growth rate (CAGR) for revenue was 2.03% during 2006-2010. This was below the Independent Exploration & Production sector average of 33.15%. A lower than sector average revenue CAGR may indicate that the company has underperformed the average sector growth and lost market share over the last four years. The company's underperformance could be attributed to a weak competitive position or inferior products and services offering or lack of innovative products and services. Trade Receivables The company reported increase in revenues from $14,814m in 2009 to $19,045m in 2010. Further, inventories have gone up from $998m in 2009 to $1,041m in 2010. Inventory turnover has increased from 5.11 in 2009 to 5.87 in 2010, indicating adequate supplies for improvement in sales. However, trade receivables have increased from $5,167m to $5,932m, indicating possible credit sales. The company's working capital growth stood at 27.16%, compared to 296.53% in 2009 therefore, it could look forward to cash sales for improvements in cash from operations. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (62) 7.4.4 Occidental Petroleum Corporation Opportunities Opportunities in Iraq Iraq has the world’s third largest proven petroleum reserves, a vast majority of which are yet to be exploited. Positive response to Iraq’s second licensing round paves the way for its leading role in the global oil industry. Iraq’s oil ministry offered 15 oil fields for development in the second licensing round and the combined oil reserves in these 15 fields were estimated at about 41 billion barrels. The second licensing round witnessed a better response than the first one in seven of the 15 fields being awarded. The newly awarded fields in the second round, once developed, will add significant production capacity to the total oil production in Iraq. In 2010, Eni S.p.A, Korea Gas Corporation (KOGAS) and Occidental Petroleum signed a technical service contract with South Oil Company and Missan Oil Company, to redevelop Zubair field, located near Basra in southern Iraq. The consortium intends to increase production by over one million barrels of oil per day (MMBOE/d), totaling to 1.2 MMBOE/d. The consortium comprises Eni with 32.81% interest, followed by Occidental with 23.44%, KOGAS with 18.75% and the Missan Oil Company with 25%. As a result of the redevelopment, the consortium will earn $2 per barrel on the increased production after an initial increase of 10%. Redevelopment of the field will contribute to Iraq becoming one of the major players in the world oil markets. Strategic Joint Venture In J anuary 2011, the company was selected by the Government of Abu Dhabi for participating in the development of Abu Dhabi’s Shah gas field, one of the largest gas fields in the Middle East. The company will have a 40% interest in the 30 year contract and Abu Dhabi National Oil Company (ADNOC) will have remaining 60% interest. Besides, in December 2010, the company aquired 50% interest in the Elk Hills Power generation facility from Sempra Generation, a subsidiary of Sempra Energy, for a cash purchase price plus year-end cash distribution totaling $179m. The 550-megawatt natural gas-fueled power plant, located near Bakersfield, Calif., has been owned by Sempra Generation and Occidental Petroleum through a joint venture since 2003. In November 2009, the company entered into a joint venture agreement with Mubadala Development Company (Mubadala), government company of Abu Dhabi and National Oil and Gas Authority of Bahrain (NOGA) for the development of the Bahrain field. This joint venture will enable Occidental Petroleum to further expand its presence in the Middle East region. As a result, Tatweer Petroleum-Bahrain Field Development Company, a new joint operating company, has been created, which will serve as the operator of the field. Pursuant to the terms of the agreement, the company holds a 48% stake in the field, followed by Mubadala with 32% and NOGA with 20%. Expansion through Inorganic Growth Occidental Petroleum focuses on long-lived oil and gas assets with long-term potential for growth in its core geographical regions such as California and the Permian Basin, to enhance production. In addition, the company plans to add new oil and gas reserves, while keeping its development costs low. Due to the global economic crisis, the valuations of assets and companies have decreased significantly and these are becoming available for acquisitions. To cash in on this opportunity,in december 2010, Royal Dutch Shell Plc signed an agreement to sell its gas fields in South Texas to OXY USA, Inc., a subsidiary of Occidental Petroleum Corporation, for $1.8 billion. Furthermore, the company acquired Phibro LLC (Phibro) for $250m. Phibro is primarily a trader in Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (63) oil and gas. Phibro became a part of Occidental's midstream segment, which includes natural gas liquids, pipeline, power and its existing trading business. 7.4.5 Occidental Petroleum Corporation Threats Environmental Laws Occidental's energy operations are subject to rules and regulations imposed by the US, and other national governmental authorities. The company and its subsidiaries are expected to follow the federal and state laws and regulations adopted for the protection of environment and the health and safety of employees and users of the company’s products. The company planned programs for the operation and design of its facilities to achieve compliance with applicable environmental regulations. There is always a possibility of changes in the policies of the government related to IT, renewable energy and other sectors. Any change in the policies may lead to the company incurring high expenses; such high expenses could adversely affect the profitability and the results of operations of the company and pose a threat to its operations. Highly Competitive Environment A highly competitive environment could affect the company's results of operations and its ability to increase production and replace reserves. Occidental’s oil and gas business operates in a highly competitive environment. Its oil and gas production and results of operations depend on its ability to acquire, develop or find additional reserves profitably. It replaces significant amounts of its reserves through acquisitions and large development projects. The company’s competitors have better financial resources, staff and other facilities than those of the company. Also, they may be able to develop and acquire more and better prospects and productive properties than the company. Some of the competitors of the company include Apache Corporation, EOG Resources, Inc., Forest Oil Corporation, Murphy Oil Corporation and Anadarko Petroleum Corporation. Inability to compete successfully may reduce its market share. US Energy Policy The government’s proposed increase in taxes, and new oil and gas leasing policy may affect the earnings and growth of oil and gas companies such as Occidental Petroleum. The US energy policy highlights a considerable shift from the fossil fuel driven economy to an economy fuelled by renewable energy. By 2019 these measures will increase the expenses of the US oil and gas companies to approximately $31 billion, according to in-house forecasts. The Obama administration has proposed various measures for increasing taxes on the US oil and gas industry. The key measures include elimination of tax breaks such as the intangible drilling and development costs, percentage depletion and manufacturing deduction. Moreover, in J anuary 2010, the US’ interior secretary Ken Salazar has announced amendments in existing oil and gas leasing policy. The leasing policy might make the domestic oil and gas explorations incompetent. As per the new regulations, the leasing process will undergo internal and external scrutiny, verification of conformance to Resource Management Plan; have greater public participation and industry participation and comprise larger environmental review procedures. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (64) 8 Profile of Petrol eo Brasi leiro S.A. 8.1 Petroleo Brasileiro S.A., Key Information Table 27: Petroleo Brasileiro S.A., Key Facts Corporate Address Avenida Republica do Chile 65, 24s Andar, Centro, Rio de J aneiro, Rio de J aneiro, 20031-912, Brazil Ticker Symbol, Exchange PETR3 [Sao Paulo Stock Exchange] Telephone +55 21 32242040 No. of Employees 80,492 Fax +55 21 32246055 Fiscal Year End December URL www.petrobras.com.bren Revenue (in USD Million) 120,493.60 Industry Chemicals, Energy and Utilities Revenue (in BRL Million) 213,273.67 Locations Angola, Argentina, Brazil, Chile, China, Colombia, Ecuador, India, Iran (Islamic Republic of Iran), J apan, Libyan Arab J amahiriya, Mexico, Mozambique, Nigeria, Pakistan, Paraguay, Peru, Portugal, Senegal, Singapore, Turkey, United Kingdom, United Republic Of Tanzania, United States, Uruguay, Venezuela Source: GlobalData 8.2 Petroleo Brasileiro S.A., Company Overview Petroleo Brasileiro S.A (Petrobras) is a Brazilian national oil company. It is an integrated energy company. The company engages in the exploration and production, refining, transport and trading of oil, natural gas and other fluid hydrocarbons. The company also performs other energy related activities. In addition, it produces biofuels. Petrobras operates through five reportable business segments, namely, Exploration and Production; Refining, Transportation and Marketing; Gas and Power; Distribution and International. The company also generates electricity through thermoelectric, hydroelectric, and eolian plants. Petrobras operates in 27 countries through subsidiaries, joint ventures and affiliated companies. Petrobras is headquartered in Rio de J aneiro, Brazil. 8.3 Petroleo Brasileiro S.A., Business Description 8.3.1 Business Overview Petrobras has presence across the energy value chain. Petrobras’s major activities include exploration and production of oil and natural gas, refining, transportation and distribution of oil products, natural gas, producing biofuels and electricity, and petrochemicals. The company also promotes research, development, production, transport, distribution, and marketing of oil, gas and renewable energy products, as well as other related or similar activities. Petrobras is one of the top 10 largest energy companies of the world as of J anuary 2010. Presently, the company operates in 27 countries across the world. The company operates through subsidiaries, joint ventures, and associate companies.The company operates through five reportable business segments, namely, Exploration and Production; Refining, Transportation and Marketing; Distribution; Gas and Power; and International. The company, through its subsidiary Petrobras Biocombustivel S.A., invested BRL150m for a 40.4% stake in Total Agroindustria Canavieira S.A., an ethanol company. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (65) Aker Solutions ASA signed a three-year contract, worth BRL30m with the company for maintenance of subsea control systems for the Brazilian national oil company. In the second quarter of 2010, the company entered into an agreement with Tereos International, a Brazilian subsidiary of the Tereos Group. As per the agreement, the company will invest $909m over five years to acquire a 45.7% stake in Acucar Guarani S.A. As of December 2010, the company’s total proved reserves were 15.986 billion boe and its total oil and natural gas production was 2,583,000 bopd, an increase of 2% over 2009. Recently, Petrobras acquired 100% of the capital of Innova S.A., at an expense of $332m, from Petrobras Energia Internacional S.A. The company entered into an agreement with Companhia Energetica Minas Gerais and the Government of of the State of Minas Gerais to study the construction of a gas pipeline connecting Sao Paulo to Uberaba. Also, the company plans to build a fertilizer plant and natural gas pipeline in Minas Gerais state to reduce imports. Further, it announced the completion of the drilling of the well 1-SPS-80, located in the block BM-S-76, in the shallow waters of Santos Basin, at water depth of 189 meters and 215 kilometers away from the shore. 8.3.2 Distribution Overview The Distribution segment of Petrobras is engaged in selling of oil products produced by its refineries and participating in expanding the domestic market for oil products and other liquid and transportation fuels. This segment's business operations are carried out by Petrobras Distribuidora S.A., a subsidiary of Petrobras, which represents 38% of the total Brazilian distribution market. It distributes oil products and vehicular natural gas to retail, commercial and industrial customers. Petrobras Distribuidora has 7,221 service stations as of December 2009, including 759 stations in Northern, Northeastern and Northwestern Brazil. The company invested R$ 895 million on the distribution segment which accounted to 1.28% of the total investment made by the company. In addition, the company also distributes oil products and biofuels under the BR brand to commercial and industrial customers. The company's major customers are aviation, transportation and industrial companies, as well as utilities and government entities. Besides, it also sells oil products produced through its refineries to other retailers and wholesalers. 8.3.3 Gas and Power Overview The company through Gas and Power segment is active in the purchase, sale, transportation and distribution of natural gas and bio-fuels in Brazil. The company also participates in electricity production. Further, the company invests in several Brazilian natural gas transportation companies, state-owned natural gas distributors, wind power, solar power, and small hydroelectric companies. In Brazil, the company operates two main pipeline networks for natural gas transportation, namely, the Malha Sudeste (Southeast Network) of 5,030 km, and Malha Nordeste (Northeast Network) with the 1,968 km length. The company’s pipeline networks are presently linked by the Southeast Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (66) Northeast Interconnection Gas Pipeline During 2010, the company increased the pipeline system by 1,696 km to 9,506 km. The company invested R$ 4,884 million on the Gas and Power division which accounted for 6.97% of the total investment made by the company.The Gas and Power segment is also involved in developing and operating gas-fired thermoelectric power generation plants. Currently, it owns stakes in 23 thermoelectric power plants, where 14 of them operated by the company. The company operates gas-fired power plants with 5,965.9 gross MW of installed capacity, represents 5% of Brazil’s total power grid. Further, it also controls an oil-fired thermoelectric power plant with 31.8 gross MW of installed capacity. Apart from this, the company invested in a number of renewable power generation sources in Brazil including wind, solar and small hydroelectric plants. The company produces biodiesel through two of its pilot plants in Guararema, in the state of Rio Grande do Norte. It is also constructing three industrial scale biodiesel plants for production, commercialization, and transportation and distribution of biodiesel. The plants are located in Candeias, Montes Claros, and Quixada. Petrobras has already signed contracts with family farming cooperatives to purchase castor beans, sunflower seeds, and oil from the oil palm fruit to produce 18 thousand tons of vegetable oil annually. Petrobras Distribuidora, a subsidiary of Petrobras, distributes biodiesel and Transpetro, is in charge of pipeline and marine logistics. Recently, the company acquired a refinery, terminal, and three piers to handle very large crude carriers. It is expected that this terminal would increase the commercialization of biofuels in Asia. The company has also setup partnerships internationally with ENI in Italy, Petroecuador, Bharat Petroleum Corporation Limited, Statoil, and Enap. Market View The company believes that natural gas is a promising new frontier, which is opening possibilities in the Brazilian energy sector. Further, the natural gas is expected to rise in the Brazilian energy mix from its current 8.9% share to 12% by 2015. Petrobras believes that the gas and energy area would play a major role in developing alternative energy sources, and invests in conserving energy and renewable energy to create additional value for the business. The company plans to invest $112.4 billion ($97.4 billion in Brazil). About $1.5 billion of these investments is set aside for biofuels with 46% towards ethanol pipelines and 29% into biodiesel. Petrobras targets to produce 63.6 mbblpd by 2013. 