As filed with the Securities and Exchange Commission on ~~May 30, 2017~~April 5, 2019

(Name, Telephone, E-Mail and/or Facsimile number and Address of Company Contact Person)

Securities registered or to be registered pursuant to Section 12(g) of the Act: None

Securities for which there is a reporting obligation pursuant to Section 15(d) of the Act: None

Indicate the number of outstanding shares of each of the issuer’s classes of capital or common stock as of the close of the period covered by the annual report.

Indicate by check mark if the registrant is a well-known seasoned issuer, as defined in Rule 405 of the Securities Act.

If this report is an annual or transition report, indicate by check mark if the registrant is not required to file reports pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934.

Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days.

Indicate by check mark whether the registrant has submitted electronically ~~and posted on its corporate Web site, if any,~~ every Interactive Data File required to be submitted ~~and posted~~ pursuant to Rule 405 of Regulation S-T (§232.405 of this chapter) during the preceding 12 months (or for such shorter period that the registrant was required to submit ~~and post~~ such files).

Indicate by check mark whether the registrant is a large accelerated filer, an accelerated filer, or a non-accelerated ~~filer.~~filer, or an emerging growth company. See definition of “large accelerated filer,” “accelerated filer,” and ~~large accelerated filer”~~“emerging growth company” in Rule 12b-2 of the Exchange Act. ~~(Check one):~~

If an emerging growth company that prepares its financial statements in accordance with U.S. GAAP, indicate by check mark if the registrant has elected not to use the extended transition period for complying with any new or revised financial accounting standards† provided pursuant to Section 13(a) of the Exchange Act. ☐¨

† The term “new or revised financial accounting standard” refers to any update issued by the Financial Accounting Standards Board to its Accounting Standards Codification after April 5, 2012.

Indicate by check mark which basis of accounting the registrant has used to prepare the financial statements included in this filing:

If “Other” has been checked in response to the previous question, indicate by check mark which financial statement item the registrant has elected to follow:

If this is an annual report, indicate by check mark whether the registrant is a shell company
(as defined in Rule 12b-2 of the Exchange Act).

We file our Annual Report on Form 20-F and other information with the U.S. Securities and Exchange Commission.

We file reports, including annual reports on Form 20-F, and other information with the SEC pursuant to the rules and regulations of the SEC that apply to foreign private issuers. ~~You~~The materials included in this annual report on Form 20-F may ~~read and copy any materials filed with the SEC in~~be downloaded at the SEC’s ~~public reference room at 100 F Street, NE, Washington, D.C. 20549. Please call the SEC at 1-800-SEC-0330 for further information on the operation of the public reference room.~~website: http://www.sec.gov. Any filings we make are also available to the public over the Internet at the SEC’s website at www.sec.gov and at our website at www.ecopetrol.com.co. (This URL is intended to be an inactive textual reference only. It is not intended to be an active hyperlink to our website. The information on our website, which might be accessible through a hyperlink resulting from this URL, is not and shall not be deemed to be incorporated into this annual report.)

Unless the context otherwise requires, the terms ~~“Ecopetrol”, “we”, “us”, “our”~~“Ecopetrol,” “we,” “us,” “our,” or the “Company” are used in this annual report to refer to Ecopetrol S.A. and its subsidiaries on a consolidated basis.

References to the Nation in this annual report relate to the Republic of Colombia (“Colombia”), our controlling shareholder. References made to the Colombian government or the Government correspond to the executive branch including the President of Colombia, the ministries and other governmental agencies responsible for regulating our business.

This annual report on Form 20-F contains forward-looking statements within the meaning of the safe harbor provisions of the U.S. Private Securities Litigation Reform Act of 1995. These statements are not based on historical facts and reflect our expectations for future events and results. Most facts are uncertain because of their nature. Words such as ~~“anticipate”, “believe”, “could”, “estimate”, “expect”, “should”, “plan”, “potential”, “predicts”, “prognosticate”, “project”, “target”,~~“anticipate,” “believe,” “could,” “estimate,” “expect,” “should,” “plan,” “potential,” “predicts,” “prognosticate,” “project,” “target,” “achieve” and ~~“intend”,~~“intend,” among other similar expressions, are understood as forward-looking statements. We have made forward-looking statements that address, among other things:

Our forward-looking statements and sensitivity analysis are not guarantees of future performance and are subject to assumptions that may prove incorrect and to risks and uncertainties that are difficult to predict. Actual results could differ materially from those expressed or ~~forecast~~forecasted in any forward-looking statements as a result of a variety of factors. These factors may include, but are not limited to, the following:

All forward-looking statements attributed to us are qualified in their entirety by this cautionary statement. We undertake no obligation to publicly update or revise any forward-looking statements, whether as a result of new information or for any other reason. Accordingly, readers should not place undue reliance on the forward-looking ~~statements contained in this annual report.~~statements.

The following table sets forth, for the periods and at the dates indicated, our selected historical financial and certain key operating data. The selected financial data has been derived from and should be read in conjunction with, and is qualified in its entirety by reference to, our consolidated audited financial statements, presented in Colombian Pesos.

(Expressed in millions of Colombian Pesos, except for the net income per share and net operating income per share, which are expressed in Colombian Pesos)

Our consolidated financial statements for the years ended December 31, 2014, 2015, 2016, 2017 and ~~2016~~2018 were prepared in accordance with IFRS as issued by IASB. References in this annual report to IFRS mean IFRS as issued by the IASB. Our date of transition to IFRS was January 1, 2014. Our consolidated financial statements for the year ended December 31, 2015 were our first set of consolidated financial statements prepared in accordance with IFRS.

IFRS differs in certain significant aspects from the current reporting standards as in effect in Colombia (“Colombian IFRS”)), which is the accounting standard we use for local reporting purposes. As a result, our financial information presented under IFRS is not directly comparable to our financial information presented under Colombian IFRS. For a description of the differences between Colombian IFRS and IFRS, see sectionFinancial Review—Summary of Differences between Internal Reporting Policies and IFRS.

Our consolidated financial statements were consolidated line by line and all transactions and balances between subsidiaries have been eliminated. These financial statements include the financial results of all subsidiary companies controlled, directly or indirectly, by Ecopetrol S.A. See Exhibit 1 – Consolidated companies, associates and joint ventures, to our consolidated financial statements included in this annual report.

As indicated ~~in paragraphs 9 and 18 of the International Accounting Standard 27~~IFRS 10 “Consolidated ~~and Separated~~ Financial Statements” we must present our financial information on a consolidated basis as if we were a single entity, combining the financial statements of Ecopetrol S.A. and its subsidiaries line by line, adding assets, liabilities, shareholder’s equity, revenues and expenses of similar nature, removing the reciprocal items among members of the Ecopetrol Group (“Ecopetrol Group” or “EG”) and recognizing non-controlling interest. We present our operating information on a consolidated ~~basis.~~basis in accordance with IFRS.

The regulations of the SEC do not require foreign private issuers that prepare their financial statements on the basis of IFRS to reconcile such financial statements to U.S. GAAP. Accordingly, while we have in the past reconciled our consolidated financial statements prepared in accordance with Colombian Government Entity GAAP to U.S. GAAP, ~~those~~these reconciliations ~~are no longer~~have not been presented in our filings ~~before~~to the ~~SEC.~~SEC since 2015. We do continue to provide the disclosure required under the U.S. Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 932 “Extractive Activities—Oil and Gas” (which we refer to as ASC Topic 932), as this is required, regardless of the basis of accounting on which we prepare our financial statements. Other than as required under ASC Topic 932, any references to accounting treatments under Colombian Government Entity GAAP or U.S. GAAP relate solely to the application of Colombian Government Entity GAAP or U.S. GAAP to our historical consolidated financial statements.

In this annual report, references to “US$” or “U.S. dollars” are to United States dollars and references to “COP$,” “Colombian Peso” or “Colombian Pesos” are to Colombian Pesos, the Ecopetrol Group’s functional and presentation currency under which we prepare our consolidated financial statements. This annual report translates certain Colombian Peso amounts into U.S. dollars at specified rates solely for the convenience of the reader. Unless otherwise indicated, such Colombian Peso amounts have been translated at the rate of COP$~~3,053.42~~2,956.55 per US$1.00, which corresponds to theTasa Representativa Promedio del Mercado(TRM), or Average Representative Market Exchange Rate, for ~~2016.~~2018. Such conversion should not be construed as a representation that the Colombian Peso amounts correspond to, or have been or could be converted into, U.S. dollars at that rate or any other rate. On ~~May 26, 2017,~~April 1, 2019, the Representative Market Exchange Rate was COP$~~2,911.66~~3,174.79 per US$1.00.

Certain figures shown in this annual report have been subject to rounding adjustments, and, accordingly, certain totals may therefore not precisely equal the sum of the numbers presented. In this annual report a billion is equal to one with nine zeros.

~~Due to market imbalances, there was~~After experiencing a ~~sharp contraction in crude oil price, particularly in~~gradual recovery during the first ~~quarter~~half of 2016. As demand proved to sustain itself while producers implemented previously announced capital expenditure reduction decisions that encompassed the adjustments necessary under the new price environment, the market began its path towards tighter balances (see Graph 1 – Supply/Demand vs ICE Brent price evolution). Although oil prices have recovered from the lowest prices during the oil crisis, high levels of uncertainty persist indicating2018 and reaching a ~~less than smooth recovery. Nonetheless, the change~~peak in ~~OPEC’s stance, announced at the end of September 2016 and later ratified in early December 2016, towards coordinated production cuts provided a lift that allowed~~October, the ICE Brent price suffered a downward trend in the latter part of 2018. The expectation of weaker economic growth for 2019 and a mismatch of supply and demand of crude played a fundamental role in this trend. The US government imposed sanctions on Iran in August of 2018, announcing the goal of reducing Iranian crude and condensate exports to ~~end~~almost zero. This created an expectation of a tight oil market during the ~~year above US$55 per barrel.~~latter part of 2018. However, several factors did not support a strong market outlook: refining margins weakened, inventories began to pile up and production from the US, Saudi Arabia and Russia ramped up, all at the same time. Additionally, the US government provided waivers to Iranian crude importers. As a reaction to low crude prices, the OPEC+ countries agreed to cut production in order to rebalance the crude market. On the demand side, weaker economic growth in China and Europe did not favor crude oil consumption.

According to estimates of the Energy Information Administration (“EIA”), in 2018 global consumption of petroleum and other liquids fuels grew by 1.4 mmboepd while Non-OPEC petroleum and other liquid fuels supply grew by 2.5 mmboepd. On the other hand, OPEC reduced its production by 0.09 mmboepd, mainly due to unplanned crude oil disruptions which in December amounted to 2.2 mmboepd in Libya and Nigeria, Iranian sanctions and decreasing production in Venezuela.

Source: ~~PIRA~~EIA: Short term Energy ~~Group, World Oil Market Forecast (February 28, 2017)~~Outlook (January 15, 2019)

Although international oil prices and global demand and supply dynamics are significant factors affecting our business and financial condition, Colombia’s local economic factors have also influenced, and could continue to influence, our performance given that we conduct most of our business in Colombia.

The performance of Colombia’s gross domestic product (GDP) is one of the main drivers of fuel consumption in Colombia. According to the National Administrative Department of Statistics (DANE for its acronym in Spanish), during ~~2016~~2018 Colombia’s GDP grew 2%2.7% in real terms, as compared to ~~2015.~~2017. The ~~industries~~sectors with the greatest growth rates were ~~financial institutions, insurance, real estate~~retail, manufacturing and ~~business services, construction and manufacturing.~~state defense spending which had the largest contribution to national GDP. On the other hand, agricultural and cattle activities had the ~~industry with the largest drop in growth was mining.~~worst performance. Local sales of liquid fuels ~~(diesel, gasoline, jet fuel and LPG)~~ increased by ~~2% mainly~~1.3%, boosted by increased demand for diesel and jet fuel.

Natural gas demand in Colombia grew by 5.1% in 2018 due to ~~the increase in sales of gasoline. Gasoline domestic sales were more competitive than its substitutes due to its price decrease and fewer than expected conversions to~~higher demand from natural gas fired power plants and from non-thermal demand, mainly for ~~vehicles (NGV)~~household consumption.

Ecopetrol’s 2019 – 2021 (the “Business Plan”) maintains the strategic priorities set forth in the previous 2020 plan: we continue to prioritize profitable reserves and production growth, underpinned by strict capital discipline and continued focus on cost efficiency and cash flow generation. The plan seeks to maximize value generation for our shareholders with continued focus on our incumbent position in Colombia, ensuring sustainability, competitiveness and profitability.

Among other matters, the Business Plan calls for achieving the following targets by the end of 2021: (i) organic production levels between 750-770 mboed, (ii) optimum throughput of the integrated refining system at a level between 370-400 mbpd, (iii) increasing transported volumes in line with the country’s production, (iv) investing approximately US$12-15 billion during the period and (v) maintaining a robust cash position and optimal leverage levels. The Business Plan is based on a reference price of US$65/bl.

Growth in reserves and production will be supported by four levers: (i) continuing the growth of our recovery factors and underlying hydrocarbons in place in existing fields, (ii) the diversification of our exploration portfolio in Colombia, (iii) the internationalization of our operations through both organic and inorganic means, and (iv) the appraisal and development of identified unconventional hydrocarbon potential in Colombia.

We estimate that by 2021 hydrocarbons originally in place (HCIIP) associated to our assets in Colombia will be approximately 60 billion barrels compared to 55 billion barrels as of the end of 2018. This increase is expected to be supported by seismic reprocessing, reassessments of reservoirs and drilling of advanced wells, among others. Additionally, the enhanced program is expected to continue to leverage our reserve and production growth.

Growth in the exploratory portfolio in Colombia will prioritize the incorporation of short cycle resources through the strengthening of the near field exploration activity in Colombia, mainly in the Llanos and Middle Magdalena basins. Furthermore, we seek to expand our presence in high potential under-explored basins, such as Putumayo and Piedemonte, and developing the potential of our operations in the offshore Caribbean.

The internationalization lever seeks to develop and maximize the potential of the position we have built in Brazil, the U.S. Gulf Mexico and Mexico. In ~~2016, there were no major changes~~addition, we expect to continue assessing business opportunities associated with unconventional hydrocarbon basins in ~~natural~~the United States and other mergers and acquisition opportunities in those geographies.

We have identified unconventional hydrocarbons potential in two basins in Colombia of approximately 10 tera cubic feet of gas ~~regulation. With respect~~and between 4 and 7 billion barrels of crude. In our investment plan described below, we are allocating US$500 million for the development of pilot programs between 2019 and 2021, subject to ~~natural gas supply, in November 2016, a new regasification plant located in Cartagena became available, meaning that Colombia is now connected~~government approval. If successful, we would then move to the ~~international LNG market~~commercial development of these pilots after 2021.

Our sustainability and ~~LNG prices~~growth are also leveraged in the concept of integration of our different segments.

We expect our midstream segment (or “transportation and logistics segment”) to continue being an important cash generator. In order to do so, the Business Plan calls for, among others, the segment to focus on improving efficiencies and synergies in our transportation system and pursuing investment opportunities in product pipelines given the increase in demand for fuels in Colombia. The Business Plan is currently projecting that our transport systems will ~~be a reference for national gas prices.~~move between 1.10-1.25 million barrels of oil and products per day during the period.

In our downstream segment (or “refining, petrochemicals, and biofuels segment”), the Business Plan focuses on the use and optimization of current infrastructure in order to achieve an expected refining throughput between 370-400 mbpd and an expected refining margin between US$12-15/bl, subject to market conditions. We expect to achieve this (i) through the incorporation of synergies between the Barrancabermeja and Cartagena refineries and (ii) by capturing market opportunities associated with the implementation of the International Convention for the Prevention of Pollution from Ships (Marpol), which favors the use of fuels with lower sulfur content in maritime transport. Additionally, as we did in 2018, we expect to continue delivering low sulfur diesel of 20 parts per million (ppm) and gasoline of 100 ppm versus the Colombian regulation of 50 ppm and 300 ppm, respectively.

~~The low oil price environment present at~~Following the ~~end of 2015 and the beginning of 2016 led to a revision~~implementation of our ~~business plan 2015-2020, originally launched~~transformation program in ~~May~~ 2015, ~~with a price scenario of~~we have accumulated approximately US$~~80 per barrel.~~3.3 billion in efficiencies to date. Our ~~new 2017-2020 business plan~~Business Plan is focused on ~~value generation, profitability~~continuing this trend. We expect to capture savings of approximately US$1.45-2.0 billion between 2019 and ~~financial sustainability under a price scenario of US$50 per barrel,~~2021, particularly: (i) capital expenditure efficiencies, (ii) revenue and allows for considerable upsides in case of potential price increases. For example, if prices were to increase to an average price of US$70 per barrel, production by 2020 could reach 830 thousand barrels equivalent per day, or 16% over the current production.margin optimization and (iii) operating expenditure efficiencies.

~~The three pillars~~In terms of sustainability, the Business Plan calls for integral water management, the protection of biodiversity and a continued focus on climate change, among others, all within the framework of the ~~plan are: (i) cash flow focus~~United Nations Sustainable Development Goals 2030. We expect to invest approximately COP$2 trillion in socio-environmental projects between 2019 and ~~cost efficiency, (ii) strict capital discipline~~2021. We are also seeking to reduce our energy costs by US $100 million by 2021 and ~~(iii) profitable reserves and production growth.~~increase our investments in renewable energy sources through the incorporation of 60 MW of renewable photovoltaic energy to our energy matrix, which already has 43 MW of biomass generation.

~~Cash flow focus and cost efficiency~~~~: In 2015, we launched~~We currently expect the ~~2015-2020 Transformation Program (the “Transformation Program”) with a goal of increasing our efficiency and decreasing cost. The Transformation Program has allowed us~~Business Plan to decrease structural costs by US$1.5 billion compared to 2014. Such reduction has been accomplished due to the implementation of initiatives through our different business segments and corporate areas. The new business plan entails a second phase of the Transformation Program, with activities aimed to achieve excellence in project planning and execution as well as in our production, transportation, refining and marketing operations.

~~Capital discipline~~: We have preserved a rigorous level of capital discipline through the adjustment of investments and the adoption of strict controls to ensure that projects are delivered efficiently and within the expected time frame and budget. The plan calls forrequire investments of between US$12-15 billion during the 2019-2021 period, of which approximately ~~US$13 billion between 2017 and 2020. By 2020, approximately 90% of this investment will~~82% would be allocated to the ~~development of exploration~~upstream segment, 8% to the midstream segment, 7% to the downstream segment and ~~production projects, while~~3% to other. These investments ~~in transportation and refining will seek to improve operational integrity and reliability.~~exclude inorganic growth opportunities, which if materialized, could be financed through cash from operations.

~~As part~~The Business Plan seeks to maintain leverage metrics to help us preserve our investment grade rating while allowing flexibility for specific optimizations of our capital ~~discipline, Ecopetrol is currently engaged in~~structure during the ~~divestment of non-strategic assets and the sale of minor fields, and has also defined a dividend policy as described in~~~~Section 6.2 Dividend Policy~~.period.

~~Profitable growth in production and exploration~~: One of the pillars of the revised business plan is the view that a strong production portfolio and a greater exploratory success will bring about profitable growth. Under a price scenario of US$50 per barrel, production should average 760 thousand barrels of oil equivalent per day by 2020, an approximately 6% growth from 2016. Approximately 94% of this production will come from the current producing assets.2.1.22019 Investment Plan

In ~~exploration,~~November 2018, the plan estimates the incorporation of approximately 1,000 million barrels of contingent resources. In respect of adding reserves, we highlight the results of the exploratory campaigns in the Colombian Caribbean offshore and the Gulf of Mexico in the United States. During the period 2017 – 2020, Ecopetrol expects to add 600 million barrels of proven reserves from current fields and exploration.

~~Consistent with the business plan update, in November 2016, the board of directors of Ecopetrol (“~~Board of ~~Directors”)~~Directors approved abetween US$3.5 and US$4.0 billion for the 2019 investment ~~plan for 2017.~~plan. The Ecopetrol Group ~~will continue~~plans to produce ~~an average of about 715~~between 720 and 730 thousand barrels of oil equivalent per day during ~~2017. This production level lays the foundation for Ecopetrol’s expected increase in production by 2020.~~

Most of the investment will be in exploration and production. In refining, petrochemicals and biofuels, and transportation and logistics, investments will be made to comply with integrity and operational requirements as well as project completion.2019. The table below sets forth the details of the investment plan per business segment.

In the exploration segment, US$~~650~~430-US$490 million ~~will be~~has been allocated mainly to the evaluation and appraisal of discoveries and ongoing exploration ~~efforts~~activity of Ecopetrol S.A. (approximately ~~US$460 million)~~44%), Hocol S.A. (“Hocol”) (approximately ~~US$114 million)~~12%), Ecopetrol America Inc. (approximately ~~US$11 million)~~1%), ECP Hidrocarburos Mexico (approximately 7%), Ecopetrol Costa Afuera (approximately ~~US$44 million)~~3%) and Ecopetrol Brazil (approximately ~~US$21 million)~~33%).

In the production segment, US$~~1,977~~2,385-US$2,725 million ~~will be~~has been allocated mainly to the execution of development and incremental production projects ~~in the~~of Ecopetrol S.A. (approximately 91%) primarily at Castilla, Rubiales, ~~Yarigui-Cantagallo,~~Chichimene, Apiay-Suria, Yariguí-Cantagallo, La ~~Cira - Infantas, Tibú,~~Cira-Infantas, Casabe, Piedemonte ~~Chichimene, Quifa, Provincia~~ and ~~Cusiana-Cupiagua fields (approximately US$1,147 million).~~Quifa. We have also allocated funds for our affiliates and subsidiaries as follows: ~~US$64 million~~approximately 3% for the development, operation and maintenance of fields of Ecopetrol America Inc. in the U.S. Gulf of Mexico, ~~US$88 million~~approximately 5% to Hocol, ~~US$63 million~~approximately 1% to Equion and ~~US$8 million to~~ Savia.

In the ~~transportation and logistics~~midstream segment, US$~~138~~240-US$275 million ~~will be~~has been allocated to investments focused on ~~the completion of projects such as San Fernando-Monterrey~~system and ~~transportation of heavy crude oils as well as crude oil dilution projects.~~operational integrity. The segment is seeking a higher efficiency in operations and maintenance practices.

In the ~~refining, petrochemicals, and biofuels~~downstream segment, US$~~105~~365-US$420 million ~~will be~~has been principally allocated to ~~Reficar, US$150 million to programs to improve operations at the~~ Barrancabermeja ~~Refinery~~refinery and Reficar through initiatives aimed ~~to increase~~at increasing revenues, ~~improve~~enhancing integrity management, improving efficiency and ~~reduce~~reducing operational ~~costs and US$82 million to Bioenergy.~~costs. The segment is seeking a higher efficiency in operations and maintenance ~~practices. It is important~~practices in order to ~~highlight that~~maximize the ~~Barrancabermeja Refinery modernization plan will continue to be delayed until~~value of the oil price environment allows investments to be made in such a major project. The mode of execution will be defined in this context, after analyzing alternatives which include a modular option in time and investment.existing assets.

We were formed in 1951 by the Colombian government asEmpresa Colombiana de Petróleos and began operating the crude oil fields at La Cira-Infantas, the oldest Colombian oil field, ~~whose~~where production started in 1918, and the pipeline that connected that field with the Barrancabermeja ~~Refinery~~refinery and the port of Cartagena. In 1961, we assumed the direct operation of the Barrancabermeja ~~Refinery~~refinery and continued its transformation into an industrial complex. In 1974, we acquired the Cartagena Refinery (as defined below), which had been in operation since 1957. Pursuant to Decree 0062 of 1970, we were transformed into a governmental, industrial and commercial company.

In 2003 pursuant to Decree Law 1760, theAgencia Nacional de Hidrocarburos - National Hydrocarbons Agency (the “ANH”) was created and ~~Ecopetrol´s~~Ecopetrol’s public role as administrator and regulator of the national hydrocarbons resources was transferred to the ANH. Ecopetrol modified its organic structure and became Ecopetrol S.A., a public stock-holding corporation, one hundred percent state-owned, and continued the development of exploration and production activities in a competitive basis with autonomy over our business decisions. Since 2006, according to Law 1118, we have been evolving from a wholly state-owned entity to a mixed-economy company with private capital. This process has resulted in a substantial change in the legal framework to which we are subject and in the nature of our relationship with the ~~Nation.~~ Nation, as our controlling shareholder. As of March 23, 2018, pursuant to our amended bylaws, the duration of the Company is 100 years.

We carried out our initial public offering in November 2007, when our common shares ~~became~~were listed on the Colombian Stock Exchange. Our American Depository Shares (“ADSs”) were listed on the New York Stock Exchange in 2008. Starting in August 2010, our ADSs began trading on the Toronto Stock Exchange (“TSX”) under the symbol “ECP.” On February 17, 2016, we announced our application for voluntary delisting from the TSX. On March 2,25, 2016, our ~~ADR´s~~ADR’s were officially delisted from the TSX. On December 7, 2017, we applied to the Alberta Securities Commission and the Ontario Securities Commission to cease our reporting requirements, due to our delisting process. On September 4, 2018, we announced that effective August 29, 2018, we had ceased to be a reporting issuer in each of the provinces of Alberta and Ontario and hence were no longer a reporting issuer in any jurisdiction in Canada. Accordingly, Ecopetrol no longer has any continuous disclosure obligations in Canada.

We operate in the following business segments: i) Exploration and Production; ii) Transportation and Logistics; and iii) Refining, Petrochemicals, and Biofuels.

Our subsidiaries, Refinería de Cartagena ~~(Reficar)~~S.A. (“Reficar” or “Cartagena Refinery”), Cenit Transporte y Logistica de Hidrocarburos S.A.S. (Cenit) and ~~Ocensa~~Oleoducto Central S.A. (Ocensa) are significant subsidiaries, as such term is defined under SEC Regulation S-X.

We have a number of directly and indirectly held subsidiaries both in Colombia and abroad. Our subsidiaries are either directly owned by us or indirectly owned by us through one or more of our other subsidiaries. As of ~~March~~December 31, ~~2017,~~2018, we have ~~eight~~seven directly owned and 2029 indirectly owned subsidiaries.

During ~~2016,~~2018, the following changes were made to the Ecopetrol Group’s structure:

Exhibit 8.1 to this annual report identifies our principal operating subsidiaries, their respective countries of incorporation, and our percentage ownership in each (both directly and indirectly through other subsidiaries), in each case as of March 31, 2017.

The stock ownership percentage listed refers to Ecopetrol S.A.’s direct and indirect participation. The data in this structure shows neither the whole ownership nor its decimal figures, so they will be used only for information purposes.

The so-called shareholding (Ecopetrol S.A.’s direct participation), affiliated, subsidiary companies are listed, as well as the stock interest of Ecopetrol S.A.’s subordinate companies.

~~We are~~In 2017, Ecopetrol completed the divestment of its stake in Empresa de Energía de Bogotá S.A. E.S.P. EEB for a total of COP$1,124 billion. The operation was carried out in accordance with the ~~process~~procedures defined by the Law 226 of ~~selling some~~1995, the Decree 2305 of ~~our non-core shareholdings:~~November 13, 2014, and the Decree 2110 of December 22, 2016.

We currently own 100% of the total outstanding shares of Esenttia. In connection with the review of its long-term strategy, the Board of Directors decided to suspend the 2016 plan to sell Ecopetrol’s shares in Esenttia.

We are a vertically integrated oil company with a presence primarily in Colombia and with activities in Peru, Brazil, Mexico and the U.S. Gulf Coast. The Nation currently controls 88.49% of our voting capital stock. We are among the ~~top 36 oil and gas~~world’s biggest state-owned companies, ~~in the world~~ranking 300 based on ~~the Petroleum Intelligence Weekly Top 50~~Forbes Global 2000 Ranking - ~~2016.~~2018. We play a key role in the local Colombian hydrocarbon market.

Our exploration and production business segment includes exploration, development and production activities in Colombia and abroad. We began local exploration in 1955 and international exploration in 2006. ~~We conduct exploration~~Exploration and production activities are conducted directly inby Ecopetrol S.A., and through some of our subsidiaries, ~~and~~as well as through joint ventures with third parties. As of December 31, ~~2016,~~2018, we were the largest operator and the largest producer of crude oil and natural gas in Colombia, maintaining the largest acreage exploration position ~~in Colombia.~~

Ecopetrol is planning to incorporate about 1 billion barrels of contingent resources by 2020, through exploration activities in the following areas: (i) offshore Colombia, (ii) near field exploration in Colombia, (iii) consolidation of exploration areas outside of Colombia, such as the Gulf of Mexico, Brazil and other areas in America.

~~During 2016 our exploration activities focused in three work fronts: onshore Colombia, Colombia and the US Gulf of Mexico offshore and near field exploration in Colombia.~~

On January15, 2016 Hocol Petroleum Limited - HPL, subsidiary of Ecopetrol S.A. and owned 100% by Ecopetrol, constituted and registered before the Chamber of Commerce in Colombia the company Ecopetrol Offshore (“Ecopetrol Costa Afuera”or “ECAS”). ECAS and Hocol S.A. are subsidiaries of HPL.

ECAS´ purpose is to develop oil and gas activities in offshore Colombia by taking advantage of offshore free trade zones regime. These activities include exploration, exploitation, production, transport, distribution, export, sales and commercialization of oil and gas and any other hydrocarbon products or derivatives.

~~During 2016 bidding rounds were not launched by the National Hydrocarbons Agency to offer licenses for exploratory activities in Colombia.~~

Ecopetrol signed farmout agreements with the following companies: Parex Resouces Colombia Ltd (acquired 50% of the working interest in Convenio Playón and 50% of the working interest in Convenio de Mares), Talisman Colombia Oil & Gas Ltd (acquired 49% of the working interest in Convenio Upar) and Hupecol Operating Co LLC (acquired 100% of the working interest in CPO-11 E&P Contract).

~~Additionally, Ecopetrol carried out its Onshore Round 1-2016 offering working interest in the onshore blocks LLA-38, LLA-39, LLA-52, PUT 13 and VMM-32 located~~ in Colombia.

For purposes of this exploration section, “we” refers to Ecopetrol S.A., its subsidiaries and partnerships in which Ecopetrol has an interest. Unless otherwise stated, all figures are given before ~~deductions for~~deducting royalties.

~~Currently we have~~Under the framework of the Business Plan, Ecopetrol is aiming to incorporate contingent resources in high reward projects concentrated in: (i) near field exploratory activity, (ii) underexplored basins, such as Putumayo and Piedemonte, (iii) offshore Colombia, and (iv) international areas such as Brazil, the U.S. Gulf of Mexico and Mexico.

Graph 3- Sedimentary Basins where Ecopetrol executes exploration activities ~~in most of the sedimentary basins in Colombia, in which active oil and gas operations are found.~~

~~The following map shows~~During 2018, the ~~basins where Ecopetrol has been conducting its main~~ exploration ~~activities.~~strategy was directed at leveraging our goal on three working fronts: onshore Colombia, offshore Caribbean, and strengthening and diversifying our exploration overseas.

~~We conduct exploration activities in Colombia on our own and through joint ventures with regional and global oil and gas companies.~~

During ~~2016, two 2D seismic programs were acquired in Colombia: Cardon (106.5 Km) and Nogal (44 Km).These seismic programs are intended to increase the knowledge of the Caguan-Putumayo basin.~~

~~Additionally, our subsidiary Hocol S.A. successfully completed the acquisition of 294.9 km~~² ~~of 3D seismic in the exploratory blocks GUA2 (213.5 km~~²~~) and YDSN1 (81.4 km~~²~~) in Middle Magdalena Basin and Llanos Basin, respectively.~~

~~During 2016, onshore drilling operations were started in five wells by~~2018, Ecopetrol and its ~~subsidiary Hocol S.A. in the Lower Magdalena Basin and Llanos Basin. Additionally Hocol finalized~~subsidiaries conducted drilling operations in twelve exploration wells (A3/A2) and in five appraisal wells (A1) in Colombia. Of these seventeen wells, six were successful, seven were plugged and abandoned, and four were under evaluation as of December 31, 2018. This activity was concentrated mainly in the ~~Payero well (Piedemonte~~following basins: Eastern Plains (Llanos Orientales), Lower Magdalena Valley, Middle Magdalena Valley and foothills.

In terms of onshore Colombia, our exploration efforts were focused on searching for hydrocarbons in mature basins, near-field exploration and areas close to existing production infrastructure.

In offshore activities, we increased our participation from 50% to 100% in theFuerte Sur and Purple Angel blocks (Sinu offshore basin), which ~~started in December 2015 and was operated~~were relinquished by ~~Equion.~~Anadarko Petroleum Corporation. In ~~terms~~the case of the block Col-5 (Sinu offshore ~~Colombia, drilling operations started at~~basin), the ~~Purple-Angel 1 well (following~~ANH approved the ~~discovery announced at the Kronos-1 well in July 2015) and at the Gorgon-1 prospect. Our joint venture partner Anadarko operates both wells. On March 8, 2017, we announced the discovery~~conversion of a ~~gas presence at Purple-Angel 1.~~Technical Evaluation Agreement (as defined below) to an Exploration and Production Contract (as defined below), where we have a 100% participation.

The following table sets forth, for the periods indicated, the number of gross and net productive and dry exploratory wells drilled by us and our joint venture partners, and the exploratory wells drilled by third parties pursuant to sole risk contracts with us.

The reserves replacement ratio for ~~2016~~2018 was ~~(0.07)~~1.29 barrels compared to ~~0.06~~1.26 barrels in ~~2015.~~2017. The average replacement ratio for the last three years was ~~0.48.~~0.83 barrels.

In 2018, revisions increased reserves by 120 million boe, mainly as a result of:

In 2018, improved recovery increased reserves by 129 million boe. The additions were associated with new proved areas under water flooding in the Chichimene, Castilla, La Cira-Infantas, Apiay, Suria, Yarigui, Casabe and Dina Cretaceo fields 86 million boe increase. In addition, the new steam injection project at the Teca-Cocorná field accounted for a 19 million boe increase in reserves.

The remaining 19%, or 24 million boe, increase was due primarily to water injection reservoir responses at various fields.

Extensions and discoveries during 2018 amounted to 57 million boe primarily due to extensions of proved acreage mainly from activities in new proved areas in the Rubiales, Castilla, Cupiagua, Pauto and Caño Sur fields, which accounted for 45 million boe and newly discovered fields and reservoirs accounted for 12 million boe. The remaining 9 million boe corresponds to smaller changes in several other fields.

~~In 2016, revisions reduced reserves by 54 million boe, mainly as a result of:~~

In 2016, improved recovery increased reserves by 11 million boe. The additions were associated with the continued development of water flood projects through existing wells, although additional drilling may be required to fully optimize the development configuration. The main additions were in La Cira-Infantas, Chichimene, Casabe and Yarigui fields, which collectively accounted for an 8 million boe increase.

Extensions and discoveries during 2016 amounted to 27 million boe, which is comprised of 25 million boe of extensions of proved acreage and 2 million boe from newly discovered fields and reservoirs. The newly discovered fields in Colombia corresponded to the Bayonero and Oripaya fields, and new reservoirs were discovered in Coren, Corocora Sur and Cravo Este. The extensions of proved acreage resulted mainly from activities in new proved areas in the Castilla, Chichimene, Gibraltar, Pauto and Rubiales fields, which accounted for 20 million boe of the total of 25 million boe from extensions of proved acreage. The remaining 5 million boe corresponds to smaller changes in several other fields.

As of December 31, ~~2016,~~2018, our total proved undeveloped oil and gas reserves amounted to ~~269~~338 million boe, ~~27%~~21% of which ~~are~~is related to new drilling activities in the Rubiales field, 41% is related to development activities in the Castilla, Caño Sur, Chichimene, Quifa, Cupiagua and Yarigui fields and 22% of which is related to the ~~drilling activities in Area Castilla and 25% to the~~new development activities in ~~Rubiales field.~~the Teca, Pauto, Bonanza and Ryberg fields. The ~~Cupiagua, Palagua, Pauto, Quifa, and Yarigui fields collectively accounted for 27% of total proved undeveloped oil and gas reserves with the~~ remaining ~~21%~~16% comes from activities at several other fields.

Our proved undeveloped reserves represent ~~17%~~20% of our total proved reserves.

The Ecopetrol’s year-end development plans are consistent with SEC guidelines for the development of proved undeveloped reserves within five years.

The following table reflects the developed and undeveloped proved reserves estimates through the past three fiscal years.

Of the total amount of proved undeveloped reserves that Ecopetrol had at the end of ~~2015 (379~~2017 (287 million boe), we converted approximately 6884 million boe, or ~~18%~~29%, to ~~proved~~proven developed reserves during ~~2016,~~2018.

Approximately 69% of the total conversion is primarily associated with the development of crude oil and gas projects in the Castilla, ~~Pauto, Mamey, Bonga~~Rubiales and ~~Gunflint fields. These projects accounted for approximately 84% of the total conversion~~Chichimene fields (58 million boe), while the remaining ~~16%~~31% is associated with development execution in other fields such as the ~~Quifa~~Ocelote, La Cira Infantas, Caño Sur and ~~Rubiales~~K2 fields, among others. The amount of investments made during ~~2016~~2018 to convert proved undeveloped reserves to proved developed reserves was US$~~709~~841 million.

The following table reflects the main changes in undeveloped proved reserves during ~~2016.~~2018.

The conversion rate used is 5,700 standard cubic feet = 1 barrel of oil equivalent.

