About this report
Materiality
(102-46) (WEF 3)
In 2020, Ecopetrol updated its materiality assessment by means of an exhaustive internal review and consultation process with its stakeholders. This analysis included aspects such as the risks and impacts associated with each material element, sustainability-related regional and global trends, and the input of the Company’s seven stakeholder groups. The objective was to define a list of elements or issues that Ecopetrol should focus on to ensure value generation for its stakeholders and the company’s sustainability over time.
This exercise led to the identification of 28 prioritized material elements, classified in four categories: exceptional, outstanding, differentiated, and compliance (see page 124).
This report pertains to Ecopetrol S.A. and includes details about the management, impact, and results of the Exceptional and Outstanding material elements. These are considered priorities by the Company and its stakeholders, which are also the focus of the TESG pillar under the corporate strategy.
The details of the materiality assessment update process, stakeholder involvement, and the final results can be found in the Materiality and Stakeholder Groups chapter.
Reporting
Methodology
(102-48) (102-54) (102-55)
This report has been prepared in accordance with Global Reporting Initiative (GRI) standards, in its essential option.
Also, the Report adheres to following reporting frameworks:
Sustainability Accounting Standards Board (SASB)
Task Force on Climate-related Financial Disclosures (TCFD)
The United Nations Sustainable Development Goals – SDGs
Global Compact Principles
Stakeholder Capitalism Metrics (SCM) of the World Economic Forum (WEF)
This information will be reflected in the report and will be identified by the corresponding codes of each reporting framework. The foregoing allows the Company to be aligned with best practices and international standards regarding the disclosure of sustainability-related information. The GRI Index, which refers to the numerical codes included throughout the Report, can be found in the Annexes section.
No relevant information has been restated with respect to previous reports. Had the calculation methodology been updated for any indicator, this will be specified in the relevant section.
Limits and Scope
of the reported data
The Exceptional and Outstanding material elements are included in the Company’s Integrated Sustainable Management Report, and its scope for 2021 is Ecopetrol S.A. Information pertaining to the companies under the Ecopetrol Group is also included, where relevant, with the respective clarification.
Significant changes in the
preparation of the report
(102-49)(WEF 3)
The 2021 Integrated Sustainable Management Report, divided into the management/annual report, ESG and Corporate Responsibility issues, delves into Ecopetrol’s Exceptional and Outstanding material elements arising from the materiality update of 2020. Its structure and content will therefore be different from the 2020 report, which was more comprehensive and only mentioned Ecopetrol’s material elements in a broader sense.
Frequency
(102-32) (102-50) (102-51) (102-52)
This report was submitted to and approved by the General Shareholders’ Meeting, and it elaborates on Ecopetrol S.A.’s performance between January 1st and December 31st, 2021.
External verification
Inquiries
Message from the Chairman
of the Board of Directors
Ecopetrol began 2021 with the challenge of continuing to be a catalyst for the Colombian economy amid a global pandemic. The Company’s higher purpose of being “Energy that Transforms” has been the driving force behind each of our decisions and has strengthened our work based on the creation of value for Ecopetrol and its Group, for the country, and for Latin America.
The new social and economic reality, in addition to the challenges imposed by climate change, anchored our commitment to the country and to the energy transition.
In 2021, as Board of Directors, we concluded our two-year long backing to the evaluation of acquiring Interconexión Eléctrica S.A. ESO (ISA), which was a historical milestone for Ecopetrol and for the country. It is Ecopetrol Group’s most relevant inorganic acquisition in its 70-year history (COP 14.2 trillion, equivalent to 51.41% stake), providing resilience to Ecopetrol by incorporating material returns (between 15% and 20% of the Group’s ebitda) with a low-carbon-emission business. This ensures greater energy security for all Colombians and contributes to the Group’s decarbonization process, by assuming the responsibility of ‘Growing with the Energy Transition’.
The efforts exerted in 2021 were also aimed at updating Ecopetrol Group’s Strategy, by establishing, for the first time, a corporate strategy spanning longer than 10 years. By working arduously and in close collaboration with the Company’s executive management, Ecopetrol designed a 2040 strategy based on four drivers:
(i)
(ii)
Generating value with TESG;
(iii)
Cutting edge knowledge; and
(vi)
Competitive returns.
For Ecopetrol, our most valuable asset is our people and our first principle in the Cultural Statement is “Life First.” For this reason, our corporate efforts will always be focused on the well-being of our workers, contractors, the community, partners, suppliers, investors, the State, and society.
