Oil Goods and Services Office of the Vice Presidency of Foreign Investment
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Oil Goods and Services Office of the Vice Presidency of Foreign Investment
Hydrocarbons
During the last century, oil was the energy
engine that drove the world economy.
There is therefore a high level of dependence
on this resource, creating an intense demand for a
finite good that is increasingly difficult to acquire.
In response to this high demand, oil-producing
countries have worked to increase their capacity
and seek new reserves to meet their fossil fuel
needs.
Colombia fits this profile as an oil-producing
country with strong growth trends and an outlook
that attracts investors from around the world.
OUTLINE
Structure of the Global Hydrocarbon Sector
Structure of the Colombian Hydrocarbon Sector
Oil Goods and Services Value Proposal
Legal Incentives for Investment
World Oil Production (2010)
Major Oil-Producing Countries
# COUNTRY BARRELS*
1 Russia 10,270
2 Saudi Arabia 10,007
3 United States 7,513
4 Iran 4,245
5 China 4,071
6 Canada 3,336
7 Mexico 2,958
8 United Arab Emirates 2,849
9 Kuwait 2,508
10 Venezuela 2,471
-- ---------- -----------
25 Colombia 801
*Thousands of barrels of oil per day Total Latin American production is 6,701,000 BDP.
Source: BP Statically Review of World Energy, June 2011
0
500
1000
1500
2000
2500
3000
3500
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Argentina Colombia Ecuador Brazil Venezuela Peru
Colombia has become the
region's third largest producer.
Historical Evolution of Production in Latin America
History of Oil Production 2000-2010
Source: BP Statically Review of World Energy, June 2011
World Oil Reserves (2010)
Main Countries with Reserves
# COUNTRY BARRELS*
1 Saudi Arabia 264.52
2 Venezuela 211.17
3 Iran 137.01
4 Iraq 115.00
5 Kuwait 101.50
6 United Arab Emirates 97.80
7 Russia 77.40
8 Libya 46.42
9 Kazakhstan 39.83
10 Nigeria 37.20
-- ---------- -----------
38 Colombia 1.90
*Billions of Barrels of Oil Total Latin American reserves amount to
237,200,000,000 BP. Source: BP Statically Review of World Energy, June 2011
World Natural Gas Production (2010)
Major Gas-Producing Countries
# COUNTRY METERS*
1 Canada 159.8
2 Iran 138.5
3 Qatar 116.7
4 Norway 106.4
5 China 96.8
6 Saudi Arabia 83.9
7 Indonesia 82.0
8 Algeria 70.5
9 The Netherlands 66.5
10 Malaysia 61.3
-- ---------- -----------
39 Colombia 11.3
*Billions of Cubic Meters Total Latin American production is 124.8 billion
cubic meters. Source: BP Statically Review of World Energy, June 2011
Historical Evolution of Production in Latin America
0
5
10
15
20
25
30
35
40
45
50
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
Argentina Colombia Bolivia Brazil Venezuela Peru
History of Gas Production 2000-2010
Source: BP Statically Review of World Energy, June 2011
The Largest Oil Companies in the World
1)
2)
3)
4)
5)
6)
7)
8)
9)
10)
Saudi Aramco Saudi Arabia
National Iranian Oil
Company Iran
ExxonMobil USA
Petróleos de
Venezuela S.A. Venezuela
China National
Petroleum Corp. China
British Petroleum United Kingdom
Royal Dutch Shell The Netherlands
Chevron Corporation USA
ConocoPhillips
Corporation USA
Total France
Ranking determined by number of gas and oil reserves, refinery distilling capacity, and total sales of refined products.
Source: Energy Intelligence Research and Advisory
Oil Sales by Type
In the world of oil trading, there are two major oil price benchmarks, WTI and Brent, which define the value
of a barrel of oil based on market estimates. One barrel of oil is currently valued in the USD 100 range.
West Texas Intermediate is a sales average for oil
produced in the West Texas oilfields.
This benchmark serves as a point of reference for
oil-producing countries in the Americas (including
Colombia), as well as some Asian Pacific markets.
The Brent benchmark is a sales average of crude oil
sourced from the North Sea. This is a light crude oil,
although not as light as WTI oil. This type of oil has some
of the lowest calorific values.