Ecopetrol’s reserves process is ~~supervised and~~ coordinated by the Corporate Reserves ~~Director,~~Manager, a highly experienced ~~geologist and~~ engineer, who reports to the Upstream Chief Financial Officer. The Ecopetrol reserves ~~audit~~ group is comprised of reserves coordinators who are geologist and petroleum engineers, each with more than 10ten years of experience in reservoir characterization, field development, estimation and reporting of reserves and who ~~have supervision~~support and ~~supporting responsibilities over~~interact with the ~~professionals~~specialists involved in the estimation and reporting ~~process.~~

~~Reserves are first estimated internally, supervised and coordinated by the Corporate Manager of Reservoirs, a geologist who holds a Master’s degree~~process, following an established procedure with its corresponding internal controls. As in ~~geology and has more than 20~~previous years, ~~of experience in projects associated with reservoir characterization and development, estimation, and reporting of reserves. The employees involved in~~ the reserves ~~process meet~~are estimated and certified by recognized external independent engineers (this year consisting of Ryder Scott Company, Gaffney, Cline & Associates, Sproule International Limited and DeGolyer and MacNaughton) in compliance with the definitions of the Society of Petroleum Engineers ~~qualifications for reserves estimators. Internally estimated reserves are submitted to an external audit process, which was conducted by~~and the ~~external engineers (Ryder Scott and DeGolyer and MacNaughton).~~applicable SEC rules. According to our corporate policy, we report the reserves values obtained from the external engineers, even if they are lower than our ~~internal estimated~~expected reserves.

The reserves estimation process ends when the Corporate Reserves ~~Director~~Manager consolidates the results and together, with the Development Vice-President and the Upstream Chief Financial Officer, presents ~~them~~the outcome to the Reserves Committee, which ~~is composed of~~comprises the ~~Chief Financial Officer~~CEO, the Ecopetrol’s Group’s CFO and the Vice-President of Development and Production. Results are later presented to the Audit and Risk Committee of the Board of Directors and finally approved by the Board of Directors.

Petroleum engineering consultants Ryder Scott Company, Gaffney, Cline & Associates, Sproule International Limited and DeGolyer and MacNaughton have estimated and ~~Ryder Scott have audited~~certified Ecopetrol’s proved reserves as of December 31, ~~2016.~~2018. These external engineers ~~audited~~estimated 99% of our estimated net proved reserves. The reserves reports of the external engineers are included as exhibits to this annual report. ~~The external engineers DeGolyer and MacNaughton and Ryder Scott audited 99% of our estimated net proved reserves for the year ended December 31, 2015 and 2014.~~

~~Ecopetrol~~Ecopetrol’s reserves process uses deterministic methods ~~that~~which are commonly used internationally to estimate reserves. These methods have some uncertainty with respect to degradation, and thus, the estimates should not be interpreted as being exact amounts. However, the technology used to estimate reserves is considered reliable. The majority of the producing proved reserves were estimated by applying appropriate decline curves or other performance relationships. In analyzing decline curves, reserves were estimated by calculating economic limits that are based on current economic conditions. In certain cases, where the methods previously employed could not be used, reserves were estimated by analogy with similar reserves for which more complete data was available.

Estimates of reserves were prepared by geological and engineering standard methods commonly used in the oil and gas industry. The method or combination of methods used in the analysis of each reserve was adopted from experience analogy reserves, including information on the stage of development, quality and completeness of basic data and production history.

The following table reflects the estimated proved reserves of oil and gas as of December 31, ~~2014~~2016 through ~~2016,~~2018, and the changes therein.

For more information regarding the potential impacts of oil prices on our reserve estimates, see the sectionsFinancial Review—Trend Analysis and Sensitivity Analysis andRisk Review—Risk Factors.

We conduct our exploration and production business through a variety of types of contractual arrangements with the Colombian government or with third parties. Below is a general description of each type of contractual arrangement to which we were a party as of December 31, ~~2016:~~2018:

~~Created~~The purpose of this type of contract, created by ~~the~~ Decree 2310 of 1974, ~~the purpose of this contract~~ is the exploration of the areas covered by the contract, and the exploitation of hydrocarbons found in that area. This type of contract, together with E&P contracts and Special Contracts (Casabe, La Cira and ~~La Cira)~~Teca-Cocorná fields) which are described below, are the most significant in terms of our production and proved reserves.

Under association contracts, the exploratory risk is assumed entirely by Ecopetrol S.A.’s contractual partner, the associate. If there is a discovery and Ecopetrol S.A. agrees that the relevant field is commercially viable, Ecopetrol S.A. will participate in the field’s development. A joint account will be created, and Ecopetrol S.A. and the partner will participate in the expenses and investments in the proportions established in the corresponding contract. Ecopetrol S.A. will reimburse the direct exploratory expenses incurred by the contractual partner in the proportions established by the contract.

If Ecopetrol S.A. does not believe that the relevant field is commercially viable, the partner has the right to execute on its own all activities considered necessary for the field’s exploitation as a “sole risk ~~operation”,~~operation,” and to be reimbursed for a defined percentage of all investments for such sole risk operation in accordance with the corresponding contract.

Every association contract provides for an executive committee that makes all technical, financial and operational decisions if Ecopetrol S.A. has agreed that a field is economically viable. All major decisions of this committee must be made unanimously by the parties.

The maximum term of an association contract is 28 years. The first six years of the contract are for the exploratory phase, and are extendible for 1 or 2 more years at the partner’s request. The remaining time is for the exploitation phase.

We enter into incremental production contracts to obtain ~~incremental~~additional hydrocarbon production beyond a base production curve that is established based on the proven reserves of a specific field or well. Under this type of arrangement, Ecopetrol S.A. owns 100% of the hydrocarbons defined by the base production curve. The incremental production ~~(i.e.~~(i.e., the hydrocarbon volume obtained beyond the basic production as a result of investment activities), will be owned by the parties to such incremental production contract in the proportions established by such contract.

The initial phase of an incremental production contract has a term of up to 3 years, in which the contractual partner executes an initial work program approved by Ecopetrol S.A. in order to gain the right (but not the obligation) to continue with the second phase. If Ecopetrol’s partner decides to continue with the project for the second phase (the complementary phase), it must inform Ecopetrol S.A. in writing no later than 90 days prior to the termination date of the initial phase and deliver a proposed development plan for each covered field. The second phase is the production phase and has a maximum term of 22 years minus the length of the initial phase.

Incremental production contracts provide for an executive committee that is responsible for taking all decisions in order to approve, control and supervise all operations that take place during the duration of the contract. These contracts also provide for a steering committee, which is responsible for the supervision of the execution of the work programs, the annual budget and other items.

Risk Production Contract for Discovered Undeveloped and Inactive Fields (First Round 2003)

We have entered into risk production contracts for discovered undeveloped fields to promote exploration by private companies of both undeveloped and inactive fields. Under these contracts, the contracting party assumes all costs and expenses for the development and operation of a field in exchange for a percentage interest in the ~~fields’~~field’s production as specified in the contract. This type of contract has a ten-year term calculated as from its date of ~~execution;~~execution: one year for the evaluation period and a maximum of nine years for the development period. Some of these contracts have subsequently been extended beyond their original term.

~~Operation for Risk Production Contracts for Discovered Undeveloped and Inactive Fields (Second Round 2005)~~

The contracts awarded in the second round of undeveloped and inactive discovered fields are service contracts wherein services rendered are payable with a percentage of the production. Ecopetrol S.A. keeps all rights to explore and exploit hydrocarbons found in the area.

These contracts have a 10 year term, including an evaluation period of 8 months, within which the operator has to comply with a minimum commitment to conduct a technical evaluation of the field at its own risk.

The facilities built during the term of the contract, other than facilities associated with drilled wells, will be owned by the operator, who will remain responsible for them, even after contract ends. Only drilled wells become property of Ecopetrol S.A. upon the contract’s termination.

The purpose of this contract is the exploration of the contracted area, and the exploitation of the oil found in the contracted area. Unlike in the association contract, Ecopetrol S.A. shares exploratory risks and costs with the contractual partner, the associate, together with the oil produced, in the proportions established by the contract.

~~Risk participation contracts provide for an executive committee which is created upon the execution of the contract.~~

These contracts have a 28 year term, including an exploratory period of six years (which period is extendible under certain contracts for one or two years), after which the exploitation period commences.

We are party to a Joint Venture Contract for Exploration and Exploitation of “La Cira-Infantas” Area, “Teca Cocorná” Area; and a Services and Technical Collaboration Contract for the “Casabe” field.

Joint Venture Contracts for Exploration and Exploitation of “La Cira-Infantas” Area and of “Teca-Cocorná” Area

These contracts between Ecopetrol S.A. and Occidental Andina LLC, executed on September 6, 2005 and June 24, 2014, respectively, have as their purpose, a joint collaboration between the parties with the goal of increasing the economic value of the La Cira-Infantas field and the Teca-Corcorná field by means of hydrocarbon exploration and production activities, including, among others, an incremental production project to improve the recovery factor, process optimization and exploratory activities.

Ecopetrol S.A. partially assigned its exploratory and production rights in the Contracted Areas to Occidental Andina LLC. Ecopetrol S.A. provides financial resources and the preferential rights of use for the existing infrastructure in that zone and Occidental Andina LLC provides financial resources and the technical and operative experience in mature fields redevelopment projects and enhanced recovery technologies.

Ecopetrol S.A. is the operator under both Joint Venture Contracts, and on behalf of the parties is responsible for the conduction, execution and control, directly or via contractors, of the operational activities.

The La Cira-Infantas contract’s term is divided in three phases. The first phase lasts 180 days, the second 730 days and the third up to the economical limit.

The incremental production, after deduction of the royalties, is owned 52% by Ecopetrol S.A. and 48% by Occidental Andina LLC. These same percentages apply to the participation in the operational and direct expenses. Adjustments to the participations for the benefit of Ecopetrol S.A. will occur if there are high production levels or high prices.

The Teca-Cocorná contract’s term is divided in two phases. The first phase lasts three years, extendable for up to an additional year, the second 20 years counted as from the initiation for the second phase and will be reduced by the term of any extensions of the first phase.

The basic production is 100% owned by Ecopetrol S.A. The incremental production, after deduction of the royalties, is owned 60% by Ecopetrol S.A. and 40% by Occidental Andina LLC. These same percentages apply to the participation in the operational and direct expenses. Adjustments to the participations for the benefit of Ecopetrol S.A. will occur if there are high production levels and high prices.

The purpose of the contract executed between Ecopetrol S.A. and Schlumberger Surenco S.A. on April 26, 2004, is the evaluation, design and execution of work programs specifically with the purpose of increasing the value in the Casabe field by means of ~~development of~~hydrocarbon exploration and production activities to obtain incremental production, application of new technologies, application of techniques for deposits management and operational costs reduction. Ecopetrol S.A. is the operator and Schlumberger Surenco S.A. keeps the right of first option regarding the activities to be executed in the area of interest.

Both parties can invest in all the activities seeking to evaluate, obtain and incorporate incremental value in the area of interest. Such activities are developed directly by the parties or via contractors (Ecopetrol) or subcontractors (Schlumberger). Amounts expended pursuant to the contract are reimbursed depending on the incremental value (monthly valuation in US$ of the results obtained from the execution of the work programs) created through the contract and the activities executed thereunder.

Both Ecopetrol S.A. and Schlumberger Surenco S.A. commit to assume full responsibility for damages and/or losses suffered by their respective personnel and goods in development of the contract, regardless of the cause. The maximum authority is the Management Committee.

The contract had an initial term of 10 years, and was amended several times to include an additional term of six years for which a new business was structured.

The National Hydrocarbon Agency (“ANH”) was created by Decree Law 1760 of 2003 and was given the authority to administer all national hydrocarbon reserves under contracts executed beginning on January 1, ~~2004 (Decree~~2004. Decree Law 1760 of 2003 states, “The Empresa Colombiana de Petróleos, Ecopetrol, is split, its organic structure is modified, and the Agencia Nacional de Hidrocarburos and the Sociedad Promotora de Energía de Colombia S.A. are ~~created”).~~created.” Prior to January 1, 2004, Ecopetrol S.A. had the authority to contract with third parties for the exploration and production of new areas.

The creation of the ANH did not modify the rights or obligations of Ecopetrol or other parties with respect to contracts in existence atbefore January 1, 2004 when the ~~time when~~ ANH was created and therefore Ecopetrol retains the authority to execute agreements with respect to all areas that it held ~~as of January 1, 2004 when the ANH was created.~~prior to that date.

Below, we include a brief description of each type of contract that we have entered into with the ANH:

This type of contract grants to the contractor the right to develop technical evaluation operations with operational autonomy at its own cost and risk, seeking to appraise the hydrocarbon potential, with the purpose of identifying the zones of prospective interest in the area by means of the execution of an exploratory program. The contractor has the option to request the conversion of a technical evaluation agreement (“Technical Evaluation Agreement” or “TEA”) into one or more E&P Contracts that cover the area of the TEA (or a portion thereof).

The contractor can conduct evaluation activities for terms that vary between 18, 24 and 36 months, depending on the terms of reference of the ANH’s bidding round.

The ANH enters into concession contracts pursuant to which the Nation grants exploration and production rights, and receives royalties and taxes. In turn, the contractor provides 100% of the investment and expenses resources, and receives 100% of the production after royalties and taxes. The ANH has named this contract an “Exploration and Production Contract” (E&P Contract).

Pursuant to the first stage of this contractual model, the ANH only ~~received~~receives a percentage of oil revenues in two cases: (i) when the international oil prices rose beyond a specified price, above which the ANH has a right to participate in a share of the increased revenues generated, or (ii) in the case of recognition of production rights in an extended contractual phase.

Under all E&P contracts executed since ANH’s 2008 bidding round, the ANH receives a percentage of the production from the beginning of the contract, upon the commencement of the production phase, and not only in the extension phase of the contract as mentioned in the previous ~~paragraph, in~~paragraph. In addition, toANH has economic rights when the price of oil exceeds a reference price set in the contract (high price fee) and the superficiary canon.

E&P contracts have two phases: (i) an exploration period, which term is 6 years counted from the effective date, renewable for two additional years, and (ii) a production period, which is, with respect to each production field, 24 years plus any extensions, which are counted from the date of declaration of commerciality of the corresponding field. The ~~above-mentioned~~abovementioned terms have been modified during ANH’s 2014 bidding round for unconventional and offshore reservoirs to an exploration period of nine years and a ~~30 years~~30-year production period.

At the time of termination or extension of any association contract ~~(executed~~executed by Ecopetrol S.A. before December 31, ~~2003),~~2003, the rights over the production area and over the movable and immovable assets therein will continue to belong to Ecopetrol S.A.

Pursuant to article 2 of Decree 2288 of 2004, which regulates Decree Law 1760 of 2003, Ecopetrol S.A. must execute an agreement with the ANH to regulate the exploration and exploitation terms and conditions of the relevant area, which was previously subject to an association contract.

Decree 2288 of 2004 also established that Ecopetrol S.A. would have to execute agreements with ANH covering fields directly operated by Ecopetrol S.A. Under these agreements ANH recognizes the exclusive right of Ecopetrol S.A. to explore and exploit the hydrocarbons property of the Nation that are obtained in the areas they cover, until resource depletion or until Ecopetrol S.A. returns the area to the Nation through the ANH.

These agreements also provide the conditions under which Ecopetrol S.A. is able to assign, partially or completely, its rights and duties thereunder to third parties.

The transportation and logistics segment includes the transportation of crude oil, motor fuels, fuel oil and other refined products including diesel, jet and biofuels. We conduct most of these activities through our ~~wholly-owned~~wholly owned subsidiary Cenit and its subsidiaries.

The map below shows the locations of the main transportation networks owned by our business partners and us.

The table below sets forth the volumes of crude oil and refined products transported through the crude oil pipelines and multipurpose pipelines owned by us.

The volume of crude oil transported by ~~Cenit´s~~Cenit’s main systems and those of affiliates ~~decreased~~increased in ~~2016~~2018 by ~~11%~~1.6% compared to the previous year. This ~~decrease~~increase was mainly the result of ~~lower production volumes in Colombia and impacted most~~a higher volume of ~~our~~Castilla Norte crude oil ~~pipelines.~~coming from the Barrancabermeja refinery through the Ayacucho-Coveñas 16”/24” systems. Additionally, we experienced an increase in the volume of Castilla crude oil transported through the Llanos node, which increased the proportion of that crude oil in the systems that reach Coveñas. Of the total volume of crude transported by oil pipeline, approximately ~~68%~~75.7% belonged to Ecopetrol’s corporate group.

The volume of refined products transported by Cenit increased by 4%1.9% in ~~2016~~2018 mainly due to ~~a higher volume~~growth of ~~products transported through the Galan – Sebastopol system to fulfill the demand in the central region.~~local fuel demand. Of the total volume of refined products transported in multi-purpose pipelines during the year, ~~20%~~33% belonged to Ecopetrol’s corporate group.

During ~~2016,~~2018, due to the calculation of our service factor (which determines the transportation capacity that can be offered), we ~~increased~~decreased the capacity of our primary and secondary oil and product pipelines and loading ~~facilities due~~facilities. Our service factor is calculated on a monthly basis and may vary from time to ~~the reversion~~time, as it considers operative and technical effects (whether scheduled or unscheduled) within a certain period of the Ayacucho-Galan 14” system. Meanwhile, our main expansion projects are under way with our main focus being to perform the adjustments to our infrastructure to allow the transportation of heavier crude oil.time. Our main crude oil pipeline systems’ operating capacity ~~increased~~decreased from ~~1,336,000~~1,500,000 bpd in ~~2015~~2017 to ~~1,369,000~~1,497,000 bpd in ~~2016.~~

2018. Our main refined products pipeline transportation capacity decreased from ~~529~~518.6 thousand bpd in ~~2015~~2017 to ~~515~~510 thousand bpd in 2016. This decrease in capacity was primarily the result of a reduction in the utilization of drag reducer agent (DRA) in our Galan – Sebastopol 12” system and the transportation of three refined products (naphtha, gasoline and diesel) in our Pozos Colorados – Galan system instead of the two refined products (naphtha and diesel) transported in 2015.2018.

References to our crude oil transportation capacity in this annual report refer to the capacity of the pipelines that belong to Cenit and its subsidiaries to transport crude oil volumes either to the ~~Barrancabermeja Refinery~~refineries or to our export facilities. In addition, we have other feeder systems that transport oil volumes from producing facilities or other pumping stations to these main pipelines. References to our refined products transportation capacity refer to the capacity of ~~our Galan-Sebastopol, Galan-Bucaramanga, Cartagena-Baranoa, Pozos Colorados-Galan~~pipelines that begin in the Galan station (Barrancabermeja refinery) and ~~Buenaventura-Yumbo systems.~~Cartagena station (Cartagena Refinery).

As of December 31, ~~2016,~~2018, we, directly or indirectly with private partners, own, operate and maintain an extensive network of crude oil and refined products pipelines. These pipelines connect our own and third-party production centers, import facilities and terminals to refineries, major distribution points and export facilities in Colombia. Cenit directly owns ~~49%~~45% of the total crude oil pipeline shipping capacity in Colombia. When aggregated with the crude oil pipelines in which Cenit owns an interest, Cenit owns ~~81%~~82% of the oil pipeline shipping capacity in Colombia. By December 31, ~~2016,~~2018, our network of crude oil and multipurpose pipelines was approximately ~~8,860~~9,071 kilometers in length. The transportation network consists of approximately ~~5,146~~5,362 kilometers of main crude terminals and oil pipeline networks connecting various fields to the Barrancabermeja ~~Refinery~~refinery and Reficar, as well as to our export facilities. We also own ~~3,714~~3,709 kilometers of multipurpose pipelines for transportation of refined products from the Barrancabermeja ~~Refinery~~refinery and from Reficar to major distribution points. Out of the ~~5,146~~5,362 kilometers of crude oil pipelines, owned by us, ~~2,985~~3,150 kilometers of crude oil pipeline are wholly owned, and ~~2,161~~2,212 kilometers of crude oil pipeline are owned through non-wholly owned subsidiaries.

The following table sets forth our main pipelines in which we own an indirect interest as of December 31, ~~2016.~~2018.

As of December 31, ~~2016~~2018 we owned 6873 stations, 3439 located in crude oil pipelines, 30 in refined products pipelines, 2 in crude oil ports and 2 in refined product ports.

As of December 31, ~~2016,~~2018, we had a nominal storage capacity associated with the transportation network of 1617.7 million barrels of crude oil and 44.9 million barrels of refined products. We do not own any tankers.

The Transportation and Logistics segment has a maintenance operating model with the aim of unifying criteria for planning and execution among the companies of the segment.

The San Fernando – the Monterrey project’s initial objectives ~~include~~included ensuring the ability to transport 300,000 bpd at 300 cSt of diluted crude oil from the Chichimene and Castilla fields to the Monterrey pumping station and the transportation of 45,000 bpd of diluent (naphtha) between the Apiay station and the Castilla and Chichimene fields.

The scope of the project includes the construction of a new 30” ~~171 km~~119-km crude oil pipeline, a ~~receipt,~~new pumping station to include reception, storage and ~~pumping station, and~~dilution facilities, the ~~reversion/~~conversion of the existing pipeline of ~~16”~~10” between the Castilla II plant and the Apiay station, and the construction of a new 10” pipeline between Chichimene and San Fernando fields in order to transport diluent (naphtha) from the Apiay station to the ~~Castilla II~~San Fernando plant.

AsIn 2018, the project completed the maximum pumping test, in accordance with the operational system parameter and owner’s requirements; as a result, of the ~~evaluations we made and due to the reduction in production forecasts, the scope~~main functional services of the project ~~was modified~~were validated. The construction, startup phase and ~~the transportation capacity was reduced from 390,000 bpd~~commissioning of all systems were completed in January 2018. The system is able to ~~300,000 bpd from~~transport crude oil at 750 cSt between the ~~San Fernando station to the Monterrey station.~~

~~During 2016 progress was achieved on construction of the San Fernando station, especially with regards to the assembly of the pumping system units. We completed the construction of the lines between~~ San Fernando and Apiay ~~and the branch lines between San Fernando and the Castilla and Chichimene~~ stations. ~~By the end of the first quarter of 2017 the filling of tanks and lines and the testing of main pumping units had been completed.~~

Given the uncertainties around the future results of the exploration and production activities in Colombia and the current expected return of the investment, in December 2017 the parties engaged in the Oleoducto al Pacifico suspended the project. Based on our current view, this decision has had no impact on the oil industry in Colombia and can be reconsidered in the event the transportation system may be necessary.

During 2018, Ocensa began to replace five pumping units with internal combustion engines with electrical energy engines. The ~~OCENSA P135 project’s main objective~~goal of this project is to ~~increase~~reduce the ~~pipeline transportation capacity by 135,000 bpd. The project involves improving~~level of greenhouse gas emissions and noise pollution, thereby having a positive effect on the ~~pumping system~~environment and ~~increasing the storage capacity. The main project activities were completed at the end of December 2016~~potentially reduce operation and ~~the shippers were notified of such completion by Ocensa. Before commencing operations, Ocensa is expecting the ruling required by the Colombian Ministry of Mines and Energy.~~maintenance costs.

~~Cenit is participating in the Oleoducto al Pacífico SAS, led by Enbridge, which intends to transport heavy crude oil to the Colombian Pacific coast. In 2015, the scope~~Adaptation of work was focused on reviewing the business case for the development of the project, conducting advance prior consultations with communities along the rights of way, negotiating project governance matters and reviewing regulatory, commercial and technical issues.

~~Due to the environment of the oil industry and uncertainty about future volume of oil production in Colombia, the project continuity is under review and it was put on hold.~~

In 2016 crude was transported at viscosities greater than 405 cSt on the principal systems, particularly at Ocensa, where since the last quarter of 2016 there has been the ability to transport crudes at viscosities of up to 600 cSt.

Adaptations were also made to one of the single buoy moorings of the Coveñas terminal to permit the importation of naphtha for dilution at this terminal. Integral capacity tests are scheduled to be executed in 2017 for the transport of crude with this viscosity, and transport is expected to begin in the second quarter of 2017.Cusiana Truck Unloading Facility

The ~~main modifications are on:~~Cusiana truck unloading facilities enables exploration and production companies in blocks or areas not connected to the ~~ODL pipeline (Oleoducto de los Llanos; Rubiales – Cusiana), on~~network to access Ocensa Segment 1 (Cusiana – Porvenir), Segments 2 & 3 (El Porvenir – Vasconia – Coveñas) and on the Oleoducto de Colombia Pipeline (ODC – Oleoducto de Colombia). This project, combined with the expansion of capacity on Ocensa (P-135), will make it possible to transport higher viscosity crudes.pipeline.

During 2018 Ocensa adapted its facilities to Colombia’s new crude oil quality basket and increased capacity up to 81 thousand bpd by means of the implementation of in-line dilution facilities. As a result, shippers can now unload heavy crudes and blend them with light crudes or refined diluents in order to maximize the value of the crude oil.

We currently have concessions granted by the ~~Nation~~Colombian Government for four export/import docks for crude oil and refined products: Coveñas, Tumaco, Pozos Colorados and Cartagena. Our export capacity reached 1.24 million bpd for crude oil. Our import capacity of refined products and crude oil reached ~~0.18~~0.19 million ~~bpd.~~bpd and 0.25 million bpd, respectively.

Our crude oil loading facilities can load tankers of up to 350 thousand deadweight tonnage (DWT). Adjacent to these loading facilities we also have ~~crude oil~~ storage facilities that are capable of storing 911.6 million barrels. Our docks used for import and export of refined products can load tankers of 70 thousand DWT. Additionally, these facilities have storage capacity of up to ~~1.2~~5.6 million barrels.

We have entered into transportation agreements with ~~tanker-truck~~tanker truck and barge companies in order to transport crude oil from locations that do not have pipeline connections to refineries and export facilities. The volume of refined products that cannot be transported inby pipelines or in tanker trucks because of capacity limitation is transported by barges. During ~~2016, 22.9~~2018, 27.9 million barrels of crude oil and refined products were transported by tanker trucks, and ~~7.9~~7.2 million barrels of crude oil and refined products were transported by barges, particularly using the ~~Rio~~ Magdalena River, connecting Barrancabermeja with Barranquilla and Cartagena.

Cenit and its subsidiaries’ main line of business is the crude oil pipeline transport ~~(73%~~(75% of revenues), followed by the refined products pipeline transport ~~(17%~~(16% of revenues) and ports and related services ~~(8%~~(6% of revenues).

Transportation contracts of crude oil may take several forms: ship or pay (payment for the availability of a fixed capacity in the system), ship and pay (payment for volumes actually transported) or spot. The main users for the crude oil transportation business are Ecopetrol S.A., Frontera, Trafigura, Mansarovar, Metapetroleum ~~Corp., Petrominerales, Occidental de Colombia, Mansarovar~~ and Gran Tierra, who collectively represented ~~92%~~93% of this business segment’s revenues in ~~2016.~~2018. Transportation services for crude oil provided to Ecopetrol S.A. represented ~~60%~~57% of this business segment’s crude oil transport revenues.

Cenit also transports refined products. Its main client for this service is Ecopetrol S.A., which accounted for ~~41%~~40% of refined products pipeline transport revenues in ~~2016,~~2018, principally due to the transport of ~~naphtha.~~naphtha, diesel and gasoline. Cenit also has 1514 other fuel wholesalers’ customers for whom it transports ~~other~~ refined products. The most significant ~~of these customers~~among them are Organizacion Terpel, ExxonMobil, Chevron Petroleum Company, Biocombustibles S.A.S. and ~~Petrobras Colombia.~~Distribuidora Andina.

Deregulated businesses, such as ports and ~~crude loading~~crude-loading facilities, represent a smaller portion of Cenit’s revenue ~~(8%~~(6% in ~~2016)~~2018). Clients for these businesses include some of the same parties for which Cenit provides crude oil and refined products transportation services.

During July 2018, the carriers Frontera Energy Colombia Corp. (“Frontera”), Canacol Energy Colombia S.A.S. (“Canacol”) and Vetra Exploración y Producción Colombia S.A.S. (“Vetra” and, together with Frontera and Canacol, the “Carriers”) sent letters to Oleoducto Bicentenario de Colombia S.A.S. (“Bicentenario”) alleging they were early termination rights under the Ship-or-Pay Transport Agreements entered by each of them and Bicentenario in 2012 (the “Transport Agreements”). Bicentenario has rejected the terms of the letters, noting that there is no option for early termination and reiterating to the Carriers that the Transport Agreements are current and therefore the Carriers must fullfill their obligations under the Transport Agreements in a timely fashion.

Under Bicentenario’s understanding that the Transport Agreements remain current and that the Carriers are in violation of their obligations under such agreements, Bicentenario declared the Carriers delinquent because of their failure to pay for transport service under the aforementioned agreements.

Consequently, Bicentenario executed the standby letters of credit posted as guarantee for the Transport Agreements. On October 19, 2018, Bicentenario notified Frontera of the existence of a “Dispute” pursuant to Clause 20 of the respective Transport Agreement and moved to the party dispute settlement stage as provided for in such clause. Such discussions ended without an agreement on December 19, 2018. On January 28,2019, Bicentenario filed an Arbitration Claim against Frontera in accordance with the arbitration clause of the Transportation Agreement to claim any compensation, indemnification or other restitution deriving from the alleged early termination of said agreements.

Similarly, on November 1, 2018, Bicentenario notified Vetra and Canacol of the existence of a “Dispute” pursuant to Clause 20 of the respective Transport Agreement and moved to the party dispute settlement stage as provided for in each such respective clause. Such discussions ended without agreement on March, 2019.

As of the date of these financial statements, Bicentenario continues evaluating its options under the Transport Agreements and the Shareholders Agreement (Acuerdo Marco de Inversión) in order to guarantee compliance and claim any compensation, indemnification or other restitution deriving from the alleged early termination of said agreements and any other contractual breaches by the Carriers.

During July 2018, the carriers Frontera, Vetra and Canacol (“carriers”) sent notifications to Cenit Transporte y Logística de Hidrocarburos SAS (“Cenit”) alleging they were exercising their early termination right under the Ship-or-Pay Crude Oil Transport Agreements (SoP agreements) entered among each of them and Cenit for the transportation of crude oil through the Caño Limón – Coveñas pipeline (owned by Cenit).

In response to the alleged termination of SoP Agreements, CENIT issued letters stating that the alleged event which would have given the carriers early termination rights had not occurred as provided for in Clause 13.3 and other clauses of the aforementioned SoP agreements. In the same letters, CENIT stated that it would continue invoicing and charging for the transport services as stipulated in the SoP agreements, since they remain in force, and therefore, Carriers must fulfill their contractual obligations.

In November, 2018, CENIT filed an arbitration demand against Frontera Energy Group pleadging that SoP Agreements are in full force and effect, that Frontera is obliged to comply its terms and conditions and, therefore, is obliged to pay transportation tariffs as agreed in the SoP agreements. In similar terms an arbitration demand was also filed against Vetra and the same will occur against Canacol.

Our main refineries ~~are: (i)~~are the Barrancabermeja ~~Refinery,~~refinery, which Ecopetrol S.A. directly owns and operates, and ~~(ii) Reficar Refinery, located~~a refinery in the ~~free trade zone~~Free Trade Zone in Cartagena ~~which is~~owned by Reficar, a wholly owned subsidiary of Ecopetrol S.A. Ecopetrol S.A. also owns and operates two other minor refineries – Orito and Apiay, but these are considered part of the upstream segment since the majority of ~~the products are~~production is for ~~local on-site consumption.~~self-consumption.

~~These~~Our refineries produce a full range of refined products, including gasoline, diesel, jet fuel, ~~liquefied petroleum gas (LPG),~~LPG and heavy fuel oils, among others.

The following table sets forth our average daily ~~average~~ installed and actual refinery capacity for each of the last three years:

We estimate that the Barrancabermeja refinery supplies ~~73.8%~~48% of the fuels consumed in Colombia according to internal calculations made by ~~the Barrancabermeja Refinery~~us and ~~Colombia´s~~Colombia’s fuels consumption reported by the Ministry of Finance.

The following table sets forth the production of refined products of the Barrancabermeja refinery for the periods indicated.

In ~~2016,~~2018, total production from the Barrancabermeja ~~Refinery decreased 3.0%~~refinery increased by 5.6% from ~~220,713~~212,515 bpd in ~~2015~~2017 to ~~214,178~~224,381 bpd in ~~2016~~2018 primarily as a result of stable operation and improved throughput due to the ~~processing~~implementation of ~~a heavier crude slate which lowered throughput,~~initiatives to segregate and ~~the scheduled maintenance of two of its crude units in March~~purchase light and ~~October 2016.~~intermediate crudes.

We own and operate four petrochemical plants and one paraffin and lube plant located within the Barrancabermeja ~~Refinery.~~refinery. In ~~2016,~~2018, we produced ~~55,642~~48,468 tons of low-density polyethylene, ~~an increase~~a decrease of ~~26%~~9.3% compared to the production of ~~44,161~~53,417 tons in ~~2015.~~2017. This ~~increase~~decrease was due primarily to ~~the recovery~~a reduction of ethylene availability due to a turnaround of one of the ~~Turbo expander unit, which resumed operations in August 2015 and supplied a greater amount of feedstock (ethylene) to polyethylene plants.~~fluid catalytic cracking (FCC) units. We produced ~~1,994 mboepd~~894 mboe of aromatics (benzene, toluene, xylene, orthoxylene, heavy aromatics and cyclohexane), a ~~12% decrease~~4.3% increase as compared with the production of ~~2,259 mboepd~~857 mboe of aromatics in ~~2015.~~2017. The ~~decline~~increase was mainly the result of ~~lower demand.~~an increase in local demand for benzene, toluene, xylene, orthoxylene (BTXO).

The gross refining margin decreased from US$~~16.8~~13.5 per barrel in ~~2015~~2017 to US$1411.8 per barrel in ~~2016,~~2018, primarily due to the decrease in the price ~~differentials~~ of refined products, mainly gasoline and fuel oil, as compared to ~~crude oil, in line with international market trends.~~

the ICE Brent. The average conversion ~~ratio~~index for the Barrancabermeja ~~Refinery~~refinery was ~~74.6%~~84.6% in ~~2016~~2018 and ~~73.5%~~82.7% in ~~2015.~~2017. This increase ~~in the conversion ratio~~ was primarily due to the ~~upgrading~~operation at higher capacity of ~~a gasoil hydro-treating unit to a mild hydrocracker unit allowing higher middle distillate yields.~~the units that convert bottom streams into diesel.

The following table sets forth the production of refined products from ~~Reficar~~the Cartagena Refinery for the periods indicated.

Table 36 – Production of Refined Products from ~~Reficar~~the Cartagena Refinery

~~During the second half of 2016, the refinery initiated its stabilization period.~~

The following tables set forth the imports and sales of refined products from ~~Reficar~~the Cartagena Refinery for the periods indicated.

Table 37 – Imports and Sales of Refined Products from ~~Reficar~~the Cartagena Refinery

During ~~2016, Reficar~~2018, the Cartagena Refinery imported products to cover the North Coast sales ~~demand.~~demand primarily due to operational turnarounds during the last quarter of 2018.

~~After seven years of construction work, Reficar reached~~During its most important historical milestone to date by entering 34 operating units into operation in July 2016. Reficar´s new and expanded processing capacity may exceed 150 thousand barrels of crude oil per day with a high value product conversion factor of 97.5%. A number of critical milestones were reached during the first semester of 2016, including finishing project construction activities and developing successful sequential start-up of the units up to July 2016. Reficar is now the most modern refinery in Latin America, introducing new technology to the Colombian refinery industry with delayed coking and hydrocracking facilities; and it now has the ability to process heavier crudes and produce gasolines and diesel fuels with ultra-low sulphur contents.

In September 2016, the operation of the new refinery was formally transferred to Ecopetrol under an Operation and Maintenance Agreement that leverages on Ecopetrol´s existing refining capabilities while keeping Reficar as independent manager and owner of the assets.

~~Following full start-up, the focus areas of the operation have been the~~ stabilization of the production process and the execution of individual unit’s performance tests, (62%, or 21 of 34, have been performed to date). The reliability test of the refinery as a whole is expected to be performedperiod in the second half of 2017, the Cartagena Refinery reached the goal of completing individual unit performance tests (for 100% of units), and the Global Performance Test on December 5, 2017.

As part of the initial phase of the refinery optimization process, during the first half of 2018 the maximum load capacity of certain of the Cartagena Refinery’s plants were tested and provided the following results: (i) the coke unit, with maximum load of 46,088 bpd versus a nominal capacity of 45,000 bpd, (ii) the crude unit, with 166,607 bpd versus a nominal capacity of 150,000 bpd and (iii) the hydrocracking unit with, 38,204 bpd versus a nominal capacity of 35,000 bpd.

In August 2018 a test was run using 100% domestic crude during nine days, achieving an average throughput of 164 mbd. In September 2018, the highest average throughput per month under regular operation was achieved since the refinery’s commissioning, at 161 mbd.

Finally, the fluid catalytic cracking unit ran at 43,515 bpd versus a nominal capacity of 40,000 bpd after coupling and putting into operation the turbo expander.

In terms of gross refining margin, the refinery ~~advanced~~progressed from US$9.5 per barrel in 2017 to US$11.0 per barrel in 2018. Throughput also improved during 2018, increasing from an average of ~~approximately US$ 3 per barrel between January and July 2016, to around US$ 9 per barrel between August and December 2016 (stabilization and performance testing period), with expectations that~~136 mbd in 2017 to 151 mbd in 2018. This result primarily reflects the ~~margin will be~~good performance of the refinery after its stabilization period and commencing its optimization process in ~~line with the market trend for highly complex refineries.~~2018.

~~Reficar´s 2016 financials~~The Cartagena Refinery’s 2018 figures already reflect the operation of ~~the new~~all units, thus total sales have increased ~~85%~~ as compared to ~~2015,~~2017, from US$ ~~1,155~~3,085 million in ~~2015~~2017 to US$ ~~2,142~~4,129 million in ~~2016.~~2018. A total of ~~42.9~~55.3 million barrels of crude were processed in ~~2016~~2018 compared to ~~3.8~~49.5 million barrels processed in ~~2015.~~2017. Exports to international markets represented ~~54%~~42% of total sales (US$ ~~1,158~~1,749 million). The refinery’s production has substituted 10 million barrels of gasoline and diesel imports, which previously had to be imported in order to supply the domestic demand. As per information provided by the Colombian Government (specifically by the National Statistics Department –DANE-), Reficar’s entrance into operation contributed 3.8% to the National Industrial GDP, and 0.4% to the National GDP during 2016.