- Updating of the 2022-2024 business plan, focusing on the profitable growth of production under the 2040 Strategy and the continuity of ISA’s 2030 Strategic Plan. Ecopetrol’s plan contemplates organic investments in 2022 ranging between USD 4.8 billion and USD 5.8 billion. Of the investments, 70% will be allocated to projects in Colombia and the remaining 30% to projects in the US (14%), Brazil (8%), Peru (5%), and Chile (3%).
- Financing for the 2022-2024 strategy towards energy transition, with a total investment between USD 17 trillion and USD 20 trillion.
- Monitoring of the measures adopted at Ecopetrol and other companies under the Ecopetrol Group, in terms of their internal control, risk management, and ethics, corruption, and fraud reporting systems.
- Approval and adoption of the Diversity and Inclusion Policy of the Board of Directors.
- Updating of the Human Rights Guide and follow-up on the Human Rights strategy as well as related trends, as part of the Company’s highest-level commitment.
The 2021 Integrated Report reflects the work and passion of each of the members of the Board of Directors, the CEO, the Vice Presidents, and all Ecopetrol employees. Each person has shown their dedication and devotion to achieving the best results, thus guiding Ecopetrol towards becoming a leading energy group in the American continent. These actions deserve my total admiration and gratitude. Each of our decisions continues to position Ecopetrol as a global player and a leader in the energy transition, committed to TESG and decarbonization, and meeting the highest ethics, transparency, and corporate governance standards.
It is precisely the dedicated and persistent work of the people who make up Ecopetrol that allows us today to show exceptional financial results for 2021.
We managed to close the year with a net profit of
COP 16.7
trillion,
a consolidated income of
COP 91.7
trillion,
and an ebitda of
COP 42
billones,
(45.7% ebitda margin).
These figures, beyond conveying that we exceeded our expectations and goals, allow us to generate well-being for all Colombians with a 2.5% contribution to the country’s Gross Domestic Product (GDP).
Furthermore, we closed 2021 with a 200% reserve replacement rate, the highest in the last 12 years. This means that, for each barrel produced in the year, two barrels were added to the reserves, thereby increasing the average life of Ecopetrol’s reserves to 8.7 years. This is yet another sign of the strength of Ecopetrol Group’s hydrocarbon portfolio, backing the Company’s sustainable growth within the framework of the energy transition.
The Board of Directors reaffirms its value proposition to guide the Company in the determination of strategic issues in order to create long-term value. Our commitment to the company of all Colombians motivates us to continue evolving and positioning Ecopetrol as Energy that Transforms.
Luis Guillermo Echeverri Vélez
Chairman
Board of Directors of Ecopetrol
Company profile
(102-4) (102-6) (102-7) (102-8) (102-9)
Grupo Ecopetrol BEFORE THE ACQUISITION OF ISA
+ 250
Production fields in 4 countries
-9,000Km
Of oil pipelines and multi-product pipelines
2
Refineries
with a capacity
of 400 kbd
1
Biodiesel plant wiith a capacity of – 120 kton/year**
1
Petrochemical plant with a capacity of – 500 kton/year**
+ 18,000
Employess***
53
Electricity self-generation centers with a capacity of 1,300mw****
48,330Km and 104,138Mva
Of transmission infrastructure in operation
860Km
Roads in operation
57,000Km
Of fiber optics in operation
* kbd thousands of barrels per day
** kton-year thousands of tons per year
*** Ecopetrol S.A. employs more than 8,000 workers
**** MW megawatts
Crude oil
Fuels
Petrochemicals
Natural gas
Electric power
Hydrocarbons chain, and now, the energy chain
Exploration and production
TransporT and storage
Refining and petrochemicals
Marketing and distribution
Transmission and infraestructura
Milestones and recognitions
- Acquisition of 51.4% of the shares of interconexión Eléctrica S.A. ESP (ISA).
- Incorporation of Ecopetrol Singapore Pte. Ltd.
- First in Latin America to offset carbon in the marketing of crude oil.
- Exceeded the GHG, emission goal by 25%.
- Inauguration of the San Fernando Solar Ecopark, with an installed capacity of 61 MWp available capacity.
- Ecopetrol adhered to the 1t.org initiative of the World Economic Forum.
- Ecopetrol completed 11 projects under the Works for Taxes Initiative, benefitting nine (9) departments.
- Ecopetrol was granted the Equipares Silver Seal and was awarded the Inclusive Company Seal.
- Included in the 2022 S&P Global Sustainability Yearbook for the second consecutive year.
Message to our
Stakeholders
I am pleased to present our 2021 Integrated Report, after a year of great achievements for Ecopetrol and its Group of Companies. It has been seven decades of great challenges to which we have responded with commitment, achieving historical records, with the firm purpose of generating value for all our stakeholders.