8.3.4 International Overview The company’s international segment represents the overseas operations related to exploration and production, supply, distribution and gas and energy. These activities are carried out in 27 countries outside Brazil. The company operated international business locations include Angola, Argentina, Bolivia, Colombia, Kazakhstan, the US, Equatorial Guinea, Nigeria, and Trinidad & Tobago. The company is expanding its participation in projects in North America, Africa and Asia. Petrobras is also expanding its business in Europe and the Middle East. In 2009, the company conducted exploration and production activities in 21 countries outside Brazil. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (67) The company invested R$ 4771 million on the International segment which accounted for 6.81% of the total investment made by the company. The Argentina market is the largest operating region outside Brazil, which represented 94% of its international production in 2009 along with Bolivia. In Colombia, the company is involved in exploration, production and distribution activities. Presently, it has four exploration and one development projects in Colombia. In Ecuador, it has a 30% interest in Block 18 and holds 11.42% stake in the 500 km Oleoducto de Crudos Pesados (OCP) crude oil pipeline with capacity of 450 mbbl/d. As on December 31, 2009, the company held interests in 211 offshore blocks in the US. In Nigeria, it owned interests in two development blocks. The company has three exploration and one development projects in Nigeria. The company has downstream operations in Chile which include 227 service stations, fuel sale and distribution centers in 11 airports and six fuel distribution terminals. Petrobras also has 89 service stations in Uruguay. In addition, the company also has 87.5% interest in a refinery in J apan. Market View The company’s production goals for its international oil, LNG, and natural gas division are 436,000 barrels of oil equivalent per day (boepd) by 2012 and 698,000 boepd by 2015. It plans to focus on operations in Gulf of Mexico and Nigeria. 8.3.5 Refining, Transportation and Marketing Overview The company’s Refining, Transportation and Marketing segment comprises all the activities related to refining, logistics, transportation and export of oil and oil products, purchase of crude oil and commercialization of oil, oil products and fuel alcohol. The segment also operates petrochemicals and the fertilizers businesses, including investments in domestic petrochemicals companies and fertilizer plants. The company has two domestic fertilizer plants. As on December 31, 2009, the company operated 92% of Brazil’s total refining capacity. Petrobras owns and operates eleven refineries in Brazil, with a total net distillation capacity of 1,942 mbbl. The company operates through a large and complex infrastructure pipelines and terminals and a shipping fleet, which is involved in transporting oil products and crude oil to domestic and export markets. In the fiscal year ended on 2010, the company invested R$ 28,007 million, which accounted for 39.96% of the total investment made by the company. The petrochemicals business is operated by the company’s subsidiary, Petrobras Quimica, which has ownership interests in all the petrochemical complexes in Brazil and a few companies that manufacture resins and other products. The transportation and storage activities of oil, oil products and gas are operated by the Transpetro. Transpetro is among the largest shipping companies in South America. The company has a new refinery under construction in Northeastern Brazil in a proposed partnership with PDVSA. The new refinery named as Abreu e Lima (RNE) will have a capacity of 230 mbbl/d after completion. The company scheduled to commence operation of the new refinery by 2012. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (68) Production As on December 31, 2010, the company's refining capacity of its facilities in Brazil is 1,798,000 bpd of crude oil. Market View The company expects the total oil products consumption in Brazil to increase in the coming days since Brazilian economy is growing continuously. However, decreasing refinery margins and surplus refining capacity internationally have a combined negative effect on profitability from refining operations. 8.4 Petroleo Brasileiro S.A., SWOT Analysis 8.4.1 Overview Petrobras is an integrated oil company. It is the national oil company of Brazil. Principal business operations of the company are exploration and production of oil and gas, refining, transportation and distribution of petroleum products. The company’s diversified revenue stream and focus on technology provide it with a significant competitive advantage in the global oil and gas industry. The company's poor resource management may affect the company’s financial condition. Its global presence led the company to cater to broader markets and reduce the risks associated with adverse economic and political developments in any particular region. However, geopolitical issues could be detrimental to its operations, if the company fails to evaluate them properly. Table 28: Petroleo Brasileiro S.A., SWOT Analysis Strengths Weakness Significant Asset Base Diversified Revenue Stream Focus on Research and Development (R&D) Litigations Trade Receivables Poor Resource Management Opportunities Threats West African Prospects Strategic Combination Brazilian Offshore Pre-Salt Region Opportunity in Emerging Economies Fleet Expansion Geopolitical Issues SCA Refining Industry Costs Regulatory Controls on Pre-salt areas Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (69) 8.4.2 Petroleo Brasileiro S.A. Strengths Significant Asset Base Petrobras is one of the leading energy companies of the world. The company’s significant asset base helps in maintaining its position as one of the top energy companies. Petrobras is one of the top 10 energy companies as of December 2010. It operates most of the producing oil and gas fields in Brazil, an oil and gas reach country. As of December 2010, the company’s total proved reserves were 15.986 billion boe. The company's reserve replacement ratio was 229% for the fiscal 2010. It had 15,283 million boe of proved reserves in Brazil, which includes 2.37 billion natural gas and 12.91 billion oil and condensate at the end of 2010. Besides, the company had 112 production platform, 16 refineries; 12 in Brazil, one each in J apan and the US and two in Argentina; and 23 thermoelectric plants as of December 2010. Petrobras operated 81.8% of Brazil’s total refining capacity as in December 2010. The company has around 7,306 gas stations and approximately 11,000 direct consumers. In 2010, the company produced 2,583,000 bopd, reflecting an increase of 2% over 2009. Besides, the company had exploration and production assets in Argentina, Bolivia, Chile, Colombia, Cuba, Curacao, Ecuador, the US, Mexico, Paraguay, Peru, Uruguay and Venezuela, which produced oil and natural gas totaling 185,100 boed in 2010. This diversified asset base reduces the over all risk of the company. Diversified Revenue Stream The company is focused on diversification strategy by both geography and business operations. Diversification further strengthens its potential for sustainable earnings growth in each of its business lines. The business activities of the company include exploration and production of oil and natural gas; refining, transportation and supply of refined products and natural gas, biofuels; and renewable energy. The company distributes oil products to wholesalers and through its own network of retailers. Furthermore, Petrobras also has dispersed its business risks across a wide geography. The company operates in 29 countries. Petrobras has exploration and production to refining, marketing and retail services businesses in North America, and natural gas pipelines business in Latin America. In Africa, the company produces oil in Angola and Nigeria and it has refining operations in J apan, Asia. The company has representative offices in New York, London, Tokyo, Beijing, Singapore, Lisbon and Tehran. The company's focus on a diverse business strategy hepled to improve its topline growth. Focus on Research and Development (R&D) To maintain a competitive edge, Petrobras emphasizes on R&D activities. The company allocates 1.0% of its gross sales to support and develop latest and cutting edge technologies. Petrobras is a leader in innovation and research in deep and ultra-deep water exploration and production. At the Leopoldo Americo Miguez de Mello Research & Development Center (Cenpes), the company is currently executing a research on submarine robotics; fuel oil and in renewable energy. The company's new R&D office in London enables it to execute research in cutting-edge exploration and production technologies. The company has spend BRL5,536.12m, BRL5344.40m and BRL5199.83m in 2010, 2009 and 2008 for research & development. The company's strong focus on R&D activities enables it to introduce various breakthrough technologies and products and thereby provide a source of future revenues to the company. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (70) 8.4.3 Petroleo Brasileiro S.A. Weaknesses Litigations Petrobras is involved in lawsuits and litigations, and this have a detrimental effect on its goodwill and reputation. In November 2010, a lawsuit was filed aganist the company by Rio de J aneiro. In September, the company issued $70 billion in shares and used some of shares to buy rights to develop deep water offshore reserves. Due to this, Rio de J aneiro authorities argued that the operation, in which Petrobras used company shares to buy oil development rights from the government and this arrangement would deny tax revenues to the state. Regarding this, Rio de J aneiro authorities argued that the arrangement violated the constitution by exempting the company from paying a "special participation" tax. Thus Rio de J aneiro authorities seeks tax payments from offshore fields of the company. Petrobras’s expenditure in defending itself in such legal cases filed against it increases its operating costs. It has an adverse impact on its revenue, and subsequently its operating profit margins also decrease. Trade Receivables The company reported increase in revenues from BRL182833.79m in 2009 to BRL213273.67m in 2010. Further, inventories have gone up from BRL19447.69m in 2009 to BRL19815.68m in 2010. Inventory turnover has increased from 5.590 in 2009 to 6.866 in 2010, indicating adequate supplies for improvement in sales. However, trade receivables have increased from BRL21084.89 to BRL26268.77, indicating possible credit sales. Petrobras reported decline in working capital turnover from 9.517 to 4.278, and its changes in working capital stood at negative BRL6759.21 in 2010, as compared to BRL611.06 in 2009. Therefore, it could look forward to cash sales for improvements in cash from operations. Poor Resource Management Petrobras's return on equity decreased to 11.47% in 2010, from 18.28% and 23.43% in 2009 and 2008, respectively. Its return on capital employed also decreased to 10.39% in 2010, from 14.99% and 20.02% in 2009 and 2008, respectively. Further, the company's return on assets decreased to 6.76% in 2010 from 8.57% and 11.28% in 2009 and 2008, respectively. Further, it return on working capital decreased to 96.56% in 2010 from 230.45% and 1252% in 2009 and 2008. This trend indicates the inability of the company to allocate its resources profitably in 2010 as compared to 2009 and 2008. 8.4.4 Petroleo Brasileiro S.A. Opportunities West African Prospects New discoveries and asset acquisition in West Africa will enable Petrobras to increase oil and gas reserves and in turn production. In late 2010, Petrobras discovered new oil resources in Block 15/06, offshore, Angola. The country has huge investment opportunities for oil and gas. Major investments are expected to be made in Angola, where the country expects to invest approximately $50 billion in its upstream and downstream industry during 2010–2013. A number of companies across sectors are investing huge sums into the country’s oil and gas industry. With a number of planned projects, especially in Angola, and the start of production from major fields such as J ubilee, Ghana, the offshore production in the West African region will continue to increase during the period 2010–2015. Currently, a large amount of natural gas is being flared in West African nations, however with the coming of new LNG plants in the region during 2010–2015 Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (71) the natural gas production in the region is also expected to increase significantly. The company acquired a 50% interest in Block 4, located off the coast of Benin in February 2011. Petrobras’s investment in the region will enable the company to record high growth. Strategic Combination Strategic Combination offer a strong growth opportunity for the company. In February 2011, the company acquired 50% working interest in Block 4, located on the coast of Benin from Compagnie Beninoise des Hydrocarbures (CBH), a subsidiary of Lusitania Petroleum. In J anuary 2011, the company signed a cooperation agreement with MesoCoat, Inc., a portfolio company, to develop and qualify MesoCoat's CermaClad process for the application of CRA (corrosion resistant alloys) to the internal and external surfaces of pipes using proprietary High Density InfraRed (HDIR) lamp technology. In December 2010, the company through its subsidiary Downstream Participacoes Ltda, signed a contract with Repsol YPF SA for the acquisition of 30% stake in Refineria Alberto Pasqualini SA (Refap), for $850m. Petrobras will indirectly hold 100% stake in Refap after the acqusition. In November 2010, the company signed a contract with Toyota Tsusho Corporation (TTC) for the provision of hydrated ethanol for a period of 10 years. In October 2010, the company's subsidiaries Petrobas Distribuidora and Petrobas Biocombustivel signed a contract to supply up to 2.2 billion of ethanol liters over four years with Acucar Guarani SA (Guarani), with a total estimated value of BRL 2.1 billion. This strategic moves would help the company to improve its financial performance in the future. Brazilian Offshore Pre-Salt Region The deepwater exploration and production market in Brazil offers a unique opportunity for the growth of Petrobras, Brazil’s national oil company. With easily accessible areas for oil finds becoming scarce, the ultra-deep, Brazilian pre-salt area has emerged as one of the few areas of growth in global oil and gas industry. Pre-salt discoveries in Brazil have transformed the country into one of the highest potential investment acreages globally. Oil and gas reserves in Brazil are expected to increase from 14.2 billion barrels boe in 2009 to 30-35 billion boe over the next few years. According to Brazil’s ANP (Agencia Nacional do Petroleo), in total, Brazil's pre-salt oil area could hold between 50 billion boe and 80 billion boe of high-quality light crude. The announced recoverable pre-salt reserves in the Santos and Campos basin are expected to more than double Brazil’s reserves in the coming years. Opportunity in Emerging Economies Petrobras has found new opportunity in China and J apan for its products and services. The company secured funds for its investment program by signing a funding agreement with the China Development Bank (CDB). The loan includes funding for the purchase of goods and services from Chinese companies. Furthermore, the loan includes an increase in the current oil exports from Brazil to China. In addition, Petrobras anticipated a long-term export agreement with Unipec Asia, a China Petroleum & Chemical Corporation (Sinopec) subsidiary. These will help the company in the expansion of its business and strengthen its relationship with an emerging economy like China. J apan is bound by the Kyoto Protocol's guidelines to reduce the greenhouse gas emissions by 5.2% each year during 2008-2012. Therefore, the government is encouraging the use of environmentally-friendly fuels such as Ethanol. Through the Brazil-J apan Ethanol Company, formed as a result of the joint venture between J apan and Brazil, Petrobras has won an exclusive franchise for selling Ethanol in J apan. Petrobras has an opportunity to capitalize on the growing demand for Ethanol in J apan. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (72) Fleet Expansion Expansion of the fleet will help the company to be more efficient and to reduce the dependence on third party Chartered vessels. Petrobras is focusing on expanding its fleet of vessels. According to the company’s expansion strategy, Petrobras will contract with Brazilian shipyards to construct 49 new vessels by 2015. The company signed contracts with three shipyards for 23 of these vessels for delivery by 2014 which include ten Suezmax and five Aframax ships to be constructed by the Atlantico Sul shipyard, in Suape, Pernambuco; four Panamax ships to be constructed by the EISA shipyard in Rio de J aneiro; and four tankers to be constructed by the Maua shipyard in Niteroi. 8.4.5 Petroleo Brasileiro S.A. Threats Geopolitical Issues Pipeline projects, Petrobras is involved in Latin America can be hit by growing political differences, border disputes and tariff disputes. The need to transport oil and gas from the remotest locations to major processing and consuming centers across regions has mandated the construction and development of long-distance, cross-country oil and gas pipelines. These pipeline projects are generally developed by a consortium of companies from different countries through which the pipelines pass. Transnational pipelines, which supply oil and natural gas to various countries across the region, encounter challenges in terms of political instability, transit tariff rates, border issues and route selection. SCA Refining Industry Costs South and Central America’s refining capacity is expected to grow at an AAGR of 5.3%, from 427.02 million tons in 2010 to 556.02 million tons in 2015. Brazil, Mexico, Venezuela, Argentina and Virgin Islands would be the leading refining countries with a contribution of 72.64% to South and Central America's total refining capacity in 2015. The crude oil available for most South and Central American countries is heavy and sour. Impurities and high sulfur content in crude oil makes processing difficult and also leads to greater yield of heavy products that need to be processed further. In addition, as the demand for lighter petroleum products is increasing, refining companies have to invest in secondary conversion units to yield the final light products. Furthermore, with the structure of petroleum products demand shifting towards cleaner products, environmental concerns have resulted in the enactment of strict regulatory frameworks and emission norms across the world. This mandates a reduction in the sulfur content of the products, apart from improving other quality parameters, which in turn calls for heavy investments for installing adequate conversion and desulfurization facilities. Regulatory Controls on Pre-salt areas Huge oil and gas finds in the pre-salt areas have made the Brazilian Government evaluate necessary changes in the regulatory framework for the region. The government aims to develop a new petroleum regime for the pre-salt basins. According to the proposed legislation, Brazil will adopt a production-sharing model for the unlicensed pre-salt blocks and other "strategic" areas as defined by the National Energy Policy Council (CNPE). Thus, the new regime will abandon the concession system, which was more lucrative for international contractors. Instead of royalty payments, the government reportedly wants a minimum of a 50% share of the profit oil, which is the oil produced after discounting expenses from the development of a field. Through the new legislation, Petrobras will be granted full ownership of some pre-salt acreage and will be Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (73) guaranteed a minimum 30% share of any pre-salt areas that the government decides to tender in licensing rounds. In all cases, the state-controlled oil company will be the sole operator overseen by a newly created regulator for the pre-salt areas, Petro-sal (the ANP will continue to oversee other parts of the upstream sector). These legislative changes will diminish the attractiveness of Brazil's upstream sector for international oil companies. For companies without pre-salt acreage, the changes to the law significantly diminish chances of entering the region, especially in areas that the government decides have a high chance of exploration success or that might produce large discoveries. Petrobras is dominant in most of the old concessions, with junior partners that include the ExxonMobil Corporation, BG Group plc, Royal Dutch Shell plc and Repsol YPF, S.A., although these contracts will remain unchanged. This move is part of the domestic government’s strategy to keep the majority of the pre-salt reserves under its own control. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (74) 9 Financi al Deal s Landscape 9.1 Detailed Deal Summary 9.1.1 Acquisition 9.1.1.1 West Isle Energy To Acquire Reto Petroleum In Reverse Takeover Transaction Table 29: West Isle Energy To Acquire Reto Petroleum In Reverse Takeover Transaction Deal Type Acquisition Deal Sub Type Reverse Acquisition Deal in Brief West Isle Energy Inc., an oil and gas company, entered into an agreement to acquire all of the issued and outstanding shares of Reto Petroleum Limited, an energy company, for a purchase consideration of CAD2.5m ($2.62m), in reverse takeover transaction. As part of the consideration, West Isle will issue 12,500,000 common shares at a price of CAD0.2 per share ($0.21 per share). The transaction is conditional on the completion of a concurrent financing in the amount of CAD7m ($7.32m). Deal Inf ormati on Deal St atus Announced Announced Dat e 12-Apr-2011 Companies Informati on Acquirer Company Information Company Name Reto Petroleum Limited Busi ness Descri ption Reto Petroleum Limited is an energy and utilities company that is engaged in developing and producing oil and gas. The company is based in Columbia, Canada. Target Company Information Company Name West Isle Energy Inc. Busi ness Descri ption West Isle Energy Inc. (West Isle), formerly known as Mera Petroleums is a junior oil and gas company. The company is actively engaged in exploration, production and development of oil and natural gas properties in Saskatchewan, Alberta and Northeastern British Columbia. West Isle operates producing properties in Drayton Valley; Provost and Sylvan Lake areas of Alberta region. In addition, the company has non-operated working interests in producing oil and gas wells in Evi; Enchant; Crystal/Pembina, all in Alberta and interests in oil wells in Manitou, Saskatchewan. The company’s projects are spread across north central Alberta and in northeast British Colombia. It is headquartered in Calgary, Canada. Deal Fi nanci al s Deal Value (CAD Mn) 2.50 Deal Value ($ milli on) 2.62 Source: GlobalData 9.1.1.2 Alange Energy Acquires Jaguar E&P CPR Consultants Table 30: Alange Energy Acquires Jaguar E&P CPR Consultants Deal Type Acquisition Deal Sub Type 100% Acquisition Deal in Brief Alange Energy, an oil and gas exploration and production company, completed the acquisition of J aguar E&P CPR Consultants, S.A., an oil and gas company, from Columbus Energy Ltd., an oil and gas company, for a purchase consideration of $25m. Alange funded the purchase price of the acquisition from its existing cash balances. J aguar E&P CPR Consultants holds 32.14% participating interest in block C of the Cubiro exploration and production contract located in the Llanos basin, a 10% participating interest over the entire block and a 15% participating interest in the Yamu 1 and Mapuro/Picure 1 exploration prospects on the Yamu E&PC, located in the Llanos basin, and overriding royalties of 4% and 3% in the A and B Sectors, respectively, of the Arrendajo E&PC. The Copa wells in the eastern block C of Cubiro are currently producing approximately 1,800 barrels of oil per day, while the current gross production from the Yamu block is approximately 900 barrels of oil per day. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (75) Alange Energy currently holds 25% participating interest in Cubiro block. Pursuant to the acquisition, the company's share of gross production in the Cubiro will be increased by almost 600 barrels per day and will have a share of approximately 90 barrels per day in the Yamu block. The transaction implies deal value of $37,396.04 per boe of daily production. Deal history Completed: On April 18, 2011, Alange Energy completed the acquisition of J aguar E&P CPR Consultants, from Columbus Energy, for $25m. Announced: On April 7, 2011, Alange Energy entered into an agreement to acquire J aguar E&P CPR Consultants, from Columbus Energy, for $25m. Deal Inf ormati on Deal St atus Completed Announced Dat e 07-Apr-2011 Complet ed Dat e 18-Apr-2011 Companies Informati on Acquirer Company Information Company Name Alange Energy Corp. Busi ness Descri ption Alange Energy Corp. (formerly known as Cierra Pacific Ventures, Ltd.) is engaged in the acquisition, exploration and production of oil and gas properties in Colombia. Vendor Company Informat ion Company Name Columbus Energy Limited Busi ness Descri ption Columbus Energy Limited (Columbus) is a development stage oil and gas company. It is principally engaged in the business of oil and gas exploration, acquisition and development. The company's properties are located in Australia and Tunisia. The company is performing operations in Italy with the help of its wholly owned subsidiary GDR Italia S.r.l. The company has explored a number of opportunities to rebuild its business, including two licence applications for acreage in Italy’s Po Valley and a failed attempt to buy a Spanish coal bed methane firm. In fiscal year 2008, the company acquired 100% interest of Hidrocarburos del Cantabrico S.L. (HDC) from Energy (CG) Ltd. In April 2009, the company sold 2% interest in the Blina oil field in northwest Australia, and Columbus also acquired Columbus Oil & Gas Inc. Columbus is headquartered in British Columbia, Canada. Target Company Information Company Name J aguar E&P CPR Consultants, S.A. (Inactive) Busi ness Descri ption J aguar E&P CPR Consultants, S.A. (J aguar), a subsidiary of Columbus Energy Limited, is an energy and utilities company that is engaged in developing and producing oil and gas. J aguar owns participating interest in oil and gas reserves in Llanos basin. The company is based in Bogota, Columbia. Deal Fi nanci al s Deal Value ($ milli on) 25 Valuation Multiples Information Commodity Daily Production Total (boe/d) 668.52 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (76) 9.1.1.3 AEI Services To Sell Its Interest In Operating Companies Table 31: AEI Services To Sell Its Interest In Operating Companies Deal Type Acquisition Deal Sub Type Majority Acquisition Deal in Brief AEI Services LLC (formerly Ashmore Energy International Limited), an energy company, entered into an agreement, to sell its equity interest in operating companies. Under the terms of the agreement, AEI will sell its 52.13% stake in Promigas S.A. E.S.P., a natural gas transmission and distribution company in Columbia, to Corporacion Financiera Colombiana S.A., a financial services company, 60% stake in Calidda, a natural gas distribution company in Peru, to EEB, 51% stake in Elektra Noreste, S.A., a power distribution company and 86.41% stake in Distribuidora de Electricidad del Sur SA de CV (DelSur), an electric utility company, to Empresas Públicas de Medellin E.S.P., a convergent utilities service provider, and 100% interest in ENS in Poland, to Kulczyk Investment House International S.a.r.l., an insurance company. Goldman, Sachs, & Co. and Banco Itau are acting as financial advisors to AEI with respect to the transaction. AEI intends to use the fund from the transaction to repay its financial debt and PIK notes. J im Hughes, CEO of AEI, said: "With these transactions and the value retained in the continuing business, the shareholders stand to realize total value for the company which is a significant increase over the proposed offering price for the unsuccessful initial public offering a year ago." Deal Rat ional e AEI intends to use the fund from the transaction to repay its financial debt and PIK notes. Deal Inf ormati on Deal St atus Announced Announced Dat e 19-J an-2011 Companies Informati on Acquirer Company Information Company Name Corporacion Financiera Colombiana Sa Busi ness Descri ption Corporacion Financiera Colombiana S.A. (Corficolombiana) is a Colombian financial institution. Its services are structured in five business areas: investment banking, treasury, private banking, portfolio investment and capital investment. Company Name Empresas Publicas de Medellin Busi ness Descri ption Empresas Publicas De Medellin E.S.P. (EPM) is a decentralized body, operational under the ownership of Medellin municipality. The company through its affiliates operates as a Group, mainly engaged in the business of electricity, water and telecommunications services. It is engaged in the electricity generation, transmission, and distribution services as well as gas distribution, wastewater treatment, and telecommunications services across the regions of the Antioquia, Bogota, Manizales, Armenia, Pereira, Bucaramanga, Cucuta, Barranquilla, Cartagena, Cali and Quibdo. It operates as a convergent utilities service provider and telecommunications company. Additionally, the company is also investing in electric generation within the Panama, and is participating in the sale of electricity to Ecuador. In addition, EPM also renders technical consulting services across several Latin American countries. Further, the group under its telecommunications service caters through EPM Telecomunicaciones UNE to the regions of the Colombia, the United States and Spain. The company is headquartered in Medellín, Colombia. Company Name Kulczyk Investment House International S.a.r.l. Busi ness Descri ption Kulczyk Investment House International S.a.r.l. (formerly known as Kulczyk Group International S.a.r.l) is a holding company. The company operates as the insurance company. Company Name Empresa De Energia De Bogota S.A. E.S.P. Busi ness Descri ption Empresa De Energia De Bogota S.A. E.S.P., is an electricity company engaged in the distribution and transmission of power. Vendor Company Informat ion Company Name AEI Services LLC Busi ness Descri ption AEI Services LLC (AEI) is a Houston based energy company. It is engaged in developing and operating its owned energy infrastructure business across the energy value chain in Latin America, Europe and Asia. In addition, it also provides natural gas transportation and related services to the residentials. AEI has the capacity to generate Electric power of 2,276 MW. It provides 4,900 miles of gas and liquids transportation and distribution pipelines and 21,800 miles of natural gas distribution pipeline networks . The company also has 121,000 miles of power distribution and transmission lines. Through its subsidiary companies GNC and SIE, AEI is also involved in the Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (77) fuel retail activities. The company is headquartered at Houston in Texas, the US. During 2010, the company entered into an agreement with Pampa Energia SA, to sell their 100% stake in Aeseba S.A., for a purchase consideration of $50 million. It also entered into an agreement to sell its equity interest of 52.13% stake in Promigas S.A. E.S.P. The company entered into an agreement with Iberdrola, S.A., to sell off its 99.68% stake in Elektro Eletricidade E Servicos SA (Elektro), a power generation, distribution and transmission company. Target Company Information Company Name Promigas S.A. E.S.P. Parent AEI Services LLC Busi ness Descri ption Promigas S.A. E.S.P. is a natural gas transmission and distribution company, engaged in the distribution and transportation of gas through a pipeline system owned by the company, from the fields of La Guajira to the terminus J obo in the department of Sucre, with a maximum carrying capacity of 475 MPCD. The company designs, builds, operates and maintains transport and distribution infrastructure and also has a portfolio of investments in transmission and distribution companies, natural gas, fuel and telecommunications. It also provides natural gas in the vehicle sector through compressed natural gas vehicle and Metrology laboratory services. Promigas is headquartered in Barranquilla, Colombia. Company Name Calidda Busi ness Descri ption Calidda is a company that owns a natural gas distribution concession in Lima and Callao, in Peru. Company Name Elektra Noreste, S.A. Parent Panama Distribution Group, S.A. Busi ness Descri ption Elektra Noreste, S.A. is a private company that is engaged in distribition of power and also owns substations. The company also offers voltage transformation, delivers the power to end consumers, meter reading, billing and collection services. The company is a 51%- owned subsidiary of Panama Distribution Group, S.A. Company Name Distribuidora de Electricidad del Sur SA de CV Busi ness Descri ption Distribuidora De Electricidad Del Sur Sa De Cv (Delsur) is a El Salvador based electric utility company. The company is principally engaged in the processing, distribution and marketing of electricity. Delsur is a subsidiary of Aei. The company distributes electricity over 5,296 miles distribution lines. Delsur through its New Business Elektra is engaged in the provision of construction and maintenance of substations and equipment, construction and maintenance of lines and low voltage, design and construction of electrical installations for interiors, studies of power quality problems, supply and installation of capacitor banks. The Company is Headquartered In san Salvador, El Salvador Deal Fi nanci al s Deal Value ($ milli on) 582 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (78) 9.1.1.4 Houston American Completes The Sale Of Hupecol Llanos and Hupecol Dorotea Table 32: Houston American Completes The Sale Of Hupecol Llanos and Hupecol Dorotea Deal Type Acquisition Deal Sub Type Majority Acquisition Deal in Brief Houston American Energy Corp., an energy company, completed the sale of an oil and gas companies, Hupecol Dorotea and Cabiona, LLC and Hupecol Llanos, LLC, for a total consideration of $281 million. Of the total consideration, the company received approximatly $200 million for Hupecol Dorotea and approximatly $81 million for Hupecol Llanos. The two companies hold interests in the Dorotea, Cabiona, Leona and Las Garzas blocks and related assets in Colombia. The sale represents only a partial sale of Houston American Energy's assets in Colombia, as the company will retain seven of its eleven concessions which are located in Colombia. Deal Inf ormati on Deal St atus Completed Announced Dat e 19-Aug-2010 Complet ed Dat e 02-Dec-2010 Companies Informati on Vendor Company Informat ion Company Name Houston American Energy Corp. Busi ness Descri ption Houston American Energy Corp. (Houston American Energy) is an independent energy company. The company is engaged in the exploration, development and production of oil and natural gas resources. At present, the company carries out its operations under two categories namely, domestic and international region. Under its domestic region it operates in Louisiana and Texas, both these properties are located on the onshore Gulf coast region of the US. While the company’s international projects are in Colombia, South America. The company is headquartered in Texas, the US. Target Company Information Company Name Hupecol Dorotea and Cabiona, LLC Busi ness Descri ption Hupecol Dorotea and Cabiona, LLC (Hupecol Dorotea and Cabiona) is a Colombia based oil and gas exploration company. It is principally engaged in operating Dorotea and Cabiona oil and gas blocks that are involved in oil and gas exploration. Hupecol Dorotea and Cabiona is headquartered in Colombia. Company Name Hupecol Llanos, LLC Busi ness Descri ption Hupecol Llanos, LLC (Hupecol Llanos) is a Colombia based oil and gas exploration and production company. It is principally engaged in operating and Las Garzas blocks that are involved in oil and gas exploration and production. Hupecol Llanos is headquartered in Deal Fi nanci al s Deal Value ($ milli on) 281 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (79) 9.1.1.5 Talisman Energy And Ecopetrol Acquires BP Exploration Company Colombia Table 33: Talisman Energy And Ecopetrol Acquires BP Exploration Company Colombia Deal Type Acquisition Deal Sub Type 100% Acquisition Deal in Brief Talisman Energy Inc., an oil and gas exploration and production company, and Ecopetrol S.A., a Colombia based national oil company, completed the acquisition of all of the issued and the outstanding shares of BP Exploration Company Colombia Limited (BPXC), an oil and gas company, from BP p.l.c., an energy company, for a purchase consideration of $1,750 million in cash. Under the terms of the agreement, Talisman acquired a 49% interest in BPXC, while Ecopetrol acquired the remaining 51% interest. Following the transaction, BPXC was renamed as Equion Energia Limited. Equion Energia assumes ownership of all assets and businesses that the BP subsidiary held in Colombia. Additionally, Equion Energia also assumes the interest that BP had in Oleoducto Central S.A.-Ocensa (24.8%), Oleoducto de Colombia (14.57%) and Oleoducto del Alto Magdalena (4.25%), as well as the 20% of Transgas de Occidente and the interest in Casanare gas plants. Pursuant to the transaction, Maria Victoria Riano Salgar will assume the role as president of Equion. BPXC’s assets include interests in five producing fields in four association contracts: Tauramena (31%), Rio Chitamena (31%), Recetor (50%) and Piedemonte (50%). The company also holds a 40.56% interest in the RC4 and RC5 exploration blocks which are located in offshore Cartagena; 24.8% interest in the OCENSA crude oil pipeline; and has interests in four pipelines and the Cusiana gas processing facility, totaling approximately 1,600 kilometers of crude and 400 kilometers of gas pipelines. Goldman, Sachs & Co. oHG, acted as financial advisor, while Slaughter and May,Gamboa & Chalela, Osler, Hoskin & Harcourt LLP, Shearman & Sterling LLP and Maples & Calder acted as legal advisors to Talisman Energy. Barclays Capital acted as financial advisor to BP. Slaughter and May,Gamboa & Chalela, Osler, Hoskin & Harcourt LLP and Shearman & Sterling acted as legal advisor and Goldman Sachs and Citigroup, Inc., acted as financial advisors to Ecopetrol with respect to the transaction. J avier Gutierrez Pemberthy, president of Ecopetrol, said: “This transaction strengthens our operations in Colombia, especially in the Piedemonte Llanero, identified as one the areas with greater potential in Colombia. The most important thing for us is that we incorporate to our group the knowledge and expertise of more than 400 people, who are well known for their capacity to operate in an efficient and safe way and who have received several awards and distinctions for their leadership at BP.” J ohn A. Manzoni, president and CEO of Talisman Energy, said: “These assets will be a cornerstone as Talisman looks to build a strong production base in Latin America over the next three to five years. We look forward to deepening our strategic relationship with Ecopetrol. Employees may be assured of our joint commitment as we work together to maximize the value of these assets and help the company grow . Those involved from all three companies should be very proud of their accomplishments in this transaction.” The transaction implies deal values of $40,000 per boe of daily production, $13.33 per boe of proved reserves and $10.2 per boe of 2P reserves. Deal history Completed: On J anuary 24, 2011, Talisman Energy and Ecopetrol completed the acquisition of all of the issued and the outstanding shares of BP Exploration Company Colombia from BP, for a purchase consideration of $1,750 million. Announced: On August 3, 2010, Talisman Energy and Ecopetrol agreed to acquire all of the issued and the outstanding shares of BP Exploration Company Colombia from BP, for a purchase consideration of $1,900 million. Deal Rat ional e The acquisition enables both Talisman Energy and Ecopetrol to increase their reserves and production and strengthen their transport and natural gas businesses and strengthens their position in Colombia. Deal Inf ormati on Deal St atus Completed Announced Dat e 03-Aug-2010 Complet ed Dat e 24-J an-2011 Companies Informati on Acquirer Company Information Company Name Talisman Energy Inc. Busi ness Descri ption Talisman Energy Inc. (Talisman Energy) is a Canada-based independent upstream energy company. Talisman Energy is one of the leading independent oil and gas producers in Canada. It engages in the exploration, development, production, transportation and marketing of crude oil, natural gas and natural gas liquids. The company and its subsidiaries operate primarily in North America, the UK, Southeast Asia, Scandinavia and Other areas, including Colombia, Peru, Algeria, Tunisia and Kurdistan region of Northern Iraq. The company produced 417,000 boe/d in fiscal 2010 and as at December 31, 2010, it held total proved reserves of gross 1,383 MMboe. Talisman Energy is headquartered in Calgary, Canada. Company Name ECOPETROL S.A. Busi ness Descri ption Ecopetrol S.A. (Ecopetrol) is one of the largest petroleum companies in Colombia. It is engaged in the exploration, production, transportation, supply and marketing of crude oil and natural gas. The company is amongst the top 40 largest petroleum companies in the world as well as the four major oil companies in Latin America. The company operates through four business units: Exploration and Production; Refining and Petrochemicals; Transportation; and Market and Supply. The company through its subsidiary, Ecodiesel Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (80) Colombia S.A. is increasing its presence in alternative energy market with expanding operations in biofuel and ethanol. It is headquartered in Bogota, Colombia Vendor Company Informat ion Company Name BP p.l.c. Busi ness Descri ption BP p.l.c. (BP) is one of the largest vertically integrated oil and gas companies in the world. Its business activities include the exploration and production of natural gas and crude oil; refining crude oil; manufacturing petroleum products; marketing refined products; construction and mining; and transportation of crude oil. The company also involves in the marketing and trading of gas and power, marketing of liquefied natural gas (LNG), natural gas liquids (NGLs) and low-carbon power generation. The company’s major brands include ARAL, ARCO, Castrol, ampm and Wild Bean Cafe. It has operations in more than 100 countries across six continents. BP is headquartered in London, the UK. Target Company Information Company Name BP Exploration Company (Colombia) Limited Advisor Information Company Being Advised Legal Advisor BP Exploration Company (Colombia) Limited Macleod Dixon LLP ECOPETROL S.A. Shearman & Sterling LLP Talisman Energy Inc. Osler, Hoskin & Harcourt LLP Slaughter and May Slaughter and May Osler, Hoskin & Harcourt LLP Maples & Calder Company Being Advised Financial Advisor BP p.l.c. Barclays Capital Inc. ECOPETROL S.A. Goldman, Sachs & Co. oHG Talisman Energy Inc. Citigroup Inc. Goldman, Sachs & Co. oHG Deal Financials Deal Value ($ million) 1,750 Deal Payment Cash ($ million) 892.50 Cash ($ million) 857.50 Valuation Multiples Information Commodity Daily Production Natural Gas (MMcf/d) 52.50 Total (boe/d) 25,000 Commodity 1P Reserves 2P Reserves Annual Production Reserve Life (Years) Natural Gas (Bcf) 180 235.20 0 9.39 Total (MMBoe) 75 98 0 8.22 Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (81) 9.1.2 Equity Offerings 9.1.2.1 Ecopetrol Plans To Issue Shares Table 34: Ecopetrol Plans To Issue Shares Deal Type Equity Offerings Deal Sub Type Secondary Offering Deal in Brief ECOPETROL S.A., an oil and gas company, intends to sell 10% of its shares, in a public offering. The company intends to use the proceeds from the offering to pay for recovery from torrential rains and floods. J uan Carlos Echeverry, finance minister of Colombia, said, “The proposal will be resubmitted to Congress soon and said the plan has the majority support of lawmakers. While the share issue could be for as much as 10% of Ecopetrol, the sale would likely take place in tranches as small as 1% at a time. The plan has to proceed through the legal steps and this will allow for the beginning of the sales toward the end of the year.” Deal Rat ional e The company intends to use the proceeds from the offering to pay for recovery from torrential rains and floods. Deal Inf ormati on Deal St atus Planned Announced Dat e 17-May-2011 Companies Informati on Target Company Information Company Name ECOPETROL S.A. Busi ness Descri ption Ecopetrol S.A. (Ecopetrol) is one of the largest petroleum companies in Colombia. It is engaged in the exploration, production, transportation, supply and marketing of crude oil and natural gas. The company is amongst the top 40 largest petroleum companies in the world as well as the four major oil companies in Latin America. The company operates through four business units: Exploration and Production; Refining and Petrochemicals; Transportation; and Market and Supply. The company through its subsidiary, Ecodiesel Colombia S.A. is increasing its presence in alternative energy market with expanding operations in biofuel and ethanol. It is headquartered in Bogota, Colombia Source: GlobalData 9.1.3 Debt Offerings 9.1.3.1 Ecopetrol Announces Public Offering Of Bonds For $18,094 Million Table 35: Ecopetrol Announces Public Offering Of Bonds For $18,094 Million Deal Type Debt Offerings Deal Sub Type Public Offering Deal in Brief Ecopetrol S.A., an integrated oil company, agreed to issue bonds in a public offering for gross proceeds of PHP800,000 million ($18,093.8 million).The company intends to use the proceeds from the offering to finance its 2010 Investment Plan. Ecopetrol expects to issue bonds in three series which includes Series A Peso-denominated variable IPC rate bonds, Series B Peso- denominated variable DTF rate bonds and Series C Peso-denominated fixed rate bonds. The nominal value for each series is PHP50 million ($1.13 million). The maturity date for the bonds are 5 years, 7 years, 10 years and 30 years and interest will be paid semiannually. Deal Rat ional e Ecopetrol intends to use the proceeds from the offering to finance its 2010 Investment Plan. Deal Inf ormati on Deal St atus Announced Announced Dat e 01-Dec-2010 Companies Informati on Target Company Information Company Name ECOPETROL S.A. Busi ness Descri ption Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (82) Ecopetrol S.A. (Ecopetrol) is one of the largest petroleum companies in Colombia. It is engaged in the exploration, production, transportation, supply and marketing of crude oil and natural gas. The company is amongst the top 40 largest petroleum companies in the world as well as the four major oil companies in Latin America. The company operates through four business units: Exploration and Production; Refining and Petrochemicals; Transportation; and Market and Supply. The company through its subsidiary, Ecodiesel Colombia S.A. is increasing its presence in alternative energy market with expanding operations in biofuel and ethanol. It is headquartered in Bogota, Colombia Deal Fi nanci al s Deal Value (PHP Mn) 800,000 Deal Value ($ milli on) 18,093.80 Securities Type Offered Bonds Source: GlobalData 9.1.4 Partnerships 9.1.4.1 Ecopetrol To Form Joint Venture With Six Partners Table 36: Ecopetrol To Form Joint Venture With Six Partners Deal Type Partnerships Deal Sub Type J oint Venture Deal in Brief ECOPETROL S.A., a petroleum company, entered into an agreement to form joint venture with Pacific Rubiales Energy Corp., an oil and gas exploration and production company, Petrominerales Colombia Ltd., an oil and natural gas energy company, HOCOL S.A., a hydrocarbon exploration and production company, Grupo C&C Energia (Barbados) Ltd., a subsidiary of C&C Energia Ltd., Rancho Hermoso S.A., a privately held Colombia-based oil production company, and Vetra Exploracion & Produccion Colombia S.A., an oil and gas company. The joint venture is named as Oleoducto Bicentenario de Colombia (OBC), under which Ecopetrol will hold a 55% stake and the other partners Pacific Rubiales, Petrominerales, Hocol, Grupo C&C Energia Barbados, Rancho Hermoso, and Vetra Exploracion & Produccion Colombia will hold 32.8%, 9.6%, 0.96%, 0.5%, 0.5% and 0.5% respectively. The new joint venture company will build and operate a 450,000 b/d oil pipeline system that will transport crude from Araguaney, in the Casanare Department of central Colombia, to the Covenas Export Terminal on the Caribbean Sea. The first phase includes a 40,000 b/d truck off-loading facility now under construction in Banadia, due for start up this month. The remaining phases include construction of the 120,000 b/d Araguaney-to-Banadia line and the 330,000 b/d Banadia-to-Coveñas line. Ecopetrol’s six partners paid a total of $139.5 million for their combined stakes. They will also put up $700 million for the $1.03 billion for the pipeline’s first phase, with 70% coming from loans and 30% from direct capital contributions. Deal Inf ormati on Deal St atus Announced Announced Dat e 15-Nov-2010 Companies Informati on Partner Company Informat ion Company Name ECOPETROL S.A. Busi ness Descri ption Ecopetrol S.A. (Ecopetrol) is one of the largest petroleum companies in Colombia. It is engaged in the exploration, production, transportation, supply and marketing of crude oil and natural gas. The company is amongst the top 40 largest petroleum companies in the world as well