On December 30, 2011, with the approval from the Colombian Ministry of Finance and Public Credit, Reficar executed a US$3.5 billion project finance to partially fund the expansion and modernization of the ~~refinery in~~ Cartagena Refinery, loans with tenors of 14 and 16 years from Commercial Banks and Export Credit Agency Facilities, respectively. The aggregate amount drawn under these finance agreements totaled US$3,496.6 million. ~~As of December 31, 2016,~~These credit agreements included a mechanism by which Reficar can exit the ~~principal amount owed~~facility by transferring the debt to the ~~senior lenders under these finance agreements was US$2,796.3 million. Interest payments during 2015 and 2016 were US$92 million and US$87 million, respectively.~~

~~As part~~Ecopetrol parent level by either (i) the occurrence of ~~the project finance structure, Ecopetrol S.A. entered into~~ a ~~Construction Support Agreement (the “Construction Support Agreement”) and~~mandatory debt assumption event or (ii) a Debt Service Guarantee Agreement (the “Debt Service Guarantee Agreement”) to support certain obligations of Reficar. Pursuant to the terms of the Construction Support Agreement, Ecopetrol S.A. agrees to support up to the completion date, any additional costs, expenses or delays incurred during the construction phase of the expansion and modernization of the refinery in Cartagena. By means of the Debt Service Guarantee Agreement, Ecopetrol S.A. provides a liquidity mechanism, allowing Reficar to pay itsvoluntary debt ~~service in situations in which there are liquidity shortfalls.~~assumption.

During ~~2016,~~2017, Reficar received ~~capitalizations for~~capital injections of US$~~615~~269 million to cover project capital expenditures, start-up costs, one-off stabilization costs of the new refinery and ~~a portion its~~the debt service ~~payments.~~payments due on June 20, 2017. The amount requested by Reficar under the Construction Support Agreement was US$~~425~~97 million. The amount requested by Reficar under the Debt Service Guarantee Agreement was US$~~170~~172 million. There was no need to request additional contributions under the Debt Service Guarantee to cover the debt service payment due on December ~~2016. Total debt service~~2017.

The principal amount repaid by Reficar during 2016 was US$269 million and during 2017 was US$130 million. Interest payments during 2016 ~~totaled~~and 2017 were US$~~356 million.~~87 million and US$42 million, respectively.

~~The current credit agreements include a mechanism to exit the project finance by transferring the debt at the level~~As part of Ecopetrol ~~S.A., either by (i)~~Group’s strategy to optimize its capital structure, on December 13, 2017, with the ~~occurrence~~approval of the senior lenders and the Colombian Ministry of Finance and Public Credit, Ecopetrol S.A. voluntarily assumed Reficar’s senior debt. As of the date of the voluntary assumption, Reficar owed the senior lenders a ~~Mandatory Debt Assumption Event or (ii) a Voluntary Debt Assumption; as defined in said agreements.~~principal amount of US$2,666 million (in nominal terms).

In ~~total,~~order to finalize the implementation of Ecopetrol Group’s strategy to optimize its capital structure, the following capital injections were undertaken by Ecopetrol on December 13, 2017, increasing its shareholding participation in Reficar ~~modernization project has had capital expenditure needs of US$7,867 million of a total capital expenditures approval of US$8,016 million.~~from 75.96% to 99.34%:

During ~~2016, Propilco~~2018, Esenttia production totaled ~~445~~447 thousand tons of petrochemical products, a ~~2.5%~~2% increase compared to the ~~434~~441 thousand tons produced in ~~2015,~~2017 primarily due to ~~higher sales volumes explained by greater competitiveness~~delays in the ~~local market.~~supply of raw materials as a result of Hurricane Harvey. The total contribution margin in ~~2016~~2018 (including the contribution of polypropylene, polyethylene and masterbatches) was ~~9% higher~~11.2% lower than in ~~2015, an increase~~2017, a decrease from US$~~293~~215 per ton in ~~2015~~2017 to US$~~318~~191 per ton in ~~2016.~~2018. The ~~increase~~decrease in contribution margin was primarily due to higher volatility in the ~~execution of a new commercial strategy focused on differentiation and value-added products and services.~~propylene market, Esenttia’s main feedstock.

We have investments in two ~~biofuels~~biofuel companies: (i) Bioenergy ~~S.A.~~S.A.S., in which we own ~~98.6%~~indirectly 99.35% of the shares, ~~currently advancing on~~that in 2017 began the ~~construction~~operation of an ethanol plant with ~~theoretical~~nominal capacity of 480,000 ~~liters /~~ liters/day, and (ii) Ecodiesel Colombia S.A., in which we own 50% of the shares, currently in ~~operations~~operation with a theoretical capacity of 100,000 tons per year of biodiesel.

We are the main producer and supplier of refined products in Colombia. We market a full range of refined and feedstock products, including regular and high-octane gasoline, diesel fuel, jet fuel, LPG, natural gas and petrochemical products, among others.

Domestic sales of products increased by 4.7 mboepd, an increase of 1.6% compared to 2017. This increase is primarily the result of: (i) a 2.5%, or 3.7 mboepd, increase in middle distillates sales mainly due to higher economic growth in general and higher airplane transportation demand by passengers, (ii) a 5.3%, or 0.9 mboepd, decrease in LPG sales, primarily as a result of lower production at Reficar and Barrancabermeja, (iii) a 12%, or a 2.2 mboepd, increase in petrochemical sales, due to an increase in asphalt sales by Ecopetrol, as a consequence of the reactivation of domestic demand and local sales to clients who then export the product.

~~The Colombian Petroleum Institute,~~During 2018, 8.8 million barrels of diesel and 3.4 million barrels of gasoline produced by Reficar were allocated to the local market in order to complement the supply from the Barrancabermeja refinery and fulfill Colombia’s demand, avoiding larger imports and allowing Ecopetrol to maintain the share of the national market. In addition, Ecopetrol imported petrochemicals in order to complement the national supply, generating additional sales of lubricating bases, polyethylene, hexanes and others.

Exports of products increased by 8.3% compared to 2017, 12 mbd from Reficar and 3.0 mbd from Ecopetrol, primarily due to (i) a 97%, or 16 mbd increase in exports of high sulfur diesel, partially offset by (ii) a 21%, or 8.4 mbd decrease in fuel oil exports.

Our innovation and technology center ~~of Ecopetrol, was created~~is the Colombian Petroleum Institute, established in ~~June~~ 1985 and located in Bucaramanga, Santander. In 2018, research and development expenses were US$40.67 million, compared to US$25.7 million in 2017. Technology and innovation are essential to our efforts to add value to our business segments through ~~innovation and~~ the development of proprietary technologies and competitive ~~advantages.~~advantages and the adaptation of third-party technologies to our processes.

The focus of technology development is on designing high added-value products and solutions for Ecopetrol and the Colombian oil industry. The scope of the Colombian Petroleum Institute activities covers all of our value chain segments: exploration, production, refining, transportation and commercialization, as well as environmental sustainability and asset ~~integrity and automation.~~ integrity.

Each year Ecopetrol presents to the Colombian Institute for the Development of Science and Technology (Instituto Colombiano para el Desarrollo de la Ciencia y la Tecnología, or COLCIENCIAS) its research, technology development projects and innovation initiatives, in order to obtain certifications for its science and technology investments. COLCIENCIAS certifies science and technology investments, which are deductible from income tax upon execution; and Ecopetrol ~~takes advantage of that~~applies the tax benefit. In ~~2016,~~2018, we obtained US$~~5.6~~1.66 million in ~~science and technology-related~~science-and-technology-related tax benefits certified by COLCIENCIAS.

Our ~~intellectual capital is~~intangible assets are preserved through a technological value-generation process and an intellectual property protection process, which include the consolidation of trade secrets, patents, copyrights, trademarks, industrial designs, and publications in specialized journals. Ecopetrol has filed ~~194~~224 patent applications in the last ~~ten~~11 years, 1217 of them in ~~2016.~~2018. Our most recent patent applications include innovative technologies, such as (i) a ~~catalyst~~method that uses nanofluids to ~~efficiently upgrade~~improve the oil relative permeability in heavy and extra-heavy oil fields, (ii) a device for controlling production fluctuations at the well head, and the subsequent separation of heavy oil ~~residues~~and water, (iii) a process to enhance the flow capacity of oil-water-diluent mixtures and the dilution capacity of diluents used in heavy and extra-heavy oil production and transportation, (iv) a ~~slurry-type hydrocracking reactor; (ii)~~method and device to determine the volumetric contraction of mixtures of heavy oil and light hydrocarbons, and (v) a ~~system~~visbreaking process for refining heavy petroleum components in the ~~early prediction~~presence of ~~production events that are likely to trigger artificial lift system failures that may be avoidable; (iii) an intelligent tool to locate restrictions in pipelines;~~a catalyst and ~~(iv) two methods to obtain nanotechnology-based fluids, to prevent the flocculation of asphaltenes around the wellbore, and to break down emulsions, respectively.~~ hydrogen at low pressure.

In ~~2016,~~2018, Ecopetrol declared ~~three~~two industrial secrets that strengthen its competitive advantages in the exploration and transportation of ~~Colombian basins.~~

~~In 2016,~~hydrocarbons. The Colombian and international authorities granted us 1015 new ~~patents.~~patents, including one in Mexico and another in Ecuador. We currently hold 7987 patents in Colombia, the United States, Mexico, Russia, Peru, Venezuela, Ecuador, Brazil, Nigeria, Indonesia and Malaysia.

In ~~2016,~~2018, Ecopetrol S.A. licensed ~~twelve (12)~~7 of its technologies to private companies for manufacturing, marketing commercialization and after-sales support. To date, we have licensed 2849 technologies to Colombian and multi-national companies. These licensed technological products have been tested and successfully used in our organization to solve problems related to refining, production and transportation of hydrocarbons, and some have potential uses in other industries.

Pursuant to the Colombian Constitution, the Nation is the exclusive owner of all hydrocarbon resources located in Colombia and has full authority to determine the rights to be held and royalties or compensation to be paid by investors for the exploration or production of any hydrocarbon reserves. The Ministry of Mines and Energy and the ANH are the authorities responsible for regulating all activities related to the exploration and production of hydrocarbons in Colombia.

Decree Law 1056 of 1953 (the Petroleum Code, orCódigo de Petróleos) declares that the hydrocarbon industry and its activities of exploration, exploitation, refinement, transportation and distribution are of public interest, which means that, in the interest of the hydrocarbon industry, the Colombian government may order necessary expropriations in order to develop such industry. The hydrocarbon industry is under governmental supervision and control, regulated mainly by the Ministry of Mines and Energy and the ANH.

Ministry of Mines and Energy Resolution 181495 of 2009, as amended by Resolution 40048 of 2015, establishes a series of regulations regarding hydrocarbon exploration and production.

Ministry of Mines and Energy Resolution 180742 of 2012, partially repealed by Resolution 90341 of 2014, ~~included~~includes a series of technical regulations for unconventional hydrocarbon resources, including the procedures for advancing the exploration and exploitation of unconventional reserves. It also establishes the types of wells and their classification, as well as the fulfillment of those minimum (drilling and abandoning) conditions necessary to initiate or perform E&P activities. Furthermore, it contemplates the applicable procedure to resolve disputes between the mining sector and the oil and gas sector, regarding the coexistence of their rights in some specific projects.

On May 26, 2015, ~~the Ministry of Mines and Energy issued~~ Decree 1073 ~~which compiles~~compiled the majority of Colombian decrees ~~and regulations~~ in force regarding the administrative sector of mines and energy.

Agreement (Acuerdo,a type of regulation) 004 of 2012, as issued by the ANH, amends Agreement 008 of 2004 and sets forth the rules governing the award of exploration and production areas and the execution of contracts. As set forth below, Agreement 002 of 2017 replaces thisAcuerdo.

Agreement 003 of 2014, as issued by the ANH, complements Agreement 004 of 2012 by setting forth the contractual framework for the carrying out of activities in unconventional reservoirs, the procurement regulations for the exploration and exploitation of unconventional fields and the procurement process for the awarding of hydrocarbon exploration and exploitation areas.

Agreement 002 of 2015, as issued by the ANH, partially amends Agreement 004 of 2012 and sets forth the initial rules and measures the Government can take to mitigate the adverse effects of the decline of international oil prices. The main measures established by this agreement are the following:

Agreement 003 of 2015, as issued by the ANH, modifies and also partially amends Agreement 004 of 2012, and provides certain rules and measures the Government can take to mitigate the adverse effects of the decline of international oil prices. This agreement permits performance guarantees required under E&P contracts to be reduced in the same amount as the works actually performed during the term of the respective phase.

Agreement 004 of 2015, as issued by the ANH, also partially amends Agreement 004 of 2012, and provides certain rules and measures for the Government to mitigate the adverse effects of the decline of international oil prices. This agreement allows contractors to attribute additional activities carried out under a TEA to commitments under the first phase of an E&P contract.

Agreement 002 of 2017, as issued by the ANH on May 18, 2017, replaces Agreement 004 of 2012, Agreement 003 of 2014, and Agreements 002, 003, 004 and 005 of 2015. It establishes the general structure of the New Regulation for Administration and Assignment of Areas and the general guidelines regarding future hydrocarbon contracts in Colombia. Seeking the interests of the Nation, the market conditions, the national hydrocarbon sector strategy, the competitive context of producer countries and the Nation’s social and environmental evolution.

Agreement 002 of 2017 adapts the existing regulations for the selection of contractors, and the applicable rules for the award, execution, termination, liquidation, monitoring, control and surveillance of the contracts signed with the ANH.

On February 4, 2019, the ANH published the new model contract for offshore exploration and production. The purpose of this new model contract is to foster and stimulate investments in exploration and the exploitation of offshore hydrocarbons, enhancing Colombia’s competitiveness to attract and retain investments from large and experienced O&G operators.

Resolution 078 of 2019, as issued by the ANH, approved the terms of reference and the model of the contract for the “permanent bidding procedure.” Pursuant to this procedure, the ANH will select areas over which proposals may be received at any time, without the need of launching specific bidding procedures for their allocation.

Law 99 of 1993 and other environmental regulations, such as ~~particularly~~ Decree 1076 of 2015 in particular (compilation decree regarding the administrative sector of environment and sustainable development), impose on companies, including oil and gas companies, the obligation to obtain an environmental license prior to undertaking any activity that may result in the serious deterioration of renewable natural resources, or that may have the capacity of materially modifying the physical environment.

The National Authority on Environmental Licensing (ANLA), created by means of Decree 3573 of 2011, is the entity responsible for evaluating the applications and issuing the environmental licenses for oil & gas-related activities, as well as surveilling and overseeing all ~~hydrocarbons~~hydrocarbon projects and monitoring the environmental compliance of such activities.

If the projects or activities could have a direct impact over the territories or the interests of indigenous, Afro-Colombian or Raizal communities, the Colombian Constitution provides that the companies developing such projects or activities must undertake a public consultation process with those communities before initiating such projects or activities. This consultation process is a ~~pre-requisite~~prerequisite for obtaining the required environmental licenses.

In addition, the Colombian Constitution and laws establish that, as part of the public participation mechanisms, Colombian individuals may request information regarding the activities of the project and their potential impacts. They may also request to undertake an environmental hearing so as to obtain information of the project subject to environmental licensing.

On May 26, 2015, the Ministry of Environment and Sustainable Development (“MESD”) issued Decree 1076, which compiles the majority of Colombian regulations in force regarding environment and sustainable development.

The environmental license encompasses all of the necessary permits, authorizations, concessions and other control instruments necessary under Colombian environmental law to undertake a project or activity that may result in the serious deterioration of renewable natural resources, or that have the capacity of materially modifying the physical environment. The license shall define specific conditions under which the beneficiary of the license may undertake such project or activity. The procedure to obtain an environmental license begins when the company files an Environmental Impact Study (EIA) related to the project before the ANLA. The licensing process includes an application for the use of natural renewable resources (water, soil and air), the filing of an EIA and a plan to prevent, mitigate, correct and compensate for any activity that may harm the environment, known as the Environmental Management Plan (PMA).

~~A new~~The environmental licensing procedure ~~came into force~~ in Colombia ~~on January 1, 2015 as a result of the enactment of Decree 2041 of 2014, which now~~ is ~~compiled by~~set forth in Decree 1076 of ~~May 26, 2015, repealing the licensing process defined in decree 2820 of 2010.~~2015. According to the regulation currently in effect, the procedure to obtain an environmental license shall not take more than 90 business ~~days but,~~days. But, depending on the complexity of the information requested by the ANLA and administrative delays, including an oral hearing to determine the viability of the project, the procedure may take between 165 and 265 business days, depending on whether the applicant is required to file additional information. The ~~new~~actual procedure incorporates an oral hearing between the ANLA and the applicant in order to evaluate the information provided in the license application and whether it is necessary or not to request additional information about the proposed project. The ANLA will have no other opportunities to request additional information after this hearing.

~~The Ministry of Environment and Sustainable Development~~MESD is also responsible for establishing guidelines regarding climate change policies for the hydrocarbon sector in Colombia. We ~~are in compliance~~comply with those guidelines. At present, ~~the Ministry of Environment and Sustainable Development~~MESD has not proposed any specific steps for the implementation of the Kyoto Protocol or the Paris Agreement, as they relate to our operations. We are continuously monitoring climate change requirements that could be applicable to us. A company that does not comply with the applicable environmental laws and regulations, does not execute the Environmental Management Plan (PMA) approved by the environmental authority or ignores the requirements imposed by an environmental license may be subject to an administrative proceeding initiated by the ANLA or the regional environmental authorities established by Law 1333 of 2009. The proceeding may result in oral or written warnings, monetary penalties, fines, license revocation or the temporary or permanent suspension of the activity being undertaken. Apart from administrative sanctions, the Colombian judiciary or other law enforcement authorities may also impose civil and even criminal sanctions if environmental damages are verified as a consequence of having breached the environmental laws and regulations applicable to the project.

In Colombia, the Nation is the owner of minerals and non-renewable resources located in the subsoil, including hydrocarbons. Thus, companies engaged in exploration and production of hydrocarbons, such as Ecopetrol, must pay to the National Hydrocarbons Agency (ANH), as representative of the National Government of Colombia, a royalty on the production volume of each production field, as determined by the ANH.

Royalties may be paid in kind or in cash. Each production contract has its applicable royalty arrangement in accordance with applicable law. In 1999, a modification to the royalty regime established a sliding scale for royalty payments for crude oil and natural gas production fields discovered after July 29, 1999 and depending on the quality of the crude oil produced. Since 2002, as a result of the enactment of Law 756 of 2002, the royalty rate was fixed as a sliding scale depending on the produced volume from 8% for fields producing up to ~~five thousand bpd~~5 mbd to 25% for fields producing in excess of 600 ~~thousand bpd. Changes~~mbd. Notwithstanding the royalties for Incremental Production Contracts, Contracts for Undeveloped and Inactive Fields, and Incremental Production Projects defined in paragraph 3 article 16 Law 756 of 2002, and article 29 of the Law 1753 of 2015, the changes in the royalty regime only apply to new discoveries and do not apply to fields already in the production stage as of July 29, 1999. Producing fields pay royalties in accordance with the royalty law in force at the time of the discovery.

Regarding natural gas, in accordance with Resolution 877 of 2013, as amended by Resolution 640 of 2014, starting on January 1, 2014, the ANH has received royalties in cash rather than in kind. Thus, the producer may dispose of its gas production volumes corresponding to royalties paid in cash.

Hydrocarbon transportation activity is ~~considered~~ a public interest activity in Colombia and a public service. As such, it is under governmental supervision and control, regulated mainly by the Ministry of Mines and Energy and ~~CREG.~~theComisión de Regulación de Energía y Gas (“CREG” as per its Spanish acronym).

Transportation and distribution of crude oil, liquefied petroleum gas and refined products must comply with the Petroleum Code, the Code of Commerce and all governmental decrees and resolutions. However, liquefied petroleum gas-related activities are regulated by CREG. According to Law 681 of 2001, multipurpose pipelines owned by ~~Ecopetrol (through Cenit)~~Cenit (a company wholly owned by Ecopetrol) must be open to third-party use on the basis of equal access to all.

Notwithstanding the general rules for hydrocarbon transportation in Colombia, Law 142 of 1994 defines the regulatory framework for the provision of public utility services, including the provision of natural gas. Moreover, natural gas transportation is subject to regulations specific to the natural gas industry as issued by CREG, due to the categorization of natural gas distribution as a public interest activity under Colombian laws.

Transportation systems, classified as crude oil pipelines and refined product pipelines, may be owned by private parties. Pipeline construction, operation and maintenance must comply with environmental, social, technical and economic requirements under national guidelines and international standards for the oil and gas industry.

Construction of transportation systems requires licenses and local permits awarded by the Ministry of Mines and Energy, the Ministry of Environment and Sustainable Development and regional environmental authorities, respectively.

The regulatory framework relating to crude oil transportation accounts for both private use and public use pipelines. Private use pipelines are those built by the operating or refining entity for its own exclusive right and that of its affiliates. Public access pipelines are defined as pipelines built and operated by a public or private legal entity, for the purpose of publicly providing crude oil transportation services. The Colombian government, through the ANH, has a preferential right to use up to 20% of the total capacity of any public or private access pipeline to transport its ~~share of production.~~crude oil royalties. However, for both private and public access pipelines, the ANH must pay the tariff for the pipeline use to transport its percentage of production.

The Ministry of Mines and Energy is responsible for reviewing and approving the design of and tracks for crude oil pipelines, by establishing transport rates based on information provided by the service providers. It also oversees the calculation and payment of hydrocarbon transport-related taxes and manages the information system for the oil product distribution chain.

In 2014, the Ministry updated the transport regulation and the rate calculation method for this line of business. It introduced a framework for the secondary market and incentives for new pipeline construction and current pipeline capacity expansions. According to the Petroleum Code, rates ~~are to~~must be revised every four years.

During the scheduled revision of 2015 and due to the dramatic changes in international crude oil prices, the Ministry of Mines and Energy allowed, by means of Resolution ~~31 325~~31325 and Resolution 31489 of 2015, transportation companies and oil production companies to engage in direct negotiations in order to agree on a tariff suitable for both parties. The negotiation period was extended until June 2016. Notwithstanding the fact that tariff agreements were reached with certain companies, the results of the negotiations were not positive. Thus, tariffs were set by the Ministry of Mines and Energy in accordance with the criteria previously established by Resolution 72146 of 2014, ~~latterly~~as further amended by Resolution 31325 of ~~2015.~~2015 and Resolution 31285 of 2016.

The Port Superintendence is the authority that oversees the port business for crude oil and refined products. Although this business is not highly regulated, market participants are required to report certain information to the Port Superintendence.

As a result of the enactment of Decree 119 of 2015, operators of private use hydrocarbon ports are currently able to provide hydrocarbon transport services to third parties pursuant to a mechanism established under that decree.

Decree 119 of 2015 was incorporated into Decree 1079 of 2015 issued by the Ministry of Transport, which compiles the majority of Colombian decrees and regulations in force regarding the administrative sector of transportation.

In 2014 CREG assumed responsibility for regulating product pipeline transportation from the Ministry of Mines and Energy, in addition to its pre-existing regulatory responsibility for liquefied petroleum gas, natural gas and electric energy transportation.

In August 2017 CREG issued a draft resolution 113 of 2017, which introduced a new framework for the transportation regulation of liquefied petroleum gas and refined products. The draft resolution was open for observations from the general public and the oil and gas industry until January 12, 2018, but the final resolution has not been issued yet. CREG is also in the process of defining ~~and introducing~~ the transportation regulation and the rate calculation method for refined products. ~~On September 25, 2015, CREG published a draft resolution that established the proposed regulations for transport of liquid fuels and liquefied petroleum gas.~~ The primary goals and components of the proposed regulation are: a)(i) to ensure access to the transport systems for liquid fuels and the LPG pipeline systems without discrimination; b)(ii) to promote the timely expansion of the transport system in line with the needs of the market; c)(iii) to promote competition and prevent restrictive practices; d)(iv) to separate the operations of refining and transport; and e)(v) to ensure the efficient and continuous operation of transport systems. ~~Currently, CREG continues with~~As of the ~~task~~date of ~~drafting~~ this ~~regulation.~~annual report, the above mentioned resolution has not been issued.

Article 58 of the Petroleum Code establishes that oil refining activities can be developed throughout the Colombian territory and are not reserved to the State. However, Article 4 establishes that such activities are considered of public interest subject to governmental regulation, and the development of those activities must comply with technical requirements established by regulation.

In 2008, Law 1205, further developed by Resolution 180689 of 2010, issued by the Ministry of Mines and Energy, was issued with the main purpose of contributing to a cleaner environment. It established the minimum quality specifications for fuels in Colombia. Since August 2010, Ecopetrol has been ~~selling diesel~~producing and ~~gasoline at its refinery in Barrancabermeja in order to produce~~selling diesel and gasoline that complies with the requirements of the aforementioned ~~law.~~law and, for some cities, we sell with better standards.

Since 1995, under Resolution number 898 of August 23, 1995 the Ministries of Environment and Sustainable Development and of Mines and Energy, have regulated the environmental criteria for liquid and solid fuels used in commercial and industrial furnaces and boilers, as well as automobile internal combustion engines. Resolution 898 has been subject to numerous modifications through the years, the most recent by Resolution 40619 of June 30, 2017. Ecopetrol has been complying with this regulation and working with governmental entities in order to improve air quality in the most critical areas in Colombia.

Wholesale marketing, transport, distribution and retail marketing of LPG are mainly regulated by CREG Resolution 74 of 1996, and subsequent resolutions. LPG in Colombia is primarily obtained through Ecopetrol’s refineries, field production and imports. The LPG must meet minimum quality standards to be marketed. Our marketing activities are regulated by CREG Resolution 53 of 2011 (as amended by CREG Resolutions 108 of 2011, 154 of 2014, 019 of 2015, and 034, 063 and 064 of 2016). The LPG price is regulated by CREG Resolutions 66 of 2007 (as amended by CREG Resolutions 59 of 2008, 002 of 2009, 123 of 2010, 095 of 2011, and 65 and 129 of 2016).

According to Article 4 and 212 of the Petroleum Code and Law 39 of 1987 (added by Law 26 of 1989), the distribution of ~~liquid fuels~~crude oil and ~~their~~its derivatives has a public purpose (utilidad pública), and the distribution of fuel oil and crude oil by-products is considered a public ~~utility.~~utility activity. Consequently, individuals or entities engaged in these activities are subject to regulations issued by the Colombian government. The Government has the power to determine quality standards, measurement and control of liquid fuels, and establish penalties that may apply to dealers who do not operate in compliance therewith.

The Ministry of Mines and Energy is the entity that controls and exercises technical supervision over the distribution of liquid fuels derived from petroleum, including the refining, import, storage, transportation and distribution in the country. Law 812 of 2003 identified the agents of the supply chain of petroleum-based liquid fuels. In this context, the Ministry of Mines and Energy through Resolution 40344 of 2017, published the required actions to ensure the LPG supply for the priority sectors in the country.

The distribution of liquid fuels, except LPG, is governed by Decree 1073 of 2015, which establishes the requirements, obligations and penalties applicable to supply agents in the distribution, refining, import, storage, wholesale, transportation, retail sale and consumption of liquid fuels.

Decree 1073 of 2015 establishes the minimum technical requirements for the construction of storage plants and service stations. This Decree also regulates the distribution of liquid fuels, except LPG establishing the minimum requirements for distributors and the activities and types of agreements permitted for these agents. The Ministry of Mines and Energy also regulates the types of liquid fuels that can be sold and purchased and the penalties for noncompliance with governmental regulations.

Pursuant to Law 1430 of 2010, the distribution of fuels in areas near Colombian borders is the responsibility of the Ministry of Mines and Energy and is subject to specific regulations that impose strong control procedures and requirements. The Ministry of Mines and Energy establishes the safety standards for LPG, storage equipment, maintenance and distribution of LPG. Resolution 31514 of 1992 established that any LPG household, commercial and industrial facility with a storage capacity of LPG greater than 420 pounds must receive an authorization from the Ministry of Mines and Energy prior to commencing operations.

The Superintendence of Public Domestic ~~Public Service Superintendence~~Utilities also oversees the liquefied petroleum gas transportation business. ~~Cenit reports key operational and financial indicators to it on a monthly basis.~~

According to the Decree - Law 4130 of 2011 and Decree 1260 of 2013, CREG is in charge of setting the prices of petroleum by-products throughout the entire chain of production and distribution, except for current gasoline engine, diesel and biofuels. On the other hand, by Decree 381 of 2012, as amended by Decree 1617 of 2013, the Ministry of Mines and Energy is in charge of setting the methodology to determine the reference price of gasoline, diesel, ~~(ACPM),~~ biofuels and mixtures thereof.

Then, since May 2012, CREG fixes the prices for most crude oil by-products, but for gasoline, diesel ~~ACPM~~ and biofuels. CREG determines the methodology to calculate their price while the Ministry of Mines and Energy fixes the relevant prices in accordance with said methodology. The ANH does not intervene in the definition of prices of gasoline and diesel fuel. In addition, under Resolution 007 of 2017, CREG determined the basis for the methodology of compensation of terrestrial transportation of liquid fuel-oil, including current gasoline, diesel and biofuels between the storage plant and the fuel service station.

The methodology for calculating jet fuel prices is set out in Law 1450 of 2011, and jet fuel prices themselves are set by the Ministry of Mines and Energy.

The ANH determines the formula that is used to calculate royalty payments corresponding to the production of crude ~~oil and the crude oil price reference for local refining.~~oil.

Decree 381 of 2012 and 1617 of 2013, as amended by Decree 2881 of 2013, as compiled in Decree 1073 of 2015, restructured the Ministry of Mines and Energy and gave it the responsibility to study industry problems and implement short- and long-term refining planning policies. The Ministry is also responsible for establishing the governmental policies and goals to ensure the reliability, stability and continuity for the production of liquid fuels, biofuels and others.

Pursuant to Article 58 of the Petroleum Code, if there is a fuel shortage, any refining company operating in Colombia must ~~provide~~offer to sell a portion or, if needed, the total of its production to supply local demand prior to exporting any production. ~~If local demand increases, and imported crudes are needed, the refining company may charge the State additional transportation costs in proportion to the imported crudes delivered to the refinery.~~

The Fuel Price Stabilization Fund (FEPC) was created by means of Law 1151 of 2007 with the aim to mitigate, in the domestic market, the impact of fluctuations in fuel prices (gasoline and motor fuel oil) in international markets. As per article 2.3.4.1.3 of Decree 1068 of 2015, the funding for the operation of the FEPC comes from the following sources: (i) financial returns on the funds of the FEPC; (ii) extraordinary contributions from the National Treasury; and (iii) resources from the General Budget of Colombia.

The Fuel Price Stabilization Fund was created by Law 1151 of 2007. It is a fund assigned and administered by the Ministry of Finance and Public Credit. Its function is to attenuate, in the domestic market, the impact of fluctuations on fuel prices in international markets.

According to article 2.3.4.1.3 of Decree 1068 of 2015, amended by Decree 1451 of 2018, the resources for the functioning of the FEPC come from the following sources: (a) financial returns of resources of the Fund; (b) extraordinary credit resources received from the National Treasury; (c) funds allocated to the FEPC in the national general budget; (d) fuel taxes and; (e) bonds or other public debt securities issued by the Nation in favor of the FEPC, in order to cover the obligations of the Fund.

The operation of the FEPC is ~~currently regulated~~governed by Decree 1068 of 2015, ~~which compiles~~amended by Decree ~~1880~~1451 of ~~2014,~~2018, Chapter 1, Title 4 (compilation decree regarding treasury public sector). First, refiners and/or importers of regular gasoline and ~~sets forth the calculation method of the Differential as the product of the volume reported by the refiner and/or importer~~diesel must report to the Ministry of Mines and Energy ~~times~~ the ~~difference between~~volume of regular gasoline and diesel sold in the ~~international parity price~~previous month and such reports must be made within the next 35 calendar days of each month.

The report must also contain, among other matters: information corresponding to each fuel disaggregated daily; the discrimination of the volumes sold, and the ~~reference price. It also provides that refiners and/~~origin national or ~~importers shall submit monthly reports to~~imported of the gasoline and diesel sold. If the regular gasoline or the diesel is of national origin, the refiner/importer must inform from which refinery they come. Secondly, the Ministry of Mines and Energy ~~on the volume, origin~~calculates and ~~type of fuel (gasoline and motor fuel oil) sold in the domestic market for said period.~~

~~Based on those reports, the Ministry of Mines and Energy shall calculate and liquidate~~liquidates, by resolution, the Net Position ~~every six months~~of each refiner/importer and each fuel to be stabilized by ~~issuing a resolution provided, however, that such Net Position results from~~ the ~~sum of the differentials for the relevant six-month period.~~ FEPC.

Decree 1068 of 2015, ~~also~~amended by Decree 1451 of 2018, provides that the FEPC ~~shall~~will pay in Colombian ~~Pesos~~pesos the value corresponding to the ~~six-month~~calculation and settlement of the Net Position of each refiner and/or importer within the term ~~that~~defined by the Ministry of Mines and Energy ~~establishes~~ and based on availability of ~~resources~~FEPC resources.

Law 1819 of 2016 created a tax, related contribution to finance the FEPC. This contribution is caused when the sum of the ~~FEPC. For more information regarding~~Differentials of Participation (difference between the ~~FEPC~~Producer Income and ~~Ecopetrol, see~~ the ~~section 5.1.2.~~International Parity Price, when the first is greater than the second on the date of issuance of the sales invoice, multiplied by the volume of fuel sold) is greater than the sum of the Differentials of Compensation (the difference presented between the Producer Income and the International Parity Price, when the second is greater than the first on the date of issuance of the sales invoice, multiplied by the volume of fuel sold).

~~By Resolution 31356~~The event that generates the contribution is the sale in Colombia of ~~2016,~~gasoline or diesel by the refiners and/or importers to the wholesale distributor of fuels, according to the price set by the Ministry of Mines and Energy, ~~liquidated~~however, if the ~~net positions~~importer is at the same time a wholesale distributor, the triggering event shall be the withdraw of the product to be sold. The taxpayer responsible for ~~Ecopetrol corresponding to December 23 to 31, 2014~~the contribution is the refiner and/or importer and the ~~first and second quarters~~active subject is the Nation. The tax base corresponds to the positive difference between the sum of ~~2015, establishing that Ecopetrol must pay to FEPC COP$114,172,749,145.09 as a contribution differential; Ecopetrol appealed but~~ the ~~Ministry~~Differentials of ~~Mines and Energy confirmed its decision by Resolution 31121 of 2017.~~

By Resolution 31127 of 2017, the Ministry of Mines and Energy liquidated the net position for the third quarter of 2015 and October 1 to November 25, 2015, establishing that FEPC must pay to Ecopetrol COP$318,638,400,647.33.

~~By Resolution 31128 the Ministry of Mines and Energy liquidated the net position for Ecopetrol corresponding to November 26 to December 31, 2015~~Participation and the ~~first half of 2016 establishing that FEPC must pay to Ecopetrol COP$338,252,758,969.68.~~

Assum of the ~~date~~Differentials of this annual report, the Ministry of Mines and Energy has not calculated or liquidated the Net Position for each fuel (gasoline and motor fuel oil) to be paid by the FEPC to Ecopetrol for its sales during the second half of 2016.

Recently, Law 1819 of December 29, 2016, created a contribution to finance the FEPC which will come from the sales in Colombia of gasoline or ACPM by the refiner or importer to the wholesale distributor, on the basis of the differential between the international parity price and the reference price.Compensation.

The Ministry of Mines and Energy ~~will exercise~~calculates the ~~functions of control, management, settlement, determination, discussion and collection of the contribution. In particular, it will calculate the~~ contribution ~~to the FEPC~~ through the liquidation of the ~~quarterly~~ Net Position of each refiner or importer with respect to the FEPC based on the ~~reporting of information~~report that the refiners and/or importers ~~present.~~submit. If the sum of the Differentials of Participation is greater than the sum of the Differentials of Compensation and the contribution is caused, the Ministry of Mines and Energy will order the refiner or the importer to pay the contribution to the National Treasury within the 30 days following the execution of the liquidation resolution.

Subsequently, Law 1837 of 2017 (article 16) provided that the remaining resources that were in the Ecopetrol’s accounts as of December 2014, as a result of the collection of the Differential Contribution from the FEPC, would be transferred to the General Direction of Public Credit and Treasury of the Ministry of Finance and Public Credit (DGCPTN).

The Ministry of Mines and Energy issued Resolutions 31536 and 31538 of 2018 which contain the settlement of our Net Positions corresponding to: (i) the period between December 29 and 31, 2016 and the first and second quarters of 2017, and (ii) the third and fourth quarters of 2017. In those resolutions the FEPC was ordered to transfer COP $729,729,493,450.88 and COP $1,183,672,269,819.52 to Ecopetrol, respectively.

As of the date of this report, the Ministry of Mines and Energy has not calculated the Net Positions corresponding to the year 2018.

The sale and distribution of biofuels is regulated by the Ministry of Mines and Energy. Regulations establish the quality and pricing standards for biofuels and impose minimum requirements for mixing ethanol with gasoline and biodiesel with diesel.

The sale and distribution of biofuels is provided under CREG Resolution 240 of 2016, which particularly regulates: a) the sorts of market that will be served with biogas and biomethane; b) the quality and safety conditions; and c) the tariff ~~regime (article 2).~~regime. Pursuant to article 4 of the ~~before mentioned~~foregoing Resolution, biogas supply through isolated networks to serve non-regulated users and natural gas vehicles (“GNV” as per its Spanish acronym), shall be incorporated as a public utility company. Furthermore, article 5 provides that biomethane supply through isolated networks or interconnected networks to the National Transportation System shall also be incorporated as a public utility company. Finally, article 12 states that biogas suppliers may develop the production, transportation, distribution and commercialization activities through integrated structures, provided that they keep separate accounts for each activity and grant free access to the networks to both regulated and non-regulated users. InTo the same ~~way,~~extent, production, distribution and commercialization of biomethane through interconnected networks to the National Transportation System may be developed through integrated structures, as long as the supplier keeps separate accounts for each activity and grants free access to the networks to both regulated and non-regulated users.