Oil production in Europe, Africa and the Middle East
tends to be sold according to Brent crude oil barrel price.
BRENT WTI
Source: Trading Economics
Global Hydrocarbon Market Expectations
Population growth and income growth are the two most
powerful factors driving energy demand.
Global integration processes are expected to continue
in the next 20 years, with rapid growth among low-income,
developing economies.
The world's population has grown by 1.6 billion people
in the last 20 years; it is expected to grow by another 1.4
billion in the next 20 years.
The fundamental relationship between energy and the
economy will become even stronger. People with higher
incomes will spur production and consumption will
continue to increase.
OUTLINE
Structure of the Global Hydrocarbon Sector
Structure of the Colombian Hydrocarbon Sector
Oil Goods and Services Value Proposal
Legal Incentives for Investment
Colombia's Oil Rush
Oil production has increased 69% from 551,000
bpd in 2004 to 929,000 bpd in July 2011, nearly
reaching the goal of one million bpd set by the
Colombian government.
Exploratory activity is robust. More than 570
wells are expected to be drilled in 2014, most
in Vichada and the open sea.
In 2003, only 4.8% of exploratory wells were
successful. Today, that figure has exceeded
30%.
The price of oil has created an incentive for
growing and developing this industry around the
world and specifically in Colombia.
Source: Ministry of Mines and Energy
Government Goals for the Hydrocarbon Sector
Sign new oil exploration and exploitation contracts
Drill new exploratory wells
Increase average daily crude oil production by December 31,
2014.
Increase average daily natural gas production by December
31, 2014.
Increase fuel refining capacity in Colombia
197 205
340 570
830 Kbpd 1,115 Kbpd
1,100 Mcfd 1,350 Mcfd
80 Kbpd 165 Kbpd
2014 Goal 2010
Results
To expand hydrocarbon exploration and exploitation by
building the infrastructure needed to ensure the supply of
these products.
Source: Ministry of Mines and Energy
Oil GDP and Sector FDI
FDI in Colombia by Sector,
2009 – 2010
OIL 35.6%
Mines and Quarries 34,416%
Financial Services 11,223%
Manufacturing 7,922%
Trade, Rest. and Hotels
7,282%
Construction 3,523% 8.1%
91.9%
Oil and Mines
Other
Colombian GDP by Sector,
2010
Source: DANE - Bank of the Republic
Cumulative 2009-2010 investment in the
oil sector: USD 5.29 billion
Colombian Land Map as of April 2011
Yellow Areas: Exploration
Red Areas: Exploitation
Purple Areas: Technical Evaluation
Colombia offers an attractive value proposal
for oil sector investment:
Unexploited potential estimated at 47 billion
barrels of oil reserves.
The Colombian government encourages
and facilitates private investment in the oil and
gas sectors through direct investment.
Colombia's new Royalties and Taxes
Contract is among the most attractive in the
world.
Qualified technical and professional labor.
Source: ANH
Hydrocarbon Sector Value Proposal
Regulatory Entities in the Hydrocarbon Sector
Responsible for coordinating,
executing and overseeing public
governmental policies related to mining
and energy resources.
Administers the country's hydrocarbon-
producing areas, assigning them for
exploration and exploitation. Evaluates the
country's hydrocarbon potential.
Sector Associations
Ecopetrol: State Oil Company
Ecopetrol S.A. is the largest company in Colombia and the
leading oil company in the country. It controls almost 80% of
the market. Ecopetrol S.A. is among the 39 largest oil
companies in the world and within the top five in Latin
America.
The company's assets include hydrocarbon extraction
fields in the center, south, east and north of Colombia, two
refineries, ports for importing and exporting fuel and crude on
both coasts, and a transportation network of 8,500 kilometers
of pipelines throughout the country connecting production
systems with large consumption centers and maritime
terminals.
Ecopetrol S.A. is a leader in Colombia and an essential
partner for exploring and producing hydrocarbons.
Other Large Producers
Canacol Canada
Petrobras Brazil
Petrominerales Canada
Occidental
Petroleum Co. USA
Second Largest
Producer
Mansarovar China - India
Hocol Colombia
Talisman Canada
OUTLINE
Structure of the Global Oil Sector
Structure of the Colombian Oil Sector
Oil Goods and Services Structure and Value Proposal
Legal Incentives for Investment
Establishing companies dedicated to oil
service delivery and supplying the goods
required for hydrocarbon production to meet
the growing local demand for oil in addition to
the dynamics of neighboring countries from a
geo-regional platform.
