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Pacific Exploration's Rubiales Field Reverts to Ecopetrol

Share Print Bookmark    |    Thursday,June 30,2016

Pacific Exploration & Production Corporation announced the reversion of the Rubiales Field to Ecopetrol, S.A.

As previously announced on March 13, 2015, the Company and Ecopetrol agreed not to extend the Rubiales and Pirirí contracts. Pacific and Ecopetrol expressed interest in developing further business opportunities for the benefit of both parties and the country.

Upon termination of this contract on June 30, 2016, any wells in production in the Rubiales and Pirirí Blocks will revert to Ecopetrol free of charge and without any compensation.

When the Company acquired the Rubiales Field in 2007 it was only producing 14,547 bbl/d due to security conditions, the high operating cost for heavy crude and lack of infrastructure and transport facilities.

With the experience and knowledge of Pacific's management and technical teams, the Company was able to achieve record gross production of 214,000 bbl/d by 2013, which represented 20% of Colombia's oil production. The Rubiales Field became the country's most important and largest producing oil field, creating more than 25,000 jobs for Colombians. Royalties paid to the state increased by 700%, improving the quality of life of more than 22,000 inhabitants of Puerto Gaitán.

In an eight year period, the Company drilled more than 1,000 wells and invested more than U.S.$5 billion in exploration and production at the Rubiales Field.

Additionally, Pacific, together with Ecopetrol, made a significant investment in transport infrastructure by building the Oleoducto de los Llanos Orientales pipeline, which connects to the national pipeline system.

The ODL Pipeline transports crude from the Rubiales Field in a much more environmentally friendly and safe manner, at substantially lower transportation costs than by trucking the crude from the Rubiales Field. This pipeline is an integral part of Colombia's oil transport system and was a key element of the Company's plan for the expansion of the Rubiales Field.

Pacific independently invested in Petroeléctrica de los Llanos, a private power transmission line, and Agrocascada, a water irrigation project for agricultural development. Petroeléctrica de los Llanos is a private power transmission line that connects the Rubiales Field with Colombia's electrical grid. The transmission line originates at the Chivor Substation and stretches 260 km to the Rubiales Field. This project led to the reduced operating costs due to a significant reduction of the cost of electricity associated with the production of oil.

The Agrocascada irrigation project will reduce water disposal costs through reverse osmosis plants with the capacity to treat up to 1 million barrels of residual water per day to be re-used for irrigation. This project, when operational, will represent an innovative approach for water disposal in Colombia and bring benefits to oil producers in terms of lower operating costs and extending the economic life of the oil fields, and will also be an excellent example of "shared value" with communities, bringing sustainable development from a social point of view to areas in need of development.

The Company's long-term strategy is focused on sustainable growth in production and reserves and cash generation within a diversified portfolio of assets. The success at the Rubiales Field is a testament to the Company's ability, expertise and track record in light and heavy oil exploration and development, as the leading independent Latin American-focused exploration and production company.