Decree 1073 of 2015, ~~issued by the Ministry of Mines and Energy,~~Part 2, Title 2, Chapter 2, established that all producers have to issue a production statement that includes the volumes of natural gas available for sale for a period of ten years. This decree established the regime for the selling and marketing of natural gas in Colombia, including specific procedures that regulate the Colombian market in order to manage the remaining natural gas reserves owned by the Nation, and to protect domestic consumers, especially residential consumers, by prioritizing delivery of gas to residential consumers, regulating the export of natural gas and setting forth the export restrictions applicable during an internal shortage of natural gas.

Currently in Colombia ~~other than with respect to the Opón field,~~ the price of natural gas is determined by the ~~market.~~

market, but some agreements still have to conform to the regulated formula. CREG issued ~~Resolutions 088~~Resolution 114 of 2017 which adjusted commercial aspects of the wholesale natural gas market in Colombia and compiled CREG Resolution 089 of 2013 and 089 of 2013 (amended by CREG Resolutions 204 of 2013, 089 and 122 of 2014, 022, 032, 088, 105, 139, 143, and 218 of 2015, 137 and 070 of 2016 and 001 of 2017) that established the procedures for marketing natural gas in Colombia.its amendments. However, pursuant to Decree 1073 of 2015, such procedures do not apply to the following activities: a) natural gas exports; b) natural gas as raw material in petrochemical production; c) natural gas commercialization from minor fields (production capacity under 30 million ~~cfpd)~~SCFD); d) natural gas commercialization from hydrocarbon fields under testing phase or which have not yet been declared commercially viable; e) natural gas commercialization from unconventional reservoirs; and f) internal consumption from natural gas producers.

CREG determines which agents can participate in the primary and secondary markets. Ecopetrol is authorized to participate as a seller in the primary market as a natural gas producer and as a buyer in the secondary market when Ecopetrol requires natural gas from other producers for its own needs. CREG regulations provide that a natural gas producer cannot participate as a merchant of natural gas in the secondary market, except that it may purchase gas to meet its existing contractual obligations. Ecopetrol is also able to ~~re-sell~~resell available natural gas transportation capacity into the secondary market.

The export of natural gas, in contrast, is not considered a public utility activity under Colombian law and therefore is not subject to Law 142 of 1994. Nevertheless, the internal supply of natural gas is a priority for the Colombian government and is considered to be a public utility complementary activity, and therefore public utility regulations apply to the internal supply of natural gas.

Decree 1073 of 2015 (amended by Decree 2345 of 2015) provides that in the event the supply of natural gas is reduced or halted as a result of a shortage, the Colombian government has the right to suspend the supply of natural gas for ~~exportation.~~export. If such export contracts are suspended by the Colombian government, the export agents are entitled to receive compensation in accordance to article 2.2.2.2.15 and 2.2.2.2.38 of Decree 1073, 2015. Notwithstanding the foregoing, Decree 1073 of 2015 establishes freedom to export natural gas under normal gas-reserve conditions. Producers of natural gas may enter into natural gas export contracts if the ratio of proved reserves to consumption exceeds seven years, as determined by the Colombian Energy Planning Authority (or UPME for its Colombian acronym).

Decree 1073 of 2015 (amended by Decree 2345 of 2015) establishes an order of supply when restrictions are placed on the supply of natural gas or serious emergency situations arise that preclude the continued provision of certain services, as follows: (i) essential demand, as established in Decree 1073 of 2015, (ii) non-essential demand under an existing agreement with a warranty of uninterrupted provision and (iii) ~~fair~~firm exports delivery.

The order of priority for the supply of natural gas is as follows: (i) the operation of the compressor stations of the National Transportation System, (ii) residential users and small business users engaged in the distribution network, (iii) vehicular compressed natural gas and (iv) gas refineries, excluding those destined for self-generation of electricity that can be replaced with energy from National Transportation System, which has first priority. The Ministry of Mines and Energy also establishes distribution priorities in the event of a natural gas shortfall derived from supply or infrastructure issues. This order of priority is based on the type of contract, with firm supply contracts having priority over interruptible supply contracts.

Decree 1073 of 2015 and CREG ~~Resolutions 089~~Resolution 114 of ~~2013 and 204 of 2013~~2017: (i) provide specific procedures and forms of supply agreements determined by CREG pursuant to which an agent may sell and buy natural gas in the Colombian primary and secondary market produced from large fields (capacity of more than 30 million ~~cfpd). Decree 1073 of 2015~~CFPD); and ~~CREG Resolution 089 of 2013 permits~~(ii) permit the sale of natural gas from small fields (capacity under 30 million ~~cfpd)~~CFPD) pursuant to contracts that fulfill certain regulatory requirements but whose form is not prescribed by law.

This section describes the health, safety and environmental (HSE) practices of Ecopetrol S.A. Currently, subsidiaries of Ecopetrol S.A. establish their own HSE models, provided that these models must be consistent with guidelines established by Ecopetrol S.A.

One of the principles that ~~guide~~guides Ecopetrol is our commitment to our employees and the development of those communities in which we operate. For that reason, Ecopetrol S.A. is devoted to improving our health, safety and environmental (HSE) practices.

We have several programs in place aimed at increasing the safety of our industrial processes and minimizing the number of occupational accidents and other major incidents. Our HSE management model is based on key focus areas that are aligned with our integrated management system.

Ecopetrol S.A. places an important emphasis on understanding, monitoring and controlling our impacts on workers and contractors.

TRIF has improved from 2.96 incidents per million hours worked in 2012 to 0.63 in 2018. In 2018, 68 recordable cases occurred, where 24% led to restricted work, 7% required medical treatment and 69% led to lost days. Additionally, we had a 12% increase in occupational incidents compared to 2017 due to a higher level of activity at the ~~HSE strategies in 2016, compared with the prior year, were:~~Company which led to a higher exposure of workers to incidents.

Graph 7 – Total Recordable Incident Rate – Employees and
Contractors^{(*) (**)}

All of our operational areas have preparedness and emergency response plans, each in accordance with Colombian legal requirements and our new internal guidelines for emergency management.

Our preparedness and emergency response plans have been developed based on our analysis of risk scenarios, the estimated consequences of these events and the implementation of strategies to be followed in response to each scenario. These contingency plans have the approval of the ANLA.

Further, we are upgrading the skills of our fire brigade, ensuring the reliability of firefighting and emergency equipment and working on improving our performance during emergency drills.

In offshore operations, ~~our~~the operator has the responsibility of designing and implementing plans and strategies aligned with international best practices that cover various emergency response scenarios.

~~Ecopetrol S.A. places an important emphasis on understanding, monitoring and controlling our impacts on workers and contractors.~~

Ecopetrol S.A. monitors a standard measure of occupational safety known as the Total Recordable Incidents Frequency Index (TRIF), which represents the number of employee or contractor injuries that require medical treatment or time off for every million hours worked.

TRIF has improved from 4.28 incidents per million hours worked in 2010 to 1.09 in 2016. In 2016, 28% of occupational accidents affecting our employees and contractors resulted in a medical treatment, restricted work or time away from work that lasted for three days or less. Additionally, we had a 38% reduction in occupational incidents compared to 2015 as a result of the sustained implementation of the HSE management system.

~~Graph 7 – Total Recordable Incident Rate – Employees and~~
~~Contractors (*) (**)~~

Our “Process Safety Management” (PSM) strategy is to: first, define high-risk processes; second, prioritize intervention in high-risk processes; and third, apply all PSM elements in the prioritized high-risk processes.

Loss of primary containment is the number of unplanned or uncontrolled releases of oil, gas or other hazardous materials.

We report Tier 1 process safety events per million hours worked, which are the losses of primary containment of greatest consequence causing harm to a member of the workforce, costly damage to equipment or exceeding defined quantities according to API-754. We ~~reduced our~~maintained the same Tier 1 process safety ~~indicator by 33%~~performance compared to ~~2015 (2016: 0.06~~2017 (0.05 in both 2017 and ~~2015: 0.09)~~2018). The reporting thresholds for API-754 Tier 1 is an unplanned or uncontrolled release of any material, including non-toxic and non-flammable materials, from a process that results in one or more health, safety or environmental consequences set forth under those guidelines. In ~~2016,~~2018, there were ~~0.06~~0.05 Tier 1 process safety incidents per million hours worked.

Frequency of Tier 1 process safety incidents per hours worked (per million hours worked):

In ~~2016,~~2018, Ecopetrol S.A. recorded 811 environmental incidents, compared with 1114 in ~~2015~~2017 and 298 in ~~2014.~~2016. The volume of oil spills was 730.26 barrels in 2018, an increase from 50.7 barrels in 2017 and 202 barrels in ~~2016, a decrease from 207 barrels in 2015 and 885 barrels in 2014.~~2016. The decrease in the numbers of environmental incidents ~~and oil spills~~ was the result of improvement in the identification of critical equipment operating in ~~high~~high- or very ~~high risk~~high-risk conditions, and the implementation of asset integrity plans designed to mitigate those risk conditions. The increase in oil spilled was due mainly to the Lisama 158/La Fortuna incident as described below.

On March 2, 2018, a seepage of water and traces of crude oil occurred near the Lisama 158 well, located in the village of La Fortuna, in the Middle Magdalena Valley of Colombia. Ecopetrol activated its contingency plan to contain the spill. It is estimated that between March 12 and March 15, 550 barrels of crude, mixed with mud and rainwater, seeped into the streams of La Lizama and Caño Muerto. As of March 30, 2018, the Lisama 158 well was sealed and stopped flowing.

Ecopetrol’s internal investigation concluded that there were four concurrent critical factors leading to the incident and that in the absence of any of them, the incident would not have occurred.

With respect to the actions performed by Ecopetrol to address, mitigate other damages and manage the incident, in compliance of the obligations contained in Law 1523 of 2012, Presidential Decree 321 of 1999 and the contingency plan for the Lisama Well, Ecopetrol did the following:

~~While Cenit~~In terms of attention to the incident, Ecopetrol coordinated actions and additional mitigation activities with several Colombian governmental authorities, including: the municipalities of Barrancabermeja, San Vicente de Chucurí and Puerto Wilches, the Department of Santander, the Environmental Regional Autonomous Authority of Santander, the Environmental Police of Barrancabermeja, the National Licensing Authority, the Colombian Red Cross, the Civil Defense, the Ministry Public, the Hydrocarbons National Authority, the Ministry of Environment and Sustainable Development, the Institute of Hydrology, Meteorology and Environmental Studies and, the Colombian Public Defender Office.

In addition, for the preparation and performance of the Environmental Recovery Plan (PRA) which Ecopetrol proposed and filed before the environmental authorities, Ecopetrol had ~~previously followed Ecopetrol’s HSE~~the support of the Biological Resources Investigation Institute Alexander Von Humboldt (pursuant to which a contract was entered into between the aforementioned parties). Furthermore, to ensure the attention and management of wildlife actually and potentially affected by the incident, Ecopetrol had the support and advice of Cabildo Verde Sabana de Torres, a non-governmental agency.

On another hand, the government of Colombia, through the Ministry of Environment and Sustainable Development, requested an independent audit review from a group of environmental and humanitarian experts, composed by the Joint UNEP/OCHA Environment Unit (JEU) and the activation of the UNDAC mechanism of the United Nations Office for the Coordination of Humanitarian Affairs. The aforementioned experts delivered a report that included a set of conclusions and recommendations which were accepted and included by Ecopetrol within the guidelines of its Environmental Recovery Plan (PRA).

The following are the most important milestones which were carried out by Ecopetrol in ~~2015, Cenit established its own HSE practice~~the attention of the incident:

Since April 8, 2018, Ecopetrol intervened the Lisama Well with a snubbing unit (specialized unit which handles pressure), with the purpose to verify the integrity of the casing, the cement used for the casing and ~~set~~to seal off the area where the spill was occurring. These activities finalized successfully on May 8, of 2018, when the Lisama Well was finally plugged with a double seal of cement.

On May 27, 2018, after ensuring that the activities described above were successfully performed to control the spill, the 63 families (approximately 177 individuals) which were directly affected by the spill returned to their homes.

On June 2, 2018, the technical abandonment of the Lisama Well initiated, a process which ended on the July 11, 2018.

On October 19, 2018 and ~~defined its own HSE Key Performance Indicators (KPIs)~~in compliance to Resolution 1767 of 2006, Ecopetrol filed before the ANLA the Environmental Recovery Plan (PRA), whereby a plan to perform several activities to ensure the recovery of affected natural resources (water, air and ~~targets~~land) plus fauna and flora was prepared, including the following aspects:

Additionally, Ecopetrol has been reporting the advances achieved of the Environmental Recovery Plan (PRA) to all competent authorities.

As of the date of this report the following investigations are being conducted by environmental authorities and control agencies in respect of ~~its non-operative facilities~~the incident:

(i) Felipe Bayón (CEO and ~~offices. This resulted~~former Chief Operating Officer)

(ii) Héctor Manosalva Rojas (former Vice-President of Development and Production)

(iii) Ricardo Ernesto Coral Lucero (former Vice-President of the Central Region)

(iv) Oscar Ferney Rincón (Development and Production Operations Manager of the De Mares region)

An initial suspension order against those Ecopetrol workers was at first issued and lifted in ~~significant cost reductions with no change~~August 2018. Currently their investigations are in ~~risk levels~~the probationary stage.

-Approximately 600 people, members of the community and fishermen who live in ~~2015~~the vicinity of where the incident took place, filed a class action in the amount of COP $614,503,232,689, seeking compensation for damages allegedly suffered as consequence of the incident.

-Senator Antonio Eresmid Sanguino filed a class action seeking protection of collective rights (no compensation or indemnification petitions), arguing that the incident led to the destruction of (i) people´s health and ~~2016. Local~~(ii) damages to the environment caused by the incident.

As of the date of this annual report, both complaints were properly answered and ~~field operations, however,~~ are ~~still conducted under Ecopetrol’s HSE model and guidelines.~~currently awaiting the commencement of the evidentiary stage.

Cenit ~~intends to implement~~established its own HSE Management System based on Decree 1072 of 2015 in 2017, and this was implemented during ~~the first half of 2017.~~2018. Cenit is also leading the definition of standard HSE ~~KPIs with~~key process indicators (“KPIs”) for all of the midstream subsidiaries to be able to measure the transportation business as a whole and share the lessons learned and best practices within the industry. Cenit consolidated the 2018 KPIs and agreed upon the goals for 2019 for the transportation business to obtain the results for each subsidiary and for the entire group. Local and field operations are mainly conducted under Ecopetrol’s HSE model and guidelines.

In ~~2016,~~2018, around ~~10.4 million~~6,779,729 man-hours were employed conducting Reficar’s business activities. Our HSE performance indicators for ~~Total Recordable Cases (TRIF),~~ Process Safety Incident (ISP) and Environmental Incident (EI) were ~~well-within~~well within our established ~~guidelines.~~expectations, but the indicator for Total Recordable Cases (TRIF) exceeded our established expectations (TRIF=1.2).

The following table covers ~~Reficar´s Total Recordable Cases (TRIF)~~Reficar’s TRIF for ~~2015~~2016, 2017 and ~~2016,~~2018, which ~~includes~~include Ecopetrol Operation and Maintenance (O&M), Reficar and subcontractors. The table presents statistics related to construction, pre-commissioning, start-up and operating activities. Reficar has not reported ~~more than 145 million man-hours without~~ fatalities (accidents that caused deaths) during the period ~~2010-2016.~~2010 – 2018.

⁽¹⁾ In our annual report on Form 20-F for 2015, man hours and accidents corresponding to Reficar’s construction stage were reported. This report registers man hours and accidents of 2015 corresponding to the entire operation of the Refinery.

* In the second half of 2016, these risks were associated with the new stage of operation of the units while in 2015 they were associated with the construction, commissioning, precomissioning and start-up of the new refinery.

~~Ecopetrol has a Human Rights Policy with an integrated and systemic management approach to human rights based on the due diligence principle, which we continued to strengthen in 2016.~~

In view of our commitment to respect and promote human rights, Ecopetrol updated its human rights risk assessment in order to evaluate and mitigate human rights impacts. As a result of this assessment, Ecopetrol S.A. has focused its efforts on the following principles:

During 2018, Ecopetrol updated its corporate responsibility strategic guidelines. These updated guidelines were developed based on the following three pillars:

As in previous years, during 2018 the Corporate Responsibility Area consulted the perceptions and expectations of our seven stakeholder groups (shareholders and investors; associates and partners; clients; contractors and its employees; employees and pensioners; community and local government; and national government) in respect of eleven attributes (i.e. compliance with made commitments, ethical and transparent behavior, responsibility with the community, the environment and Human Rights, among others).

On average, 73% of respondents rated these attributes in the two highest options on the scale. This represents an improvement of 3% to the result obtained in 2017 (70%). Of particular note, are the improvements in results obtained in the community and local government and associates and partners stakeholder groups.

During 2018, following the United Nations Guiding Principles on Business and Human Rights, we conducted two Human Rights risk assessments for the activities we carry out in our Oriente and Orinoquía regions, which represent the largest part of our gross production. As a result of the evaluations, action plans were proposed, which will guide the incorporation of the results in the processes of each relevant company.

Additionally, in 2018 we applied the Corporate Social Responsibility self-diagnosis designed by UNICEF for children and adolescents. The recommendations we received from this self-diagnosis will also be incorporated into the processes of each relevant company.

During ~~2016,~~2018, the environmental management strategy of Ecopetrol included the following components:

~~Since 2009,~~In 2018, Ecopetrol ~~has~~ reported its ~~achievements in the sphere of~~performance related to environmental management in its Sustainability Management Report to ~~various~~ relevant ~~organizations~~institutions focused onin promoting sustainable ~~business practices,~~issues, such as the ~~Dow Jones Sustainability Index, the Carbon Disclosure Project (CDP) and the CDP Water Information Request; Environmental Benchmarking~~environmental benchmarking of ~~ARPEL.~~Asociación Regional de Empresas del Sector Petróleo, Gas y Biocombustibles en Latinoamérica y el Caribe (ARPEL).

~~Refining~~Ecopetrol is committed to improving the quality of the fuels it supplies in order to contribute to a better air quality for Colombians and comply with fuel quality regulations. Taking advantage of being an integrated company, after April 2018, we reduced the sulfur content in our diesel B2 (98% fossil and 2% biodiesel) to under 25 ppm. In particular, in December 2018, the diesel that we distributed in Colombia had an average of 16 ppm of sulfur and the gasoline we distributed had an average of 108 ppm of sulfur, values that are lower than the current local regulations of 50 ppm in diesel and 300 ppm in gasoline.

~~Ecopetrol’s refining companies~~In compliance with Ecopetrol's Climate Change Strategy, since 2010, we have developed greenhouse gas reduction projects in various of our operating areas. As a result, in 2018, we achieved a reduction of about 1.2 million tons of CO2e, through the implementation of projects in energy efficiency and reducing gas flaring, among others.

Ecopetrol has been undertaking significant efforts to make efficient and rational use of energy resources in its production processes and to reduce energy consumption, ~~and~~ costs and carbon dioxide emissions. We focus on efficiency, reliability, ~~and~~ optimization and energy diversification.

During ~~2016,~~2018, the ~~refinery segment’s~~Barrancabermeja refinery’s average monthly energy consumption was ~~61.42 MWhm (megawatts~~66 GWhm (gigawatts per hour per month) ~~equivalents,~~, provided through self-generation. The Cartagena Refinery’s average monthly energy consumption was 67 GWhm (gigawatts per hour per month), 100% was provided through self-generation.

Further, during 2018, Ecopetrol S.A.’s production segment had an average monthly energy consumption of 399 GWhm (gigawatts per hour per month) for its direct operation, from which ~~99.9%~~68% was provided through self-generation and the remaining ~~0.01%~~32% with non-regulated energy purchased from the National Transmission System.

~~Production~~The cost of power transmission and the cost of operation and maintenance for the self-generation centers of the Rubiales field were reduced through the renegotiation of the contracts.

We also began the construction of our first solar complex that will allow us to supply part of the energy required by the Castilla field, becoming the largest self-generation park with non-conventional renewable sources in Colombia.

~~Further, during 2016, Ecopetrol S.A.’s production sector had an average a monthly energy consumption~~The cost of ~~272,839 MWhm (megawatts per hour per month)~~power transmission for Oleoducto de los Llanos (ODL) was reduced due to the optimization of its ~~direct operation, from which 76% was provided through self-generation and the remaining 24% with non-regulated energy purchased from the National Transmission System.~~take or pay contract.

Set forth below is a description of material ~~related party~~related-party transactions. For additional information about transactions with related parties, see Note ~~32 – Related Parties~~29 to our consolidated financial statements.

Ecopetrol S.A. has entered into a number of agreements with its 72.65%-owned subsidiary, Ocensa, of which the following are the most significant:

On July 29, 2014, after Ocensa implemented and carried out an open process to receive offers to enter into transportation agreements for an extended capacity of approximately 135,000 barrels per day in Ocensa’s pipeline (the “P135 Project”), Ocensa accepted the proposal made by Ecopetrol S.A. to enter into a ship-or-pay transportation agreement for 70,000 barrels per day of crude.

On November 20, 2014, after a total and definitive assignment agreement that was notified to Ocensa on December 15, 2016, Ecopetrol became the successor of Hocol, of a ship-or-pay transportation agreement for 17,500 barrels per day, thus increasing Ecopetrol’s contracted capacity in the P135 Project to 87,500 barrels per day.

On July 1, 2017, with the consent of Ecopetrol and Ocensa, and as contemplated in the Act of Commencement of Operations issued by the Ministry of Mines and Energy (Resolution 31344 dated April 27, 2017), Ocensa started supplying increased capacity in the P135 Project.

On July 17, 2018, Ecopetrol and Ocensa entered into an amendment to the P135 ship-or-pay transportation agreements mentioned above (consisting of a capacity of 87,500 barrels of crude per day) in order to adjust the standard tariff and monetary conditions. This followed Ocensa having entered into a settlement agreement as approved by an arbitration panel with Frontera Energy Colombia and executed on May 15, 2018 pursuant to which the transportation tariff and monetary conditions in Ocensa's ship-or-pay transportation agreement with Frontera Energy Colombia in respect of the P135 Project were adjusted. Therefore, in application of regulatory principles, Ocensa offered similar terms to the remaining shippers of the P135 Project, including Ecopetrol, and executed (i) settlement agreements with those who accepted Ocensa's offer and (ii) the corresponding amendments to the transportation agreements.

In 2018, payments made by Ecopetrol S.A. under these two agreements amounted to US$1.049 million.

The Ocensa shareholders’ agreement establishes the basis for Ocensa’s corporate governance model. It provides for a board of directors composed of five members, two of which must be independent. Cenit may nominate three members of the board of directors, including the two independent members, while minority shareholders may together nominate the remaining two members.

The Ocensa shareholders’ agreement provides the minority shareholders with certain rights, including the right to nominate two members of the five-member board of directors. Significant decisions must be approved by a qualified majority of at least four Ocensa shareholders, and by supermajorities of the outstanding Ocensa shares. These actions include, among others (i) issuing additional shares or publicly listing shares, declarations of dividends in amounts other than all distributable income and certain amendments to Ocensa’s bylaws and (ii) asset sales in excess of US$50 million;

Ocensa has entered into the following agreements, among others, with some of our other subsidiaries:

Ecopetrol S.A. entered into the following agreements with its 73%-owned subsidiary, ODC:

ODC has entered into the following agreements with some of our other subsidiaries:

Ecopetrol S.A. has entered into the following agreements, among others, with its 65%-owned subsidiary, ODL:

Ecopetrol S.A. has entered into the following agreements, among others, with its 55.97% owned subsidiary, Oleoducto Bicentenario:

Other than the agreements that we have entered into with the ANH, in the ordinary course of business we enter into transactions with other state-owned entities that include but are not limited to the following:

For the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014,~~2016, we purchased the following volumes of crude oil from the ANH (National Hydrocarbon Agency) corresponding to royalties paid in kind by oil producers in Colombia: ~~42.9~~37.6 million barrels, ~~45.6~~40.3 million barrels and ~~45.4~~42.9 million barrels, respectively. See the sectionBusiness Overview—Applicable Laws and Regulations—Regulation of Exploration and Production Activities—Business Regulation—Royaltiesfor a description of the current royalty scheme.

We have a clear and defined corporate policy based on risk financing guidelines that summarizes the Company’s risk transfer and retention alternatives and provides support and guidance for all the insurance-related issues of all of our affiliated and subsidiary companies.

There are three corporate insurance programs covering Ecopetrol S.A. and its subsidiaries. In the text and tables below, we set forth our insurance programs and the companies covered, along with limits and coverage details.

Group 1- Downstream Program:This insurance program provides coverage for downstream (assets and operations) of Ecopetrol S.A. and all of its subsidiaries in excess of their local insurance programs, when applicable. Coverage includes all physical damage and sabotage and terrorism, which were designed to cover downstream operations.

Group 2 – ~~Up and Midstream~~Upstream Program:This program provides coverage for upstream ~~and midstream~~ (assets and operations) of Ecopetrol’s interests and all of its upstream subsidiaries. Coverage includes all physical damage, sabotage and terrorism and control of wells.

Group 3 – Transversal Program:This program provides coverage for downstream, upstream and midstream operations of Ecopetrol and its subsidiaries and all of its subsidiaries in excess of their local insurance programs. Coverage includes general liability, directors and officers, cargo, crime and charterers’ liability.

Our third-party liability insurance policies cover Ecopetrol S.A., our subsidiaries and affiliates in excess of local underlying policy limits for claims made against them by third parties. Our commercial general liability coverage will pay on behalf of or indemnify amounts for which an insured becomes legally obligated to pay, including damages in respect of bodily injury, property, pollution and product liability. Coverage of bodily injury and property damage is subject to coverage territory during the policy period.

Ecopetrol’s midstream subsidiaries (Cenit, Ocensa, ODL, Bicentenario and ODC) have an independent program for its oil transportation companies (including crime and directors & officers policies).

The corporate insurance programs detailed above are subject to particular conditions, limits, sub-limits, deductibles, guarantees and exclusions applying for each line of insurance and each coverage. For purposes of this annual report, only the main limits and deductibles were mentioned in each group.

With respect to offshore operations in the U.S. Gulf Coast, Ecopetrol America Inc. is party to Operating Agreements, or ~~OAS,~~OAs, that include customary conditions and which contain similar terms and provisions to those in the Model Form of Offshore Deepwater Operating Agreement of the American Association of Professional Landmen. In general, pursuant to these OAs, the obligations, duties, and liabilities of the contract parties are several, and not joint or collective, for all operations covered by the OAs.

Ecopetrol S.A. has a contract with two local insurance companies for domestic operations. The local policies relate to transit, accidents, mandatory policies, liability mandatory policies, and personal accidents policies, among others. Additional policies are requested from the insurers as they are needed.

As of December 31, ~~2016,~~2018, the Ecopetrol Corporate Group had ~~10,920~~12,228 employees, an increase of ~~1.48%~~4.3% from ~~2015.~~2017. Most of our employees are located in Colombia. The table below presents the breakdown of Ecopetrol employees according to the business segments where they work, and the personnel of our subsidiaries for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014.~~2016.

The number of Polipropileno del Caribe S.A. (now Esenttia S.A.) employees reported in 2017 was re-stated to include Esenttia Masterbach’s employees. Essentia Masterbach is a subsidiary of Esenttia S.A.

~~To improve the quality~~As part of ~~life of our employees,~~its total compensation programme, Ecopetrol S.A. extends various types of loans to its employees, including housing loans and general-purpose loans. The principal amount of the loan depends on the applicant’s ~~tenure and cannot exceed 59 times the applicant’s monthly salary.~~tenure. Ecopetrol S.A. does not guarantee any loans made by third parties. ~~In 2016,~~Since January, 2018 and up February 2019, Ecopetrol S.A. extended ~~999~~913 housing loans for a total of COP$~~173~~184 billion and ~~1,742~~2,329 general-purpose loans for a total of COP$1321 billion. In 2018, Ecopetrol S.A. also provided on-site and external training and development, which ~~total~~totaled to COP$~~5.7~~20.8 billion, and it extended a total of COP$~~165~~213 billion in subsidies for education.

We have not provided loans (including housing loans), extended or maintained credit lines, arranged for the extension of credit by third parties, materially modified or renewed an extension of credit lines, in the form of a personal loan to or for any of our executive officers (defined as first line management under the bylaws of Ecopetrol S.A.) since our ADSs were registered under the Exchange Act.

In accordance with article 123 of the Colombian Constitution and the article 7th of the Law 1118 of 2006, our employees are considered “public ~~servants”;~~servants,” even though they are subject to the common labor law. As such, their behavior is subject to the rules to those who handle public interests and goods and could be held liable for their illegal actions and omissions pursuant to the following regimes: (i) disciplinary (Law 734 of 2002), (ii) criminal or (iii) civil.

A collective bargaining agreement between us and our main labor unions governs labor relations with our unionized employees, which amounted to ~~4,180~~50.3% employees as of January 1, ~~2017.~~2019. The agreement also governs our labor relations with the ~~2,818~~2,657 non-unionized employees who, according to current labor legislation, have been beneficiaries of the collective bargaining agreement.

We currently have ~~five~~eight industry-wide labor unions and seven company labor unions:

~~Currently Ecopetrol S.A. does not have any workers in the SINCOPETROL union. This union does not participate in the negotiation process.~~

Any employee working for any company in the oil and gas industry may join the USO, ADECO, SINDISPETROL, ~~UTEN~~UTIPEC, ASTIP, SINATRINHI, ASINTRAHC or ~~ASTIP.~~SINTRAMANPETROL. Only our employees may join the company labor unions.

Ecopetrol S.A. relations with unions are based on a permanent dialogue and communication sessions where different matters are discussed in order to solve and prevent any labor conflict.

~~The~~Our current collective bargaining agreement has been in effect since ~~2014~~July 1, 2018 and ~~expires on June 30, 2018. In 2016, the agreement was reviewed on application matters, except for monetary expenses (including wages~~has a term of four and ~~benefits). This review ended with a mutual arrangement document, signed~~half years, expiring on December ~~10, 2016.~~31, 2022. The collective bargaining agreement included an increase in salaries at an annual rate of the local consumer price index (CPI) +1.21% for the remainder of 2018 and CPI +1.70% every year for the remainder of its duration. The agreement covers health, food, loans and transportation, among other benefits for workers, within reasonable criteria. It also includes union guarantees and addresses regulatory issues. The following unions are parties to the new collective bargaining agreement: USO, ADECO, TRASINE, UTIPEC, APROTECO, SINDISPETROL and ASINTRAHC.

Our consolidated financial statements for the years ended December 31, ~~2014, 2015~~2016, 2017 and ~~2016~~2018 were prepared in accordance with IFRS. ~~Our date of transition from our previous GAAP to IFRS was January 1, 2014.~~

IFRS differs in certain significant ~~respects~~aspects from the current Colombian IFRS (which is the accounting standard we use for local statutory reporting purposes). As a result, our financial information presented under IFRS is not directly comparable to certain of our financial information presented under Colombian IFRS. A description of the differences between Colombian IFRS and IFRS is presented underSummary of Differences between Internal Reporting (Colombian IFRS and IFRS) below.

Our consolidated financial statements were consolidated line by line and all transactions and significant balances between affiliates have been eliminated. These financial statements include the financial results of all subsidiaries companies controlled, directly or indirectly, by Ecopetrol S.A. See Exhibit 1—Consolidated companies, associates and joint ventures, to our consolidated financial statements included in this annual report.

Our operating results were affected mainly by international prices of crude oil, ~~and, to a somewhat lesser extent,~~ international prices for refined products and local prices for natural gas, as well as sales volumes, product mix, exchange rate and our operational performance. Crude oil prices and volumes are particularly important to the results of our exploration and production segment. This is because as export volumes or export prices of crude oil and products decrease or increase, ~~thus~~our revenues ~~too.~~do also. Results from our refining activities are also affected by the price of crude oil used as raw material, changes in product prices in the international market, change in environmental regulations, conversion ratios and utilization rates and refining capacity, all of which affect our refining margins. ~~Changes~~Terrorist attacks by guerillas against our pipelines and other facilities or social unrest can lead to loss of revenues by restricting the availability of transport systems for exports or sales of crude oil and products and/or production activities, in addition to the direct costs of repairing and cleaning. Finally, changes in the value of foreign currencies, particularly the U.S. dollar against the Colombian Peso, can also have a significant effect on our financial statements. Finally, terrorist attacks by guerillas against our pipelines and other facilities can lead to loss of revenues by restricting the availability of transport systems for exports or sales of crude oil and products in addition to the direct costs of repairing and cleaning them.

Our results from the exploration and production segment ~~depends~~depend mainly on our sales volumes and average local and international prices for crude oil ~~petrochemicals~~ and natural gas. Additionally, sales volumes ~~are affected by~~also reflect the purchase of crude oil and natural gas that we make from third parties and the ANH.

We sell crude oil ~~mainly~~and natural gas in the local and the international market. We also process crude oil at ~~the~~ Barrancabermeja and Reficar ~~refineries~~ and sell refined and other petrochemical products in the local and international markets.

We have a number of crude oil short-term commercial agreements with local customers, and natural gas short and long-term supply contracts with gas-fired power plants and local natural gas distribution companies. Local sale prices are determined in accordance with existing regulations, contractual arrangements and the spot market linked to international benchmarks. Local sales represent ~~48%~~49.9% of our total revenues, on average, for the past three years.

Our foreign sales represented ~~52%~~50.1% of our total revenues, on average, for the past three years.

International sale prices are determined in accordance with contractual arrangements and the spot market linked to international benchmarks primarily ICE Brent benchmark.

A market diversification strategy has allowed us to ~~focus towards~~capture markets where we have been able to ~~capture better value~~obtain higher prices for our crudes and refined products. We sell our crudes and refined products in various regions, such as the U.S., Central America and the Caribbean, Asia and Europe. In our negotiations with potential customers, we seek to use the most liquid benchmark reference prices in each region.

We account for exploratory drilling costs using the successful efforts method, whereby all costs associated with the exploration and drilling of productive wells are initially capitalized. Costs incurred in exploring and drilling of dry or unsuccessful wells are expensed in the period in which the well is determined to be a dry or unsuccessful well and are accounted for under “Exploration and Project expenses.” Consequently, an increase in the number of exploratory wells we declare as dry or unsuccessful will negatively affect our results and may cause volatility in our operating expenses. See Note 4.7 to our consolidated financial statements for a summary of our accounting policy for exploration costs.

Each of our production contracts has its own royalty arrangement in accordance with applicable law. Law 141 of 1994 established a royalty fixed rate equivalent to 20% of total production. In 1999, a modification to the royalty system established a sliding scale for royalty percentage linked to the production level of crude oil and natural gas to fields discovered after July 29, 1999, depending on whether the production is crude oil or natural gas, and on the quality of the crude oil produced. Since 2002, as a result of the enactment of Law 756 of 2002, the royalty percentage has ranged from 8% for fields producing up to five thousand bpd to 25% for fields producing an excess of 600 thousand bpd. Producing fields pay royalties in accordance with the applicable royalty rate at the time of the discovery. Also, Law 756 of 2002 establishes that in the fields of the association contracts that finalize or revert back, an additional royalty rate of 12% of the basic production applies. ~~Therefore, pursuant to this law, in 2016, as a result of the return of the Rubiales field to Ecopetrol in July 2016, the royalty rate went from 20% to 32%.~~

Since January 2014, the ANH has collected natural gas production royalties from producers settled in cash based on a formula, regardless of whether a producer has sold the gas. As a result, we no longer commercialize this gas on behalf of the ANH. In addition, because the royalties are now payable to the ANH in cash, all the gas we produce is considered part of our reserves and production, without any deduction for royalties. The cost of natural gas royalties totaled COP$ ~~478,332~~423,939 million in ~~2016.~~2018.

We ~~continue purchasing~~purchase all crude oil delivered to the ANH as royalties by us and by third parties. The purchase price is calculated according to a formula set forth in a contract between usEcopetrol and the ANH that reflects our export sales prices (crudes and products), a quality adjustment for API gravity and sulfur content, transportation rates from the wellhead to the Coveñas ~~and~~or Tumaco ports and a marketing fee. We sell the physical product purchased from the ANH as part of our ordinary business. ~~In June 2016, the~~The contract between the ANH and us was extended until ~~June 30, 2018.~~

Our purchases of hydrocarbons from the ANH are made in the ordinary course of business, and on terms comparable to those offered to private parties. We have established procurement policies and approval processes for purchases of products and services, which do not depend on whether the counterparties are state-owned entities.January 31, 2020.

Since 2016, we ~~import~~have imported crude oil for Reficar feedstock when such imports ~~are to~~ result in a better operational or economic performance of the Ecopetrol Group.

4.2 Effect of Taxes, Exchange Rate Variation, Inflation and the Price of Oil on our Results

In December 2016, the Colombian Congress adopted Law 1819, which introduced ~~more~~ changes to the Colombian tax system, applicable beginning in 2017, including the following aspects:

For ~~the oil and gas industry the tax reform includes~~additional information SeeNote 10.4of our Finacial Statements.

The 2016 Tax Reform included two tax benefits that are expected to improve the operations of the oil and gas industry:

For exploration activities, the “CERT” (for its acronym in Spanish) incentive was approved, consisting of the reimbursement of part of the investment made in the exploration phase. The reimbursement will depend on certain percentages that should be established and further regulated by Colombian Government.