Colombia, an investment destination for . . .
Ecopetrol estimates that Colombia could have up to 47 billion barrels of oil in reserves. More than 80% of Colombia's territory has not been explored.
Colombia is now the third largest oil producer in Latin America. The country's production increased 69% between 2004 and July 2011, when 929,000 bpd
were produced.
Ecopetrol is increasing its hydrocarbon refining capacity at plants in Barrancabermeja and Cartagena. Talks are also under way to build
petrochemical plants.
In light of growing hydrocarbon production in Colombia, there is a large demand for both land and pipeline transportation services. Current capacity is
insufficient to meet this demand.
Colombia provides investors a stable, predictable business environment and a solid legal system. Colombian law gives local and foreign investors equal
rights.
Colombia has it all!
On the international level, this sector generated
USD 177.6 billion in 2009. Platform construction
and drilling equipment were the most lucrative
sectors, representing USD 55 billion.
According to forecasts by Datamonitor, this
market will be slowing down at an average annual
rate of 4.1% through 2014.
A directly proportional relationship can be
observed between oil prices and investment flows
along the hydrocarbon value chain. Planning for
the entire sector is based on the behavior of barrel
market prices.
The Global Oil Goods and Services Sector
Source: Datamonitor 2009
This sector consists of the goods and services needed along the hydrocarbon
production value chain.
UPSTREAM DOWNSTREAM
TRANSPORT AND
STORAGE
(Midstream)
REFINING EXPLORATION PRODUCTION
Oil Goods and Services Sector
Field geology and
prospecting.
Seismic studies.
Drilling.
Cementing.
Well registry.
Completion.
Crude transport to
refineries or ports:
-Ground transportation
(truck, rail)
-Maritime
transportation
-Pipeline
Processing and
storage.
Storage and blending.
Separation.
Catalytic conversion.
Heavy load conversion.
Petrochemical
conversion.
Extraction system.
Separation of gas
and crude.
Process plant.
TR
AN
SP
OR
T A
ND
ST
OR
AG
E
(En
d)
Operational and General Maintenance Services along the Chain
13%
5%
5%
4%
4%
69%
Schlumberger Limited
Baker Hughes Inc
Smith International
Halliburton Company
Weatherford International
Otros
Sector Participation
According to Datamonitor, the top
five players on the world market
control more than 30% of the
global sector market. These
companies provide
comprehensive services for the
entire value chain.
These five leading companies are
already active in Colombia and have
been classified according to their
operating income from 2010.
Source: Datamonitor – BPR Benchmark
Global Oil Goods and Services Participation,
2009
Oil Goods and Services in Colombia, 2010
Revenue
19%
16%
11% 11%
2%
41% Schlumberger Limited
Halliburton Latin America
Baker Hughes
Wheatherford
Smith International SA
Other
The world's largest oil goods and services
companies are already active in Colombia.
The local market is receptive to small and
medium businesses that meet specific needs
along the production chain.
In terms of goods, Colombia has the metal and
mechanical potential to develop products
required by exploratory companies and
producers.
Sector Strategy
Local Market
Business Landscape within the Oil Goods and Services Industry
180 companies dedicated to
supplying oil goods and services
in Colombia
114 dedicated to delivering
services
85 dedicated to providing
goods
84 are Colombian
companies and 30 are
foreign companies
62 are Colombian
companies and 23 are
foreign companies
Professional Training Programs
Colombia has four universities with
petroleum engineering programs
located in areas with development in
the sector, such as Santander and
Huila. These programs place an
emphasis on bilingual education
requirements.