as the four major oil companies in Latin America. The company operates through four business units: Exploration and Production; Refining and Petrochemicals; Transportation; and Market and Supply. The company through its subsidiary, Ecodiesel Colombia S.A. is increasing its presence in alternative energy market with expanding operations in biofuel and ethanol. It is headquartered in Bogota, Colombia Company Name Pacific Rubiales Energy Corp. Busi ness Descri ption Pacific Rubiales Energy Corp. (Pacific Rubiales) is the largest independent oil and gas exploration and production company. The company is principally focusing on the exploration and production of heavy crude oil and natural gas. Pacific Rubiales is principally focusing on identifying opportunities within the Eastern Llanos Basin as well as in other areas in Colombia and northern Peru. The company's keys operating areas include Llanos basin of Colombia, Lower Magdalena Valley Basin of northwest Columbia, Upper and Middle Magdalena Valley Basins, Putumayo Basin at Southwest border of Columbia and Maranon Basin at Peru. The company also operates pipeline to transport crude oil from Rubiales to Monterrey Stations. The company is headquartered in Bogota D.C. in Columbia. Company Name HOCOL S.A. Parent ECOPETROL S.A. Busi ness Descri ption HOCOL S.A. operates as a hydrocarbon exploration and production company. It has exploration and oil operations in the upper and middle Magdalena valleys, including the San Francisco field, and Central Plains (Llanos) regions of Colombia, as well as in Lake Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (83) Maracaibo, Venezuela. Company Name Rancho Hermoso S.A. Busi ness Descri ption Rancho Hermoso S.A. is a privately held Colombia-based oil production company and is engaged in operating two oil fields located in the Casanare department of Colombia. Company Name Petrominerales Colombia Ltd Busi ness Descri ption Petrominerales Colombia Ltd (Petrominerales) is a oil and natural gas energy company. Petrominerales is engaged in exploration and production of oil and natural gas. The company has operations in western Canada and Colombia. Petrominerales Colombia is wholly owned subsidiary of Petrobank Energy and Resources Ltd. Currently, the company is operating through 12 active blocks. In fiscal year 2007, the company produced 1.74 million Boe (barrels of oil equivalent) of crude oil. The operating fields of the company include Corcel, Neiva, OPON-6 (P.E), and Orito, which are located in South and Central American region. The company is headquartered in Bogota, Colombia. Company Name C&C Energia Ltd Company Name Vetra Exploracion & Produccion Colombia S.A. Source: GlobalData 9.1.5 Asset Transactions 9.1.5.1 Parex Resources To Acquire Remaining 50% Interest In Four Blocks In Llanos Basin Table 37: Parex Resources To Acquire Remaining 50% Interest In Four Blocks In Llanos Basin Deal Type Asset Transactions Deal Sub Type Deal in Brief Parex Resources Inc., an oil and gas exploration company, through its subsidiary, entered into an agreement to acquire remaining 50% interest in four blocks in Llanos basin of Colombia, including block LLA-16 and the Kona discovery, from Remora Energy International LP, a Bermuda based oil and gas exploration and production company, for a purchase consideration of CAD245m ($254.78m). The four blocks include LLA-16 (78,772 net acres), LLA-20 (72,105 net acres), LLA-29 (34,943 net acres) and LLA-30 (58,636 net acres) in Llanos basin. Following the completion of the acquisition, Parex will have 100% working interest in all the four blocks and will be the operator of the blocks. The acquisition will enable Parex to double its production and operating income. The acquisition is expected to close no later than J une 29, 2011. The transaction implies deal values of $219,637.93 per boe of daily production, $49 per boe of 1P reserves, $26.54 per boe of 2P reserves, and $1,042.23 per net acre of land. Deal Rat ional e The acquisition will enable Parex to double its production and operating income. Deal Inf ormati on Deal St atus Announced Announced Dat e 20-Apr-2011 Expect ed Closing Date 29-J un-2011 % Acquired 50 Companies Informati on Acquirer Company Information Company Name Parex Resources Inc. Vendor Company Informat ion Company Name Remora Energy International, L.P. Busi ness Descri ption Remora Energy International, L.P. (Remora Energy) is an international exploration and production company. It is engaged in exploring, developing, drilling and producing oil and gas in 30 countries on 6 continents. Remora Energy is a joint venture of First Reserve Corporation, which is a private equity firm focused exclusively in the energy industry; and Nabors Industries. It is capable to partner with operators and national oil companies to invest in exploration and exploitation opportunities worldwide. It has Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (84) exploration and production operations in Colombia and is currently pursuing additional projects in South America and North Africa. Remora Energy is headquartered in Hamilton, Bermuda In 2008, the company had drilled 11 wells in which resulting in a 91% success rate and the addition of over 2,800 Bbl/d of net production. Deal Fi nanci al s Deal Value (CAD Mn) 245 Deal Value ($ mill ion) 254.78 Target Asset Information Asset Name Four Blocks - Columbia Asset Description The four blocks include LLA-16 (78,772 net acres), LLA-20 (72,105 net acres), LLA-29 (34,943 net acres) and LLA-30 (58,636 net acres) in Llanos basin of Columbia. Valuation Multiples Information Commodity Daily Production Total (boe/d) 1,160 Commodity Total (MMBoe) 0 5.20 0 0 Acreage Valuation Multiple Land (Acres) Transaction Implied Value ($ / Acre ) Source: GlobalData 9.1.5.2 Sagres Energy Acquires 90% Participating Interest In Llanos 11 Block Table 38: Sagres Energy Acquires 90% Participating Interest In Llanos 11 Block Deal Type Asset Transactions Deal Sub Type Deal in Brief Sagres Energy Inc., an oil and gas exploration company, through its wholly-owned subsidiary, completed the acquisition of 90% participating interest in the Llanos 11 block, from Stetson Oil & Gas Ltd. an oil and gas company. Under the terms, Sagres will be responsible for 100% of all costs required to be incurred by the operators under their respective exploration and production contracts with the Agencia Nacional de Hydrocarburos of Colombia for the duration of the first exploration phases. In addition, Sagres will be entitled to 98.5% of the net revenue from the block until it has recovered the cost of the 10% carried interest held by the operator. Pursuant to the transaction, Stetson retained the remaining 10% interest of Llanos 11, which consists of $9.5m of costs over a 36-month period. In addition, Mr. Stan Bharti has been appointed to the board of directors of Sagres as chairman replacing Mr. Gerold Fong. The Llanos 11 block covers an area of 51,190 gross hectares and is located in the Llanos basin of Colombia. Deal history Completed: On May 17, 2011, Sagres Energy completed the acquisition of 90% participating interest in the Llanos 11, from Stetson Oil & Gas. Announced: On April 20, 2011, Sagres Energy entered into an agreement to acquire 90% participating interest in the Llanos 11, from Stetson Oil & Gas. Deal Inf ormati on Deal St atus Completed Announced Dat e 20-Apr-2011 Complet ed Dat e 17-May-2011 % Acquired 90 Companies Informati on Acquirer Company Information Company Name Sagres Energy Inc. Busi ness Descri ption Sagres Energy Inc. is an oil and gas company. It holds interest in the Takutu Basin Petroleum Prospecting Licence in Guyana. Vendor Company Informat ion Company Name Stetson Oil & Gas Ltd. Busi ness Descri ption Stetson Oil & Gas Ltd. (Stetson) is a Canada based upstream oil and gas company. The company was formerly known as Arctos Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (85) Petroleum Corp and was founded in 2004. The company is engaged in the exploration and production of oil and gas properties in western Canada. The lands acquired by Stetson are in close proximity to very successful drilling for light oil in the Bakken Formation. In 2008, Stetson acquired interests in oil and gas mineral rights on the Fort Berthold Reservation in North Dakota. The company is headquartered at Calgary in Alberta, Canada. Target Asset Information Asset Name Llanos 11 Block - Columbia Asset Description The block covers an area of 51,190 gross hectares and is located in the Llanos basin of Colombia. Source: GlobalData 9.1.5.3 Sagres Energy Acquires 90% Participating Interest In Putumayo 3 Block Table 39: Sagres Energy Acquires 90% Participating Interest In Putumayo 3 Block Deal Type Asset Transactions Deal Sub Type Deal in Brief Sagres Energy Inc., an oil and gas exploration company, through its wholly-owned subsidiary, completed the acquisition of 90% participating interest in the Putumayo 3 block (PUT-03), from Vast Exploration Inc., an oil and gas company. Under the terms, Sagres will be responsible for 100% of all costs required to be incurred by the operators under their respective exploration and production contracts with the Agencia Nacional de Hydrocarburos of Colombia for the duration of the first exploration phases. In addition, Sagres will be entitled to 98.5% of the net revenue from the block until it has recovered the cost of the 10% carried interest held by the operator. Pursuant to the transaction, Vast retained the remaining 10% of PUT-03 during the first exploration phase, which consists of $12.9m of costs over a 36-month period. In connection with the transaction, Mr. Stan Bharti has been appointed to the board of directors of Sagres as chairman replacing Mr. Gerold Fong. The Putumayo 3 block covers an area of 148,000 gross acres and is located in the Putumayo basin of Columbia. Deal history Completed: On May 17, 2011, Sagres Energy completed the acquisition of 90% participating interest in the Putumayo 3 block (PUT-03), from Vast Exploration. Announced: On April 20, 2011, Sagres Energy entered into an agreement to acquire 90% participating interest in the Putumayo 3 block (PUT-03), from Vast Exploration. Deal Inf ormati on Deal St atus Completed Announced Dat e 20-Apr-2011 Complet ed Dat e 17-May-2011 % Acquired 90 Companies Informati on Acquirer Company Information Company Name Sagres Energy Inc. Busi ness Descri ption Sagres Energy Inc. is an oil and gas company. It holds interest in the Takutu Basin Petroleum Prospecting Licence in Guyana. Vendor Company Informat ion Company Name Vast Exploration Inc. Busi ness Descri ption Vast Exploration Inc. (Vast) is an independent upstream oil and gas company. It is engaged in the exploration, development, and production of conventional and non-conventional oil and gas reserves in Canada. The company started its ten well drilling program on the Paddle prairie Metis Settlement in Boyer, Alberta. The company is joint ventured with Samson Oil and Gas Inc. The company focuses on the principal asset, the Qara Dagh Block, in the Kurdistan refion of Iraq with partner Niko Resources Ltd. The Qara Dagh Block lies on trend with existing discoveries and is located in the prolific Zagros Fold Belt of Northern Iraq, which contains several large fields, including the Kirkuk field. The company is headquartered in Calgary, Canada. Target Asset Information Asset Name Putumayo 3 Block - Colombia Asset Description The block covers an area of 148,000 gross acres and is located in the Putumayo basin of Columbia. Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (86) 9.1.5.4 Reto Petroleum To Acquire 30% Undivided Working Interest In Fenix Exploration And Production Contract Table 40: Reto Petroleum To Acquire 30% Undivided Working Interest In Fenix Exploration And Production Contract Deal Type Asset Transactions Deal Sub Type Deal in Brief Reto Petroleum Limited, a private Cayman Island company, entered into an agreement to acquire 30% undivided working interest in the Fenix Exploration and Production contract, from Amerisur Resources plc, an oil and gas exploration and development company. Under the terms, Reto will fund the drilling, acquisition and processing program of the project in two phases. In the phase 1, Reto will fund the drilling of 10 wells on the project’s Isabel structure in exchange for a 20% undivided working interest in the contract. The phase 1 is subject to regulatory approvals and must be completed within 18 months. Upon satisfactory completion of Phase 1, Reto has an option to earn an additional 10% undivided working interest in the Fenix contract in exchange for the funding of 100% of the acquisition and processing of a seismic program of at least 75 line kilometers within the Fenix contract area. In the event that Reto does not exercise this right, it will fund 20% of this seismic program. Amerisur Exploracion Colombia, the Colombian branch of Amerisur Resources, will remain the operator of the contract. J ohn Wardle, CEO of Amerisur Resources, said, "I am very pleased to welcome Reto, whose principals have enjoyed great success in the Colombian E&P sector in the past and who bring a wealth of experience and background understanding to the Fenix contract. Your board believes this is a strong win-win deal for both parties, which will expose us to significant activity in the Fenix block without impacting upon progress or taking our focus away from our principal challenge this year, the development of the Platanillo asset. The terms of the agreement may also cover off our exploration commitments in the Fenix contract for the next two phases, which begin on 22nd April. Naturally this agreement also demonstrates the level of industry interest in Fenix, which we continue to believe has very significant potential. These work programmes will go a long way to defining and accessing that potential." Deal Inf ormati on Deal St atus Announced Announced Dat e 12-Apr-2011 % Acquired 30 Companies Informati on Acquirer Company Information Company Name Reto Petroleum Limited Busi ness Descri ption Reto Petroleum Limited is an energy and utilities company that is engaged in developing and producing oil and gas. The company is based in Columbia, Canada. Vendor Company Informat ion Company Name Amerisur Resources Plc Busi ness Descri ption Amerisur Resources plc (Amerisur Resources) is an an oil and gas exploration and development company. It is engaged in the exploration, development and production of oil and natural gas in onshore South America, principally Colombia and Paraguay. In Colombia, Amerisur is operating in two projects namely, Platanillo (100% working interest ) and Fenix (100% working interest ). In addition, Amerisur is also operating two oil and gas permits in the Paraguayan part of the Chaco and Parana basins, which are San Pedro Block (100% owned), and Curupayty Block (100% owned). The company is headquartered in Cardiff, the UK. Target Asset Information Asset Name Fenix Exploration And Production Contract - Columbia Asset Description The assets consist of 30% interest in Fenix Exploration and Production contract loacted in the Middle Magdalena basin of Columbia. Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (87) 9.1.5.5 Repsol To Acquire 50% Stake In Two Caribbean Offshore Blocks From Ecopetrol Table 41: Repsol To Acquire 50% Stake In Two Caribbean Offshore Blocks From Ecopetrol Deal Type Asset Transactions Deal Sub Type Deal in Brief Repsol YPF, S.A., an energy company, entered into an agreement to acquire 50% stake in RC-11 and RC-12 exploration blocks located off Caribbean coast from Ecopetrol S.A., a petroleum company. The RC-11 and RC-12 blocks cover an area of approximately 185,000 hectares (456,800 acres) and 135,000 hectares (333,590 acres), respectively. The agreement is subject to approval by ANH energy sector regulator of Colombia. Deal Inf ormati on Deal St atus Announced Announced Dat e 07-Apr-2011 % Acquired 50 Companies Informati on Acquirer Company Information Company Name Repsol YPF, S.A. Busi ness Descri ption Repsol YPF, S.A. (Repsol) is an integrated international oil and gas company. It engages in the exploration, development, and production of crude oil and natural gas; transportation of petroleum products namely, LPG and natural gas; and petroleum refining and production of petrochemical products. The company is also involved in the marketing of petroleum products, petroleum derivatives, petrochemicals, and natural gas for power generation. Geographically, the company operates in more than 30 countries and its major operational regions include Spain, Argentina, Bolivia, and Brazil. Repsol is headquartered in Madrid, Spain. Vendor Company Informat ion Company Name ECOPETROL S.A. Busi ness Descri ption Ecopetrol S.A. (Ecopetrol) is one of the largest petroleum companies in Colombia. It is engaged in the exploration, production, transportation, supply and marketing of crude oil and natural gas. The company is amongst the top 40 largest petroleum companies in the world as well as the four major oil companies in Latin America. The company operates through four business units: Exploration and Production; Refining and Petrochemicals; Transportation; and Market and Supply. The company through its subsidiary, Ecodiesel Colombia S.A. is increasing its presence in alternative energy market with expanding operations in biofuel and ethanol. It is headquartered in Bogota, Colombia Target Asset Information Asset Name RC-11 And RC-12 Exploration Blocks - Columbia Asset Description The RC-11 and RC-12 blocks cover an area of approximately 185,000 hectares (456,800 acres) and 135,000 hectares (333,590 acres), respectively, and are located off Caribbean coast of Columbia. Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (88) 9.1.5.6 Bolivar Energy To Acquire Additional 17.5% Interest In LLA-24 Block In Colombia Table 42: Bolivar Energy To Acquire Additional 17.5% Interest In LLA-24 Block In Colombia Deal Type Asset Transactions Deal Sub Type Deal in Brief Bolivar Energy Corp., an oil and gas exploration company, entered into an agreement to acquire an additional 17.5% interest in the LLA- 24 Block, Llanos Basin Colombia. Under the terms of the agreement, combined with the terms of its initial 17.5% farm-in, Bolivar agreed to pay 70% of the initial 3D seismic program and the first exploration well to earn a total 35% interest in the block. The LLA-24 Block is located in the central Llanos Basin and comprises of 147,000 gross acres (51,450 net).Following the completion of transaction, Bolivar will hold a total of 35% interest in the block. The completion of the transaction is subject to approval by the Agencia Nacional de Hidrocarburos. Deal Inf ormati on Deal St atus Announced Announced Dat e 21-Mar-2011 % Acquired 17.50 Companies Informati on Acquirer Company Information Company Name Bolivar Energy Corp. Busi ness Descri ption Bolivar Energy Corp. (formerly known as Benchmark Energy Corporation) is an energy company engaged in exploration of oil and gas. The company is focused on exploiting marginal oil fields. Benchmark Energy provides drilling services using Radial Drilling Technology. Benchmark Energy's strategy is to identify proven reserves that have the potential for increased production through technology and expertise. It carries out its operation in South America and North Africa. Bolivar Energy is headquartered in Calgary, Canada. Bolivar Energy, an oil and gas company, has sold 33.33% interest including 1.66% carried interest held by another party, in the offshore Cosmos concession in Tunisia, to a wholly owned subsidiary of Storm Ventures International, Inc. (SVI), an oil and gas company, for a cash consideration of $5.65 million. Target Asset Information Asset Name LLA-24 Block - Colombia Asset Description The LLA-24 Block is located in the central Llanos Basin, Colombia. The block comprises of 147,000 gross acres (51,450 net). Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (89) 9.1.5.7 Azabache Energy To Acquire 30% Working Interest In Antares Block From Petromar Table 43: Azabache Energy To Acquire 30% Working Interest In Antares Block From Petromar Deal Type Asset Transactions Deal Sub Type Deal in Brief Azabache Energy Inc., an oil and gas resource company, entered into an agreement to acquire 30% working interest in the Antares block and the E&P Contract, located in the Upper Magdalena basin, Colombia, from Petroleos Del Mar (Petromar). As part of the consideration, Azabache Energy will pay $1m in cash and will issue $1.1m of its common share upon completion of drilling operations in the first of two exploratory wells in the block. In addition, the company agreed to fund the drilling, completion and well testing of the exploratory wells, with an expected cost of $5m, and to issue $1m of its common shares to Petromar as a success fee upon commercial discovery in one of the exploratory wells. The block covers an area of more than 41,731 gross acres (169 square kilometres) and 12,500 net acres (50 square kilometres), and surrounds the Andalucia field, which has proved recoverable reserves of more than 12 mmbl of oil. Azabache expects to drill an initial two well on the Block before the end of 2011. Following the completion of the agreement, the block will continue to be operated by Petromar. The acquisition is subject to the completion of a due diligence process by each of Azabache Energy and Petromar, the execution of a definitive agreement and the receipt of all necessary regulatory approvals, including the approval of the TSX Venture Exchange Inc. The transaction implies deal value of $248 per acre of land. Deal Inf ormati on Deal St atus Announced Announced Dat e 21-Mar-2011 % Acquired 30 Companies Informati on Acquirer Company Information Company Name AZABACHE ENERGY INC Busi ness Descri ption Azabache Energy Inc (Azabache) is a junior energy company. The company is engaged in exploration, production of oil and natural gas properties. The company has its properties in South America and the Caribbean, with its initial focus on Argentina and Colombia. The company acquired an 89.5% of Argenta Oil and Gas T & T Limited. In the fiscal year 2008, the company also acquired working interests in three onshore blocks in Argentina referred to as Loma El Divisadero, Covunco, and El Corte.The company was formerly known as Argenta oil and gas. The company is headquartered at Toronto in Ontario, Canada. Deal Fi nanci al s Deal Value - Esti mated Minimum Value ($ million) 2.10 Maximum Value ($ million) 3.10 Deal Payment Cash ($ million) 1 Others ($ million) 1.10 Target Asset Information Asset Name Antares Block - Colombia Asset Description The block covers an area of more than 41,731 gross acres (169 square kilometres) and 12,500 net acres (50 square kilometres) and is located in the Upper Magdalena basin, Colombia. Valuation Multiples Information Acreage Valuation Multiple Land (Acres) Transaction Implied Value ($ / Acre ) Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (90) 9.1.5.8 Assam Company To Acquire 70% Interest In Colombian Oil Block Table 44: Assam Company To Acquire 70% Interest In Colombian Oil Block Deal Type Asset Transactions Deal Sub Type Deal in Brief Assam Company India Limited (ACIL), a company engaged in tea plantation, oil and gas exploration, production and supply, and road transportation, entered in to an agreement to acquire 70% working interest in the oil block called ANH EL Triunfo, located at Casanare in Colombia, from Sismopetrol S.A., a petroleum company and R3, a company that operates and manages the oil blocks, in exchange for ACIL drilling one well. The oil block consists of 10,200 hectares and contains one discovery well (La Cabana), which is located in Llanos basin. The work at the block is expected to commence by early J uly, 2011 and production of oil will commence from November 2011. ACIL will be the operator of the block, subject to the ANH approval, where in the company will pay 100% of the drilling and initial testing costs of the phase 5 commitment well in the block. L.B. Kondradoff, COO of ACIL-oil and gas project, said, "Growth in our oil gas division is anticipated to be significant in 2011. This entry into Columbian market is an exciting opportunity which fits well into our overall objective and strategy for the future." Deal Inf ormati on Deal St atus Announced Announced Dat e 24-Feb-2011 % Acquired 70 Companies Informati on Acquirer Company Information Company Name Assam Company India Limited Busi ness Descri ption Assam Company India Limited, formerly known as Assam Company Limited is a conglomerate group. The company through its subsidiaries is engaged in various business activities, such as oil and gas exploration, tea plantation and infrastructure. The company has one exploration block and four fields for development of Hydrocarbon in Assam and Nagaland. ACL conducts its business operations under three business areas, namely, Oil & Gas, Tea Plantation and Infrastructure and Development. Its tea plantation business carries through operating 16 factories, 19 tea estates and gardens. The company's Infrastructure and Development division focuses on development of Special Economic Zone (SEZ) to offer products and related services for Oil & Gas, Energy and Petrochemical in Gujarat. The company is headquartered in Kolkata, India. Vendor Company Informat ion Company Name Sismopetrol S.A. Company Name R3 Target Asset Information Asset Name Oil Block - Colombia Asset Description The ANH EL Triunfo consists of 10,200 hectares and contains one discovery well (La Cabana), which is located in Llanos basin, Colombia. Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (91) 9.1.5.9 Ecopetrol To Acquire 100% Stake In Cano Sur Block From Shell Exploration Table 45: Ecopetrol To Acquire 100% Stake In Cano Sur Block From Shell Exploration Deal Type Asset Transactions Deal Sub Type Deal in Brief Ecopetrol S.A., an integrated oil company, entered into an agreement to acquire the entire stake in the exploration of Cano Sur block, located in the Llanos Orientales basin, from Shell Exploration and Production Colombia Cano Sur GmbH. Upon completion of the transaction, Ecopetrol will retain 100% stake in the block and continue as operator to carry out anticipated investment programs associated with Cano Sur block. Cano Sur block covers an area of about 610,000 hectares, which is covered under the hydrocarbons exploration and exploitation contract signed in 2005 with the ANH. Deal Inf ormati on Deal St atus Announced Announced Dat e 14-Feb-2011 % Acquired 100 Companies Informati on Acquirer Company Information Company Name ECOPETROL S.A. Busi ness Descri ption Ecopetrol S.A. (Ecopetrol) is one of the largest petroleum companies in Colombia. It is engaged in the exploration, production, transportation, supply and marketing of crude oil and natural gas. The company is amongst the top 40 largest petroleum companies in the world as well as the four major oil companies in Latin America. The company operates through four business units: Exploration and Production; Refining and Petrochemicals; Transportation; and Market and Supply. The company through its subsidiary, Ecodiesel Colombia S.A. is increasing its presence in alternative energy market with expanding operations in biofuel and ethanol. It is headquartered in Bogota, Colombia Vendor Company Informat ion Company Name Shell Exploration and Production Colombia Cano Sur GmbH Target Asset Information Asset Name Cano Sur Block - Colombia Asset Description The Cano Sur block is located in the Llanos Orientales basin which covers an area of about 610,000 hectares. Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (92) 9.1.5.10 Life Sciences To Acquire 35% Interest In Exploration Block, Colombia Table 46: Life Sciences To Acquire 35% Interest In Exploration Block, Colombia Deal Type Asset Transactions Deal Sub Type Deal in Brief Life Sciences Institute, Inc., a provider of post secondary massage therapy training and oil and gas exploration and development company, entered into a non-binding letter of intent to acquire 35% interest in an exploration block, located in the Eastern Cordillera region of Colombia, from a private Colombian corporation. The exploration block covers an area of approximately 77,574 hectares and is located in the Eastern Cordillera basin, Southwest of Bogota, Colombia. The transaction is subject to due diligence towards the execution of a definitive binding agreement. Rob Thomas, president and chief executive officer of LSN, said: "Upon the successful conclusion of our due diligence related to the Colombian acquisition and completion of our obligations under the earn-in. We will have added a complimentary asset to our core project in the Williston Basin of Saskatchewan. The two areas could represent a compelling mix of opportunities for our shareholders. We look forward to the completion of the previously announced change of business, as well as the proposed name change to Quattro Exploration and Production Ltd. These events, in conjunction with the proposed drilling program in Saskatchewan, if successful, are believed to be the beginning of a foundation for the Company's strategic growth." Deal Inf ormati on Deal St atus Announced Announced Dat e 31-J an-2011 % Acquired 35 Companies Informati on Acquirer Company Information Company Name Life Sciences Institute, Inc. Busi ness Descri ption Life Sciences Institute, Inc. provides educational courses in massage therapy and sports training under the name Professional Institute of Massage Therapy. The company is headquartered in Alberta, Canada. Target Asset Information Asset Name Exploration Block - Colombia Asset Description The exploration block covers an area of approximately 77,574 hectares and is located in the Eastern Cordillera basin, Southwest of Bogota, Colombia. Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (93) 9.1.5.11 Bolivar Energy To Acquire 32.5% Interest In Arrendajo Block, Colombia Table 47: Bolivar Energy To Acquire 32.5% Interest In Arrendajo Block, Colombia Deal Type Asset Transactions Deal Sub Type Deal in Brief Bolivar Energy Corp. (formerly known as Benchmark Energy Corporation), an exploration company, agreed to acquire 32.5% interest in Arrendajo block, located in the Llanos basin, Colombia, from Pacific Rubiales Energy Corp., an producer of oil and natural gas, for a consideration of $9.94 million. Under the terms, Bolivar will pay $6.5 million cash in addition to reimbursing Pacific Rubiales approximately $3.44 million for its share of phase 5 and 6 costs already incurred. The Arrendajo block comprises 31,606 gross hectares (10,272 net) and offers multi-zone stacked potential. The block is located close to numerous producing fields in the Central Llanos basin which include: Las Abejas, Chaparrito, Los Toros, Palmarito, Sirenas, Corocora and Dorotea. The transaction is subject to subject to regulatory approval by the Agencia Nacional de Hidrocarburos (ANH) and by partners in the block. J ohn Moreland, president and CEO of Bolivar states: “Bolivar is very excited at the prospect of assuming a material ownership stake in the Arrendajo Block. We are encouraged by the technical merit and potential of the Block and look forward to near-term news flow from the expected Q1/2011 drilling of a well. We are pleased to have concluded this initial deal with Pacific Rubiales and look forward to a long and prosperous relationship with them in the future.” The transaction implies deal values of $391.62 per acre of land. Deal Inf ormati on Deal St atus Announced Announced Dat e 25-J an-2011 % Acquired 32.50 Companies Informati on Acquirer Company Information Company Name Bolivar Energy Corp. Busi ness Descri ption Bolivar Energy Corp. (formerly known as Benchmark Energy Corporation) is an energy company engaged in exploration of oil and gas. The company is focused on exploiting marginal oil fields. Benchmark Energy provides drilling services using Radial Drilling Technology. Benchmark Energy's strategy is to identify proven reserves that have the potential for increased production through technology and expertise. It carries out its operation in South America and North Africa. Bolivar Energy is headquartered in Calgary, Canada. Bolivar Energy, an oil and gas company, has sold 33.33% interest including 1.66% carried interest held by another party, in the offshore Cosmos concession in Tunisia, to a wholly owned subsidiary of Storm Ventures International, Inc. (SVI), an oil and gas company, for a cash consideration of $5.65 million. Vendor Company Informat ion Company Name Pacific Rubiales Energy Corp. Busi ness Descri ption Pacific Rubiales Energy Corp. (Pacific Rubiales) is the largest independent oil and gas exploration and production company. The company is principally focusing on the exploration and production of heavy crude oil and natural gas. Pacific Rubiales is principally focusing on identifying opportunities within the Eastern Llanos Basin as well as in other areas in Colombia and northern Peru. The company's keys operating areas include Llanos basin of Colombia, Lower Magdalena Valley Basin of northwest Columbia, Upper and Middle Magdalena Valley Basins, Putumayo Basin at Southwest border of Columbia and Maranon Basin at Peru. The company also operates pipeline to transport crude oil from Rubiales to Monterrey Stations. The company is headquartered in Bogota D.C. in Columbia. Deal Fi nanci al s Deal Value ($ milli on) 