~~The CERT will be granted when the income tax return is filed, subject to the procedure to be established by the Colombian Government.~~

~~The CERT can only be redeemed to pay taxes and is effective up to two years after it is issued. However, the CERT can also be sold and traded in fixed income market.~~

For production activities, the CERT will be granted exclusively to investments that increase the recovery factor, i.e. investments that increase the reserves that are currently proved in certain wells.

~~The effect of this regulation is still uncertain and will depend on how and when the government issues the detailed regulations.~~“CERT: Certificado de Reembolso Tributario” incentive:

Taxpayers in the oil and gas industry are entitled to refund VAT paid in the exploration phase for offshore projects. Taxpayers can request for this VAT as of the next fiscal year in which the investment was made. VAT that is reimbursed cannot be used as a higher cost or expense for income tax purposes.

In December 2018, the Colombian Congress adopted Law 1943, which introduced the following key changes to the Colombian tax system, among others:

The functional currency of each of the companies of Ecopetrol Group ~~company~~ is determined in relation to the main economic environment where each company operates; however our consolidated financial results are reported in Colombian Pesos, which is the Ecopetrol Group’s functional and presentation currency. A substantial part of our consolidated revenues ~~coming~~comes from Ecopetrol Group companies whose functional currency is the Colombian Peso. The conversion effect from U.S. dollar to Colombian Peso is ~~derived from~~mainly due to local sales and exports of crude oil, natural gas and refined products whose prices are ~~sold at prices referenced to~~based on benchmarks quoted in U.S. dollars. Therefore, they are exposed to foreign currency exchange risk on revenues, capital expenditures and financial instruments that are denominated in a currency other than its functional currency.

Fluctuations in the U.S. dollar-Colombian Peso exchange rate have effects on our consolidated financial statements. As crude oil is priced in U.S. dollars, fluctuations in the exchange rate of the Colombian Peso against the U.S. dollar may have a significant impact on revenues, cost, monetary assets and liabilities held in foreign currency.

An appreciation of the Colombian Peso has a negative impact on our results of operations because our revenues from exports of crude oil, natural gas and refined products are primarily expressed in ~~Colombian Pesos.~~U.S. dollars. Costs of imported ~~goods~~products and contracted services expressed in U.S. dollars will also be lower when expressed in Colombian Pesos, but on balance, our operating income in Colombian Pesos tends to decline when the Colombian Peso appreciates, other factors being equal. The appreciation of the Colombian Peso against the U.S. dollar also decreases the debt service requirements of our Companies with the Colombian Peso as their functional currency, as the amount of the Colombian pesos necessary to pay principal and interest on foreign currency debt decreases with the appreciation of the Colombian Peso.

Conversely, when the Colombian Peso depreciates against the U.S. dollar, our reported revenues, costs related to imported ~~goods~~products and services, interest costs, and operating income, all tend to increase. ~~As crude oil is priced in U.S. dollars, fluctuations in the exchange rate of~~

During 2018, the Colombian Peso depreciated slightly on average 0.2% against the U.S. ~~dollar may have a significant impact~~dollar. During 2017, the Colombian Peso appreciated on ~~revenues, cost, assets and liabilities held in foreign currency.~~

~~During~~average 3.35% against the U.S. dollar. In 2016, ~~2015 and 2014,~~ the Colombian Peso depreciated on average 11.18%~~, 37.28% and 7.05%, respectively,~~ against the U.S. dollar. Additionally, as of December 31, ~~2016~~2018 the Colombian ~~Peso appreciated 4.72%~~Peso/U.S. dollar exchange rate depreciated 8.91% from the rate a year earlier. AsIn contrast, of December 31, ~~2015~~2017 and ~~2014, in contrast,~~December 31, 2016, the Colombian ~~Peso depreciated 31.64%~~Peso/U.S. dollar exchange rate appreciated 0.56% and ~~24.17%,~~4.72% respectively from the rate a year earlier.

In 2018, our consolidated debt in foreign currency decreased by a total of US$2,123 million mainly as a result of prepayments of local and foreign currency of US$2,446 million and amortization of foreign currency capital expenditures. In 2017, our consolidated debt in foreign currency decreased by a total of US$2,582 million mainly as a result of prepayments of foreign currency denominated loans of US$2,400 million and amortization of foreign currency capital expenditures. In 2016, our consolidated debt in foreign currency increased by a total of US$975 million as Ecopetrol S.A. raised US$475 million through international loans and US$500 million through an international bond issuance. In 2015, our consolidated debt in foreign currency increased by a total of US$3,425 million as Ecopetrol S.A. raised US$1,925 million through an international loan and US$1,500 million through an international bond issuance. In 2014, our consolidated debt in foreign currency increased through international bond issuances by Ecopetrol S.A. and Ocensa for a total of US$3,700 million.

As of December 31, ~~2016~~2018 our U.S. ~~dollar-denominated~~dollar denominated total debt was US$~~15.2 billion,~~10,467 million, which we recognize in our financial statements at its amortized cost, which corresponds to the present value of cash flows, discounted at the effective interest rate. Out of this total, US$~~12 billion~~9,689 million relates to Ecopetrol S.A., whose functional currency is the Colombian Peso. Therefore, when the Colombian Peso depreciates against the U.S. dollar, Ecopetrol S.A. is exposed to an exchange rate loss. In contrast, when the Colombian Peso appreciates against the U.S. dollar, Ecopetrol S.A. has an exchange rate gain. Some of the Ecopetrol Group companies have the U.S. dollar as their functional currency and are not exposed to a material exchange rate risk resulting from fluctuations in the Colombian Peso against the U.S. dollar. On the asset side, when the financial statements of the Group are consolidated, the exchange rate differential of the subsidiaries’ assets and liabilities whose functional currency is the U.S. dollar is recognized directly in equity, as part of ~~the~~ other comprehensive income.

~~The Company~~In 2015, Ecopetrol S.A. adopted hedge accounting, ~~as part of its risk management strategy,~~ using two types of natural hedges with its U.S. dollar debt as a financial instrument: i)(i) a cash flow hedge for exports of crude oil and ~~ii)~~(ii) a hedge of athe net investment in a foreign ~~operation.~~operations. As a result of the implementation of both hedges ~~88% ($10.5 billion)~~67.1% (US$6,500 million) of Ecopetrol S.A.’s debt in U.S. dollars, as of December 31, 2018, was designated as a hedge. With the adoption of hedge accounting, the effect of the volatility of the foreign exchange rate on the hedged portion of the debt is recognized directly in equity, as part of ~~the~~ other comprehensive income.

The remaining portion of Ecopetrol S.A.’s U.S. dollar-denominated debt, as well as the financial assets and liabilities denominated in foreign currency, continues to be exposed to the fluctuation in the exchange rate, which means that an appreciation of the Colombian ~~peso~~Peso against the ~~U.S~~U.S. dollar could generate a loss iffor companies whose functional currency is the Colombian ~~peso~~Peso that have ~~an active~~a net position in U.S. dollars or a gain if they have a net liability position in U.S. dollars. Conversely, a depreciation of the Colombian ~~peso~~Peso against the U.S. dollar could generate a gain iffor companies whose functional currency is the Colombian peso that have a net ~~active~~ position in U.S. dollars or a loss if they have a net liability position in U.S. dollars.

As of December 31, ~~2016,~~2018, Ecopetrol Group companies ~~with~~have the ~~U.S. dollar as functional currency have~~equivalent of a net ~~active~~ U.S. dollar position of US$0.7 million after the ~~instruments~~implementation of the natural hedging previously ~~mentioned.~~mentioned above, neutralizing the effect of exchange rate fluctuations in their results for the year.

~~Inflation in Colombia has not exceeded an~~The average annual rate of 8%inflation in Colombia for the past ten ~~years.~~years is 4.04%. It decreased in ~~2016~~2018 as compared to ~~2015.~~2017. As measured by the general consumer price index, average annual inflation in Colombia for the years ended December 31, 2018, 2017 and 2016 ~~2015~~was 3.18%, 4.09% and ~~2014; inflation was~~ 5.75%~~, 6.77% and 3.66%~~, respectively. The decrease in inflation in ~~2016~~2018 is mainly ~~explained by~~due to the ~~normalization~~favorable price behavior of ~~prices as a consequence of the ending of “El Niño” weather phenomenon~~both tradable and ~~the slight appreciation of the Colombian Peso against the U.S. dollar in the second half of 2016.~~non-tradable items. Cost inflation in the prices of goods, raw materials, interest cost of debt in local currency indexed to inflation and services ~~that are necessary~~ for ~~the development and~~ operation of oil and gas producing assets can vary over time and between each market segment.

The average price of ICE Brent crude in 2018 was US$71.7 per barrel as compared to US$54.7 per barrel in 2017 and US$45.1 per barrel in ~~2016 as compared to US$53.6 per barrel in 2015~~2016. See sectionStrategy and US$99.3 per barrel in 2014. As a consequence, our average price crude oil basket was US$35.7 per barrel in 2016 as compared to US$43.9 per barrel in 2015 and US$87.3 per barrel in 2014, which represents a decrease of US$8.2 per barrel in 2016 compared to 2015. This decrease is mainly explained by a continuing imbalance between supply and demand in the global crude market due to higher OPEC production as well as a resilient North American production. Nevertheless, the Ecopetrol’sMarket Overview.

In addition, Ecopetrol’ average crude oil basket price relative to ICE Brent reported a discount of US$~~9.4~~8.50 per barrel in 2018, a higher discount than the US$6.90 in 2017 and a lower discount than the $9.40 observed in 2016 ~~stronger than~~due to: (i) our knowledge of the ~~US$9.7~~refining market for heavy and ~~US$12 observed~~intermediate crudes, (ii) the ability to identify and capture opportunities in ~~2015~~the United States and ~~2014, respectively, due~~Asia, and (iii) the incorporation of new refinery customers in those markets. Our average price crude oil basket was US$63.2 per barrel in 2018 as compared to US$47.8 per barrel in 2017 and US$35.7 per barrel in 2016, which represents an ~~active commercial strategy.~~increase of US$15.4 per barrel in 2018 compared to 2017.

In theOperating Results section below, we present the impact of the price ~~decline in~~increase on our revenue and cost of sales.

Additionally, fluctuations in the price of oil ~~have~~ had an impact on the value of our oil and gas reserves. ~~The~~Reserves valuation ~~of these reserves was~~is made ~~using a price~~ in accordance with SEC price regulations. ~~A decline~~Volatility in hydrocarbon prices, refining margins and reserves, as well as changes in environmental regulations may lead to the recognition of impairment or recovery of non-recurring assets. In 2015, in connection with the current adverse economic context faced by the hydrocarbons sector, which resulted in a reduction in forecasted oil prices and an increase in market and country risk that is reflected in the discount rate, as well as a reduction in the recoverable reserves amount and refining margin, among other factors, Ecopetrol recognized an impairment of non-current assets of COP$7,864,875 million before taxes. In 2016, in connection with our evaluation of the recoverable amount of the assets value, which includes the variation in estimations of future prices under the current scenarios of OPEC’s oil quota agreements and the impact resulting from changes on specifications issued by the International Marine Organization agreement regarding marine pollution, Marpol on crude and fuels with high sulfur content, Ecopetrol recognized an impairment of non-current assets of COP$928,747 million before taxes.

For additional information about ~~this~~ impairment charges, and reversals, see ~~Notes 14, 17~~sectionsOperating Results—Consolidated Results of Operations—Impairment of non-current assets,Segment Performance and 28Analysis and Note 16 to our consolidated financial statements.

Our consolidated financial statements for the years ended December 31, ~~2014, 2015~~2018, 2017 and 2016 were prepared in accordance with IFRS. ~~Our date of transition to IFRS was January 1, 2014.~~ The detail of the accounting policies is described in Note 4 to our consolidated financial statements.

Critical accounting policies are those policies that require us to exercise judgment or involve a higher degree of complexity in the application of the accounting policies that currently affect our financial condition and results of operations. The accounting judgments and estimates we make in these contexts require us to calculate variables and make assumptions about matters that are highly uncertain. In each case, if we had made other estimates, or if changes in the estimates occur from period to period, our financial condition and results of operations could be materially affected.

See Note 3 to our consolidated financial statements for a summary of the critical accounting judgments and estimates applicable to us. There are many other areas in which we use estimates about uncertain matters, but we believe the reasonably likely effect of changed or different estimates would not be material to our financial presentation.

The following discussion is based on information contained in our audited consolidated financial statements and should be read in conjunction therewith.

The following table sets forth components of our income statement for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014.~~2016.

The following table sets forth our principal sources of third-party revenues by business segment for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014.~~2016. An explanation of how we classify our operations into business segments is included in Section ~~4.5.2~~4.5.1.8 below.

In ~~2016,~~2018, total revenues ~~decreased~~increased by ~~7.4%~~22.6% as compared to ~~2015,~~2017, primarily as a result of: (i) a COP$~~6,456,917~~12,898,392 million ~~decrease~~increase in revenues mainly due to the ~~18.6%~~32.2%, or US$~~8.2~~15.4 per barrel ~~reduction~~increase of our average crude oil basket price, which in turn was primarily the result of the better performance of the Brent crude benchmark price and the 23.3%, or US$14.6 per barrel increase, of our average refined products basket price, which in turn was primarily due to strengthening of diesel prices, and (ii) ~~a COP$1,572,854 million decrease in revenues attributable to~~ the ~~decrease in our sales volume and lower services provided by our transportations and logistics segment. This decrease was partially offset by the 11.2% devaluation~~0.2% depreciation of the Colombian Peso against the U.S. dollar, from an average exchange rate of COP$~~2,746.47/US$~~2,951.15 /US$1.00 in ~~2015~~2017 to an average exchange rate of COP$~~3,053.42/~~2,956.55/US$1.00 in ~~2016,~~2018, resulting in an increase in sales revenue from exports, which represented an increase of COP$~~4,168,061~~297,937 million. This increase was partially offset by: (i) a COP$407,261 million revenue decrease attributable to the decrease in our sales volume explained below and (ii) a COP$139,424 decrease in services revenue from our transportations and logistics segment, primarily due to the resolution of the disagreement regarding the P135 Project tariffs leading to lower tariffs, which was partially offset by higher volumes transported through the San Fernando – Apiay system and the expansion of the P135 Project.

The decrease of our sales volume in 2018 as compared to 2017 was the result of (i) the 7.9%, or 12.5 mbe, decrease in our crude sales volume was primarily the result of lower crude exports due to a greater allocation of domestic crudes to supply Reficar in order to replace imports. This decrease was partially offset by (i) the 3.4%, or 5.0 mbe, increase in refined products volumes due to greater refining throughput and (ii) the 3.5%, or 1.0 mbe, increase in natural gas sales volume, primarily due to greater demand and active incremental sales.

In 2017, total revenues increased by 15.4% as compared to 2016, primarily as a result of a COP$10,971,709 million increase in revenues mainly due to the 33.9%, or US$12.1 per barrel increase of our average crude oil basket price and a smaller discount of Ecopetrol’s average crude oil basket price from international prices. This increase was partially offset by: (i) a COP$1,894,819 million decrease in revenues attributable to the decrease in our sales volume and a COP$261,200 decrease in services provided by our transportations and logistics segment and (ii) the 3.35% appreciation of the Colombian Peso against the U.S. dollar, from an average exchange rate of COP$3,053.42/US$1.00 in 2016 to an average exchange rate of COP$2,951.15/US$1.00 in 2017, resulting in a decrease in sales revenue from exports, which represented a decrease of COP$1,347,023 million.

The decrease of our sales volume in ~~2016~~2017 as compared to ~~2015~~2016 was the result of ~~(a)~~(i) the ~~18.1%~~3.7%, or ~~36.4~~6 mbe, decrease in our crude sales volume caused mainly by lower crude exports due to ~~production decline, reduced purchases by third parties and lower availability~~a greater allocation of ~~crude~~domestic crudes to supply Reficar in order to replace imports, (ii) the 6.7%, or 10.7 mbe, decrease in refined products volumes due to ~~its use for feedstock~~lower exports of diesel, primarily due to: (a) our strategy of focusing on allocating higher volumes to the domestic market to supply local demand and replace imports which resulted in lower cost of sales and better gross margin, (b) lower exports of fuel oil, and (c) a decrease in production at ~~Reficar,~~the Barrancabermeja refinery as a result of reliance on more efficient alternative sources, and ~~(b)~~(iii) the ~~15.6%~~3%, or ~~5.3~~0.86 mbe, decrease in natural gas sales volume due to continued lower thermal demand as a result of ~~the end~~no effect of the “El Niño” weather phenomenon and the termination of our sales contract to Venezuela on June 30, 2015. This decrease in sales volume was partially offset by the 20.2%, or 26.8 mbe, increase in sales of refined products given the increase of operations at Reficar and higher demand due to the growththat ended in the ~~number~~middle of ~~motor vehicles in Colombia.~~2016.

~~The increase~~4.5.1.2Cost of our sales volume in 2015 as compared to 2014 was mainly the result of the 3.9%, or 4.97 mbe, increase in our refined products sales volume, which in turn was primarily the result of the 8.2% increase in local sales of refined products given higher demand caused mainly by the increase in the number of vehicles in Colombia, the higher consumption of diesel for energy generation at thermal power plants due to warmer weather caused by the El Niño climate phenomenon and supplying the border area with Venezuela due to that country’s decision to temporarily close its border with Colombia; partially offset by lower exports of fuel oil, as a result of the difficulties in transporting these products to port by means of the Rio Magdalena due to the reduced flow from this river. This increase in sales volume was partially offset by the 56.8%, or 3.8 mbe, decrease in natural gas exports due to the termination of our Venezuela sales contract on June 30, 2015 and the natural decline in production at the Guajira field.Sales

Our cost of sales was principally affected by the factors described below. See Note ~~26 Cost of sales~~24 to our consolidated financial statements for more detail.

Cost of sales in ~~2016~~2018 was COP$~~34,251,423~~41,184,379 million, representing a COP$~~2,743,093~~4,276,054 million ~~(7.4%) decrease~~or 11.6% increase as compared to ~~2015,~~2017, primarily as a result of the following factors:

Cost of sales in 2017 was COP$36,908,325 million, representing a COP$2,656,902 million or 7.8% increase as compared to 2016, primarily as a result of the following factors:

The factors mentioned above were partially offset by a a) COP$784,266 million increase in the amortization, depletion and depreciation of property, plant and equipment in connection with the start-up of the Reficar units and capitalization of major maintenance costs at the Barrancabermeja refinery and b) a COP$70,515 million decrease in other minor items.

~~Cost of sales in 2015 was COP$36,994,516 million, representing a COP$5,980,612 million (13.9%) decrease as compared to 2014, primarily as a result of the following factors:~~

The factors mentioned above were partially offset by a COP$~~341,228~~231,222 million increase in inventories and an increase in unit costs associated with the ~~amortization, depletion~~increase of the Brent price of crude oils and ~~depreciation~~products.

4.5.1.3Operating Expenses before impairment of ~~property, plant~~non-current assets effects

Operating expenses and ~~equipment, primarily~~selling, general and administrative expenses before taking into account the impairment of non-current assets amounted to COP$4,592,445 million in 2018, a COP$407,259 million or 9.7% increase as compared to 2017, mainly as a result of ~~higher investments in~~ the ~~Castilla, Chichimene,~~following factors (see Notes 25 and ~~Rubiales fields.~~26 to our consolidated financial statements for more detail).

Operating expenses and selling, general and administrative expenses before taking into account the impairment of non-current assets, amounted to COP$~~4,400,843~~4,185,186 million in ~~2016,~~2017, a COP$ ~~955,872~~215,657 million ~~(17.8%)~~or 4.9% decrease as compared to ~~2015,~~2016, mainly as a result of the following factors (see Notes 2725 and 2926 to our consolidated financial statements for more detail).

Operating expenses and selling, general and administrative expenses before taking into account the impairment of our non-current assets amounted to COP$5,356,715 million in 2015, a COP$886,451 million (14.2%) decrease as compared to 2014, mainly as a result of the following factors:

~~This decrease was partially offset by a COP$628,813 million increase in taxes mainly due to the wealth tax applicable for year 2015, as no accrual was made for wealth tax expenses in 2014.~~

Each of our operating segments bears the costs and expenses incurred for product use and marketing and each segment assumes administrative expenses and all non-operational transactions related to its activity. Discussion of operating expenses by business segment is included in the sectionFinancial Review—Operating Results—Consolidated Results of Operations—Segment Performance and Analysis.

The impairment of our non-current assets includes expenses ~~(recovery)~~(or recovery) of impairment of property, plant and equipment and natural resources, investments in companies, goodwill and ~~goodwill.~~other non-current assets. The Company is exposed to ~~certain~~ future risks derived mainly from variations in: a)(i) oil prices b)outlook, (ii) refining margins and profitability, c)(iii) cost profile, d)(iv) investment and maintenance e)expenses, (v) amount of recoverable reserves, f)(vi) market and country risk assessments reflected onin the discount rate, g)and (vii) changes in domestic and international regulations, among others.

Any change in the foregoing variables used to calculate the recoverable amount of a non-current asset can have a material effect on the recognition of either losses or recovery of impairment ~~charges. For example,~~charges in the profit or loss statement. In our business segments highly sensitive variables can include among others: (i) in the exploration and production segment, ~~is highly sensitive to variation~~variations of the hydrocarbon prices ~~while~~outlook; (ii) in the refining segment, ~~is highly sensitive to~~ changes in product ~~prices~~ and ~~raw materials in the international market, the~~crude oil prices, discount rate, ~~given the leveraging, the~~ refining margins, changes in environmental regulations, ~~and the~~ cost structure and the level of capital ~~expenditures.~~expenditures; (iii) in the transportation and logistics segment, changes in tariffs regulation and volumes transported. (See Notes 3.2, 4.12 17 and 2816 to our consolidated financial statements for more detail). ~~Impairment~~

In 2018, we recognized impairment losses of non-current assets ~~amounted~~of COP$368,634 million as compared to a COP$1,311,138 million net reversal of impairment of non-current assets in 2017 and impairment losses of COP$928,747 million in ~~2016, COP$7,864,875 in 2015 and COP$2,304,567 in 2014.~~2016. These impairments are ana non-cash accounting effect ~~that does~~and consequently do not involve any disbursement or cash inflow. Further, any cumulative impairment amount of ~~resources and they are~~non-current assets is susceptible to reversion when the fair value of the asset exceeds its book value. On the contrary, in the event that the book value exceeds the fair value of the asset, an additional impairment expense could be recognized.

WeAs mentioned above, in 2018, Ecopetrol recognized ~~a smaller~~ impairment losses, net of non-current assets of COP$368,634 million, which corresponds to the net result of:

The partial reversal of the impairment recorded in ~~2016~~2017 is primarily the result of an improved hydrocarbon prices outlook, incorporation of new reserves, Ecopetrol’s crude oil basket price discounts as compared to ~~2015 mainly by~~ the ~~variation in estimations of future prices which include~~ICE Brent crude price, favorable refining margins outlook, market conditions affecting the ~~current scenarios of oil quota agreements of OPEC~~discount rate and the impact of changes in specifications issued by the Marpol (abbreviation of marine pollution) agreement on crude and fuels with high sulfur content. Additionally, the impairment recognized in 2016 included the effect oftechnical operational ~~adjustments to the variables observed during Reficar’s stabilization period and new ethanol prices affecting Bioenergy.~~capacity, among other factors.

The ~~impairments~~impairment losses recognized in ~~2015 and 2014~~2016 were mainly due to lower estimates of the ~~existing low~~outlook for oil prices given the oil price environment ~~which resulted~~during those years, operational variables in ~~a reduction in forecasted crude oil prices~~the exploration and ~~an increase in~~production and refining segments, market and country risk ~~which had been~~assessments reflected in the discount rate, ~~as well as~~and a reduction in the amount of recoverable ~~reserves.~~ reserves, among others.

For more information regarding impairment by segment, see the sectionFinancial Review—Operating Results—Consolidated Results of Operations—Segment Performance and Analysis.

Finance results, net, mainly includes ~~the~~ exchange rate gains or losses, ~~and~~ interest expense, yields and interest from our investments and non-current liabilities financial costs (asset retirement obligation and post-benefits plan) ~~and results from our hedging operations.~~.

Finance results, net, amounted to a loss of COP$~~1,175,367~~2,010,375 million in ~~2016~~2018 as compared to a loss of COP$~~7,663,104~~2,495,731 million in ~~2015.~~2017. This decrease in loss was mainly due to:

~~The adoption~~Finance results, net, amounted to a loss of COP$2,495,731 million in 2017 as compared to a loss of COP$1,175,367 million in 2016. This increase in loss was mainly due to:

This increase in our financial loss was partially offset by: (i) the use of cash flow and net investment hedge accounting, ~~in October 2015 and the hedging of our net investment in June 2016~~which has allowed us to neutralize, overall, the effect of the exchange rate fluctuation ~~over 88%~~on 71.2% of the U.S. dollar debt of Ecopetrol S.A., since exchange rate changes are recognized under other comprehensive income within ~~equity.~~

~~This decrease~~equity, (ii) the efficient allocation of debt within the companies that make up the Ecopetrol Group, thereby achieving an approximately zero net position in ~~our financial loss was partially offset by~~U.S. dollars as of December 31, 2017, and (iii) a COP$~~996,406~~379,030 million ~~increase~~decrease in interest expenses as a result ofof: (i) the ~~recognition~~use of ~~Reficar’s interest expenses which, up~~cash surpluses to ~~2015, had been capitalized (ii) the aggregate~~pre-pay foreign currency-denominated loans totaling US$1,925 million in June 2017 and US$475 million ~~international loans we entered into~~ in ~~February and May 2016 and the US$500 million international bond we issued in June 2016, and (iii) the negative effect the Colombian Peso had on our exchange rate on interest due on our foreign debt.~~

~~Finance results, net, amounted to a loss of COP$7,663,104 million in 2015 as compared to a loss of COP$3,510,669 million in 2014. This increase in loss was mainly due to:~~

This increase in our financial loss was partially offset by (i) a COP$110,600 million gain resulting from the sale of shares in Empresa de Energía de Bogotá and dividends received from equity instrumentsDecember 2017 and (ii) a ~~COP$40,748 million~~ decrease in ~~other minor financial expenditures.~~interest on local currency-denominated loans with a lower interest rate indexed to the Consumer Price Index (CPI) and a decrease in interest on capital payments.

For more details on our financial income and expenses see Note ~~30 – Finance results, net~~27 to our consolidated financial ~~statements.~~statements for more details.

Income taxes amounted to COP$8,258,485 million in 2018, COP$5,800,268 million in 2017 and COP$4,543,046 million in ~~2016, COP$710,353 million in 2015 and COP$5,434,855 in 2014.~~2016. The above is equivalent to an effective tax rate of ~~58.3%~~40.1%, ~~12.7%~~42.1% and ~~48.9%~~58.3% in 2018, 2017 and 2016, ~~2015 and 2014,~~ respectively.

The increase in the effective tax rate from 2015 to 2016 was mainly due to: i) lower recovery of deferred tax asset, ii) the effect of the adjustment in deferred tax resulting from the application of the Colombian tax reform described above, and iii) the recognition of the presumptive tax on subsidiaries reporting tax losses.

The decrease in the effective tax rate from ~~2014~~2017 to ~~2015~~2018 was mainly due to: (i) ~~foreign~~the positive impact of Law 1943, 2018 that led to higher deferred asset taxes, primarily at Reficar and Bioenergy, given the lower presumptive income rate of 0% starting in 2021, which will allow them to offset higher tax losses from previous years; (ii) the 300 basis points nominal tax decrease as a consequence of the 2016 tax reform; and (iii) an increase in the contribution of our income from Reficar, which is taxed at a lower nominal rate of 15%. This decrease was partially offset by (i) a non-deductible expense effect, primarily due to exploratory activity at Ecopetrol América Inc.’s León 1 and 2 wells and (ii) exchange rate effects on tax bases for companies with the U.S. dollar as their functional currency but with profit or tax losses in Colombian pesos, which required them to recognize a deferred taxes according to IAS 12.41 between the carrying amount of non-monetary assets in their financial statements and ~~a related adjustment for foreign currency translation, (ii) an adjustment~~their respective tax bases converted from Colombian pesos to U.S dollars using the exchange rate on December 31, 2018.

The decrease in the effective tax rate from 2016 to 2017 was mainly due to: (i) the better financial performance of ~~entities whose~~the exploration and production segment, (ii) the reduction of losses at Reficar and Ecopetrol America Inc, which also resulted in lower tax ~~rate differed from that of Ecopetrol S.A.~~rates and (iii) the ~~implementation~~reduction of ~~a nondeductible~~the wealth tax rate from 1% in ~~2015.~~2016 to 0.4% in 2017.

See Note 10 ~~–Taxes~~ to our consolidated financial ~~statements.~~statements for more details.

As a result of the foregoing, in 2018, net income attributable to owners of Ecopetrol was COP$11,381,386, in 2017, net income attributable to owners of Ecopetrol was COP$7,178,539 million whereas and, in 2016, net income attributable to owners of Ecopetrol was COP$2,447,881 ~~million whereas, in 2015, net loss attributable to owners of Ecopetrol was COP$7,193,859 million and, in 2014, net income attributable to owners of Ecopetrol was COP$5,046,517~~ million.

In this section, including the tables below, we present our financial information by segment: Exploration and Production, Refining and Petrochemicals and Transportation and Logistics. See the sectionBusiness Overview for a description of each segment.

The following tables present our revenues and net income by business segment for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

Total revenues by segment include exports and local sales to third-parties and inter-segment sales. See the sectionFinancial Review—Operating Results—Consolidated Results of Operations—Total Revenues for prices and volumes to third parties.

In ~~2016,~~2018, exploration and production segment sales were COP$~~28,221,210~~50,372,764 million, compared to COP$~~31,732,611~~36,494,934 million in ~~2015.~~2017. In ~~2016,~~2018, our segment sales ~~decreased~~increased by ~~11.1%~~38.0% as compared with ~~2015~~2017 mainly as a result of:

In ~~2015,~~2017, exploration and production segment sales were COP$~~31,732,611~~36,494,934 million, compared to COP$~~45,155,191~~28,221,210 million in ~~2014.~~2016. In ~~2015,~~2017, our segment sales ~~decreased~~increased by ~~29.7 %~~29.3% as compared with ~~2014~~2016 mainly as a result of:

Cost of sales affecting our exploration and production segment isare mainly related to: (i) the amortization and depletion of our production assets, (ii) contracted services ~~in partnership contracts~~ and (iii) ~~the~~ costs related to maintenance, operational services, electric power, projects and labor in the exploration and production segment. In addition, this segment’s costs are impacted by the purchases of crude oil from ANH and third parties, naphtha for dilution and by transportation services.

In ~~2016,~~2018, the cost of sales for this segment ~~decreased~~increased by ~~10.6%~~22.5% as compared with ~~2015, due to the net effect of:~~

~~In 2015, the cost of sales for this segment decreased by 8% as compared with 2014,~~2017, due to the net effect of:

In 2017, the cost of sales for this segment increased by 14.5% as compared with 2016, due to the net effect of:

In ~~2016,~~2018, operating expenses before impairment of non-current assets ~~decreased~~ increased by ~~70.1% in 2016~~30.9% as compared to ~~2015,~~2017, primarily as a result of (i) ~~lower~~the bargain purchase in our acquisition of an additional stake in the K2 field in 2017, (ii) the sale of the following fields in 2017: Sogamoso, Río Zulia, Río de Oro and Puerto Barco, Santana, Nancy Maxine Burdine and Valdivia Almagro, (iii) the recognition of exploratory activity at Ecopetrol America Inc.’s León 1 and 2 wells and Hocol’s Bonifacio, Hurón and Payero wells in 2018, (iv) an increase in operation expenses related to the Lizama’s well environmental incident that occurred in the first half of 2018. This increase was partially offset by (i) the elimination of the wealth tax since 2018 and (ii) a decrease in exploratory activity at the Kronos-1, Parmer-1, Warrior 2, Lunera-1, Brama-1, Molusco-1, Godric, Dumbo and Pollera wells recognized in 2017.

In 2017, operating expenses before impairment of non-current assets increased by 7.8% in 2017 as compared to 2016, primarily as a result of (i) higher expenses related to our exploratory activity as we engaged in ~~less~~more seismic activity and exploratory drilling, (ii) minor commissions, fees, freight and services as a result of the savings obtained in the implementation of our transformation plan, and (iii) a lower wealth tax. This decrease was partially offset by an increase in labor expenses due to the implementation of the voluntary retirement plan.

~~In 2015, operating expenses before impairment of non-current assets decreased by 23.9% in 2015 as compared to 2014, primarily as a result of (i) lower~~recorded expenses related to ~~our~~ exploratory activity asat the Kronos-1, Parmer-1, Warrior 2, Lunera-1, Brama-1, Molusco-1, Godric, Dumbo and Pollera wells, (ii) the termination in 2016 of the deferred income amortization we ~~engaged~~had been recognizing since 2007 for the advance payment by the Ministry of Finance and Public Credit of the obligations under Ecogas, in less seismic activity and exploratory drilling, (ii) a decrease in commissions, fees, freight and services as a result of cost savings related to our transformation program, and (iii) the recovery of provisions for litigation relatedrelation to the ~~payment~~Built, Operate and Transfer contracts (BOMT’s) for the construction, operation, maintenance and transfer of ~~an electric-power-generation contribution by Ecopetrol S.A. and compensation to third parties for infringement of the free competition clause in the Garcero association contract.~~gas pipelines. This increase was partially offset by (i) increased income due to the acquisition of an additional 11.6% interest at the K2 field in the Gulf of Mexico which generated a gain due to the increase in the ~~Colombian~~book value of the asset above the value paid for the additional interest and (ii) the reduction of the wealth ~~tax.~~tax rate from 1% in 2016 to 0.4% in 2017.

The net reversal of impairment of non-current assetsrecognized in the exploration and production segment in ~~2016,~~2018, which totaled COP$785,940 million in 2018 as compared to COP$183,718 million in 2017, increased by 327.8 % as compared to 2017 mainly due to due to the incorporation of new reserves, improved short-term hydrocarbon price outlook and improvements in technical operational capacity.

The net reversal of impairment of non-current assets recognized in the exploration and production segment in 2017 totaled COP$183,718 million as compared to an impairment loss of COP$196,448 million in ~~2016 as compared to COP$4,504,497 million in 2015, decreased by 95.6% as compared to 2015 mainly due to variation in estimations~~2016. The net reversal of ~~future prices which include~~ the current scenarios of oil quota agreements of OPEC and the impact of changes on specifications issued by the Marpol (abbreviation of marine pollution) agreement on crude and fuels with high sulfur content (See Note 17.1 to our consolidated financial statements for more detail).

~~The increased~~ impairment ~~charges for non-current assets in 2015, which totaled COP$4,504,496 million as compared to COP$965,607 million in 2014,~~ was primarily due to the ~~existing low~~increased value of offshore oil ~~price environment, which resulted in a reduction in forecasted crude oil prices and~~fields, partially offset by an ~~increase in market and country risk, which was reflected in the discount rate, as well~~impairment of onshore fields, both as a ~~reduction in~~result of calculating their valuation taking into account market variables, reserves, price spreads as compared to the ~~amount of recoverable reserves. The most significant cash generation units impacted by the impairments were the following fields: in Colombia, Chichimene, Tibú, CP09, Apiay, Llanito~~ICE Brent price, and ~~La Hocha~~available technical and ~~in the Gulf of Mexico, K2 and Dalmatian (see Note 17.1 to our consolidated financial statements for more details).~~operational information.

The segment recorded net income attributable to owners of Ecopetrol of COP$~~1,322,370~~9,930,519 million in ~~2016~~2018 as compared to net ~~loss~~income attributable to owners of Ecopetrol of COP$~~5,851,619~~3,820,501 million in ~~2015~~2017 and net income attributable to owners of Ecopetrol of COP$~~5,089,841~~1,322,370 million in ~~2014.~~2016.

The aggregate average production cost, on a Colombian Peso basis, has ~~decreased~~increased to COP$~~20,993~~27,782 per boe during ~~2016~~2018 from COP$~~21,732~~23,684 per boe during ~~2015, primarily due to:~~

As2017. On a ~~result of the above-mentioned factors,~~dollar basis, our aggregate average production cost ~~on a Colombian Peso basis, decreased in 2016 as compared~~increased to ~~2015. On a dollar basis, it decreased to~~ US$~~6.88~~9.40 per boe in ~~2016~~2018 from US$~~7.92~~8.02 per boe in ~~2015 also~~2017, due to ~~an 11.21%~~a 0.18% depreciation of the average exchange rate of the Colombian Peso against the U.S. dollar in ~~2016.~~2018.

The aggregate average lifting cost, on a Colombian Peso basis, ~~has decreased~~increased to COP$~~19,799~~25,614 per boe during ~~2016~~2018 from COP$~~20,308 per boe~~22,585 during ~~2015, primarily due to:~~

~~As a result of the above-mentioned factors, our aggregate average lifting cost, on a Colombian Peso basis, decreased in 2016 as compared to 2015.~~2017. On a dollar basis, it ~~decreased~~increased to US$~~6.49~~8.66 per boe in ~~2016~~2018 from US$~~7.40~~7.65 per boe in ~~2015~~2017 also due partially to ~~an 11.21%~~the 0.18% depreciation of the average exchange rate of the Colombian Peso against the U.S. dollar in ~~2016.~~2018.

The difference between the aggregate average lifting cost and aggregate average production cost is that lifting ~~costs do~~cost does not include the costs related to ~~consumption of hydrocarbons by us~~hydrocarbon self-consumption required in ~~our~~the production process or ~~that Ecopetrol sold~~the deliveries we make to our refineries and natural gas liquid plants.

The following table sets forth crude oil and natural gas average sales prices, the aggregate average lifting costs and aggregate average unit production cost for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014.~~2016.