Total Number of Graduates from
Undergraduate Programs (2005-2009)
507
237
347
165
Source: Labor Observatory
POSITION YEARS OF EXPERIENCE AVERAGE MONTHLY
INCOME (USD)
President (in Colombia) 10 to 15 $ 28,731
Executive Vice President 10 to 15 $ 21,572
Chief Executive of Hydrocarbon Engineering 8 to 10 $ 12,505
Chief Executive of HSEQ 10 to 15 $ 10,994
Chief Environmental Executive 8 to 10 $ 9,263
Chief Executive of Drilling 8 to 10 $ 8,072
Geophysicist 8 to 10 $ 4,105
Environmental Director 7 to 9 $ 5,911
Drilling Engineer 5 to 7 $ 6,480
Production or Oil Engineer 7 to 9 $ 3,897
Field Engineer 7 to 9 $ 3,574
Geological Engineer 2 to 5 $ 3,548
Specialized Machine Operator 0.5 to 1 $ 1,123
Maintenance Technician 0.5 to 1 $ 975
Source: Human Capital 2010 - TRM COP$1,900 = US$ 1
Salary Ranges within the Oil Goods and Services Sector
Opportunities in the Colombian Oil Goods and
Services Sector
The oil sector is Colombia is going strong. There are
opportunities in the Oil Goods and Services sector for
growth and improvements on an international scale.
Growth is projected in terms of the number of wells
explored- 570 by 2014- and extraction- to nearly one
million barrels of oil per day (2012).
The Cartagena Refinery will enter operation in 2013
with a capacity of 165,000 BDP. The demand for goods
and services at this facility as well as the Barrancabermeja
Refinery will increase.
Various investment opportunities exist in producing
high-performing, high-quality goods and developing high-
tech oil services.
A regional goods and services exportation platform can
be established for meeting the needs of the Venezuelan,
Peruvian and Ecuadorean markets.
Caribbean Zone
Eastern Central Zone
Southern Central Zone
Bogotá - National Provider New Exploratory Areas
Eastern Central Zone - Meta
Meta: Meta has become Colombia's largest producer of crude
oil as it enters a promising new era of hydrocarbon
exploitation. The Rubiales and Quifa fields have been
particularly productive.
As oil production is a relatively new phenomenon here,
there is a high demand for goods and services along the
entire chain.
Exploration, maintenance and administration stand out
as the services with the greatest development potential
along the chain.
Production
Ranking
Active
Companies
BDP
Produced
1 8 407,219
TRANSPORT AND
STORAGE
(Midstream) EXPLORATION PRODUCTION
Eastern Central Zone - Casanare
Casanare:
Department with the greatest amount of oil activity based
on the number of companies in operation.
The second largest producer in the country.
The most productive well is Cusiana-Cupiagüa. There is
high demand for maintenance services along the chain.
The department's geographic location makes it possible to
meet the demands of surrounding exploration sites such as
those in the department of Vichada.
Production
Ranking
Active
Companies
BDP
Produced
2 23 144,453
TRANSPORT AND
STORAGE
(Midstream) EXPLORATION PRODUCTION
Eastern Central Zone - Arauca
Arauca:
Home to one of the oldest oil wells in the country, Caño-
Limón. Over the course of its history, Caño-Limón has
produced more than one billion barrels of oil.
The third largest producer in the country. Its production
chain requires maintenance services.
Its geographic location is convenient for meeting needs in
Venezuela, specifically the Orinoco basin region.
Production
Ranking
Active
Companies
BDP
Produced
3 3 79,775
TRANSPORT AND
STORAGE
(Midstream) EXPLORATION PRODUCTION
Eastern Central Zone - Santander
Santander:
Significant oil goods and service demands related to the
B/bermeja Refinery, the country's largest.
The Santander region has seen major growth in
hydrocarbon exploration and production (Border Zone).
Home to one of Colombia's four university petroleum
engineering departments.
The department is the fourth largest oil producer in the
country.
Production
Ranking
Active
Companies
BDP
Produced
4 8 50,558
TRANSPORT AND
STORAGE
(Midstream) EXPLORATION PRODUCTION REFINING
Huila:
This department has reserves in the foothills of the Central
Andes Mountain Range.
Colombia's fifth largest producer.
Strategically located in the central region for providing service
operations to the neighboring departments of Caquetá and Valle.
Neiva is home to one of Colombia's four university petroleum
engineering departments.
South Central Zone - Huila
Production
Ranking
Active
Companies
BDP
Produced
5 4 43,502
TRANSPORT AND
STORAGE
(Midstream) EXPLORATION PRODUCTION
Putumayo:
Reserves located along the Amazon in the border region with
Peru.
Colombia's seventh largest producer.
High levels of exploratory activity that require oil services.
Strategically positioned as a regional service center for
operations in border regions with Ecuador and Peru.