9.94 Target Asset Information Asset Name Arrendajo Block - Colombia Asset Description The Arrendajo block comprises 31,606 gross hectares (10,272 net) and offers multi-zone stacked potential. The block is located close to numerous producing fields in the Central Llanos basin which include: Las Abejas, Chaparrito, Los Toros, Palmarito, Sirenas, Corocora and Dorotea. Valuation Multiples Information Acreage Valuation Multiple Land (Acres) Transaction Implied Value ($ / Acre ) Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (94) 9.1.5.12 Repsol Exploracion To Acquire 30% Stake In Tayrona Block Table 48: Repsol Exploracion To Acquire 30% Stake In Tayrona Block Deal Type Asset Transactions Deal Sub Type Deal in Brief Repsol Exploracion Colombia S.A., an oil company and a subsidiary of Repsol YPF, S.A., signed an agreement to acquire 30% stake in the Tayrona block from Ecopetrol S.A., an integrated oil and gas company, and Petrobras Colombia Limited, an oil and gas exploration company. Tayrona block is located in the Caribbean coast of Colombia, and has an area of approximately 1,657,900 hectares. The block is covered by a hydrocarbon exploration and exploitation contract signed with the agency in mid-2004. Following the transaction, Ecopetrol will retain 30% stake and Petrobras will hold the remaining 40% stake in the block. This transaction is subject to authorization of the assignment of interests by the National Agency of Hydrocarbons. Deal Inf ormati on Deal St atus Announced Announced Dat e 05-J an-2011 Companies Informati on Acquirer Company Information Company Name Repsol Exploracion Colombia S.A. Vendor Company Informat ion Company Name ECOPETROL S.A. Busi ness Descri ption Ecopetrol S.A. (Ecopetrol) is one of the largest petroleum companies in Colombia. It is engaged in the exploration, production, transportation, supply and marketing of crude oil and natural gas. The company is amongst the top 40 largest petroleum companies in the world as well as the four major oil companies in Latin America. The company operates through four business units: Exploration and Production; Refining and Petrochemicals; Transportation; and Market and Supply. The company through its subsidiary, Ecodiesel Colombia S.A. is increasing its presence in alternative energy market with expanding operations in biofuel and ethanol. It is headquartered in Bogota, Colombia Company Name Petrobras Colombia Limited Parent Petroleo Brasileiro S.A. Busi ness Descri ption Petrobras Colombia Limited is an oil and gas extraction company. Target Asset Information Asset Name Tayrona Block- Colombia Asset Description Tayrona block is located in the Caribbean coast of Colombia, and has an area of approximately 1,657,900 hectares. Source: GlobalData Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (95) 10 Recent Devel opments 10.1 License Awards 10.1.1 May 18, 2011: InterOil Signs Two New Exploration Blocks In Colombia InterOil Exploration & Production ASA (InterOil) said that InterOil Colombia has signed the exploration blocks LLA 47 and COR 6 with the Colombian Hydrocarbon Agency (ANH) awarded in the Colombian licensing round 2010. The LLA 47 license is located in the prolific Llanos basin and covers an area of 447sq km. COR 6 is located in the Middle Magdalena Valley close to its existing producing licenses and covers an area of 399sq km. Two wells have been drilled in the COR-6 block in the Middle Magdalene Valley. Tijeras-1 well discovered oil in the upper Guadalupe formation and was abandoned after testing of 127bopd. A second well, Aleli-1, was stopped and abandoned prior to reaching the target. InterOil is committed to acquire 150sq km of 3D seismic and to drill two exploration wells during the initial exploration phase of 36 months. Two wells were drilled in the southernmost part of the LLA-47 block testing a structural closure at the C7 level. The Lince-2 well was a re-drill of Lince-1 and tested some 90bopd after experiencing technical difficulties. InterOil is committed to acquire 350sq km of 3D seismic and to drill eight exploration wells before September 2014. InterOil will use the next nine months to do more technical work in order to optimize the position of the 3D seismic surveys. The preliminary plan is to acquire the 3D seismic during early 2012 in order to start drilling late 2012. InterOil is the operator of the two blocks with 100% working interest. The company will consider farming-out part of the licenses. The company was initially offered three blocks in the 2010 ANH license round. 10.1.2 Apr 20, 2011: Vast Exploration Wins Oil And Gas Block In Colombia Vast Exploration Inc. (Vast Exploration) has signed a hydrocarbon exploration and production contract (E&P contract) with the Agencia Nacional de Hidrocarburos of Colombia (ANH) for oil and gas exploration block PUT-03 (block). The block was successfully won by the company during a bid round held on J une 22, 2010, in Cartagena, Colombia (bid). Vast Exploration has also agreed to farm-out a 90% interest in the block to wholly-owned subsidiary of Sagres in consideration for the company retaining a 10% carried interest during the first exploration phase (carried interest), which phase shall consist of a minimum expenditure of $12.9m over a 36 month period. The block has an area of 148,000 acres (gross) and is located in the Putumayo basin of Columbia. The block offers exploration upside on a structural trend with existing discoveries, and is situated strategically between two blocks (CAG-6 and PUT-09) awarded to Pacific Rubiales and Talisman Energy, respectively. The block carries a royalty of 7% payable to the government of Colombia in addition to the basic royalty scheme established under Colombia Law, being 8% for up to 5,000bopd and increasing to 25% for a 600,000bopd field. All other terms of the contract are standard to the model Colombian Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (96) E&P Contract. Sagres will have an option to acquire the company's carried interest in the block over the next twelve months at a price to be mutually agreed. In 2010, Vast Exploration entered into a letter of intent with a private company (Ontario Co.), whereby it would be granted a 90% interest in the block in consideration for paying to Vast Exploration a fee of $50,000, taking responsibility for 100% of the costs of the first exploration phase and reimbursing Vast Exploration for all expenses of the bid and granting Vast Exploration the carried interest (LoI). Ontario Co. was subsequently acquired by Sagres. Ahmed Said, president and CEO of Vast Exploration, said, "We are pleased with the successful award in Colombia. The Carried Interest provides our shareholders with additional upside potential, without committing additional capital and while keeping our strategic focus on our primary asset in Kurdistan." 10.1.3 Apr 08, 2011: Ecopetrol Signs Eight E&P Contracts Resulting From Colombia Round 2010 Ecopetrol S.A. (Ecopetrol) has signed eight exploration and production (E&P) contracts with the National Hydrocarbons Agency (ANH), corresponding to blocks awarded to the company in the Colombia Open Round 2010. The eight blocks cover a total area of more than 840,000 hectares and are located in the Llanos (provinces of Arauca, Casanare and Meta), Valle Medio del Magdalena (Cundinamarca and Caldas) and Sinu-San J acinto (Antioquia and Cordoba) basins, and the Pacific offshore. Ecopetrol has a 100% stake in six of the contracts. In the SSJ S 1 contract, its stake is 70%, with the other 30% belonging to SK Innovation Co. Ltd. In the VMM 32 contract, it holds a 51% stake, with the other 49% belonging to the CPVEN S.A. As for the other two blocks awarded to Ecopetrol in the Colombia Open Round 2010 (Cayos 1 and Cayos 5), the contracts will be signed once the ANH reinitiates the corresponding process, which requires a prior determination by environmental officials regarding the necessary conditions for carrying out exploratory activities in the areas where the blocks are located. Ecopetrol has a 50% stake in these blocks, in partnership with the Repsol and YPF. 10.2 Strategy and Business Expansion 10.2.1 Mar 31, 2011: Ecopetrol And Pacific Rubiales Energy Announce Agreement To Start Pilot Project Of Star Technology Ecopetrol S.A. (Ecopetrol) and Pacific Rubiales Energy have agreed to carry out a pilot project of the Synchronized Thermal Additional Recovery (STAR) technology, provided by Pacific Rubiales Energy, in the Quifa field in los Llanos Orientales, Colombia. The two companies, after a period of studies and tests in the research laboratories at the University of Calgary, have reached the conclusion that the implementation of in-situ combustion based technologies, such as STAR, is one of the best options to increase the recovery factor in the heavy oil fields of Colombia. Considering the above, the two companies acknowledge the importance of starting as soon as possible a pilot project under field conditions. This pilot project will be carried out in the Quifa field, Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (97) under the terms, conditions and obligations established in the existing Quifa association contract between the two companies. The reservoir characteristics in the Quifa field are similar to those of the neighboring Rubiales field. The companies agree that the technology could be extended to the Rubiales field, provided that both the pilot project in Quifa is judged to be successful, and the two parties reach satisfactory commercial terms in addition to all the aspects necessary to its commercial application in the Rubiales field. The STAR pilot project in Quifa aims to test the efficiency of the technology, to fine-tune the necessary operational parameters, and to establish the increase in the recovery factor that will lead to the commercial implementation of the technology. As part of this agreement, the two companies will proceed in the shortest possible time, to the definition of the required parameters for the implementation of the pilot project, as well as the basis for the following phases, including: •The design, duration and scope of the pilot project, and other tests to be carried out in the Quifa field. •The technical conditions under which the pilot project will be judged to be successful as well as other conditions that are deemed necessary to proceed to the implementation of STAR at commercial scale in the Quifa field. •Metapetroleum, Pacific Rubiales Energy's 100% owned affiliate, and the operator in the Quifa field, will start the construction of the production facilities, drilling of wells and equipment movements necessary to put the pilot project into operation. Ecopetrol and Pacific Rubiales Energy have agreed to subscribe all the necessary documentation to commence the STAR pilot project. 10.2.2 Mar 07, 2011: Petroamerica Oil Withdraws From Two Colombian Blocks Petroamerica Oil Corp. (Petroamerica Oil) said that it is withdrawing from the eastern Cordillera blocks, COR-12 and COR-14, in Colombia. This divestment reflects part of an ongoing portfolio restructuring plan by the company to focus on its lower to medium risk exploration properties, and on the Llanos basin in particular. Petroamerica Oil entered into a farmout agreement for the subject blocks with Green Power Corporation S.A. Colombia (Green Power) and Petrolera Monterrico S.A. Colombia, through Imore S.A., which later on became Petroamerica. The original farmout terms required Petroamerica Oil to carry 100% of the first exploration phase commitments for seismic and drilling up to a cap of $18,547,620 to earn a 50% participating interest in both blocks. By way of consideration for the withdrawal, the company will surrender to Green Power guarantees of $2.3m and will pay an additional sum of $5.5m to Green Power. The cost of withdrawing from these blocks is significantly less than the potential exposure the company could face to execute the required work programs. Furthermore, Petroamerica Oil's senior management does not see the cost and risk profile of these blocks as being a particularly good fit with the company's present size and strategy. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (98) 10.3 Other Significant Developments 10.3.1 May 15, 2011: Ecopetrol To Modernize Barrancabermeja Refinery In Colombia Ecopetrol S.A. (Ecopetrol) said that its board gave the green light to Phase 3 of the modernization project of the Barrancabermeja refinery (PMRB), for a total investment of $3,386m. As a result, operations will officially begin on the construction phase of the project, which is scheduled to commence operations in 2016. The project will enable the country's refinery to increase the conversion factor from 76–95%, which means that it will be possible to obtain more products, such as gasoline and diesel, and a greater quantity of heavy crudes will be processed, whose production has been increasing in Colombia in recent years. This project is expected to improve the refinery's profitability and supply the entire Colombian market without the need for any imports. The modernized refinery is expected to produce fuels of higher quality, which will help reduce pollution and lead to better air quality in Colombia, and place the country among the group of leaders in Latin America in the use of cutting edge technology, with operations that are reliable, safe, efficient and environmentally friendly, the company said. It is expected that the execution of this project will generate great benefits for Barrancabermeja, the region and the country in the form of training of skilled local labor, employment and contracting of goods and services, as well as greater tax revenues and transfers to the national, departmental and municipal governments. The Barrancabermeja refinery, which supplies nearly 80% of the fuels consumed in Colombia, is located in the department of Santander and has a crude processing capacity of 250,000bpd. 10.3.2 May 11, 2011: InterOil Re-Completes Altair-1 Well In Llanos Basin, Colombia InterOil Exploration & Production ASA (InterOil) has re-completed the Altair-1 production well in the Llanos basin, Colombia last week. Initial production during the first four days was 1,290bopd wide open. The well is now producing 610bopd with a 14/64" choke. InterOil decided to close in the Altair-1 well on J anuary 2, 2011. Originally Altair-1 was produced from two separate reservoir zones within the upper part of the main reservoir (C7). The water-cut increased during the first two months of operation up to a level of 85%. The well was therefore shut in. The re-completion of the well is now designed to isolate the lower zone and produce only the upper reservoir. Presently the well is producing 610bopd through a 14/64" choke, with a water cut of less than 1%. The company expects the production to decline over time and stabilize at 250–300bopd. 10.3.3 May 09, 2011: Petroamerica Oil Announces Balay-2 ST1 Well Test Results Confirming Significance Of Balay Discovery, Llanos Basin, Colombia Petroamerica Oil Corp. (Petroamerica Oil) announced that the Balay-2 ST1 appraisal well flowed from two perforated intervals in the Upper Mirador, 2,620 barrels of 26 degree API oil per day with 9.3% bulk sediment and water (BS&W) that is probably mainly completion fluid, under electro- submersible pump. The Balay-2 ST1 well also defined a deeper oil-down-to in the Upper Mirador reservoir. Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (99) Additionally, 145 barrels of heavy oil (13 degree API, waiting on laboratory confirmation) and water (10-16% BS&W) was recovered from the Barco Formation. No hydrocarbons were recovered from tests carried out in the Une and Gacheta reservoirs. Nelson Navarrete, president and CEO, said, “this is significant in terms of proving up recoverable oil volumes in the Balay structure, and more importantly, moving the project one step closer towards a commercial development.” The Balay discovery was announced on March 11, 2010 and the Balay-1 discovery well has been on long-term production test since J uly 14, 2010, producing more than 285,000 barrels of 28 degree API oil from the Upper Mirador Formation, with no measurable water (0.22% BS&W). The forward plan is to put the Balay-2 ST1 well on long-term test together with the Balay-1 well. A third well, Balay-3, is planned for the fourth quarter 2011 to appraise the northern extent of the Balay discovery. 