In 2021, we continue addressing unprecedented challenges. Ecopetrol has responded by prioritizing life and maintaining resilient operations that grow considering the challenges and opportunities of the energy transition, and that seek to be increasingly sustainable supported on solid corporate governance and the highest ethics and transparency standards.
Our lessons learnt in this trajectory have made us accelerate our path towards a more flexible, agile, and dynamic Ecopetrol that can quickly adapt to the constant changes faced by society and the industry.
We have embodied this purpose in our new 2040 Strategy ‘Energy that Transforms’ approved in 2021 by the Board of Directors of Ecopetrol and presented to the market at the beginning of February 2022. The new strategy integrates the fundamental pillars of the 2020 strategy and implements the energy transition roadmap, as well as the six principles of the Cultural Statement, our higher purpose, and the long-term portfolio expected for the Company.
This strategy is intended for Ecopetrol Group to continue growing and generating value in its businesses, in a competitive manner and considering the demands and opportunities of the context and the energy transition. This will be achieved by maximizing the value and competitiveness of our oil businesses, as well as ensuring the diversification of our portfolio and maintaining our commitment to sustainability and decarbonization.
Our operational, financial, and industrial safety results were exceptional in 2021. We stayed on the reactivation path thanks to our ability to generate sustainable value and respond quickly and timely to the conditions of the environment, which continues to be challenging after two particularly cumbersome years for the world.
The strategy consists of four drivers that will further our vision in the next two decades:
with the energy transition
Generating value
with TESG
Cutting-edge
knowledge
Competitive
returns
It was precisely the committed and persistent work of the people who make up Ecopetrol that allows us today to generate exceptional financial results for 2021.
Furthermore, this year we successfully conducted our first foreign public debt operation in the amount of USD 2 billion. This operation portrays the international markets’ confidence in Ecopetrol’s financial strength and in its prospects for the future.
We successfully conducted exploration activities such as Flamencos-2, Lorito A-1, and El Niño-1, as well as the discovery of a new field in Casanare, Liria YW12, which produces gas and light oil and is currently undergoing extensive testing, connected to production facilities. We also declared the marketability of the Boranda, Flamencos-1, and Tobo fields. The cumulative production of the exploration assets amounted to more than 1.2 million boe at the end of 2021 (4,517 boed on average), with 67% of the production corresponding to oil and 33% to gas.
At the international level, and in line with Ecopetrol Group’s growth and geographic diversification strategy, our subsidiary, Ecopetrol Óleo e Gás do Brasil, acquired a 30% stake in block S-M1709 in the Santos basin in Brazil. The acquisition of this block, which will be operated by our partner Shell, is part of our interest in partaking in the highest-potential basins in the continent.
The Group’s production was
679 thousand
barrels of oil equivalent per day (kboed).
Although we continue on the path towards recovery, we experienced a decrease compared to 2020 due to public order issues in Colombia, the hurricane season in the Gulf of Mexico, and restrictions associated with water management in the department of Meta.
In addition, we achieved the highest reserve replacement rate in the last 12 years, amounting to 2,002 billion barrels of oil equivalent (mboe) at the end of 2021.
In the transportation segment, we mobilized 1,010.61 kbod through our subsidiary Cenit and our transportation subsidiaries. The volume of crude oil mobilized using our transportation systems decreased by 10% compared to the previous year.
However, this situation was offset by the volume of refined products, which increased by 19.9% compared to 2020, mainly due to the economic recovery of the country.
Our refineries showed an outstanding performance, with a consolidated load of 353.6 kbd and an integrated gross margin of 10.24 USD/Bl, thanks to the stabilization of fuel demand. Esenttia, an Ecopetrol subsidiary, increased its petrochemical production to 500 thousand tons/year and was favored by the high demand for polyethylene in the Americas in 2021, allowing the company to grow its market share margin.
In 2021, we took on the challenge of being a leading company in the energy sector in the American continent, by consolidating our traditional business and being at the forefront of the energy transition to address climate change.
By acquiring 51.4% of the shares of Interconexión Eléctrica S.A. ESP (ISA) for COP 14.2 trillion, we concluded Ecopetrol Group’s most relevant inorganic acquisition in its 70-year history. This transaction represents the meeting point of two successful paths traveled by ISA and Ecopetrol to strengthen both companies, to grow and be protagonists in the energy market, not only in Colombia but in the region, thereby solifidying the path towards electrification with low emission activities and with significant contributions to the decarbonization route.
