Refractarios básicos para el refinamiento secundario del

The country has a variety of energy sources, enough to handle the internal energy needs as well as to maintain exports of oil, coal and electricity; this last one has contracted several business interchanges with Ecuador. With the exception of DIESEL, the internal supply is, in essence, sufficient in potential terms to reach self- supply status. However, the view regarding oil production is very uncertain due to the actual decline of the present rate of production as well as the absence of new finds that would allow for replacement of extracted resources. It is important, to point out, that we are expecting successful results with the new exploration activities whose levels, in terms of exploratory wells is higher than those registered during the nineties.

The prospective analysis for the basis scenario implies availability of primary resourses that grow about 49% during the study period and shift from 309.000 Teracalories in 2006 to 462,000 in 2025, which implies a yearly average growth rate of over 2.1%.

Graph 20

DEMANDS FOR PRIMARY ENERGY 2006-2025

Hydro-energy and natural gas are two of the energy sources with the greatest dynamics, whose demand practically duplicates in the future of the analysis and in absolute terms increases by 35.000 and 43.000 Teracalories respectively. It is anticipated that in the 20 years of projection, coal will also increase its participation in the primary energy basket.

According to the results, the greatest consumption will be oil, followed by natural gas and hydro-energy. It is important to note that the increase in the oil

consumption projected for 2011 is due to the expansion of the capacity at the Cartagena refinery. The non-conventional energy sources such as biomass and wind indicate low growth rates and by the end of the study period, represent more than 10% of the total consumption, while oil participates will have close to 40%.

Table 19

COMPOSITION OF THE PRIMARY ENERGY STRUCTURE 1006-2025 SOURCE 2006 2010 2015 2020 2025 Petroleum 48.9% 44.0% 47.0% 43.8% 40.4% Hydraulic 9.9% 11.1% 10.8% 13.3% 14.1% Coal 10.3% 12.6% 11.6% 12.1% 13.1% Natural Gas 17.9% 20.0% 19.7% 19.7% 21.4% Wind 0.0% 0.0% 0.0% 0.0% 0.0% Biomass 13.1% 12.3% 10.8% 11.2% 10.9%

It is interesting to note the decrease in oil participation throughout the projection plans, losing close to 8 percentage points during the analysis period, which are compensated with the increase in natural gas, coal and hydro-energy. In the meantime, there are projections for a decrease in the relative participation of the biomass.

Table 20

PRIMARY ENERGY GROWTH RATES 2006 to 2025

SOURCE 2006-2010 2011-2015 2016-2020 2021-2025 Petroleum -1.30% 5.60% -0.08% 0.37% Hydraulic 4.32% 3.31% 5.60% 3.30% Coal 6.82% 2.04% 2.16% 3.73% Natural Gas 4.20% 3.50% 1.36% 3.70% Wind 0.00% 0.00% 0.00% 0.00% Biomass -0.15% 1.11% 1.96% 1.60% Total 1.33% 3.83% 1.36% 1.99%

To be able to fulfill the requirements for primary energy, we have considered four scenarios to supply crude and natural gas, based on studies completed regarding the reserve potential for hydro- carbons in the country, where geological, technical and economic aspects were taken into consideration.

The scenarios considered are called: of abundance, which is characterized by important finds of crude and gas reserves, incorporates 6.800 million barrels and 34.4 Terra cubic feet (TPC) during the period 2007-2025. The oil case scenario is different from the previous one by lowering the levels of discovery and would include 5,100 million barrels and 10.2 TPC in the same time period.

The third scenario would be gas, where there are plans to find 3,300 million barrels of oil and 22 TCP of gas. The last scenario is called scarcity, identified because it is critical to discover natural gas and oil reserves, adding only 2,300 million barrels of oil and 6 TCP of natural gas. The scenarios we considered are based on three strategies:

• Increase the recovery factor in the exploration areas. • Develop new projects in exploration areas

• New discoveries

Each one of these scenarios has a production profile for oil and gas wherein balances will be completed. Facing the actual declining situation for production and in absence of new crude oil reserves, in the short term, towards 2010 it will become necessary to purchase crude from the associates of ECOPETROL to supply the needs for national refineries and from 2011 acquire crude from international markets to provide for internal needs.

The projection scenarios in the case of abundance and in the case of oil, registered extra material for export. In the case of scarcity, there is a controlled reduction of production to 2013 and then from 2017 and 2018 the situation will become critical, because the balance of production supply is deficient in these scenarios, and it will become necessary, not only to import crude oil to charge the refineries, but it would also require increasing the national refinery capacity by close to 80,000 BPD to supply for internal demands.

Graph 21

PRODUCTION SCENARIOS FOR CRUDE OIL 2007-2025

Even with the above, the refineries will have to import crude oil from 2012 to compensate for the quality of the cargo, because the energy basket becomes heavier as the production of light crude oils declines. Graph 22 details the evolution of the basket of crude oils produced in the country, highlighting the decrease in light and medium crude oil supply, which would be substituted by heavy and extra heavy crude oils.