10.3.4 Apr 19, 2011: Global Energy Plans New 3D Seismic Acquisition At Bolivar Association Contract Area Global Energy Development PLC (Global Energy) has begun planning the acquisition of 100sq km of new 3D seismic over the company's Bolivar association contract area. The company has previously reprocessed existing seismic over the contract area and made an exhaustive interpretation. The acquisition and interpretation of the new seismic data will enable the company to validate the previous interpretation and establish the optimum position of the future wells scheduled to be drilled on the contract area. Although the major structural elements of the block have been delineated using older vintage 2D seismic, the much higher resolution data gained from a 3D survey will identify the smaller features and ensure proper placement of lateral wellbores in the fractured reservoirs. Using the current "fairway" concept, it is necessary to locate the exact position of the various faults in order to identify areas of maximum natural fracture density. A portion of the 3D will be designed to image the Crisol gas cap, in order to determine the continuity and limits of that reservoir should the injection of associated gas become necessary in the future. The company has engaged Third Coast Enterpises, Inc. to aid in the design of an approximately 100sq km 3D survey and is currently in the process of soliciting bids for selection of an acquisition company. Once the design phase is finished and an acquisition company is selected, the company plans to move to the permitting and acquisition phase of the projects which is expected to take approximately one to two months. 10.3.5 Apr 18, 2011: Loon Energy Updates On Tuqueque-1X Well At Buganviles Block In Upper Magdalena Valley Basin, Colombia Loon Energy Corporation (Loon Energy) has provided an update on the status of the Tuqueque-1X well located in the Buganviles block, Upper Magdalena Valley basin, Colombia. Loon Energy has a 10% interest in the well and in the Buganviles block. Tuqueque-1X Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (100) The petrophysical evaluation of the upper part of the well indicated three prospective intervals in the Olini formation with aggregate potential hydrocarbon pay of 34ft and a prospective interval in the Montserrate Formation with potential hydrocarbon pay of 31ft.Three intervals, two in the Olini formation and one in the Montserrate formation, were perforated without any appreciable amounts of hydrocarbons flowing into the well. The rig has been released and the well has been suspended pending analysis of the testing results and a decision by the joint venture partners on further activity on the well. 10.3.6 Apr 15, 2011: Parex Resources Provides Update On Colombia Operations Parex Resources Inc. (Parex Resources) has provided an update on its operations activities in Colombia. Parex Resources's average working interest is 50% in its properties in Colombia. Light oil production from the Kona-1 well during March 2011 has averaged approximately 2,520bopd (company working interest before royalty (net) 1,260bopd) with a water cut of approximately 5% on natural flow. For the first three months of 2011, Parex Resources's sales and production volumes averaged approximately 1,145 and 1,160bopd net respectively. Cumulative Kona-1 production from December 2010 to March 31, 2011 is approximately 264,000 barrels of light oil (132,000 barrels net). The company's operating netback has increased along with the increase in world oil prices. During March 2011 the company estimates its operating netback, defined as net revenue less field operating costs on a per barrel basis, was approximately $64 per barrel, compared to $56 per barrel reported for the fourth quarter of 2010. In May 2011, Parex Resources expects to complete the construction of the Kona oil treatment plant with a capacity of 25,000bfpd located on the Kona-1 lease. Clean oil from the oil treatment plant will be piped 7km to the oil loading facility located on the region's main paved road allowing for all-season tanker truck access. After commissioning of the oil treatment plant and drilling a shallow zone water disposal well on the Kona-Norte location, the company will temporarily shut-in Kona-1 which is producing on natural flow and install an electric submersible pump to maintain production at an expected level of approximately 2,000bopd (net 1,000bopd). The commissioning of the Kona oil treatment plant and water disposal well is also expected to allow for the production start-up of other Kona wells that exhibit poor cement isolation from water bearing zones thereby prohibiting dry oil production, but which are capable of production and are currently shut-in. Southwest of the Kona field on block LLA-16 along a separate fault trend the Supremo-1 well is expected to commence oil production in early May 2011 following the completion of a water disposal well and associated handling facilities. This well had previously tested approximately 2,500bfpd from the Mirador formation, with a 31 degree API oil rate of 500bopd (net 250bopd). Based on test results or log analysis of Kona-1, Kona-2, Kona-3, Kona-4 and Supremo-1 and upon the commissioning of the Kona oil treatment plant and the water disposal wells, Parex expects production of approximately gross 4,000-6,000bopd (net 2,000-3,000bopd). Kona Field Drilling Update In March 2011 a drilling rig re-entered the Kona-2 well to drill out below the existing casing to redrill the Gacheta formation potential oil pay and prepare to complete this deeper zone. Depending on the Gacheta formation testing results the company may move up hole to remediate, complete and test the Mirador formation. The Mirador was initially tested in the Kona-2 well and Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (101) flowed naturally up to a rate of approximately 3,000bfpd, comprising 1,600bopd (net 800bopd) of 35 degree API oil plus 1,400 barrels of water per day. The Kona-3 well was drilled in J anuary 2011 and was designed to evaluate the northern extent of the Kona field. Initial evaluation of well logs indicates potential net oil pay, measured as true vertical depth, of 20ft in the C7 formation and 40ft in the Mirador formation, which was consistent with the company's pre-drill expectations. During March 2011 the Mirador formation was tested and the recovered fluid was on average 40% oil of a quality consistent with oil recovered in Kona-1 and Kona-2 wells. Cement bond logs indicated that there was poor cement across the pay zone and therefore the 40ft of prospective oil pay section was not isolated from the underlying wet reservoir. Remediation attempts were unsuccessful and the company suspended the zone and moved up hole to the C7 formation. The C7 formation was completed and tested at approximately 750bfpd, with a 42% light oil cut. An electrical submersible pump will be installed to produce the C7 formation. The company is of the opinion that the initial water production from the C7 formation may be caused by poor cement isolation from water bearing zones. On March 1, 2011, the Kona-4 well was spud. Kona-4, located approximately 420m south of Kona- 2, was drilled to a total measured depth of 12,827ft and evaluated the C7, Mirador, and Gacheta formations. Logging-while-drilling tools indicated potential net oil pay of 20ft and 30ft in the C7 and Mirador formations respectively, consistent with the company's pre-drill expectations, while the Gacheta formation was evaluated as wet. The well has been cased and the Mirador formation will be completed. Parex Resources has skid a drilling rig and has spud Kona-6, which is being drilled as an appraisal well for the C7 formation which has not yet been tested in either of the Kona-1 or Kona-2 wells. Log analysis of the C7 formation has indicated 35ft and 50ft of potential net oil pay in the C7 on Kona-1 and Kona-2 respectively. Colombia Exploration Update On J anuary 19, 2011 the Kopi-1 well was spud and was drilled to a depth of 10,993ft. The Mirador formation tested wet and the C7 tested low swab rates of 31 degree API oil. Due to the low flow rates the well was acidized and subsequently produced 100 percent water. As Parex Resources believes the testing results were inconclusive, the well has been suspended. Parex is currently evaluating the potential to drill an exploratory sidetrack well up-dip from Kopi-1. The company's next new exploration drilling prospects on block LLA-16 are Sulawesi-1 and J ava- 1. Both these prospects are defined by 3D seismic and are programmed to test multi-zone targets with drilling depths of 11,000ft and 12,000ft respectively. Both these prospects are located on the same fault trend as the Kona discovery. Lease construction is complete on the Sulawesi prospect. As previously disclosed, Parex Resources intends to drill an exploratory well, Supremo-2 to test the potential up-dip of the Supremo-1 well. This well is expected to spud mid year 2011. For the remainder of 2011, Parex Resources's drilling strategy is to utilize two to three drilling rigs and a service rig to allow for continuous operations on the Kona discovery and on additional block LLA- 16 and LLA-20 drilling prospects. Reserves Update For Colombia Kona Discovery Notwithstanding the Kona-4 well has been deemed successful with internal log analysis calculating approximately 50ft of potential oil pay in the C7 and Mirador formations, the company's independent engineer GLJ Petroleum Consultants Ltd. (GLJ ) had ascribed probable reserves in Colombia Gas Markets Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (102) the company's December 31, 2010 oil and gas reserve report (December 31, 2010 Evaluation) that projected thicker potential pay zones in the C7 and Mirador and anticipated oil pay in the Gacheta formation. 10.3.7 Apr 13, 2011: Petro Vista Energy To Test Morichito-5b Exploration/Appraisal Well In Llanos Basin, Colombia Petro Vista Energy Corp. (Petro Vista Energy) has announced that the Morichito-5B well in Colombia has reached total depth and production casing is being run to evaluate oil and gas shows encountered in the Tertiary Carbonera and Mirador and Cretaceous Guadalupe, Gacheta, and Ubaque formations. This Morichito-5B was drilled from the company's original M-5 (2010 discovery) drilling pad and deviated approximately 1,200ft to the southwest of the original well. The well was drilled to a total depth of 6,855ft in the Paleozoic. During drilling mud-log shows were encountered in the Carbonera C7, Mirador, Guadalupe, Gacheta, and Ubaque formations. Subsequent petrophysical analysis of electric logs indicated multiple potential pay zones. The Carbonera C7 zone is equivalent to and 6ft structurally high to the 5,900 foot zone in the Morichito M-5 well which swabbed at a rate of 375bopd of 23 degree API oil with no water cut (see news release dated March 25, 2010). A decision has been taken with partners Green Power Corporation and Golden Oil Corp. to run 7" production casing and test at least two zones. Petro Vista Energy expects testing to commence approximately May 1, 2011 and take 15-20 days to complete. Assuming success and the receipt of necessary permits, this well will be placed on a long-term production test along with the existing M5 discovery well on which a work-over rig is being mobilized with testing to commence approximately April 28, 2011. The Morichito-5B well was drilled as a deeper pool wildcat and fulfills the company's Phase V contract commitment with the Colombian National Hydrocarbon Agency (ANH). Appendix Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (103) 11 Appendi x 11.1 Abbreviations BCM- Billion cubic meters Bcf- Billion Cubic Feet BOPD- Barrels of oil per day MBoe- Million Barrels of Oil Equivalent Mcf- Thousand cubic feet MMcf- Million Cubic Feet MMbbls- Million Barrels of Oil MMBTU- Million British thermal units MMTPA- Million Metric Tonnes per Annum (1 MMTPA =20081.55 BOPD) Tcf- Trillion cubic feet 11.2 Methodology GlobalData’s dedicated research and analysis teams consist of experienced professionals with marketing, market research and consulting backgrounds in the energy industry, and advanced statistical expertise. GlobalData adheres to the codes of practice of the Market Research Society (www.mrs.org.uk) and the Society of Competitive Intelligence Professionals (www.scip.org). All GlobalData databases are continuously updated and revised. 11.2.1 Coverage The objective of updating GlobalData’s coverage is to ensure that it represents the most up-to- date vision of the industry possible. Changes to the industry taxonomy are built on the basis of extensive research of company, association and competitor sources. Company coverage is based on three key factors: market capitalization, revenues and media attention/innovation/market potential.  An exhaustive search of 56 member exchanges is conducted and companies are prioritized on the basis of their market capitalization  The estimated revenues of all major companies, including private and governmental, are gathered and used to prioritize coverage  Companies which are making the news, or which are of particular interest due to their innovative approach, are prioritized Appendix Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (104) GlobalData aims to cover all major news events and deals in the energy industry, updated on a daily basis. The coverage is further streamlined and strengthened with additional inputs from GlobalData’s expert panel (see below). 11.2.2 Secondary Research The research process begins with exhaustive secondary research on internal and external sources being carried out to source qualitative and quantitative information relating to each market. The secondary research sources that are typically referred to include, but are not limited to:  Company websites, annual reports, financial reports, broker reports, investor presentations and SEC filings  Industry trade journals and other literature  Internal and external proprietary databases  National government documents, statistical databases and market reports  News articles, press releases and web-casts specific to the companies operating in the market. 11.2.3 Primary Research GlobalData conducts hundreds of primary interviews each year with industry participants and commentators in order to validate its data and analysis. A typical research interview fulfills the following functions:  It provides first-hand information on the market size, market trends, growth trends, competitive landscape, and future outlook  It helps in validating and strengthening the secondary research findings  It further develops the analysis team’s expertise and market understanding Primary research involves email interactions and telephone interviews, as well as face-to-face interviews for each market, category, segment and sub-segment across geographies The participants who typically take part in such a process include, but are not limited to:  Industry participants: CEOs, VPs, business development managers, market intelligence managers and national sales managers  Outside experts: investment bankers, valuation experts, research analysts and key opinion leaders specializing in oil and gas markets. 11.2.4 Expert Panel Validation GlobalData uses a panel of experts to cross-verify research and forecast methodologies and drive its analytical content. The GlobalData expert panel comprises marketing managers, product specialists, international sales managers from energy companies, academics and geologists from research universities, consultants from venture capital funds and distributors/suppliers of oil and gas goods and services. Details of the makeup of the expert panel can be viewed through our website, and are available to clients on request. Appendix Col ombia Gas Markets, 2011 Source www.oilandgasetrack.com ©GlobalData. This report is a licensed product and is not to be photocopied GDGE0169CAR / Publi shed JUN 2011 Page (105) 11.3 Contact Us If you have any queries about this report or would like further information, please contact us using the following telephone numbers or email address.  North America: +1 646 395 5460  Europe: +44 207 406 6653 (or) +44 1204 543 523  Asia-Pacific: +91 40 6616 6700  Email: [email protected] 11.4 Disclaimer All Rights Reserved. No part of this publication may be reproduced, stored in a retrieval system or transmitted in any form by any means; electronic, mechanical, photocopying, recording or otherwise, without the prior permission of the publisher, GlobalData. The facts of this report are believed to be correct at the time of publication but cannot be guaranteed. Please note that the findings, conclusions and recommendations that GlobalData delivers will be based on information gathered in good faith from both primary and secondary sources, whose accuracy we are not always in a position to guarantee. As such, GlobalData can accept no liability whatsoever for actions taken based on any information that may subsequently prove to be incorrect.