In ~~2016,~~2018, ourtransportation and logistics segment sales were COP$~~10,648,776~~11,354,167 million compared to COP$~~10,844,550~~10,598,064 million in ~~2015.~~2017. The ~~1.8% decrease~~7.1% increase in ~~2016~~2018 as compared with ~~2015~~2017 was mainly due to (i) higher volumes of crude oil transported by our pipelines which was primarily due to reversal cycles through the Bicentenario pipeline, the startup of the San Fernando-Apiay System and the expansion of the P135 Project, (ii) an ~~11.3%~~increase in the volume of refined products transported mainly due to the increase in production at Barrancabermeja and Reficar, (iii) the positive effect on our U.S. dollar-indexed transportation fees resulting from the depreciation of the Colombian peso against the U.S. dollar. This increase was partially offset by a decrease in revenue due to the resolution of the disagreement regarding the P135 Project tariffs, leading to lower tariffs.

In 2017, our transportation and logistics segment sales were COP$10,598,064 million compared to COP$10,648,776 million in 2016. The 0.5% decrease in 2017 as compared with 2016 was mainly due to (i) a 5% decrease in the volume of crude oil transported by our pipelines, which was primarily due to the production decrease at the national level ~~in spite of (i)~~and (ii) the ~~positive~~negative effect on our U.S. dollar-indexed transportation fees resulting from the ~~devaluation~~appreciation of the Colombian Peso against the U.S. ~~dollar and (ii)~~dollar. This decrease was almost offset by a ~~3.7%~~1.9% increase in the volume of refined products transported primarily due to the increase in demand for refined products in Colombia and the elimination of restrictions in the Pozos Colorados - Galá~~n-Sebastopol system to meet the demand for fuel in the country’s interior and the start-up of Reficar.~~n system. Sales to third parties decreased in ~~2016~~2017 as compared to ~~2015~~2016 primarily due to the fact that the segment received income from the transportation services to ~~Pacific Rubiales~~Frontera Energy for its participation in the Rubiales field, and once the field returned to us in July 2016, these services were recognized as inter-segment sales.

Thecost of sales for our transportation and logistics segment is mainly related to: (i) project costs associated with the maintenance of transportation networks and (ii) operating costs related to these systems, including the costs of labor, energy, fuels and lubricants and others.

The cost of sales amounted to COP$~~3,349,791~~3,402,087 million in ~~2016~~2018 as compared to COP$~~3,744,422~~3,271,835 million in ~~2015.~~2017. The cost of sales for this segment increased by 4.0% in 2018 as compared with 2017 mainly due to (i) an increase in costs associated with higher volumes transported, primarily due to the reasons described above and (ii) increased consumption of materials, supplies and depreciation resulting from to the start of the San Fernando – Apiay system at Cenit since January 2018 and the expansion of the P135 Project since July 2017.

The cost of sales amounted to COP$3,271,835 million in 2017 as compared to COP$3,349,791 million in 2016. The cost of sales for this segment decreased by ~~10.5%~~2.3% in ~~2016~~2017 as compared with ~~2015~~2016 mainly due to a decrease in costs associated with maintenance, operating supplies and materials due to the continuity of our efficiency program to optimize our operating costs. This decrease was partially offset by (i) an increase in material processing costs needed for power generation in three new pumping stations to operate Ocensa’s P135 project and (ii) an increase in depreciation ~~due to a higher level~~resulting from the start of ~~investments in the segment.~~

The cost of sales amounted to COP$3,744,422 million in 2015 and COP$3,941,052 million in 2014. The cost of sales for this segment decreased by 5% in 2015 as compared with 2014 mainly due to a decrease in costs associated with maintenance and operating supplies and materials. This decrease was partially offset by an increase in depreciation and amortization due to our increased investments in this segment.

~~In 2016,~~~~operating expenses before the impairment of non-current assets~~ increased by 30.7% as compared to 2015 due to a recovery of environmental provisions in 2015, no similar recoveries in 2016 and an increase in labor costs as a result of the implementation of the voluntary retirement plan. This increase was partially offset by lower wealth and industry taxes.P135.

In ~~2015,~~2018, operating expenses before the impairment of non-current assets decreased by ~~16.2%~~27.1% as compared to ~~2014~~2017 due ~~to decreased expenses related to social investment~~to: (i) a reversal of a provision we had set aside in respect of tariff dispute we were having in connection with the P135 Project and ~~security agreements, and more stable operations due to a decrease in repairs~~(ii) the elimination of ~~our transportation systems.~~wealth tax since 2018. This decrease was partially offset by ~~(i) the Colombian wealth tax implemented in 2015 and, (ii) increased depreciation and amortization.~~higher expenses associated with attacks on our infrastructure by third parties.

~~The~~In 2017, operating expenses before the impairment of non-current assets decreased by 15.1% as compared to 2016 due to lower administrative expenses mainly as a result of the consolidation of administration areas within the segment and a decrease in taxes because of the reduction of the wealth tax rate discussed previously.

The impairment losses of non-current assets recognized in the segment in ~~2016 which~~2018, totaled COP$169,870 million in 2018 as compared to an impairment recovery of COP$59,455 million in 2017. The difference in impairment from a reversal in 2017 to a loss in 2018 was primarily the result of a decrease in the forecast of the volume to be transported by the southern cash generating unit and an increase in investment needs to mitigate the operative risk of our transportation systems.

The impairment recovery of non-current assets recognized in the segment in 2017, totaled COP$59,455 million in 2017 as compared to an impairment recovery of COP$41,062 million in 2016. The increase in the impairment recovery ~~in 2016 as compared~~was due to ~~COP$81,388 million expense in 2015, decreased by 150.5% as compared to 2015 mainly by~~ the ~~incorporation,~~inclusion, in the assessment of the recovery amount of this segment’s assets, of flows associated towith the ~~San Fernando - Apiay system project~~Port of Tumaco that positively affects the recoverable amount of the ~~Llanos transportation line, partially offset by an increase in impairment of assets related to the~~ southern ~~transportation line.~~cash generating unit (See Note ~~17.3~~16.3 to our consolidated financial statements for more detail).

The increased impairment charges for non-current assets in 2015, which totaled COP$81,388 million as compared to a COP$1,121 million recovery of impairment in 2014 was primarily due to Colombia’s hydrocarbon production curves, based on the crude oil price environment and pipeline transportation rates (see Note 17.3 to our consolidated financial statements).

The segment recorded net income attributable to owners of Ecopetrol of COP$~~2,960,449~~3,424,234 million in ~~2016~~2018 as compared to net income of COP$~~2,819,759~~2,999,978 million in ~~2015~~2017 and COP$~~1,758,777~~2,960,449 million in ~~2014.~~2016.

In ~~2016,~~2018, therefining and petrochemical segment sales were COP$~~24,823,714~~37,011,373 million compared to COP$~~23,245,676~~28,644,016 million in ~~2015.~~2017. In ~~2016,~~2018, sales of refined products and petrochemicals increased by ~~6.8%~~29.2% as compared with ~~2015,~~2017, mainly due toto: (i) an increase ~~in the volume~~ of ~~domestic and export sales mainly in mid-distillates due to the startup of operations at Reficar. This increase was partially offset by a decrease or~~ our average products basket price due to the ~~decrease~~increase in ~~the~~ international ~~price~~prices and (ii) increased sales volumes, primarily of ~~crude oil.~~medium distillates, and gasoline in Colombia and international markets, due to higher refining throughput and positive operating performance at our refineries.

In ~~2015,~~2017, the refining and petrochemical segment sales were COP$~~23,245,676~~28,644,016 million compared to COP$~~27,172,300~~24,823,714 million in ~~2014.~~2016. In ~~2015,~~2017, sales of refined products and petrochemicals ~~decreased~~increased by ~~14.5%~~15.4% as compared with ~~2014,~~2016, mainly due ~~to:~~to an increase of our average products basket price due to the increase in the international prices. This increase was partially offset by (i) a decrease in exports of fuel oil primarily due to reduced production at the ~~international price~~Barrancabermeja refinery as a result of ~~fuels~~reliance on more efficient alternative sources and stabilization of the coker unit at the Cartagena Refinery and (ii) a decrease in ~~foreign sales volumes~~exports of ~~fuel oil~~diesel due to our commercial strategy of focusing on selling to the ~~low water level in the Rio Magdalena. This decrease was partially offset by (i) an increase in the volume of~~ domestic ~~sales~~market due to ~~increased local demand for fuel resulting from an increased number~~better commercial conditions, replacing lace imports of vehicles and the closure of Colombia’s border with Venezuela that led to higher diesel demand and (ii) an increase in intercompany sales due to higher volumes of diluent sold to our exploration and production segment.such products.

Thecost of sales for our refined products and petrochemicals segment is mainly related to the purchase of crude oil and natural gas for our refineries, imported crude oil and products to ~~substitute for the loss of production due to the closure of Reficar as the new refinery was being built for most of 2014 and 2015,~~supply local demand, feedstock transportation services, services contracted for maintenance of the ~~refinery~~refineries and the amortization and depreciation of refining assets. Cost of sales amounted COP$35,658,753 million in 2018, compared to COP$26,855,395 million in 2017 and COP$22,843,987 million in ~~2016, compared to COP$20,758,808 million in 2015 and COP$25,537,228 million in 2014.~~2016.

In ~~2016,~~2018, the cost of sales for this segment increased ~~10%~~32.8% as compared with ~~2015,~~2017, principally due ~~to the operation of Reficar’s units in 2016 which led~~ to (i) an increase in purchases of crude oil purchases through import and inter-segment transactions as Reficar required a special raw material or ‘diet’ during the stabilization and performance testing period which increased production cost,at higher international benchmark prices, (ii) higher volumes purchase of crude oil for use by our refineries due to higher throughput, (iii) an increase in cost of transportation associated with higher production in our refineries. This increase was partially offset by: (i) lower imports of products primarily medium distillates and gasolines as a result of higher production at Barrancabermeja Reficar and (ii) lower imports of light crude used at the ~~depreciation~~Cartagena Refinery as a result of ~~Reficar’s units (iii) inventory consumption that had been~~the substitution of such crude, which resulted in ~~stock~~a more cost-effective crude slate for the Cartagena Refinery.

In 2017, the cost of sales for this segment increased 18% as compared with 2016, principally due to (i) an increase in ~~December 2015,~~purchases of crude oil at increased international benchmark prices and ~~(iv)~~(ii) higher ~~costs~~volumes of imports of crude oil and inter-segment purchases of crude oil for ~~services contracted, materials of process, maintenance and electrical power.~~the Cartagena Refinery. This increase was partially offset by lower imports of ~~products~~other fuels, especially diesel and ~~the excellent operational performance of the Barrancabermeja Refinery.~~

In 2015, the cost of sales for this segment decreased 18.7% as compared with 2014, principally due to lower raw material costs, which corresponded to the decrease in international oil prices and lower operating costs as a result of cost optimization at the Barrancabermeja Refinery. This decrease was partially offset by higher imports of gasoline, due to ~~increased local demand for fuel resulting from an increased number~~the use of ~~vehicles and~~products produced by the ~~closure of Colombia’s border with Venezuela.~~Cartagena Refinery rather than imported products.

In ~~2016,~~~~operating expenses before the impairment of non-current assets~~ ~~increased by 27.3% as compared to 2015, due to an increase in labor expenses related to our voluntary retirement plan in 2016 and other expenses related to the start-up of operations at Reficar.~~

~~In 2015,~~2018, operating expenses before the impairment of non-current assets ~~increased~~decreased by ~~23%~~24.6% as compared to ~~2014,~~2017, due to ~~higher levels~~stabilization expenses of ~~investment for~~ the ~~Reficar modernization project, the Colombian wealth tax implemented~~Cartagena Refinery which was reflected in ~~2015~~lower maintenance expenses, contracted services and ~~the increase in other expenses related to the start-up of operations at Reficar.~~general expenses.

~~The~~In 2017, operating expenses before the impairment of non-current assets decreased by 17.2% as compared to 2016, due to a decrease of stabilization expenses of the Cartagena Refinery and a decrease in taxes because of the reduction of the wealth tax rate.

The impairment losses of non-current assets recognized in the segment in ~~2016,~~2018, which totaled COP$984,704 million in 2018, as compared to a net reversal of impairment of COP$1,067,965 million in 2017, is primarily the result of: (i) adjustments in market expectations with respect to the impact of implementation of IMO regulation on projected margins for the Cartagena Refinery’s refined products, (ii) a decrease in the short-term outlook for the ethanol prices given a global over-supply of ethanol, (iii) downward updates to Bioenergy’s near-term agricultural outputs and (iv) an increase in the discount rate used for Reficar and Bioenergy, reflecting updated macroeconomic conditions. These negative impacts were partially offset by the commencement of the stabilization period at both Reficar and Bioenergy as well as tax benefits associated with Law 1942, 2018.

The net reversal of impairment of non-current assets recognized in the segment in 2017, which totaled COP$1,067,965 million in 2017 as compared to an impairment loss of COP$773,361 million in 2016, decreased as compared to ~~COP$3,278,993 million~~2016 as a result of (i) a net reversal of the impairment of Reficar as a result of an improved outlook in ~~2015, decreased by 76.4% as compared to 2015. The 2016 scenario incorporated the~~ refining margins ~~that include~~due to the ~~effect~~anticipated effects of the ratification of Marpol which goes into effect in ~~2016 compared~~2020, (ii) a lower discount rate resulting from the application of WACC methodology and (iii) operational and financial optimization due to ~~2015,~~the stabilization of the refinery. This reversal was partially offset by Bioenergy’s impairment related to the ~~effect~~change of ~~adjustment~~the project start date, the process of stabilization of the industrial plant, the updating of operational variables ~~based on that observed during Reficar’s stabilization period~~ and ~~new ethanol prices on Bioenergy’s impairment (see Note 17.2 to our consolidated~~the financial ~~statements).~~ expenses of the Barrancabermeja refinery’s modernization project, which is currently postponed.

As mentioned earlier, the refining segment is highly sensitive to changes in product prices and ~~raw materials~~feedstock in the international market, ~~the~~ discount rate, ~~given the leveraging, the~~ refining margins, changes in environmental regulations and cost structure and the level of capital expenditures.

The increased impairment charges for non-current assets in 2015, which totaled COP$3,278,993 million in 2015 as compared to COP$1,340,086 million in 2014 was recorded by the Cartagena Refinery due to the current low oil price environment, which resulted in a reduction in expected refining margins in the coming years, and an increase in market and country risk, which has been reflected in the discount rate (see Note 17.2 to our consolidated financial statements).

The gross margin in 2016 was 8%, compared to 10.7% in 2015. The decrease in the gross margin was explained principally by decreased operational activity during the period of stabilization and testing of Reficar.

The gross margin in 2015 was 10.7%, compared to 6% in 2014. The increase in the gross margin was explained principally by decrease in the oil price (feedstock) compared to the decrease in fuel prices (output).

~~The~~ refining and petrochemicals segment recorded net loss attributable to owners of Ecopetrol of COP$~~1,823,020~~1,973,075 million in ~~2016~~2018, as compared to a net income to owners of Ecopetrol of COP$358,859 million in 2017, and a net loss attributable to owners of Ecopetrol of COP$~~4,016,050~~1,823,020 million in ~~2015 and COP$1,627,705 million in 2014.~~2016.

Our principal ~~sources~~source of liquidity in ~~2016 were~~2018 was cash flows from our operations amounting to COP$~~14,232,940 million, and cash flows from financing activities, mainly from the proceeds of our net movement of indebtedness, which totaled COP$ 1,444,723~~22,469,194 million.

Our ~~principal~~main uses of cash in ~~2016~~2018 were (i) COP$~~5,837,477~~11,363,077 in debt payments through the pre-payment of local and foreign currency-denominated loans totaling the equivalent of US$2,446 million in 2018 and amortizations to capital and interest payments, (ii) COP$8,460,426 million in capital expenditures, which included investments in property, plant and equipment, ~~and~~ natural and environmental resources and ~~(ii) COP$5,446,507 in investment of liquidity surpluses in portfolios,~~intangibles, (iii) dividend payments ~~for the fiscal year 2015~~ amounting to COP$~~1,712,298~~4,427,701 million, which ~~included the last installment of~~includes dividends ~~to the majority shareholder~~ relating to fiscal year ~~2014~~2017 for COP$~~690,177~~3,659,373 million and the payment of dividends to non-controlling interest ~~in 2016~~ for COP$~~1,022,121~~768,328 million.

On January 29, 2016, we entered into an international credit agreement for an aggregate amount of US$175 million with The Bank of Tokyo-Mitsubishi UFJ, Ltd. The credit agreement has a term of five years, repayable with a 2.5 year grace period on principalFor more information regarding our debt, see the sectionFinancial Review—Financial Indebtedness and ~~interest, payable semi-annually at a rate of Libor plus 145 basis points.~~Other Contractual Obligations.

~~On February 23, 2016, we entered into a bilateral commercial loan agreement with Bancolombia S.A. for COP$990 billion (approximately US$330 million at the representative exchange rate~~4.6.1Review of as of December 31, 2016). This loan agreement had a term of 8 years and a 2-year grace period on principal, with interest payable semiannually at a rate of DTF TA plus 560 basis points. Ecopetrol prepaid this loan in full with excess liquidity in October 2016.Cash Flows

On May 16, 2016, we entered into a bilateral commercial loan agreement with Export Development Canada, an export promotion agency of the Canadian Government for US$ 300 million. This loan agreement has a term of five years, with interest payable semi-annually at rate of six-month Libor + 140 basis points.

On June, 2016, we issued US$500 million (COP$1,500 billion according to the COP$/US$ exchange rate as of December 31, 2016) aggregate principal amount of our SEC-registered 5.875% notes due 2023. The notes were listed on the NYSE.

Net cash provided by operating activities increased by ~~21.9%~~32.4% in ~~2016~~2018 as compared to ~~2015,~~2017, mainly as a result of ~~(i) lower working capital needs mainly due to the higher oil prices observed at the end of 2016 versus the end of 2015, (ii)~~ a 4%31.9% increase in our operational income before depreciation, depletion and amortization (DD&A) and impairment of non-current assets ~~resulting from a decrease~~primarily due to (i) higher hydrocarbon production levels, (ii) an increase in our ~~costs~~refining throughput, (iii) our continued strategy of replacing imports of crude oil and ~~operational expenses (before DD&A~~refined products with domestic production, (iv) the commencement of operations of the San Fernando – Apiay project and ~~impairment) due to~~expansion of the P135 Project in our ~~savings generated by~~ the midstream segment, (v) cost efficiencies from our transformation ~~plan.~~plan and (vi) a favorable price environment. This increase was partially offset by ~~(i) the decrease in international prices of crude oil during 2016, and (ii)~~higher working capital needs mainly due to an increase in ~~income~~accounts receivable from the FEPC and the payment in advance of the capital gains tax ~~paid by the transportation and logistics segment~~ due in 2019 pursuant to ~~the better results in 2015.~~Decree 2146, 2018.

Net cash provided by operating activities ~~decreased~~increased by ~~35.6%~~19.3% in ~~2015~~2017 as compared to ~~2014,~~2016, mainly as a result ~~of:~~of (i) a ~~33.2% decrease~~32.7% increase in our ~~gross~~operational income ~~resulting from the decrease in international prices~~before depreciation, depletion and amortization (DD&A) and impairment of ~~crude oil during 2015~~non-current assets and ~~(ii) higher operating expenses due to the Colombian wealth tax implemented~~efficiency gains and ~~paid in 2015.~~cost-savings generated by our corporate strategy. This ~~decrease~~increase was partially offset by ~~a decrease~~(i) higher working capital needs mainly due to increase in ~~income tax paid~~accounts receivable from the FEPC and commercial receivable accounts and (ii) an increase in our costs due to the ~~decrease~~effect of recovery in international crude oil prices on our purchases and an increase in maintenance activities, contracted services and operating supply needs associated with an increase in our ~~income before tax for the year and lower working capital needs due to a decrease in inventories, trade receivables and accounts payable.~~operational activities.

In ~~2016,~~2018, net cash used in investing activities increased by 98.9% as compared to 2017, mainly as a result of: (i) a 38.5% increase in investments in capital expenditures, which was driven mainly by drilling in the Castilla and La Cira Infantas fields and the B3 module of the Rubiales field and (ii) a 249.4% increase in our investment portfolio as a result of excess liquidity.

In 2017, net cash used in investing activities decreased by ~~26.8%~~53.3% as compared to ~~2015,~~2016, mainly as a result ~~of:~~of a 110.4% decrease in our investment portfolios as a result of pre-payments of foreign currency-denominated loans totaling US$2,400 million in 2017. This decrease was partially offset by (i) ~~a 62.4% decreased investments in capital expenditures due to the effect of decreasing oil prices and the end of the Reficar modernization project, and (ii) additional~~ cash proceeds from the sale of our ~~investments~~shares in Empresa de Energía de Bogotá ~~and Interconexion Electrica S.A,~~, which totaled COP$~~966,715~~56,930 million in the ~~aggregate. This decrease was partially offset by increased investments of our excess liquidity~~aggregate and (ii) a 4.6% increase in ~~our investment portfolios, which in turn resulted from the savings we achieved and the recovery of the price of oil during the second half of 2016.~~

In 2015, net cash used in investing activities decreased by 2.4% as compared to 2014, mainly as a result of: (i) a decrease in the amount of dividends we received from associates and joint ventures companies (ii) slightly larger investments in capital expenditures, which was driven mainly ~~relating to~~by the ~~Reficar modernization project and~~reactivation of activity in our ~~drilling campaigns, primarily in the~~ Castilla ~~Chichimene~~ and Rubiales fields, the development of improved recovery projects in fields such as La Cira and ~~(iii) a lower net cash contribution from purchase~~Chichimene, and ~~sale of fixed income investments. This decrease was partially offset by cash proceeds from the sale of our investment~~an increase in ~~Empresa de Energia de Bogotá, which totaled COP$613,998 million.~~exploration activities.

Net cash used in financing activities increased by ~~98.5%~~23.7% in ~~2016,~~2018, as compared to ~~2015,~~2017, due to ~~a decrease in cash from borrowings~~(i) prepayments of ~~COP$5,151,937~~local and foreign currency-denominated loans totaling the equivalent of US$2,446 million ~~which was partially offset by a decrease in dividends payments of COP$3,781,099 million in 2016~~ as compared to ~~2015.~~US$2,400 million in prepayments of foreign currency-denominated loans made in 2017 and (ii) an increase in dividend payments to the shareholders of Ecopetrol of COP$2,713,712 million and in dividend payments made by certain of our subsidiaries to their non-controlling shareholders of COP$209,342 million.

Net cash used in financing activities ~~decreased~~increased by ~~81%~~362% in ~~2015,~~2017, as compared to ~~2014,~~2016, due to (i) prepayments of foreign currency-denominated loans totaling US$2,400 million and (ii) an increase in dividend payments to the shareholders of Ecopetrol of COP$255,484 million in 2017 as compared to 2016, which was partially offset by a COP$~~7,023,166~~463,135 million decrease in dividend payments ~~which was partially offset~~made by ~~an increase in borrowing and interest payments~~certain of ~~COP$1,069,146 million in 2015 as compared~~our subsidiaries to ~~2014, which in turn was due to the US$1,925 million international loan we entered into in February 2015 and the US$1,500 million international bond we issued in June 2015.~~their non-controlling shareholders.

Our consolidated capital expenditures in ~~2016, 2015~~2018, 2017 and ~~2014~~2016 were COP$~~5.8 trillion,~~8,460,426 million, COP$~~15.5 trillion~~6,107,506 million and COP$~~15.6 trillion,~~5,837,477 million, respectively. These investments were distributed by business segment on average, for the past three years as follows: ~~61.2%~~73.0% for the exploration and production segment, ~~22.1%~~12.5% for refining and petrochemicals and ~~16.7%~~14.5% for the transportation and logistics segment. See Note ~~34.1.2~~31.3 to our consolidated financial statements for more detail about capital expenditures by segment.

Our investment plan approved for ~~2017 totals~~2019 is a range of between US$3,500 million and US$4,000 million. The investments will be distributed approximately as follows: ~~81%~~81.0% for exploration and production, ~~10%~~11.0% for refining, ~~and~~ petrochemicals, ~~8% for~~and transportation and logistics, and 1%8.0% for other investments.

The resources required for the investment plan ~~will~~can be funded through internal cash generation with no need to raise additional net financing.

In 2018, we paid dividends for the fiscal year ended December 31, 2017 amounting to COP$3,659,373 million to Ecopetrol’s shareholders, including the Nation, and dividends paid to non-controlling shareholders of our subsidiaries totaling COP$768,328 million.

In 2017, we paid dividends for the fiscal year ended December 31, 2016 amounting to COP$945,661 million to Ecopetrol’s shareholders, including the Nation, and dividends paid to non-controlling shareholders of our subsidiaries totaling COP$558,986 million.

In 2016, we paid the last installment of dividends relating to ~~our~~2014 net income to the Nation offor COP$690,177 million and our transportation and ~~logistics’~~logistics subsidiaries paid dividends to their non-controlling ~~shareholder~~shareholders for COP$1,022,121 million. ~~Given the net loss we reported in 2015,~~

On March 29, 2019, our shareholders at the ordinary ~~general shareholder’s meeting did not approve~~General Shareholders Assembly approved a distribution of ~~dividends for 2015.~~

~~On March 31, 2017, our shareholders at the ordinary general shareholders’ meeting approved~~ dividends for the fiscal year ended December 31, ~~2016~~2018 amounting to COP$~~945,684~~9,251,256 million, or COP$23225 per share, based on the number of outstanding shares as of December 31, ~~2016.~~2018. Of the total dividends that will be paid, COP$169 per share corresponds to an ordinary dividend pursuant to our current dividend policy and COP$56 per share corresponds to an extraordinary dividend given the strong operational results and robust cash position of the Company in 2018. The dividend payment was ~~paid~~approved to be made in one installment for the minority shareholders of Ecopetrol on April ~~28, 2017.~~25, 2019 and three installments for the Nation, the first to be paid on April 25, 2019, the second to be paid on June 25, 2019 and the final installment to be paid on September 25, 2019.

We prepare our interim and annual statutory financial information in accordance with our internal reporting policies, which follow Colombian IFRS and differ in certain significant aspects from IFRS. The following table sets forth our consolidated net income and equity for years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014,~~2016, in accordance with Colombian IFRS and IFRS:

As noted above, certain differences exist between our net income and equity as determined in accordance with our internal reporting policies, which follow Colombian IFRS, which are used for management reporting purposes, as presented in the business segment information, and our net income and equity as determined under IFRS, as presented in our consolidated financial statements.

The primary differences between Colombian IFRS and IFRS as they apply to our results of operations are summarized below:

Cash flow hedge for future company exports. In September 2015, in order to hedge the effect of exchange rate volatility on Ecopetrol’s foreign currency debt, Ecopetrol’s Board of Directors approved a cash flow hedge for future crude oil exports. According to IAS 39 – Financial Instruments, Ecopetrol implemented this hedge beginning on October 1, 2015, the date on which it formally completed the related hedging documentation.

Under Colombian IFRS, the~~Contaduria~~ General ~~de la Nación~~Accounting Office of the Nation (CGN for its acronym in Spanish) issued Resolution 509, which allows companies to apply hedge accounting for non-derivative financial instruments from any date within the transition period or the first period of application of International Accounting Standards in Colombia, even if such company has not yet formally documented the hedging relationship, the objective or the risk management strategy. Under these rules, Ecopetrol applied cash flow hedge accounting from January 1, 2015 in its financial statements under Colombian IFRS.

As a result of this accounting policy ~~differences,~~difference, for the year ended December 31, ~~2016,~~2018, our net income as reported under IFRS was COP$~~494,604~~471,314 million higher than our net income as reported under Colombian IFRS.

Exchange rate effects on tax bases – Deferred tax. According to IAS 12.41, companies with a U.S. dollar functional currency and profit or tax loss in Colombian Pesos are required to recognize deferred taxes attributable to the difference between the carrying amounts of non-monetary assets in their financial statements and their respective tax bases converted from Colombian Pesos to U.S. dollars using the exchange rate on the closing date. The effect of the temporary difference is charged to profit and losses without a cash outflow expected in the future. Under local accounting principles (The General Accounting Office opinion No. 20162000000781 dated January 18, 2016), the result attributable to the aforementioned difference in accounting policies does not generate any deferred taxes.

Ecopetrol’s functional currency is the Colombian Peso and it consolidates some subsidiaries whose functional currency is the U.S. dollar but who settled their taxes in Colombian Pesos. As a result of the application of paragraph 41 – IAS 12, such subsidiaries are required to calculate deferred taxes under IFRS.

As a result of this accounting policy difference, for the year ended December 31, ~~2016,~~2018, our net income attributable to owners of Ecopetrol as reported under IFRS was COP$~~388,568~~ 646,333million ~~higher~~lower than our net income attributable to owners of Ecopetrol as reported under Colombian IFRS.

The application of IAS12.41 also generated adjustments to our goodwill and investments in companies impairments of COP$22,030 million in 2018, COP$61,893 million in 2017 and COP$86,781 million in 2016 ~~and COP$418,872 million in 2015~~ in connection with our purchase of subsidiaries whose functional currency is the U.S. dollar as well as adjustments to our revenue from the equity method of COP$11,316 million in 2018, COP$60,748 million in 2017 and COP$71,056 million in 2016 ~~and COP$81,808 million in 2015~~ in connection with our associates and joint ventures whose functional currency is the U.S. dollar.

As a result of these accounting policy differences described above, for the year ended December 31, ~~2016,~~2018, we reported net income attributable to the owners of Ecopetrol under IFRS of COP$11,381,386 million as opposed to a net income attributable to the owners of Ecopetrol of COP$11,556,405 million reported under Colombian IFRS for the same period. For the year ended December 31, 2017, these same accounting differences led us to report net income attributable to the owners of Ecopetrol under IFRS of COP$7,148,539 million as opposed to a net income attributable to the owners of Ecopetrol of COP$6,620,412 million reported under Colombian IFRS for the same period. For the year ended December 31, 2016, these same accounting differences led us to report net income attributable to the owners of Ecopetrol under IFRS of COP$2,447,881 million as opposed to a net income attributable to the owners of Ecopetrol of COP$1,564,709 million reported under Colombian IFRS for the same period. For the year ended December 31, 2015, these same accounting differences led us to report a net loss under IFRS of COP$7,193,859 million as opposed to a net loss of a COP$3,987,726 million reported under Colombian IFRS for the same period.

As of December 31, ~~2016,~~2018, we had outstanding consolidated indebtedness of COP$~~52.2~~33.2 trillion, which corresponded primarily to the following long-term transactions:

** ~~Bank loans refinanced from their original conditions.~~Debt originally obtained by Reficar for the Refinery modernization and voluntarily assumed by Ecopetrol.

The long term debt ~~transactions executed in 2016 were~~balance for the end of 2018 is explained as follows:

Ecopetrol did not incur any short-term or long-term bank loans or bonds in 2018.

We enter into various commitments and contractual obligations that may require future cash payments. The following table summarizes our contractual obligations as of December 31, ~~2016.~~2018.

The table does not include the contractual obligations of Equion, Savia and Ecodiesel, which do not consolidate within the Ecopetrol’s Group.

As of December 31, ~~2016,~~2018, we did not have off-balance sheet arrangements of the type that is required to be disclosed under Item 5.E of Form 20-F.

Ecopetrol updated its ~~2020~~ Business Plan on ~~September 29, 2016. This~~February 26, 2019. See sectionOur Corporate Strategy—Business Plan is based on three fundamental pillars: i) protection of cash and cost efficiency; ii) strict capital discipline; and iii) growth in reserves and production; these pillars will strengthen the Company’s financial sustainability and afford it opportunities for ~~both organic and inorganic growth, generating value and profitability for its shareholders.~~

~~According to this business plan, during 2017 the Company will continue to pursue its transformation to ensure operational and financial sustainability. Ecopetrol has named Phase 3.0~~a discussion of the business Transformation plan “Ecopetrol’s New Frontier”. It will focus on opening up new markets; multi-year fields development plans; improved return on assets; attracting and retaining the best human talent; committing ourselves to integrity, safe operations, environment consciousness and joint prosperity with communities in which we operate and execute projects.

We believe that our strategy of diversifying our export destinations and sales under term contracts with fixed discounts to reference prices will help to mitigate the impact of the current crude oversupply over the spread of our export basket. We forecast a discount between US$9 and US$10 per barrel compared to ICE Brent crude in 2017.

Furthermore, with the full operation of all units of Reficar since 2016 and shifting from stabilization to optimization, Ecopetrol’s trade balance is expected to continue improving due to the reduction of gasoline imports and incremental exports of fuels. Reficar’s fuels production is expected to continue being allocated primarilytrends recognized in the ~~domestic market, with a surplus to be exported.~~development of that plan.

Adding reserves and maintaining the pace of production are the Company’s focus. The exploration campaign will be focused in regions of high prospectivity. Investment in exploration will rise from US$ 282 million to US$ 650 million, thus increasing offshore wells from one to six and onshore wells from five to 11 from 2016 to 2017. Enhanced recovery will continue to leverage additional reserves in mature fields.

~~We stress that a strong cash position allows us to assess opportunities for inorganic growth of Ecopetrol ‘s reserves.~~

The Company expects to continue the divestment program and expects to receive during 2017 between US$500 and US$1,000 million. The Company is in the process of carrying out the sale of non-strategic assets and shareholdings, such as Propilco, its remaining shares in Empresa de Energía de Bogota and minor production fields.

In order to preserve its investment grade ratings, the Company seeks to maintain financial sustainability and adequate levels of indebtedness. In 2016 international bonds were issued totaling US$ 500 million and commercial loans were entered into totaling US$ 475 million. Going forward, and according with the assumptions of the business plan, the Company does not foresee the issuance of new debt or short-term financing.

The Company will continue monitoring oil price scenarios to make the proper decisions and take preventive actions to ensure financial sustainability in 2017 such as: prioritization of investments associated with regulatory commitments and project completion, temporary closing of producing assets with negative margins, redefining and prioritizing maintenance activities and additional austerity measures related to administrative expenses, sponsorships and labor recruitment.

The following table provides information about the sensitivity analysis conducted on our oil and gas reserves as of December 31, ~~2016,~~2018, taking into account ICE Brent crude oil prices that reasonably reflect management’s view of crude oil prices given prevailing market conditions.

The following table provides information about the sensitivity of our results as of December 31, ~~2016,~~2018, due to variations of US$1 in the price of ICE Brent crude and of 1% in the COP$/US$ exchange rate.

The table below sets forth the line items that are being affected by the variation on the reference prices or the average exchange rate.

The risks discussed below could have a material adverse effect, separately or in combination, on our business’s operating results, cash flows, liquidity and financial condition. Investors should carefully consider these risks.

Our crude oil and natural gas reserve estimates involve some degree of uncertainty and may prove to be incorrect over time, which could adversely affect our ability to generate revenue.

Reserves estimates are prepared using generally accepted geological and engineering evaluation methods and procedures. Estimates are based on geological, topographical and engineering facts. Actual reserves and production may vary materially from estimates shown in this annual report, and downward revisions in our reserve estimates could lead to lower future production which could affect our results of operations and financial condition.

Hydrocarbon reserves presented in this annual report were calculated in accordance with SEC regulations. As required by those regulations, reserves were valued based on the unweighted average of closing prices for the first day of each month in the 12-month periods ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014,~~2016, as well as other conditions in existence at those dates. The average of closing prices of ICE Brent crude oil for the first day of each month in the 12-month period was US$~~101.80 per barrel in 2014, US$55.57 per barrel in 2015 and US$~~44.49 per barrel in ~~2016. Mainly as a result of the pronounced fall~~2016, US$54.93 per barrel in ~~hydrocarbon prices between 2014~~2017 and ~~2015,~~US$72.20 per barrel in 2018. In 2017, the Company recognized ~~a reduction~~an increase in oil and gas proven reserves of ~~11% in 2015~~4% as compared to ~~2014,~~2016, to ~~1,849~~1,659 mmboe in ~~2015~~2017 from ~~2,084~~1,598 mmboe in ~~2014.~~2016. In ~~2016,~~2018, the Company recognized ~~a reduction~~an increase in oil and gas proven reserves of ~~14% in 2016~~4% as compared to ~~2015,~~2017, to ~~1,598~~1,727 mmboe in ~~2016~~2018 from ~~1,849~~1,659 mmboe in ~~2015~~2017. For more information, see the sectionBusiness Overview—Exploration and Production—~~Reserves.~~Reserves.

Furthermore, at least once a year, or more frequently if the circumstances require, the Company ascertains whether there are ~~signs~~indicators of impairment to its assets or cash-generating units (CGUs) due to the difference between the carrying amount of such assets or CGUs ~~as opposed~~against to their recoverable amounts, using reasonable assumptions, based on internal and external factors, which reflect market conditions. The recoverable amount is ~~calculated~~considered to be the higher of the fair value less costs of disposal and value in use, based on the free cash flow method, discounted at the weighted average capital cost (WACC). Whenever the recoverable amount of an asset or CGU is lower than its net carrying amount, such amount is reduced to its recovery amount, recognizing a loss for impairment as an expense in the consolidated statement of profit or loss. External and internal sources of information may indicate that an impairment loss recognized for an asset, other than goodwill, may no longer exist or may have decreased, in this case, the reversal is recognized as an impairment recovery in the consolidated statement of profit or loss.

~~Impairment charges for~~In 2018, Ecopetrol recognized an impairment loss, net of non-current assets ~~in 2016 amounted~~of COP$368,634 million, which corresponds to ~~COP$928,747 million before taxes as a~~the net result of the evaluation of the recoverable amount of the assets value which includes the variation in estimations of future prices under the current scenarios of OPEC’s oil quota agreements and the impact resulting from changes on specifications issued by the International Marine Organization agreement regarding marine pollution, Marpol, on crude and fuels with high sulfur content. For additional information about this impairment charges,~~see Notes 14, 17 and 28 to our consolidated financial statements.~~of:

Any significant change in estimates and judgments could have a material effect on the quantity and present value of our proved reserves and subsequently on the recognition or recovery of impairment charges. Changes to estimations of reserves are applied prospectively to the amounts of depreciation, depletion and amortization charged and, consequently, the carrying amounts of exploration and production assets.

