COMMUNICATION TO THE PUBLIC

Regarding the announcement made yesterday by Cenit and its subsidiaries about “relief of up to 50% in transportation tariffs for oil producers,” the Colombian Petroleum Association (ACP), representing private hydrocarbon-producing companies, wishes to clarify that:

1. The proposal from the transporters does not reduce the tariffs. It is not a decrease of 50% in the tariffs, but an offer of financing (for two months) with interest charged on this percentage. The measure does not meet the economic requirements of the shippers regarding the current value of the tariffs, which, as indicated, are excessively high. This would only increase transportation costs, as after the two months, the same tariff would have to be paid with interest (1.5% effective annual).
2. The financing offered by the transporters disregards the reality of the price crisis that the sector is experiencing, the duration of which is unclear as to how long it will last. This price situation is leading private companies to close fields and therefore reduce their production. To date, production has been reduced by about 52,000 barrels per day, and an additional cut of 30,000 barrels per day is expected starting next month. This not only affects crude oil production with consequences for the country's energy self-sufficiency but also reduces significant resources from royalties, taxes, and economic rights, considerably impacting the Nation's finances and contributions to the regions.
3. Regarding specific tariff reductions, the real proposal from Ocensa (the pipeline that transports the largest volume of oil in the country) is to decrease by 0.6%. That is, it goes from a tariff of USD 7.75 to USD 7.70 per barrel; a minimal adjustment when oil prices have fallen by 71% since January and 42% in the last two months, and more so, considering that in July 2019 the company increased tariffs by 10%.
4. Considering that crude oil transportation tariffs by pipeline account for about 45% of operating costs, what the industry requires and has requested is a reduction of 60% when the Brent reference price is below USD 45 per barrel.
5. The negotiation stage between carriers and shippers has ended unsuccessfully, considering that the offers presented by the carriers have not been the result of a negotiation, but unilateral announcements.
6. For this reason, the ACP has requested the Ministry of Mines and Energy to, in exercise of its powers provided by the Petroleum Code, intervene in the transportation tariffs by pipelines, issuing a resolution that restores economic balance in the hydrocarbons sector during this period of low prices, as a measure to help mitigate the current crisis.