This process was also strengthened by our actions aimed at incorporating more and more renewable energies into our self-generation capacity. The San Fernando Solar Ecopark came into operation providing 61 MWp of available capacity, and it is considered the largest renewable energy self-generator in the country. This will prevent the emission of approximately 508 thousand tons of CO2 equivalent in the next 15 years. In addition, six new solar plants came into operation with an installed capacity of 0.46 MWp that began to supply energy to the same number of pumping stations of the Cenit pipeline transportation system.
This adds up to
112 MWp
of renewable energy capacity,
Our subsidiary Cenit, and our subsidiaries Oleoducto de los Llanos (ODL) and Oleoducto Bicentenario (BIC), made steady progress in this regard by obtaining the “carbon neutral” certification from ICONTEC, thus adding to the efforts already advanced by ISA, whose Scope 1 and 2 operations are carbon neutral in all its businesses.
With these measures, we want to continue growing as a comprehensive energy group recognized for its sustainable growth and its commitment to environmental, social, and governance (ESG) issues, leveraged on technology and innovation (TESG). For this reason, within the framework of our commitment to TESG, we push forward decisively on different fronts:
We announced our commitment to achieve net zero carbon emissions by 2050 (Scopes 1 and 2). In this sense, Ecopetrol became the first company in the oil and gas sector in Latin America to set this ambitious goal. As an intermediate goal, by 2030, Ecopetrol Group will seek to reduce its CO2e emissions by 25% (Scopes 1 and 2) compared to the baseline established in 2019.
We made progress in studies on other renewable energies such as wind and geothermal energy, as well as in the design of the Strategic Plan for the development of low-carbon hydrogen, for which we will conduct a pilot with a 50-kilowatt electrolyser in 2022 at the Cartagena refinery.
With the purpose of achieving net zero carbon emissions by 2050, we ratified our commitment to the 2030 Agenda for Sustainable Development of the United Nations, including the Sustainable Development Goals (SDG) and the Paris Climate Accord. Our active participation in COP 26 in Glasgow allowed us to continue positioning Ecopetrol’s efforts and learn first-hand about global expectations, in order to anchor these objectives in our strategy and increasingly in our daily work.
Our vision does not stop there. In view of our commitment to local development, through our lines of investment, we benefited more than 100,000 students in different school programs, we continued our support in the COVID-19 health emergency, and we deployed initiatives to expand access to household public services for more Colombians, such as drinking water and gas.
On this front, for example, we are advancing in projects to provide water access in the municipalities of Cúcuta, Barrancabermeja, Villavicencio, Guamal, and surrounding villages, and we completed projects in Puerto Gaitán, San Martín, Cantagallo, and Riohacha, benefiting more than 21,000 people in Colombia. Regarding social gas, we completed eight projects to facilitate access to residential gas by building grids, expanding coverage, establishing distribution and marketing lines, and developing plans for the mass use of this service, providing access to more of
6,100
gas users.
Our commitment to social and economic inclusion continues to grow.
Our corporate culture became stronger as well. We strengthened our commitment to human rights and extended it to all our business relationships. In terms of diversity and inclusion, we obtained the Equipares Silver Seal certification, ANDI’s inclusive companies’ certification, and came in 4th in the National Ranking of Inclusive Companies of the Chamber of LGBT Merchants of Colombia (CCLGBT) and the Centro Nacional de Consultoría. These efforts, and many others in TESG, added Ecopetrol, for the second consecutive year, to the S&P Global Sustainability Yearbook 2022, differentiating us from our peers for our commitment to spearheading ESG.
This recognition inspires us to continue working along this path to meet the expectations of our stakeholders and continue to position Ecopetrol Group as an energy group that transforms.
Our involvement in drafting the recommendations of the Taskforce on Nature-related Financial Disclosures (TNFD) to manage natural capital related risks and opportunities will be of great relevance, as it portrays our commitment beyond Ecopetrol to issues such as biodiversity.
In addition to the foregoing, our challenge is also to consolidate our internationalization in Asia and the US, with the expansion of our crude oil and product marketing operations in these regions. Setting up our office in Singapore is part of the plan to meet this goal.
Ecopetrol’s management efforts, challenges, and achievements of the year are collected in this 2021 Integrated Report, which would not have been possible without our Board of Directors, their strategic guidance for our sustainable growth, and the commitment of our employees to the principle of our Cultural Statement “We Make the Impossible Possible”.
To them, my sincere gratitude and my appreciation for their dedication and commitment.
Felipe Bayón
CEO
Ecopetrol Group
1. This refers to 100% of the production of the joint venture.
2. Total Recordable Incident Frequency Rate
3. Carbon Capture, Utilisation, and Storage