In order to assess the possible impact of current expected oil price scenarios and market conditions, as well as of further developments driven by the economic environment for the oil and gas industry, the Company has performed a sensitivity analysis over its proved reserve balance as of December 31, ~~2016.~~2018. Based on these calculations, assuming an average price per barrel of ICE Brent ~~crude oil~~price of US$~~55 per barrel in 2017, US$60 per barrel in 2018, US$65~~67 per barrel in 2019, US$7071 per barrel in 2020, ~~and~~ US$7569 per barrel ~~for later years,~~in 2021, and between US$66 and US$71 onwards, Ecopetrol could recognize ~~an increase~~a decrease in oil and gas proved reserves of approximately ~~9.6%~~3%. This analysis takes into account Ecopetrol’s estimates and expectations regarding the main assumptions used in its proven reserve calculation, which final actual result may fluctuate and differ substantially from those provided herein due to several factors outside of the control of the Company. For additional information see the sectionFinancial Review—Trend Analysis and Sensitivity Analysis.

~~Moreover,~~On the contrary, any ~~downward~~upward revision in our estimated quantities of proved reserves would indicate ~~lower~~higher future production volumes, which could result in ~~higher~~lower expenses for depreciation, depletion and amortization for properties to which we apply the units of production method for calculating these expenses. These ~~higher~~lower expenses, and any ~~lower~~higher revenues as a result of actual production volumes and realized prices, could ~~adversely impact~~benefit our results of operations and financial condition.

Achieving our long-term growth depends on our ability to execute our strategic plan — specifically, the discovery ~~and~~and/or successful development of additional reserves.

Our long-term growth objectives depend largely on our ability to develop the reserves recovery potential associated with existing fields and to discover and/or acquire new reserves, and in turn ~~developing~~develop them ~~successfully and improving the recovery factor in our mature oil fields.~~successfully. Our exploration activities expose us to the inherent geological and drilling risks including the risk of not discovering commercially viable crude oil or natural gas ~~reserves;~~reserves, and the risk that some exploratory wells initially budgeted for may be drilled at a later stage or not be drilled at all. Despite the effort we make to control costs associated with drilling, these are often uncertain, and numerous factors beyond our control may cause drilling operations to be curtailed, delayed or cancelled.

Our ability to add and develop reserves also depends on our capacity to structurally reduce costs to maintain the profitability of oil fields already being exploited without compromising infrastructure integrity and HSE performance.

Additionally, our strategy includes the exploration and development of unconventional reservoirs in Colombia, by using fracking technology. However, the implementation of this strategy depends, among others, on the final outcome of the regulatory framework affecting this technology currently being discussed in Colombia, obtaining the requisite environmental license required for the exploratory phase (including pilot wells) to begin and the results of these pilot projects. In February 2019, a commission of experts appointed by the Colombian government submitted its non-binding recommendation to advance in the pilot testing phase with the previous necessary steps to assure effective monitoring, control and communication of the pilot program development to stakeholders. See the sectionBusiness Plan. However, we cannot assure you that unconventional reservoirs in Colombia will be able to be exploited.

If we are unable to achieve expected recovery factors in our existing fields, or successfully discover and develop additional reserves, or if we do not acquire properties having proved reserves, our reserves portfolio will decline. Failure to secure additional reserves may impede us from achieving or maintaining production targets, and may have a negative impact on our results of operations and financial condition.

See the sectionStrategy and Market Overview—Our Corporate Strategy for a discussion of our strategic plan.

Our business depends substantially on international prices for crude oil and refined products. The prices for these products are volatile; a sharp decrease could adversely affect our business prospects and results of operations.

In ~~2016,~~2018, in Ecopetrol, approximately ~~91.7%~~95% of the revenues came from sales of crude oil, natural gas and refined products and 91% of the total volume sold of these products iswas indexed to international reference prices or benchmarks such as ICE Brent. Consequently, fluctuations in those international indexes have a direct effect on our financial condition and results of operations.

Prices of crude oil, natural gas and refined products have traditionally fluctuated as a result of a variety of factors including, among others, competition within the international oil and natural gas ~~industry;~~industry, long-term changes in the demand for crude oil (as further explained below), natural gas and refined ~~products;~~products, the economic policies in the United States, China and the European ~~Union;~~Union, regulatory ~~changes;~~changes, changes in global supply, ~~such as the current oversupply of crude oil;~~ inventory ~~levels;~~levels, changes in the cost of ~~capital;~~capital, adverse or favorable economic ~~conditions;~~conditions, global financial ~~crises; development of~~crises, substitute sources of energy, development of new ~~technologies;~~technologies, global and regional economic and political developments in the Organization of the Petroleum Exporting Countries, (OPEC);, the willingness and ability of the OPEC and its members to set production ~~levels;~~levels, local and global demand and supply for crude oil, refined products and natural ~~gas;~~gas, trading activity in oil and natural gas, which thereby affects their respective ~~margins;~~margins, derivative financial instruments related to oil and gas; ~~development or availability of alternative fuels;~~ weather ~~conditions;~~conditions, natural events or ~~disasters;~~disasters, and terrorism and global conflict. ~~In 2016~~After experiencing gradual recovery during the ~~impact~~first half of ~~an oversupplied market was put to test, as OPEC changed its traditional controlling~~2018 and reaching a peak in October, Brent suffered a downward rally in the latter part of 2018. The outlook of weaker economic growth for 2019 and a mismatch of supply and demand of crude played a fundamental role for this trend. See the sectionStrategy and ~~let~~Market Overview for a discussion of the market find its own balance. The price of crude oil may also fluctuate due to changes in demand. For example, Brexit’s impact on crude oil demand for 2017 is expected to be moderate, the Petroleum Industry Research (PIRA Energy Group) estimates a short-term impact of US$2 per barrel on crude oil due to a reduction between 100-200 KBD in demand for gasoline, middle distillates and other products.overview.

When crude oil, refined products and natural gas prices are low, we earn less revenue and we generate lower cash flow and less income. Conversely, when crude oil, refined product and natural gas prices are high, we earn more and generate a larger amount of cash and net income. During ~~2016,~~2018, our crude oil basket price was US$~~35.7~~63.2 per barrel versus US$~~43.9 per barrel~~47.8 in ~~2015;~~2017, the refined product basket price was US$~~50.1~~77.3 per barrel versus US$~~63.4~~62.7 per barrel in ~~2015;~~2017; and the natural gas price was US$~~23.5~~22.4 per barrel equivalent in ~~2016~~2018 versus US$~~22.0~~22.7 per barrel equivalent in ~~2015.~~2017. However, it is important to consider that the margin on refined products can result either in higher or lower margins due to a change in price of crude the same way gas prices can be impacted by local conditions, such as local demand and weather conditions.

~~Impairment charges for~~In 2018, we had an impairment of non-current assets of COP$368,634 million compared to the COP$1,311,138 million net reversal of the impairment of non-current assets in ~~2016 amounted to~~2017 and the impairment of non-current assets of COP$928,747 million ~~before taxes as a result~~in 2016. These impairments are an accounting effect that does not involve any inflow of resources and they are susceptible to reversion when the fair value of the evaluation of the recoverable amount of the assets’ value which includes the variation in estimations of future prices under the current scenarios of OPEC’s oil quota agreements and the impact resulting from changes on specifications issued by the International Marine Organization agreement regarding marine pollution, Marpol, on crude and fuels with high sulfur content.asset is below its book value. For additional information about this impairment charges,,see ~~Notes 14, 17~~the sectionFinancial Review—Operating Results—Consolidated Results of Operations—Impairment of non-current assets and 28Note 16 to our consolidated financial statements.

A reduction of international crude oil prices could also result in a delay or a change in our capital expenditure plan, in particular delaying exploration and development activities, thereby delaying the development of reserves and affecting future cash flows. In order to maintain a profitable operation and preserve the cash flow of the Company at certain oil price levels, some of our producing fields may have to be closed or their operations temporarily suspended which would affect our production levels and expected revenues.

Changes in the Colombian Peso/U.S. dollar exchange rate could have an adverse effect on our financial condition and results of operations given the amount of U.S. dollar denominated debt held by the company and the fact that most of our revenues isare derived from sales of products quoted in or with reference to U.S. dollars.

Most of our revenues are derived from sales of products quoted in or with reference to U.S. dollars. Therefore when the Colombian Peso depreciates against the U.S. dollar, our revenues converted into Colombian Pesos, increase. Conversely, when the Colombian Peso appreciates against the U.S. dollar, our revenues decrease.

On the other hand, imported goods, oil services and the debt, which is mainly denominated in U.S. dollars, become less expensive when the Colombian Peso appreciates against the U.S. dollar and more expensive when the Colombian Peso depreciates against the U.S. dollar.

As of December 31, ~~2016~~2018 our U.S. dollar-denominated total debt was US$~~15.2~~10.5 billion, which we recognize in our consolidated financial statements at its amortized cost, which corresponds to the present value of cash flows, discounted at the effective interest rate. Out of this total, US$129.7 billion relate to Ecopetrol S.A., whose functional currency is the Colombian Peso. Therefore, when the Colombian Peso depreciates against the U.S. dollar, Ecopetrol S.A. is exposed to an exchange rate loss. In contrast, when the Colombian Peso appreciates against the U.S. dollar, Ecopetrol ~~S.A.is~~S.A. is exposed to an exchange rate gain. Some of the Group’s affiliates have the U.S. dollar as functional currency and are not exposed to a material exchange rate risk resulting from fluctuations in the Colombian Peso against the U.S. dollar. On the asset side, when the financial statements of the Group are consolidated, the exchange rate differential of the affiliates’ assets and liabilities whose functional currency is the U.S. dollar is recognized directly in the equity, as part of ~~the~~ other comprehensive income.

The Company adopted hedge accounting as part of its risk management strategy, using two types of natural hedges with its U.S. dollar debt as a financial instrument: i) cash flow hedge for exports of crude oil and ii) hedge of a net investment in a foreign operation. As a result of the implementation of both hedges, ~~88%, or $10.5 billion,~~US$6,500 million of Ecopetrol S.A.’s debt in U.S. dollars as of December 31, 2018, was designated as a hedge. With the adoption of hedge accounting, the effect of the volatility of the foreign exchange rate on the hedged portion of the debt is recognized directly in equity, as part of other comprehensive income. The remaining portion of Ecopetrol S.A.’s U.S. dollar-denominated debt as well as the financial assets and liabilities denominated in foreign currency continues to be exposed to the fluctuation in the exchange rate.

The U.S. dollar/Colombian Peso exchange rate has fluctuated during the last several years. On average, the Colombian Peso depreciated ~~7.05% against the U.S. dollar in 2014, 37.28% in 2015 and~~ 11.18% in ~~2016.~~2016, appreciated 3.35% in 2017 and depreciated 0.18% in 2018. Additionally, as of December 31, 2018, the Colombian Peso depreciated 8.91%, as of December 31, 2017, the Colombian Peso appreciated 0.56% and as of December 31, 2016, the Colombian Peso appreciated 4.72%, ~~but depreciated as of December 31, 2015 and 2014, 31.64% and 24.17%, respectively,~~in each case from year-end exchange in the previous year. In addition, given the performance of interest rates in the U.S., crude oil prices in the next few years and political uncertainty ~~surrounding the United States of America following the recent presidential election and the unpredictability~~ in ~~the economic performance of some developed countries,~~Colombia, there is no clear view of how the U.S. dollar and the Colombian peso will behave in the medium to long-term. Given that markets are dealing with a great deal of uncertainty, it is expected that U.S. dollar movements will remain difficult to ~~forecast, as the U.S. currency will respond immediately to any new opportunities for or challenges to the U.S. economy.~~forecast.

A future depreciation in the exchange rate of the Colombian Peso against the U.S. dollar may affect our financial results when converted into Colombian Pesos, given our current net position in U.S. dollars, the fact that most of our revenues are collected in U.S. dollars and the portion of our U.S. dollar debt that is not designated as hedge instrument and the future debt we may acquire. Please see our sensitivity analysis on our results of operation to exchange rate fluctuations in the sectionFinancial Review—Effect of Taxes, Exchange Rate Variation, Inflation and the Price of Oil on our Results—Exchange Rate Variationand in Note ~~31.2~~28.1 to our consolidated financial statements.

Increased competition from local and foreign oil companies may have a negative impact on our ability to gain access to additional crude oil and natural gas reserves in Colombia and abroad.

We must bid for exploration blocks offered by the ANH in Colombia and similar authorities in other countries, which means we compete under the same conditions as other domestic and foreign oil and gas companies, and receive no special treatment. Our ability to obtain access to potential fields also depends on our ability for evaluating and selecting potential opportunities and to adequately bid for such opportunities.

We are also exposed to international competition as a result of our international exploratory activities. Currently, we are exploring in Brazil, Mexico and the US Gulf of Mexico, where we ~~both~~ partner and compete with other oil and gas companies operating in those locations.

If we are unable to adequately compete with local and foreign oil companies, or if we cannot enter into joint ventures with market players having high potential exploration projects, our exploration activities may be limited. This could reduce our market share and, in turn, adversely affect our financial condition.

If operational risks to which we are exposed in Colombia or overseas materialize, the health and safety of our workforce, the local community and the environment may be affected. In addition, we may suffer a disruption or shutdown of our operational activities.

Our exploration, production, refining and transportation activities in Colombia and in the foreign countries in which we operate are subject to industry-specific operating risks, some of which, despite our internal procedures and adherence to industry best practices, are beyond our control. Our operations may be curtailed, delayed or cancelled due to adverse or abnormal weather conditions, natural disasters, blockages in the communities in which we operate, equipment failures or accidents, oil or natural gas spills or leaks, shortages or delays in the availability or in the delivery of equipment, delays or cancellation of environmental licenses or other government authorizations or judicial decisions, fires, explosions, blow-outs, surface cratering, pipeline failures, theft and damage to our transportation infrastructure, sabotage, terrorist attacks and criminal activities.

Some of our operations in Colombia and abroad could be conducted in remote and uninhabited locations ~~which~~that involve health and safety risks that could affect our workforce. By our own Company policy and practices, as well as under Colombian law and international industrial safety regulations, we are required to have health and safety practices that minimize risks and health issues faced by our workforce. Failure to comply with health and safety regulations in the jurisdictions where we operate may lead to investigations by health officials that could result in lawsuits or fines.

We may be required to incur in additional costs and expenses to allocate funds to industrial safety and health compliance under Colombian law and international industrial safety regulations. Additionally, if any operational incident occurs that affects local communities and ethnic communities in nearby areas, we will need to incur in additional costs and expenses in order to return affected areas to normality and to compensate for any damages we may cause. These additional costs may have a negative impact on the profitability of the projects we may decide to undertake.

The occurrence of any of these operating risks could result in substantial losses or slowdowns to our operations, including injury to our employees, malfunction or destruction of property, equipment and infrastructure, clean-up responsibilities, third-party liability claims, government investigations and imposition of fines, withdrawal of environmental licenses and other government permits, suspension or shutdown of our activities and loss of revenue. The occurrence of any of these events may have a material adverse effect on our financial condition and results of operations.

Our involvement in deep-water drilling either as direct operator or in conjunction with our business partners involves risks and costs, which may be out of our control.

Our deep-water drilling activities present severe risks, such as the risk of spills, explosions on platforms and drilling operations, and natural disasters. The occurrence of any of these events or other incidents could result in personal injuries, loss of life, severe environmental damage with the resulting containment, clean-up and repair expenses, equipment damage and liability in civil and administrative proceedings. Heightened risks and costs associated with deep-water drilling may have a negative effect on our results of operations and financial condition and in our reputation.

See the sectionBusiness Overview—Exploration and ~~Production—Exploration Activities—Exploration Activities Outside of Colombia~~Productionfor a summary of our current deep-water drilling activities.

As a result of the oil spill in the Macondo field operated by ~~British Petroleum~~BP in the U.S. Gulf Coast in April 2010, significant concerns regarding the safety of deep-water drilling have been raised and, as a result, applicable regulations in various countries have changed. More stringent government regulation may result in increased costs and longer exploration and development timeframes for our deep-water drilling operations and consequently could adversely affect our results of operations and financial condition.

We are exposed to the credit, political and regulatory risks of our customers and any material nonpayment or nonperformance by our key customers could adversely affect our cash flow and results of operations.

Some of our customers may experience financial problems that could have a significant negative effect on their creditworthiness. Severe financial problems encountered by our customers could limit our ability to collect amounts owed to us, or to enforce the performance of obligations owed to us under contractual arrangements. In addition, many of our customers finance their activities through their cash flows from operations, short and long term debt or equity.

The combination of decreasing cash flows as a result of declines in commodity prices, a reduction in borrowing bases under reserve-based credit facilities and the lack of availability of debt or equity may result in a significant reduction of our customers’ liquidity and limit their ability to make payments or perform their obligations to ~~us.~~us according to their contractual terms.

Furthermore, some of our customers may be highly leveraged and subject to their own operating expenses. Therefore, the risk we face in doing business with these customers may increase. Other customers may also be subject to regulatory changes, which could increase the risk of defaulting on their obligations to us. ~~Financial~~We also could have disagreements with customers regarding tariffs, excusable events, or other aspects of our commercial relations that could lead to contract breaches by our clients. See Note 28.2 to our consolidated financial statements for more details.

Such financial problems experienced by our customers or deterioration in our relations with our customers could result in the impairment of our assets, a decrease in our operating cash flows and may also reduce or ~~curtail~~restrict our customers’ future use of our products and services, which may have an adverse effect on our revenues and our ability to make payments under our existing debt obligations.

Our ability to access the credit and capital markets on favorable terms to obtain funding to refinance our debt maturities may be limited due to the deterioration of these markets, any change to our credit ratings and the authorizations we need before incurring any financial indebtedness.

In recent years, particularly during the last quarter of 2015 and the first quarter of 2016, due to significant decrease in oil prices, domestic and global financial markets and economic conditions have been weak and volatile and have contributed significantly to a substantial deterioration in the credit markets. A new financial crisis, ~~remaining~~ volatility in prices in the oil and gas sector, the spread in protectionist policies in the United ~~Statess~~States, China and Europe, the lack of consensus among OPEC members, the political uncertainty in the region, the discovery of corruption by governments and private companies in emerging markets and further geopolitical disruptions in the Middle East, which could involve developed countries, which in turn could worsen risk perception with respect to the emerging markets, or the occurrence of any of the risks described in the sectionRisk Review—Risk Factors—Risks Related to Colombia’s Political and Regional Environment could ~~also~~ make it more difficult for us and our subsidiaries to access international and local capital markets and finance our operations and potentially refinance our debt maturities on terms acceptable to us. These conditions, along with significant write-offs in the financial services sector and the re-pricing of credit risk, can make it difficult for us to obtain funding for our capital needs on favorable terms. Access to credit and capital markets is also dependent on our credit ratings, which are mainly determined by our financial and operational strength, oil and gas market conditions and the support that could be provided by the Colombian government. On January 18, 2016, our senior unsecured debt ratings were downgraded to Baa3 from Baa2 by Moody’s Investors Service, and Standard & Poor’s (S&P) and Fitch Ratings revised our outlook from stable to negative on January 29 and July 26, 2016, respectively. We cannot assure that our credit ratings will continue for any given period of time or that the ratings will not be further lowered or withdrawn. An assigned rating may be raised or lowered depending, among other things, on the respective rating agency’s assessment of our financial strength. In addition, a downgrade in the rating of the Republic of Colombia could also trigger a downgrade on our ratings as our rating is capped by the rating of the Republic of Colombia and the implicit support that can potentially be provided to the Company. On February ~~16, 2016, S&P revised~~23, 2018, despite the ~~outlook~~downgrade of the Republic of Colombia, Moody’s maintained our long term international credit rating and outlook. On June 27, 2018, S&P maintained our long-term corporate credit rating at BBB- and our outlook at stable. On July 16, 2018, Moody’s upgraded our BCA (Baseline Credit Assessment) to ~~negative. While on March 14, 2017,~~ba1 from ba3 and maintained our long term international credit rating at Baa3 and outlook at stable. On December 6, 2018, Fitch Ratings ~~upgraded~~maintained our ~~outlook from negative to stable following the upgrade from the Republic of Colombia from negative to stable also in March 2017, we~~long term international credit rating at BBB stable. We cannot offer any assurance that our credit rating will continue.

As a result of these factors, we may be forced to revise the timing and scope of our capital projects as necessary to adapt to existing market and economic conditions, downgrades to our credit ratings or to access the financial markets on terms less favorable, therefore negatively affecting our results of operations and financial condition.

In addition, under applicable regulation, the Government, through the Ministry of Finance and Public Credit and the favorable opinion of the National Planning Department, must authorize all indebtedness of state-owned entities and government-controlled companies through a majority equity stake. Consequently, excluding our foreign subsidiaries or those subsidiaries in which we hold minority interest, most of our indebtedness must be previously authorized by the Colombian Ministry of Finance and Public Credit and the National Planning Department. As such, our indebtedness is subject to the Government’s time frames and policies, and we cannot guarantee that such authorizations would be granted in a timely fashion or granted at all.

We may be exposed to increases in interest rates, thereby increasing our financial costs.

We may incur debt locally and in the international capital markets and, consequently, may be affected by changes in prevailing interest rates. If market interest rates increase, our financing expenses may increase, which could have an adverse effect on our results of operations and financial condition. Interest rates in the United States may continue rising due to Federal Reserve’s monetary policy, which is looking for economic activity expansion at a moderate pace, labor market conditions strengthening and inflation stability to 2% over the medium term.

As of December 31, ~~2016,~~2018, approximately ~~31%~~13.9%, or a principal of US$~~5.4~~1,569 billion (COP$~~16.2~~5.1 trillion), of our total indebtedness consisted of floating rate debt. If market interest rates rise, our financing expenses will increase, which could have an adverse effect on our results of operations and financial condition. In addition, as we refinance our existing debt in the coming years, the mix of our indebtedness may change, specifically as it relates to the ratio of fixed to floating interest rates, the ratio of short-term to long-term debt, and the currencies in which our debt is denominated in or indexed to. We cannot assure ~~you~~ that such changes will not result in increased financing expenses borne by us. Finally, as we incur new debt in the future to fund our capital projects or inorganic acquisitions, the prevailing interest rates and spreads at any specific time could be less favorable in terms of cost when compared to our previous financing transactions, which could adversely affect our financial condition and results of operations.

Our current and planned investments and exploration activities outside Colombia are exposed to political and economic risks.

~~As part of~~We began exploration activities outside Colombia in 2006 through our ~~strategic plan, we~~Brazilian subsidiary, Ecopetrol Óleo e Gás do Brasil Ltda. We operate through business partners, subsidiaries or affiliates outside of Colombia. We currently have investments, joint ventures and subsidiaries incorporated in Peru, Brazil, Mexico, Bermuda, Panama, the Cayman Islands, Switzerland, ~~Germany,~~ Spain, the United Kingdom and the United States, and we are analyzing investments in other countries. In connection with making investments, we are and will be subject to risks related to economic and political conditions and governmental economic actions. We cannot predict the positions of foreign governments relating to the oil and gas industry, land tenure, protection of private property, environmental standards, regulation or taxation; nor can we assure ~~you~~ that future governments will maintain policies favorable to foreign investment or repatriation of capital.

We began exploration activities outside Colombia in 2006 through our Brazilian subsidiary, Ecopetrol Óleo e Gás do Brasil Ltda. Our foreign subsidiaries have subsequently entered into a number of joint venture exploration agreements with regional and international oil companies to explore acreage in Brazil and the U.S. Gulf Coast. We have limited experience exploring outside Colombia. We Additionally, we may face new and unexpected risks involving environmental and other legal requirements beyond those we currently experience.

The results of operations and financial condition of our subsidiaries in these countries also may be adversely affected not only by risks associated with hydrocarbon exploration and production, but also by fluctuations in their local economies, political instability and government actions, including: the imposition of price controls, the imposition of restrictions on hydrocarbon exports, fluctuation of local currencies against the Colombian Peso, the nationalization of oil and gas reserves, increases in export and income tax rates for crude oil and oil products, and unilateral (governmental) institutional and contractual changes, including controls on investments and limitations on new projects.

Any of these conditions occurring could disrupt or terminate our operations, causing our development activities to be curtailed or terminated in these areas, or our production to ~~decline;~~decline, limit our ability to pursue new ~~opportunities;~~opportunities, affect the recoverability of our ~~assets;~~assets, or cause us to incur additional costs or delay the timeline of our projects.

Our future performance depends on the successful development and deployment of new technologies and the knowledge to apply and improve them.

Technology, knowledge and innovation are essential to our business, especially for reductions to our operating costs and improvements in processes related to the production, refining and transportation of heavy crude oil and the exploitation of mature ~~fields, and reductions in our operating cost.~~fields. If we do not develop the right technology, ordo not secure access to required third-party technology, fail to deploy the right technology, do not obtain the expertise to operate ~~new~~our deployed technology or to improve our processes, ~~do not have access to,~~ or do not deploy the knowledge necessary to ~~apply and~~ improve such technology effectively, the ~~execution~~achievement of our corporate goals, our profitability and our earnings may be adversely affected. In the case of our recovery program, we not only depend on the successful ~~development~~selection, adaptation, demonstration and deployment of ~~new~~appropriate technologies but also in the reservoir response ~~of the reservoir~~ to the application of ~~this~~these recovery ~~technology.~~technologies.

Our performance could be negatively affected by a deficiency in leadership capacity and lack of key skilled employees.

As the oil and gas industry faces an increasing number of challenges, the ability to react quickly to these challenges has become a key factor in achieving efficiency, profitability, growth and sustainability. Our ability to achieve these goals can be negatively affected by a deficiency in leadership capacity and a lack of key skilled employees that can execute our business strategy with competency, creativity and determination.

Our operations may not be able to keep pace with the increasing domestic demand for natural gas.

According to ~~the Colombian Energy and Gas Regulatory Commission (CREG)~~CREG Resolution 114 of 2017, former Resolution 089 of 2013, ~~a supplier of~~the natural gas market is a physical market, which means that suppliers must ~~possess sufficient economically viable natural gas reserves before executing a natural gas delivery contract~~comply with ~~a customer. In~~ the ~~long term, we may~~quantities agreed in their contracts. Hence, Ecopetrol will not be able to keep ~~up with increasing~~or increase its market participation unless the Company increases its natural gas reserves as local demand for natural gas if demand outpaces the rate of growth of our natural gas supply, especially because of the decline of our main fields. As a result, we may lose market share, which may negatively impact our financial condition and results of operations.grows.

Additionally, we are currently party to a number of national gas supply contracts that have firm gas commitments. If we are unable to deliver natural gas to these clients as a result of cuts in operations, delays in the completion of projects relating to our production facilities or the acceleration of the decline in our gas production, among other reasons, we may be required to compensate our customers for our failure to supply natural gas. In 2016, we paid a penalty due to a cut in operations that occurred on October 12, 2016. This cut was caused by an operational failure in the ignition system of the Guajira B compression train, which caused an unavailability of gas supply, which in turn affected gas demand in a portion of the industrial and thermal sectors.

Delays in the start of new projects could result in penalties imposed on us by our clients. Although we did not pay penalties due to delays in the start of new projects in ~~2016,~~2018, we cannot assure ~~you~~ that in the future we will not be subject to additional monetary fines which can in turn affect our financial condition and results of operations.

We depend on others for the construction and availability of natural gas transportation infrastructure for the transport of our gas, which may limit our ability to develop new or existing fields or lead to the deterioration of related assets and may not allow us to recover the cost of capital invested in natural gas discoveries.

~~We are prohibited by law from holding more than~~Ecopetrol S.A. can only hold up to 25% of the equity of any natural gas transportation ~~company.~~company according to Article 5 of CREG Resolution 057 of 1996. Therefore, there can be no assurance that the transportation infrastructure necessary to transport natural gas from the fields to distribution points and our customers will be built by third parties or that if built there will be sufficient capacity available to us for the exploitation of new natural gas discoveries or the development of existing fields. The failure to commercially exploit new or existing discoveries may result in impairment of the related assets and our inability to recover the capital expenditures invested to make these natural gas discoveries. As a result, we may be required to enter into agreements with natural gas transportation companies on terms that are not favorable to us.

For example, we have developed natural gas reserves in the Cusiana and Cupiagua fields, but transportation capacity to deliver gas from these fields is currently limited. Although there are projects under development that will eliminate this limitation, ~~in 2018,~~ we can offer no assurance that they will prove successful.

Our operations ~~have and may continue to~~could be affected by reactions of labor unions, social organizations, communities and contractors to Colombia’s political and social environment, environmental and climate change concerns and organizational ~~changes and other management decisions.~~changes.

Due to ~~the volatility of the markets~~Colombia’s political and ~~the existing low oil price~~social environment, ~~we have~~emerging environmental and ~~will continue to undertake measures to enhance operating cost efficiency. Such measures involve~~climate change concerns and organizational changes, ~~in cost structure, downsizing our staff (including direct and indirect employees), and budget cuts, among others. Unions, contractors and~~ social organizations in the communities where we have operations, communities in general, contractors and unions, may have ~~in the past~~reactions and ~~may continue to oppose such measures causing work stoppages or decreasing productivity,~~present their demands through social movements, which could have an adverse effect on our operations and financial condition.

~~In addition, our current~~On July 1, 2018, a new collective bargaining agreement ~~has been in effect since 2014 and has~~became effective for a term of ~~five~~four and half years, expiring ~~June 30, 2018. There will be no changes to these terms until 2018; therefore, we do not expect any adverse reactions from our labor unions relating to this matter. However, we~~on December 31, 2022. We cannot assure you that we will not experience strikes or labor unrest in the future.

Our activities may be interrupted or affected by external factors, such as abnormal weather conditions and natural disasters.

We are exposed to several risks that may partially interrupt our activities. They include fires or explosions, natural disasters, criminal acts and acts of terror, malfunction of pipelines and emission of toxic substances.

Also, the effects of climate change could create impacts and losses in any part of our business operations, for instance, as the result of increase in the intensity of the “La Niña” and “El Niño” climate phenomena, causing floods and drought periods, increased temperature and rising sea levels.

The “El Niño” climate phenomenon is characterized by (i) a lack of rainfall, which limits the amount of water necessary for the development of various activities of the company, ~~and~~ (ii) increased temperatures, which could have a direct impact on our ~~workers’~~worker’s health given an increased occurrence of heat waves and the increased occurrence of epidemics and ~~diseases.~~diseases and (iii) potential negative impact on energy supply. The “La Niña” climate phenomenon is characterized by increased rainfall, which can generate (i) landslides that threaten pipeline infrastructure and limit road transportation and (ii) flooding, which could limit operations in our production fields and facilities.

As a result, our activities could be significantly affected or even paralyzed. These risks could result in property damage, loss of revenue, loss of life, pollution and harm to the environment, among others. If any of these occur, we may be exposed to economic sanctions, damages, fines or penalties in addition to the costs required to repair or remediate the related damage. These costs, fines and penalties may adversely affect our financial condition and results of operations.

Our operations, including our activities in areas classified as indigenous reserves and Afro-Colombian lands, are subject to opposition from members of various communities.

We currently carry out and plan to ~~carry~~continue carrying out activities in areas classified by the Government as indigenous reserves (~~resguardos~~) and Afro-Colombian ~~lands (~~~~territorios colectivos~~).lands. In order to undertake these activities, we must first comply with the previous consultation process, set forth by Colombian law. These consultation processes are part of the administrative procedures for obtaining environmental licenses to start our projects, works or activities in areas belonging to ethnic communities. In addition, consultations can be seen as a potential instrument to involve communities in the decision of developing extracting industry and infrastructure projects in their territories. Generally, these consultation processes last between six months to one year depending on the community expectations, but may be significantly delayed if we cannot reach an agreement with the communities. We strive to be respectful of the Constitution and laws and the autonomy of indigenous and Afro-descendant communities, and we therefore do not enter their territories until we have reached an agreement with them.

Our activities are subject to opposition, including protests by various communities, and even in areas in which the previous consultation process does not apply. Recently, through popular consultation, some communities have voted against the development of extractive industry projects. Any such similar situation may affect our future projects.

In recent years, indigenous communities have been claiming their ancestral territories and requesting recognition on previously closed consultation processes. We may be exposed to operational restrictions as a result of the opposition of these communities.

No certainty can be given that we will be able to reach an agreement with the different communities opposed to our operations or that such communities will participate in consultation processes if available. We may be exposed to similar delays due to opposition from local communities in other countries where we carry out our activities.

We have made significant investments in acquisitions and we may not realize the expected value.

We have acquired interests in several companies in Colombia and abroad. See the sectionBusiness Overview—Our Corporate Structure. Obtaining the expected benefits of the acquisitions will depend, in part, on our ability to (i) obtain the expected results of operations and financial condition from these acquisitions, (ii) manage ~~disparate~~different sets of assets and operations and integrate distinct corporate cultures, (iii) manage our objectives as a corporate group, and (iv) institute our corporate governance rules as well as other factors beyond our control such as ~~(v)~~ the economic and regulatory environment in countries in which we have made acquisitions as well as all other risks affecting the oil and ~~(vi) crude oil prices.~~gas industry. These efforts may not succeed. Our failure to successfully obtain the expected results from our acquisitions could adversely affect our financial condition and results of operations.

We might be required to provide ~~additional~~ financial support to ~~Bioenergy and Reficar~~our subsidiaries in ~~spite of the recent completion of their projects~~Colombia or abroad.

Reficar raised US$3.5 billion through a limited-recourse project financing in which Ecopetrol S.A. provided both construction support and debt service guarantee and was also the sponsor of the financing. If Reficar experiences any situation that might affect the fulfillment of its financial obligations, Ecopetrol S.A. must provide financial support to Reficar, through capitalizations, subordinated loans or even the assumption of the debt. These situations might be related, but are not limited to, labor productivity, failure of the upgraded refinery to reach the expected performance level in terms of the quality of products and/or volumes produced. See the section~~Business Overview—Refining and Petrochemicals—Refining—Reficar.~~

Also, Bioenergy’s ethanol plant, that was financed with COP$123 billion through bilateral loans for its agricultural component and COP$382 billion through an infrastructure leasing for its industrial component, may also meet situations such as social unrest, strikes or other operational difficulties that could negatively impact its operation and financial results. Although currently Ecopetrol is not the sponsor and has not provided financing guarantees to ~~Bioenergy,~~any of its subsidiaries, some ~~additional~~ financial support at any point in time might be needed to assure the ~~stabilization~~long term viability of ~~the project.~~such subsidiaries when exposed to unexpected conditions or results.

Any situation that could affect the operations of ~~these~~our subsidiaries, particularly for those that recently entered into operations, such as Bioenergy, may have a negative impact on their profitability as well as on their ability to pay their ~~debt,~~liabilities, which in turn could adversely affect our financial condition and results of operations.

Ongoing Colombian ~~Statecontrol~~State control entities investigations regarding our subsidiaries Reficar and Bioenergy could adversely affect us.

Ecopetrol is a corporation majority owned by the Colombian Government that administers public resources and Reficar and Bioenergy are subsidiaries of Ecopetrol. Ecopetrol’s employees have a statutory responsibility to ensure the proper use of public resources. Reficar and Bioenergy’s employees also have a duty for proper management of public resources. The conduct of Ecopetrol, Bioenergy and Reficar’s employees are generally subject to the control and supervision of the Colombian State control entities. See ~~the~~ sectionRisk Review—Legal Proceedings and Related Matters for additional information.

The investigations concerning Reficar and Bioenergy that are described in ~~the~~ sectionRisk Review—Legal Proceedings and Related Mattersremain ongoing. Because these actions are in their early stages, it is still not possible to estimate the duration, scope or results of these investigations or related inquiries and requests for information by Colombian State control entities. While we are cooperating fully with both cases, adverse developments in connection with these investigations, including any expansion of the scope of the investigations, could negatively impact us and could divert the efforts and attention of our management team from our ordinary business operations.

~~As described in the section~~~~Risk Review—Legal Proceedings and Related Matter~~s, the Prosecutor’s Office is conducting a confidential investigation regarding Reficar’s expansion and modernization project. On April 27, 2017, the Prosecutor’s Office announced its intention to pursue charges against eight individuals, including five past officers of Reficar or Ecopetrol, for the alleged crimes of document forgery, illegal interest in the execution of agreements, misappropriation of public funds and unjust enrichment. The Prosecutor’s Office has not yet made public the factual basis for such charges, and accordingly we are not in a position to predict the outcome of the Prosecutor’s Office’s investigation or the disposition of any charges that the Prosecutor’s Office may bring.

In connection with this investigation or any other investigation carried out by any other authority, there can be no assurance that we will not ~~be required to pay penalties, or~~ incur in additional costs and expenses ~~and~~or expose us or our employees to sanctions and lawsuits, any of which could adversely impact our reputation and, in turn, could have adverse effects on our financial condition and results of operations. See section~~See~~Risk ~~Review-~~ Review—Legal and Regulatory ~~Risk -~~ Risk—We may incur losses and spend time and money defending pending lawsuits and arbitrations and responding to administrative investigations.

Our results may be affected by the performance of our suppliers, our business partners or their third-party service ~~providers, as many~~providers.

Some of our suppliers may face financial or operational problems that could led them to a breach of their obligations settled under contractual arrangements. Other suppliers may also be subject to regulatory changes or sanctions that could increase the risk of defaulting on their obligations to us, which could have an adverse effect on our operations and financial condition.

In addition, some of our operations ~~are executed under joint venture agreements.~~

~~Many of our operations~~and projects are performed through joint ventures or other contractual arrangements with our business ~~partners.~~partners or third party service providers. Consequently, we depend on the performance of our business ~~partners.~~partners or third party service providers. The poor performance of any of them, especially in those projects in which we do not act as operator, could negatively impact ~~oil~~the execution of projects and ~~natural gas production,~~operating performance, which in turn could have a negative impact on our results of operations and financial condition. We are exposed to the risk of not finding business partners with the appropriate skills and performance we require for our projects. We are also indirectly exposed to supply agreements and other third-party services contracted by our business partners acting as operators under joint venture agreements.