South Central Zone - Putumayo
Production
Ranking
Active
Companies
BDP
Produced
7 6 34,954
TRANSPORT AND
STORAGE
(Midstream) EXPLORATION PRODUCTION
Cundinamarca:
This department has reserves in the foothills of the Central
Andes Mountain Range.
Cundinamarca has large metal, mechanical and industrial
production potential for providing products related to the value
chain. (Packaging and pipe accessories.)
Proximity to the country's capital makes the department an
ideal goods and services operational center, without needing
to assume the expenses arising from being located directly
within the capital.
South Central Zone
Production
Ranking
Active
Companies
BDP
Produced
14 3 925
TRANSPORT AND
STORAGE
(Midstream) EXPLORATION GOODS
Bolívar:
High demand for oil goods and services related to the
Cartagena Refinery and, to a lesser extent, oil production.
The refinery is expected to increase crude processing
capacity by 165,000 BDP.
The oil services sector has high growth expectations.
Exploration and refining services (maintenance) can be
provided from Cartagena to the surrounding region.
Caribbean Zone - San Andrés and Providencia
Production
Ranking
Active
Companies
BDP
Produced
10 1 14,189
TRANSPORT AND
STORAGE
(Midstream) EXPLORATION PRODUCTION REFINING
Atlántico: Strength in metal and mechanical goods production for the
oil industry (pipes and tools).
Barranquilla is the country's fourth largest city with a
strategic hub location for regional goods distribution.
It is also one of the 10 Latin American cities that has
experienced the greatest economic growth.
Caribbean Zone- Atlántico
Production
Ranking
Active
Companies
BDP
Produced
N.A N.A N.A
GOODS
Bogotá D.C. - National Provider
Bogotá D.C.
Home to the most oil service companies.
Has some of the most competitive labor and office costs in Latin
America.
Home to one of Colombia's four university petroleum
engineering departments.
Strategically positioned as a national service operations center
and geo-regional platform for Colombia and neighboring countries.
The ANH will soon be opening a new round of
exploration block assignments for 200 wells in these
departments. These wells may have enormous
hydrocarbon potential.
As departments without oil traditions, there is demand
for comprehensive services along the entire chain so that oil
activities can be developed here.
At the moment, only Vichada has consolidated
production.
New Exploration Blocks
EXPLORATION
San Andrés and
Providencia Caquetá Guaviare Vichada
A few reasons to make the decision to invest:
Unexplored potential to be discovered in addition to the more than one million
barrels of oil stored in proven reserves.
Colombia offers investors a stable business environment and a solid legal system.
Colombia has an excellent geographic location with coasts along the Pacific and
Atlantic Oceans to cover all of the world's markets.
Colombia encourages and facilitates private investment in gas and oil sectors,
which involve a large number of oil goods and services associated with the
hydrocarbon production chain.
The country's successful 80-year history in the hydrocarbon industry is its strongest
endorsement for investment.
This is a great time to invest in oil goods and services in Colombia!
OUTLINE
Structure of the Global Oil Sector
Structure of the Colombian Oil Sector
Oil Goods and Services Structure and Value Proposal
Legal Incentives for Investment
Pursuant to Article 189 of the Tax Code, for the purposes of calculating taxable bases
and determining presumed income, net equity from goods directly related to companies
whose business activity is mining can be subtracted from the previous year's total liquid
assets.
According to Paragraph E of Article 428 of the Tax Code, the temporary importation of
heavy machinery for the mining and hydrocarbon industries does not result in sales tax
(VAT) as long as said machinery is not produced in Colombia.
Article 476 of the Tax Code provides a sales tax (VAT) exemption for hydrocarbon
transport.
Legal incentives
Tax Incentives:
The special exchange control system applies only to subsidiaries of foreign companies
from the hydrocarbon and mining sectors that perform exploration, exploitation or service
activities for the hydrocarbon sector. Said mining activity is related exclusively to coal, iron-
nickel and uranium exploration and extraction.
Under this system, the subsidiaries are not required to reintegrate currency derived from
sales into foreign currency or exports on the exchange market. Instead, they can choose
to reintegrate only the currency needed to meet their local currency needs.
These subsidiaries do not have access to the exchange market for acquiring foreign
currency for their operations in Colombia or abroad.
Legal incentives
Exchange Incentives:
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