Ecopetrol S.A. (NYSE:EC) Q2 2023 Earnings Call Transcript

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All is focused on self-generation for low-emission supply and for the hydrocarbon business. And our main objective in the medium term, of course, we evaluate permanently the profitability and competitively of this opportunity, and as the president mentioned, being out of that framework or things that will have to be reviewed, we are focused. But as it is sufficiently material to build the facilities that are required to focus on this. We have tested different business cases, which are quite profitable options, and the replacement that we have of sources that are CO2 emission intensive with sources that will improve to reduce that emission with more resources is our main focus.

Operator: The next question has from Bruno Montanari from Morgan Stanley.

Bruno Montanari: Good afternoon. Good morning. Thanks for taking my questions. I have two questions here. Can you talk a little bit about trends in oil production for the second half of the year? Maybe address where you see upside risks and downside risks. What the main challenges are for you to finish the year according to the guidance, to the most recent guidance provided, please? And then the second question, it’s very interesting to see you making a lot of advances on hydrogen, with the actual operations. But can you give us, some clarity or color on the level of returns you currently see on hydrogen operations or the expected returns? And how do they compare with the returns you are able to do on the hydrocarbon business? Thank you very much.

Alberto Consuegra: Bruno, good morning. Thank you for your first question. I will answer the one related to production. My name is Alberto Consuegra, and I would like to tell you that we maintain our production forecast to the range that we have been giving you. And by the end of the year, it will be between 720,000, and 725,000 barrels hopefully clearly to the upper range. We in the first half have had a materialization of bridge related to the environment. This trend could continue in the second half, but we will have scheduled maintenance in some of the production fields. This will not be substantial, but we must consider the impact in the plan. This is to tell you that, we continue with the perspective of finishing in accordance with what we have planned.

The third quarter looks quite robust with respect to production. And as I said, there are factors that perhaps will not help us, such as the planned or the scheduled shutdowns for maintenance, and the environmental issues that continue to materialize. Thank you. Bruno, thank you for your question. With respect to opportunities that we are managing in the hydrogen portfolio, I would like to share that, we are focusing on those that enable us to have some links that are more sophisticated in the supply chain. And that have synergy with the hydrocarbon business, which is what is allowing us to reach profitability rates that are appealing. And that means could exceed two-digit dollars. The most evident example that we have is the two projects that we have at the refineries of Cartagena Refinery, as I have shared before.

In this case, to give you the example of what we do is to build a facility to produce green hydrogen based on a nonconventional renewable source. Hydrogen is used primarily for processes that have more hybrid treatment at the refineries, thus producing fuel such as diesel and gasoline that are clean and have no sulfur, but also producing more sophisticated products, concretely, green methanol. In Colombia, we are net importers of methanol and it’s used in industry processes and we think that this could be replaced with a local product, but also with a product that is less to intensive. When we combine all these pieces in the business case we, was in fact a tier that is competitive. The middle and long-term challenges for Ecopetrol and for all the companies that are working with it.

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