Graph 22

COMPOSITION OF THE CRUDE OIL PRODUCTION 2007-2025

Regarding the above, it is of vital importance to refit the refineries to operate with heavier crude oils, with a higher content of sulfur, that due to the pattern change in demand and the greater environmental restrictions regarding sulfur content in fuels, demand a very careful analysis of the investment strategies for the refineries.

Regarding natural gas, the new reserves are concentrated basically in the basins of La Guajira and Piedemonte Llanero and new ones are being incorporated in other areas, one of which, the Sinú basin, is of particular importance.

Graph 23

PRODUCTION PROFILES FOR NATURAL GAS 2007-2025

The increase in reserves would allow for a higher usage of gas in the scenarios considered to increase the supply during the evaluation projections. The scenarios in the case of abundance and in the case of gas, allow for self-sufficiency and the generation of extra material for export. The scarcity scenario, in the long run, is shown as critical for the basis demand scenario, because it is foreseen that from 2022 the consumption would be above the production capacity, without considering imports.

In the decreasing conditions and without new finds of natural gas, there will be difficulties in the short term, especially in 2009 when it will be necessary to go ahead with the compression programs in the fields of La Guajira and commence production in Gibraltar. Also, towards the year 2013, there would be a deficit situation that would be balanced by 2017 with the importing of gas from Venezuela. After that time, the imbalance would be of such magnitude that not even with the importing of 500 MPCD from Venezuela would we be able to supply our internal needs.

The above indicates the need for alternative strategies of positioning and the need to carefully follow the projection plan 2006-2025 and its different scenarios, several of which depend on exploration efforts, they also are derived from geological factors which today are insufficient. Hence the need to endow the ANH with an operative structure able to create and handle a greater number of programs, keeping in mind the temporary structure between the beginning of a contact and the actual putting into production of the liquid or gaseous hydrocarbons which could be found.

Regarding the other primary sources (coal, hydro-energy and biomass), although they are important to the energy basket and there are large sources of these materials in Colombia, there is a certain degree of uncertainty in the case of hydro- electricity due to its costs and the difficulties in financial closure of contracts, so that they might be developed by the private sector, and to coal due to the supply conditions for internal use and access to clean technologies. Both these aspects merit in depth studies with all possible alternatives and their costs because, although it is always possible to resort to imports, this would mean more unfavorable conditions from the macroeconomic and social point of view for the sustainable development of Colombia.

Regarding the supply of secondary energies or derived from processes of transformation such as electricity, gasoline, DIESEL and the LPG which are very important energy sources, due to their high participation in the final consumption and the availability of the resources is a priority for the internal supply.

With reference to gasoline, the production capacity is above the demand curve, producing high surplus that could be sold to international markets, generating important foreign cash flow as long as it is in accordance with the international quality requirements, especially regarding octane and the sulfur content (maximum 30 ppm)

Although LPG has registered moderate growth in demand during 2006-2025 as well as the reserves from the field of gas production, their availability could be compromised in the medium term as a result of the updating of refineries and their use as raw materials in the petrochemical processes. In this case, the total offer may not equal the demand after the year 2013.

The long range prospects for DIESEL supply is of great concern to us, given that the country confirms its dependence on external markets to satisfy internal demand. In the short term (2010) the import needs will be close to 22,000 BPD, which would decrease once the expansion at the refinery in Cartagena takes place.

Graph 24

DIESEL OFFER 2006-2025

This view forces us to look for measures that curtail the accelerated growth of demand, such as modification of gasoline and DIESEL prices to find a balance of prices in energy terms. With these measures we may be able to expand and develop the natural gas for vehicles program.

For the electricity offer in the basis case, the generation of energy structure does not register any important changes during the evaluation period, with the continuing superiority of hydro-electricity over natural gas and coal.

This scenario assumes the finding of new natural gas reserves or making a decision to import gas on a massive scale via re-gasification or GNC on a high scale, with the increase of prices that follows. The low contribution of the non-conventional sources of energy to the generating basket could be modified taking regulatory measures that would ease development of the distribution of the energy, within which co-generation projects would be considered.

From the technological alternatives point of view, for modeling purposes, in this scenario we considered the possibility of incorporating: hydro-electric plants up to a maximum of 3,900 MW in the interior of the country, coal systems with a fluid bed, not only on the coast but also in the interior of the country after the year 2015 with a maximum of 2,150 MW, gas plants up to 3,000 MW distributed throughout the country, and possibly eolic systems up to 200 MW on the Atlantic coast. At the same time, within the modeling process we considered the prices of the generating technologies within the Expansion Plan 2006-2025 completed by the UPME.

Graph 25

COMPOSITION OF THE ELECTRICITY SUPPLY 2006-2025