Our insurance policies do not cover all liabilities and may not be available for all risks.

Our insurance policies do not cover all liabilities, and insurance may not be available for all risks. There can be no assurance that incidents will not occur in the future, that insurance will adequately cover the entire scope or extent of our losses or that we will not be found liable in connection with claims arising from these and other events, which could adversely affect our financial condition and results of operations.

A failure in our information technology systems or cyber security attacks may adversely affect our financial results.

We depend on the reliability and security of our information technology systems to conduct certain exploration, development and production activities, process financial records and operating data ~~communication~~and communicate with our employees and business partners, and for many other activities related to our business. Our information technology systems may fail or have other significant shortcomings due to operational system flaws or employee misuse, tampering or manipulation. In addition, we may become the target of cyber-attacks or information security breaches that could result in the unauthorized release, gathering, monitoring, misuse, loss or destruction of proprietary and other information. Any of these occurrences could disrupt our business, result in potential liability or reputational damage or otherwise have an adverse effect on our financial results.

During ~~2016,~~2018, our internal cyber security systems identified ~~several~~and contained cyber security attacks such as ~~brute force login attacks designed to identify valid credential in IT infrastructure~~malware, phishing and ~~seventeen ransomware attacks-only one~~denial of ~~them with data loss (low level confidentiality) at Ecopetrol S.A.-Our platforms also identified~~service. In total, we had 20 critical incidents during the year and ~~controlled certain malware events and SQL injection attacks.~~

~~Although~~although we have not experienced any material losses relating to failure of our information technology systems or cyber incidents, there can be no assurance that we will not suffer such losses in the future.

We are exposed to behaviors incompatible with our ethics and compliance standards.

Given the large number of contracts that we are a party to in Colombia and abroad with local and foreign suppliers, the geographic distribution of our operations and the great variety of actors that we interact within the course of business, we are subject to the risk that our employees, contractors, or any person having relations with us may misappropriate our assets, manipulate our assets or information or engage in money laundering or the financing of terrorism, for such person’s personal or business advantage. Our systems for identifying and monitoring these risks may not be effective to fully mitigate them in all situations. Such acts may result in material financial losses or reputational harm to the Company.

The reliability and capacity of national power supply systems may affect or limit the continuity of our operations or limit growth.

Our average energy consumption in ~~2016~~2018 was ~~6,948~~7,138 GWh/year, of which ~~65%~~66% was supplied through self-generation, and the remaining ~~35%~~34% through power grid. Our demand is 10.5% of the total energy demand in Colombia.

~~Several~~Our self-generation is subject to fuel availability. In addition, several producing fields are connected to the national transmission system and depend on its expansion and reliability to keep steady production ~~levels and to accommodate future growth.~~levels. The national electricity market is volatile due to changes in hydrology and availability of fuels (natural gas, diesel etc.);, bringing uncertainty to prices. If energy were to become unavailable or difficult to obtain, our results of operation and the grid expansion projects which are executed by power distribution contractors have experienced delays due to licenses and limited execution capability. To mitigate these risk the Ecopetrol Group decided to centralize the management of power sources and uses in order to optimize the energy availability, quality and cost, for the short, medium and long term. While the intention is to enhance system reliability by timely execution of electrical projects and to launch energy efficiency programs in all of our segments, we cannot offer any assurance that we will prove successful.financial condition could be adversely affected.

Rising water production levels may affect or constrain our crude oil production.

During ~~2016, we~~2018, Ecopetrol produced approximately ~~9.36~~13.8 million barrels of water per day. Taking into account the nature of our reservoirs, the water production levels to be managed by the Company may increase in the future. In order to achieve our oil and gas production goals and to avoid any production restrictions going forward, we will need to secure the required capacity to manage water levels. Factors that may trigger a possible constraint in our crude oil production due to the rising water production levels are: (i) ineffective project management of the required facilities, (ii) the Company’s and its partners’ ability to timely obtain the environmental permits related to water management, (iii) social and community interactions that could affect the development and operation of these projects, and (iv) the availability of capital to execute the required projects.

This section discusses potential risks related to our extensive operations in Colombia.

The Colombian government could seize or expropriate Ecopetrol’s assets under certain ~~circumstances.~~circumstances for fair compensation.

Pursuant to Articles 58 and 59 of the Colombian constitution, the Government can exercise its eminent domain powers in respect of ~~Ecopetrol’s~~private property assets in the event such action is deemed by the Government to be required in order to protect public interests. According to Law 388 of 1997, eminent domain powers may be exercised through: (i) an ordinary expropriation proceeding, (~~expropiación ordinaria o judicial~~), or (ii) an administrative ~~expropriation (~~~~expropiación administrativa~~).expropriation. In all cases we would be entitled to a fair compensation for the expropriated assets. Also, as a general rule, compensation must be paid before the asset is effectively expropriated. However, the compensation may be lower than the price for which the expropriated asset could be sold in a free-market sale or the value of the asset as part of an ongoing business. The aforementioned Article 59 of the Colombian constitution establishes an expropriation for war reasons, (~~expropiación en caso de guerra~~), which ~~does not~~require that compensation be paid before expropriation but can only be executed on a temporary basis.

Colombia has experienced internal security issues that have had or could have a negative effect on the Colombian economy and on us.

Colombia has experienced internal security issues, primarily due to the activities of guerrillas, paramilitary groups, drug cartels and criminal bands known asBacrim. From time to time, guerrillas target crude oil and multi-purpose pipelines, including the Oleoducto Transandino, Caño Limón-Coveñas and Oleoducto Bicentenario pipelines, and other related infrastructure disrupting our activities and those of our business partners.

During ~~2016,~~2018, the attacks against our pipeline infrastructure ~~decreased~~increased by ~~35%~~66% in relation to ~~2015 (80~~2017 (63 attacks in ~~2015~~2017 compared with 52105 attacks in ~~2016), however they were strategically targeted and more severe.~~2018). In 2019, there have been 20 attacks to date. This situation especially affected the infrastructure located in ~~Nariño,~~the following departments: Norte de Santander, Arauca and ~~Norte de Santander~~Nariño and the following pipelines: Caño Limón Coveñas and Transandino. During the first quarter of 2017, 29 attacks against the infrastructure of the Caño Limon – Coveñas system have taken place, impacting our operations in this pipeline and resulting in deferred crude oil production of 603 thousand barrels. On several occasions, guerillaGuerilla attacks have resulted in unscheduled shutdowns of our transportation systems in order to repair or replace sections of pipelines or production facilities that have been damaged ~~and~~with deferral of production in certain fields, as well as caused us to undertake environmental remediation. For example, these attacks led to a deferred productionof 11,102 barrels in 2018. This represented a decrease from 2017 (when similar attacks led to a deferred production of 1.6 million barrels) due to the transportation of the crude from the Caño Limón field through the Bicentenario pipeline ~~infrastructure managed by Ecopetrol S.A., the~~from Banadia in Arauca to Araguaney in Casanare. However, we cannot offer any assurance that we will continue to ensure such transportation through alternate routes.

The direct cost of ~~repair pipeline infrastructure~~repairs due to terrorist attacks and illicit taps in ~~2016~~2018 was approximately COP$~~41.7~~153 billion (US$~~13.9~~47 million, with a ~~3,000.71 Colombian Peso/U.S. dollar~~COP$3,249.75/1.00 US exchange rate as of December 31, ~~2016)~~2018). ~~Also,~~Additionally, these attacks have resulted in certain of our ~~production was impacted by approximately 3,215 bpd due~~customers requesting the early termination of their transport agreements. We are currently disputing such terminations. See Note 21.4 to ~~events related to attacks on~~ our ~~infrastructure that limited~~consolidated financial statements for further information.

Likewise, the theft of refined products and crude oil, resulting from security issues, may impact our ~~production. Guerrilla groups~~operating and ~~other illegal armed groups also attacked natural gas transportation infrastructure that have affected our natural gas production~~financial results in the ~~past.~~ future. Theft of refined products, decreased from approximately 34.9 boed in 2017 to approximately 21 boed in 2018. Theft of crude oil decreased from approximately 1,883 bod in 2017 to approximately 1,324 bod in 2018.

These activities and their possible escalation and the effects associated with them have had, and may have in the future, a negative impact on the Colombian economy or on us, which may affect our customers, employees, assets or the environment, with resulting containment, clean-up and repair expenses.

Likewise, theft of refined products and crude oil, resulting from security issues, may impact our results in the future. Theft of refined products, which reached a peak of approximately 7,270 bpd in 2002, was reduced to approximately 28.5 bpd in 2016. The theft of crude oil increased from approximately 646 bpd in 2015 to approximately 1,830 bpd in 2016.

Despite the peace agreement between the Colombian government and the FARC and the ~~ongoing~~ peace negotiation process attempts with the National Liberation Army (the ELN), some illegal and terrorist activities of guerrilla groups or their members may ~~continue~~continue.

On November 30, 2016, the Colombian Congress approved a peace agreement between the Colombian government and the Revolutionary Armed Forces of Colombia, or FARC. Currently, the Colombian government is in the process of gradually integrating FARC members into civilian life.

On the other hand, the National Liberation Army, or ELN, an insurgency guerrilla group, has increased its actions against the Colombian security forces and the critical infrastructure of the Nation, ~~in recent months,~~ which we believe is an attempt to show its presence and influence in some regions and put pressure ~~on the ongoing~~to resume peace negotiations which formally began in February 2016. In February 2017, the public dialogue phase began in Quito, Ecuador. These dialogues were interrupted as a result of the terrorist attacks carried out by the ELN since January 2018. In April 2018, the Colombian Government decided to resume the dialogue, due to the suspension of ELN terrorist actions during the electoral period in March 2018.

The new Colombian President Ivan Duque took office in August 2018 and set the following conditions for the continuation of dialogue with the ELN: the suspension of terrorist activities and the release of hostages.

~~Despite~~However, following the ~~progress made with~~terrorist attack by ELN against the ~~FARC and~~National Police Academy (Escuela de Policía General Santander) on January 17, 2019, the ~~ongoing negotiations~~Colombian Government decided to suspend dialogue with the ELN indefinitely.

It is expected that some ~~guerrilla~~guerilla groups, such as the ELN, may continue their illegal and terrorist activities, including attacks on our infrastructure, resulting in a deterioration of Colombia’s national security and our assets, which consequently may negatively ~~impacting~~impact our operating results.

There have been certain events in Colombia and abroad, which have resulted in political tensions between Colombia and some of its neighboring countries.

~~Diplomatic relations~~There have been certain events in Colombia and abroad, which have resulted in political tensions between Colombia and some of its neighboring ~~countries,~~countries.

In particular, the economic, political and social crisis in ~~particular~~ Venezuela ~~have been tense in the past. Although relations with Venezuela have stabilized~~is having a severe impact on Colombia’s economy and ~~improved with Colombia’s current administration, economic differences between Colombia and Venezuela, mainly due to Venezuela’s current public disorder and internal political tension,~~social situation. This situation could affect ~~our~~the countries’ diplomatic relations, impact border towns and cities, accelerate Venezuelan migration flow into Colombia, affect our borderline operations and therefore may have a negative impact on Colombia’s economy and general security ~~situation.~~situation as well as in our operating results.

Companies operating in Colombia, including us, are subject to the prevailing economic conditions and the investment climate in Colombia, which may be less stable than the prevailing economic conditions and investment climate in developed countries.

Market prices of securities issued by Colombian companies, including us, are subject to the prevailing economic conditions in Colombia. A large portion of our assets and operations are located in Colombia and most of our sales are currently derived from our crude oil and natural gas production and the production of our refineries located in Colombia. Accordingly, our financial condition and results of operations depend to a significant extent on macroeconomic and political conditions prevailing from time to time in Colombia and on the exchange rates between the Colombian Peso and the U.S. dollar.

If the perception of improved overall security in Colombia deteriorates or if the investment climate worsens, the Colombian economy may face lower growth rates than the ones posted recently, which could negatively affect our financial condition and results of operations. Furthermore, the market price of our shares and American Depositary Shares, or ADSs, may be adversely affected by changes in governmental policies, particularly those affecting economic growth, exchange rates, interest rates, inflation and taxes. The Government has changed monetary, fiscal, taxation, labor and other policies over time and has thus influenced the performance of the Colombian economy. We have no control over the extent and timing of government intervention and policies.

Colombian political and economic conditions have a direct impact on our business and may have a material adverse effect on us.

Colombia’s economic policies may have direct impact on our ~~company~~Company as well as market conditions, the prices of securities and our ability to access national and international capital markets. Our financial condition and results of operations may be adversely affected by the following factors, among others, and the Government’s response to such factors: exchange rate movements; inflation; exchange control policies; price instability; interest rates; liquidity of domestic capital and lending markets; tax policy; regulatory policy for the oil and gas industry, including pricing policy; and other political, diplomatic, social and economic developments in or affecting Colombia.

Uncertainty over whether the Government will implement changes in policy or regulations that may affect any of the factors mentioned above or other factors in the future may lead to economic uncertainty in Colombia and increase the volatility of the Colombian securities market and securities issued abroad by Colombian companies.

The administration of President Iván Duque took office in August 2018. Any changes in the ruling government, oil and gas or investment regulations and policies or a shift in political attitudes in Colombia are beyond our control.

Developments and the perception of risk in other countries, especially emerging market countries, may adversely affect the market price of Colombian securities, including our ADSs.

Securities issued by Colombian companies may be affected by economic and market conditions in other countries, including other Latin American and emerging market countries. Although economic conditions in Latin American countries and in other emerging market countries may differ significantly from economic conditions in Colombia, investors’ reactions to developments in these other countries may have an adverse effect on the market value of securities of Colombian issuers and our ability to access capital markets.

Due to past financial crises in several emerging market countries (such as the Asian financial crisis of 1997, the Russian financial crisis of 1998 and the ~~Argentine~~Argentinean financial crisis of 2001), the world financial crisis of 2008 and the recent sovereign debt crises in certain European countries, investors may view investments in emerging markets with heightened caution. In the past, as a result of crises in other countries, flows of investments into Colombia have been reduced. Crises in other countries, especially in emerging market countries, may hamper investor enthusiasm for securities of Colombian issuers. If Latin America experiences a new slow-down or if the price for securities of Latin American issuers falls, the price for our ADSs could follow this trend and could be adversely affected, as could our ability to access domestic or international capital markets.

The Ministry of Mines and Energy has not calculated or liquidated the corresponding Net Positions for Ecopetrol as refiner and/or importer and for each fuel (gasoline and motor fuel oil) to be recognized by the FEPC to Ecopetrol for the second half of 2016

Under current Colombian regulations, the Ministry of Mines and Energy is required to periodically (initially by quarters, now twice a year) calculate and liquidate each refiner and/or importer of fuel’s Participation Differential (i.e. this arise when the international parity price is lower than the reference price established by the Ministry of Mines and Energy), leading to a “Net Position”. However due to changes in law and the Ministry methodologies we have still not received the calculations or liquidations for the second semester of 2016.

We do not know and we cannot anticipate the terms and conditions that will be established by the Ministry of Mines and Energy for future liquidations. For more information regarding the FEPC, see the section~~Business Overview—Applicable Laws and Regulations—Regulation of Refining and Petrochemical Activities—Regulation Concerning Production and Prices~~.

New or higher taxes resulting from changes in tax regulations or the interpretation thereof in Colombia could adversely affect our results of operations and financial condition.

New tax laws and regulations, and uncertainties in the interpretation with respect to existing and future tax policies pose risks to us. In recent years, the Colombian Congress and tax authorities have imposed and subsequently eliminated additional taxes such as the~~Impuesto sobre la Renta para la Equidad~~ Income Tax for Equality (“~~CREE surtax”~~CREE”), and the wealth tax, and enacted modifications to taxes related to financial transactions, income, value added tax (“VAT”), and taxes on net worth. In addition, in December 2016, pursuant to Law 1819, the Colombian Congress enacted a ~~new~~ tax reform, which became effective in 2017. Furthermore, in December 2018, pursuant to Law 1943, the Colombian Congress enacted a tax reform (the Financing Law), which became effective as of January 1, 2019 modifies the Colombian income tax regime. For a description of taxes affecting our results of operations and financial condition in ~~2016,~~2018, see ~~the~~ sectionFinancial Review—Effect of Taxes, Exchange Rate Variation, Inflation and the Price of Oil on Our Results—Taxes. Changes in tax-related laws and regulations, and interpretations thereof, can affect tax burdens by increasing tax rates and fees, creating new taxes, limiting tax deductions, and eliminating tax-based incentives and non-taxed income. In addition, tax authorities and tax courts may interpret tax regulations differently than we do, which could result in tax litigation and associated costs and penalties.

Until ~~recently,~~2016, for Colombian income tax purposes, dividends that were distributed from profits taxed at the corporate level were not taxed or subject to withholding tax at the shareholder level. However, beginning in 2017, dividends paid to non-resident shareholders are subject to a withholding tax. ~~The~~Until 2018, the withholding tax rates applicable to dividends paid to non-resident shareholders ~~are:~~were: (i) a 5% dividend tax on dividends distributed from profits taxed at the corporate ~~level;~~level, with certain exceptions; and (ii) a 35% withholding tax rate on dividends distributed from profits not taxed at the corporate ~~level; and (iii)~~level plus an additional 5% dividend tax ~~rate~~ after applying the initial 35% withholding tax rate. As of January 1, 2019, the withholding tax rates applicable to dividends paid to non-resident shareholders are: (i) a 7.5% dividend tax on dividends distributed from profits taxed at the corporate level (except that dividends paid to non-resident shareholders out of profits taxed at the corporate level prior to and including December 31, 2016, are not subject to this tax); and (ii) 33% withholding tax rate on dividends distributed from profits not taxed at the corporate level (32% for 2020, 31% for 2021 and 30% as of 2022), plus an additional 7.5% dividend tax after applying the initial 33% withholding tax rate. Tax treaty rules might also apply on dividend distributions when a shareholder is a resident in a country that has executed a tax treaty with ~~Colombia.~~Colombia and reduce or eliminate the applicable taxes if the applicable requirements are met.

This section discusses potential legal and regulatory risks to Ecopetrol, including the risk of having to comply with new laws and regulations.

The Colombian hydrocarbons industry is subject to extensive regulation and supervision by the Government and regulatory agencies in matters including the award of exploration and production blocks by the ANH, the imposition of specific drilling and exploration obligations, restrictions on production, price controls, capital expenditures, liquidation of the Net Position of each refiner or importer with respect to the FEPC and required divestments. Existing regulation applies to virtually all aspects of our operations in Colombia and abroad. The commercialization activities of some of our products also face extensive regulation. Such regulation is subject to change by the applicable regulator affecting our ability to commercialize our products. See ~~the~~ sectionBusiness Overview—Applicable Laws and Regulations.

The terms and conditions of the agreements with the ANH under which we explore and produce crude oil and natural gas generally reflect negotiations with the ANH and other governmental authorities and may vary by fields, basins and hydrocarbons discovered.

We are required, as are all oil companies undertaking exploratory and production activities in Colombia, to pay a percentage of our production to the Government as royalties. The Colombian Congress has modified the royalty program for crude oil and natural gas production several times in the last 20 years, as it has modified the regime regulating new contracts entered into with the Government. In the future, the Colombian Congress may once again amend royalty payment levels for new contracts and such changes could have an adverse effect on our future exploration and production in Colombia. See ~~the~~ sectionBusiness Overview—Applicable Laws and Regulations—Regulation of Exploration and Production Activities—Business Regulation—Royaltiesfor a description of the current royalty scheme.

Our operations in Colombia are subject to extensive national, state and local environmental regulations. Environmental rules and regulations are applicable to our exploration, production, refining, transportation, supply and marketing activities, as well as the biofuels we produce. These regulations establish, among other things, quality standards for hydrocarbon products, air emissions and greenhouse gases, water discharges and waste disposal, soil remediation, water pollution and the general storage, handling, transportation and treatment of hydrocarbons in Colombia. Currently, all exploratory drilling projects ~~drilling~~ in areas that do not yet have a license must undergo an environmental impact assessment and must receive an environmental license from the governmental agency responsible for awarding environmental licenses, the Environmental License National Agency or ANLA. Environmental authorities with jurisdiction over our activities routinely inspect our crude oil fields, refineries and other production sites, and they may decide to open investigations or sanction proceedings, which may result in the imposition of fines, restrictions on operations or other sanctions in connection with potential non-compliance with environmental laws.

We are also subject to control and monitoring by the regional autonomous corporations (CAR), which are regional environmental authorities that grant permits for the use and exploitation of natural resources, establish compensation measures for the use of these resources, and perform monitoring, control and impose sanctions ~~function.~~as result of investigations.

If we fail to comply with any of these national or regional environmental regulations, ~~or authorities,~~ we could be subject to administrative and criminal penalties, including warnings, fines or closure orders of our facilities. Any such criminal penalty would be imposed on the legal representatives of the Company, including any legal representative, director or worker who participated or failed to take action related to the activities that lead to environmental damage. See ~~the~~ sectionBusiness Overview—Applicable Laws and Regulations—Regulation of Exploration and Production Activities—Business Regulation—Environmental Licensing and Prior Consultation.

Environmental regulation has become more stringent in Colombia in recent years. As a result, our operating costs have increased in order to comply with these new technical environmental requirements as well as the need to strengthen our specialized team in charge of environmental compliance in project and operations. If environmental laws continue to impose additional costs on us, we may need to reduce our investments on strategic projects in order to allocate funds to environmental compliance. We are also exposed to delays in obtaining environmental licenses from ANLA, which can lead to cost overruns or to changes in our investment plans. These additional costs may have a negative impact on the profitability of the projects we intend to undertake or may make them economically unattractive, in turn having a negative impact on our results of operations and financial condition.

WeSome of the companies in the business group perform exploratory activities outside of Colombian territory. As such, such companies are subject to foreign environmental regulations for the exploratory activities conducted by usthe business group outside of Colombia. Failure to comply with foreign environmental regulations may result in investigations by foreign regulators, which could lead to fines, warnings or temporary suspensions of our operations, which could have a negative impact ~~on our~~in the consolidated financial ~~condition~~statements and results of ~~operations.~~operations of the group.

In addition, the companies of the business group conducting upstream activities outside Colombia may be subject to foreign health, safety and environmental regulations. Foreign health and safety regulations may be more severe than those established under Colombian law and, therefore, we may be required to make additional investments to comply with those regulations.

Under certain of our credit agreements, we are under an obligation to comply with international environmental standards established by our lenders or by multilateral institutions. Failure to comply with such environmental standards could result in an event of default under the relevant credit agreements that we, or our subsidiaries, have entered into, which would affect our financial condition. For instance, the credit facility executed by Reficar for the financing of its expansion and modernization project includes an obligation to comply with the U.S.-Exim Environmental Procedures and Guidelines and the Organization for Economic Co-operation and Development (OECD) Common Approaches on Environment and Officially Supported Export Credits, and a credit agreement executed by Ecopetrol S.A. to finance purchases of U.S. goods and services requires Ecopetrol S.A. to comply with the U.S.-Exim Environmental Procedures and Guidelines.

In addition, we may be subject to foreign health and safety and environmental regulations for our upstream activities conducted outside Colombia. Foreign health and safety regulations may be more severe than those established under Colombian law and, therefore, we may be required to make additional investments to comply with those regulations.

We may incur losses and spend time and money defending pending lawsuits and arbitrations and responding to administrative investigations.

We are currently a party to several legal proceedings filed against us. We are also subject to labor-related lawsuits filed by current and former employees in connection with pension plans and retirement benefits. ~~For example, as~~As of December 31, ~~2016,~~2018, Ecopetrol S.A. was a party to ~~2,774~~4,681 legal proceedings relating to civil, administrative, environmental, tax, and labor claims, of which 3,279 were filed against us in the Colombian courts and arbitration tribunals and of which 341 met the accounting threshold for an accrual provision. Additionally, Ecopetrol S.A.’s subsidiaries were a party to 1,136 legal proceedings relating to civil, administrative, environmental, tax, and labor claims filed against them of which 86 met the accounting threshold for386 had an accrual provision. We allocate substantial amounts of money and time to defend against these claims, in which the claimants often seek substantial sums of money as well as other remedies. See Note ~~23– Accrued liabilities and provisions~~21 to our consolidated financial statements and see ~~the~~ sectionRisk Review—Legal Proceedings and Related Matters. In addition, in accordance with Colombian law, we and our employees are subject to surveillance and investigations by certain administrative control entities in Colombia, which are intended to determine whether public funds have been misused, mismanaged or misappropriated or whether they have been used in compliance with applicable law. Such investigations may divert the attention of management and subject the Company to reputational risk and increase difficulties in retaining talent. See ~~the~~ sectionRisk Review—Legal Proceedings and Related Matters.

This section discusses potential risks associated with an investment in our American Depository Shares (as opposed to our common shares) by investors outside Colombia.

Holders of our ADSs do not have the same voting rights as holders of our common shares. As set forth in the amended and restated deposit agreement, dated ~~September 16, 2008,~~December 29, 2017, among Ecopetrol S.A., JP Morgan Chase Bank, N.A., as depositary (the “Depositary”), and all holders from time to time of our American Depositary Receipts ~~(the~~(as amended and restated, the “Deposit Agreement”), holders of our ADSs may instruct ~~our current depositary, JP Morgan Chase Bank, N.A.,~~the Depositary, to vote on shareholder matters prior to a shareholders’ meeting. ~~Colombia~~

Colombian law ~~does~~is not ~~however, require Ecopetrol~~clear about the need to request proxies from existing shareholders. Thus, ~~shareholders~~holders of our ADSs may not become aware of some matters in time to instruct the ~~depositary~~Depositary to vote their shares.

The Deposit Agreement provides holders of our ADSs with the right to instruct the ~~depositary~~Depositary to vote common shares separately. ~~The viability~~However, holders of ~~this contractual provision~~our ADRs should be aware that in Colombia, it is ~~unclear. This is because regulatory agencies have advanced inconsistent positions regarding~~uncertain whether a ~~depository~~depositary must vote all common shares of a Colombian corporation in an American Depositary Receipt, or ADR, program in the same manner as a single block or may vote them separately. ~~Going~~Accordingly, if either the custodian or the Depositary are not able to vote the common shares (including the right to receive common shares in the form of ADRs) deposited under the Deposit Agreement and any other securities, cash or property from time to time held by the Depositary in respect or in lieu of deposited common shares (the “Deposited Securities”) separately, all such Deposited Securities shall be voted based on the majority vote of the voting instructions timely received from holders of ADRs. In the case of such single block voting, all holders of ADRs, including holders of ADRs for which no voting instructions are timely received and holders of ADRs with voting instructions contrary to the voting instructions of a majority of the Deposited Securities timely received, should be aware that the Deposited Securities shall all be voted as a single block and that the voting instructions of such holders of ADRs will be deemed given in the manner stated above.

The Depositary will not itself exercise any voting discretion in respect of any Deposited Securities. The holders of our ADRs will be solely responsible for any exercise of the voting rights of the Deposited Securities represented by the ADRs if such vote is made pursuant to the procedures described in the Deposit Agreement. Holders of ADRs are strongly encouraged to forward their voting instructions as soon as possible as voting instructions will not be deemed received until such time as the ADR department responsible for proxies and voting has received such instructions, notwithstanding that such instructions may have been physically received by the Depositary, prior to such time.

In the future, the Colombian regulatory authorities may ~~change~~clarify their interpretation as to how the voting rights should be exercised by ~~ADS~~ holders of our ADSs, and such possible interpretation could adversely affect the value of the common shares and ADSs.

Our ADSs holders may be subject to restrictions on foreign investment in Colombia.

Colombia’s International Investment Statute (the set of rules and regulations which govern the foreign exchange market and the transactions thereto, which include Decree 1068 of 2015, Resolution 81 of ~~2000~~2018 and External Circular ~~No.~~ DCIN 83 issued by the Colombian Central Bank among others) regulates the manner in which non-Colombian residents can invest in Colombia and participate in the Colombian securities market. Among other requirements, Colombian law requires foreign investors to register certain foreign exchange transactions with the Colombian Central Bank and outlines the necessary procedures to authorize certain types of foreign investments. Colombian law requires that certain foreign exchange transactions, including international investment in foreign currency between Colombian residents and non-Colombian residents, must be made through the foreign exchange market, either through authorized foreign exchange market ~~intermediaries.~~intermediaries or compensation accounts, which are regular bank accounts held abroad by Colombian residents and registered with the Colombian Central Bank. Any income or expenses under our ~~American Depositary Receipt, or~~ ADR program must be made through the foreign exchange market.

Investors acquiring our ADRs are not required to register with the Colombian Central Bank directly, as they will benefit from the registration to be obtained by the custodian for our common shares underlying the ADRs in Colombia. If investors in ADRs choose to surrender their ADRs and withdraw common shares, they must register their investment with the Colombian Central Bank in the common shares as a portfolio investment through their local representative, which may be a brokerage firm, trust company or investment management companies supervised by the Superintendence of ~~Finance (~~~~Superintendencia Financiera de Colombia~~).Finance. Investors will only be allowed to transfer dividends abroad after their foreign investment registration procedure with the Colombian Central Bank has been completed. Investors withdrawing common shares could incur expenses and/or suffer delays in the application process. The failure of a non-resident investor to report or register foreign exchange transactions with the Colombian Central Bank relating to investments in Colombia on a timely basis may prevent the investor from remitting dividends abroad, or result in the initiation of an investigation and in the imposition of fines. In the future, the Government, the Colombian Congress or the Colombian Central Bank may amend Colombia’s International Investment Statute or the foreign investment rules, which could result in more restrictive rules and could negatively affect trading of our ADSs.

Colombia currently has a free convertibility system. If a more restrictive convertibility system is implemented, the ~~depositary~~Depositary may experience difficulties when converting Colombian Peso amounts into U.S. dollars to remit dividend payments. Also, currently Colombia has a floating exchange rate system that might be subject to change in the future. See ~~the~~ sectionShareholder Information—Exchange Controls and Limitations.

Holders of our ADSs may not be able to effect service of process on us, our directors or executive officers within the United States, which may limit your recovery in any foreign judgment you obtain against us.

We are a mixed economy company organized under the laws of Colombia. In addition, most of the members of our Board of Directors (“Directors”) and executive officers reside outside the United States. All or a substantial portion of our assets and the assets of these persons are located outside of the United States. As a result, it may not be possible for you to effect service of process within the United States upon us or these persons or to enforce judgments against us or them in U.S. courts obtained in such courts predicated upon the civil liability provisions of the U.S. federal securities laws. Colombian courts determine whether to enforce a U.S. judgment predicated on the U.S. securities laws through a procedural system known asexequatur. For a description of these limitations, see ~~the~~ sectionShareholder Information—Enforcement of Civil Liabilities.

The protections afforded to minority shareholders in Colombia are different from those in the United States, and may be difficult to enforce.

Under Colombian law, the protections afforded to minority shareholders are different from those in the United States. In particular, the legal framework with respect to shareholder disputes is substantially different under Colombian law than U.S. law and there are different procedural requirements for commencing shareholder lawsuits, such as shareholder derivative suits. As a result, it may be more difficult for our minority shareholders to enforce their rights against us or our Directors or controlling shareholder than it would be for shareholders of a U.S. company.

ADRs do not have the same tax treatment as other equity investments in Colombia.

Although ADRs represent Ecopetrol’s common shares, for Colombian tax purposes, ADRs are securities different from their underlying assets. Therefore, ADR holders are not entitled to the tax treatment granted to holders of the common shares. Such tax treatment includes, among others, ~~those~~ benefits relating to dividends and to profits derived from sale of Colombian common shares. For further information, see ~~the~~ sectionShareholder Information—Taxation—Colombian Tax Considerations.

Judgments of Colombian courts with respect to our ADSs will be payable only in Colombian Pesos.

If proceedings are brought in the courts of Colombia seeking to enforce the rights of ADS holders of common shares, we will be required to discharge our obligation amounts in Colombian Pesos. Colombian law provides that an obligation in Colombia to pay amounts denominated in foreign currency may only be satisfied in Colombian currency at the Representative Market Exchange Rate of the date the judgment is obtained, and such amounts are then adjusted to reflect exchange rate variations through the effective payment date.

The relative volatility and illiquidity of the Colombian securities markets may substantially limit our investors’ ability to sell our ADSs at the price and time they desire.

Investing in securities that are traded in emerging markets, such as Colombia, often involves greater risk when compared with other world markets, and these investments are generally considered to be more speculative in nature.

The Colombian securities market is substantially smaller, less liquid, more concentrated and can be more volatile than other securities markets in the United States. As of December 31, ~~2016,~~2018, the Colombian Stock Exchange (~~Bolsa de Valores de ColombiaI~~~~,or “BVC”~~(“BVC”) had a market capitalization of approximately COP$~~311,384~~339,653 billion (US$~~103,770 million~~104.52 billion using the closing rate for ~~2016)~~2018), a ~~12% increase~~7% decrease when compared with the amount at the end of ~~2015,~~2017, a daily average trading volume of approximately COP$~~194,116~~147,031 million (US$~~64.69~~45.24 million, using the average exchange rate for ~~2016)~~2018), a ~~42%~~6% increase when compared with the volume in ~~2015.~~2017. By comparison, the New York Stock Exchange (the “NYSE”) had a market capitalization of US$~~19.6~~25.7 trillion as of December 31, ~~2016,~~2018, and a daily trading volume of approximately US$~~68.9~~71.8 billion in ~~2016.~~2018.

As of December 31, ~~2016,~~2018, our shares represented the highest market capitalization of the BVC accounting for ~~as of 7.6%~~14.54% of the total COLCAP index, which reflects the price volatility of the 20 most-liquid stocks.

Given the current ownership structure of our shares, it may be difficult for you to purchase large quantities of shares from a single shareholder. We cannot assure you that a liquid trading market for our ADSs will develop or, if developed, that it will be maintained. Without a liquid trading market, the ability of investors in our ADSs to sell them at the desired price and time could be substantially limited.

We are not required to disclose as much information to investors as a U.S. issuer is required to disclose.

We are subject to the reporting requirements of the Superintendence of Finance and the ~~BVC.~~BVC - (Colombian Stock Exchange). The corporate disclosure requirements that apply to us may not be equivalent to the disclosure requirements that apply to a U.S. issuer and, as a result, you may receive less interim information about us than you would receive from a U.S. issuer.

Our controlling shareholder’s interests may be different from those of ~~our~~certain minority shareholders.

~~Colombian Law 1118 of 2006 requires the Nation to maintain the majority of our outstanding capital stock.~~ The Nation currently holds 88.49% of our outstanding capital stock, making it our controlling shareholder. The Nation as our controlling shareholder has majority voting rights at the ~~shareholders’ meeting~~General Shareholders Assembly to elect the members of our Board of ~~Directors. The Nation~~Directors and may propose and approve decisions that ~~are~~may be in its own interest and ~~in furtherance of its own economic and political interests~~ that domay not necessarily benefit minority shareholders.

Our controlling shareholder may approve dividends at the ordinary ~~general shareholders’ meeting,~~General Shareholders Assembly, notwithstanding the interest of certain minority shareholders, in an amount that results in us having to reduce our capital expenditures or increase our debt levels, thereby negatively affecting our prospects, results of operations and financial condition. See the sectionShareholder Information—Dividend Policy.

Additionally, ~~given~~ our controlling ~~shareholder’s interests, it~~shareholder may undertake projects, approve decisions or make announcements about its intentions related to its holding of ~~our capital~~the Company’s stock, which may not be in our best interest or in the best interest of our minority shareholders, including holders of our ADSs, and could ~~impact~~affect the price of our shares or ADSs.

Under the leadership of the Vice-Presidency of Compliance, Ecopetrol S.A. consolidated its internal control systems into ana unified system that integrates the best practices called for by the Committee of Sponsoring Organizations of the Treadway Commission (COSO 2013), Sarbanes–Oxley Act (SOX), governance and management of enterprise IT (COBIT), Enterprise Risk Management (ERM) and our ethics and compliance rules, with the aim of establishing an integrated management system for all control ~~components;~~components, thereby allowing us to strengthen all of our control system.

The main purpose of the Ecopetrol S.A.’s Internal Control System is to provide reasonable assurance regarding the achievement of all of the Company’s ~~objective~~objectives relating to operations, strategy, reporting and compliance, through the appropriate risks management and ensuring the effectiveness of its controls. The system performance is systematically monitored by the Board of ~~Directors semiannually.~~Directors.

Ecopetrol S.A.’s Internal Control System is aligned to the Company’s strategy and business processes and gives responsibility to all employees to manage risk, to maintain the effectiveness of controls, to report incidents ~~and~~in order to preventively correct possible deficiencies and to ~~ensure continuous improvement~~provide reasonable assurance of ~~processes.~~achieving corporate objectives and goals.

The risk management component of our Internal Control System is in charge of identifying events or situations that may affect our defined objectives, assessing and prioritizing them to implement the most appropriate response. This component has been designed and implemented across the organization, with a two-level focus: Enterprise Risk and Processes Risks.

Our risk management approach is based ~~around~~on the risk management cycle, consisting in five main stages: planning, identifying, evaluating, treatment and monitoring risks, as well as communication across all stages. This cycle is supported in three pillars of risk management: culture, organizational structure and normative and management tools.

Ecopetrol has also defined guidelines and ~~minimum requirements to implement~~implemented an Internal Control System, ~~framework for its subsidiaries. These guidelines provide different classifications according to three important variables: the size of the organizational structure,~~ the scope of ~~SOX and the asset value of each subsidiary. The classification of each subsidiary determines the scope of implementation (Basic, Intermediate and Complete) of our Internal Control System.~~which includes its subsidiaries. Under those guidelines, each subsidiary must implement and report the performance of its ~~performance to its enterprise management committee, audit committee, or board of directors (or whoever is acting on their behalf). In addition, they have to report it annually~~Internal Control System to Ecopetrol S.A. Toto ensure compliance with the above measures, and the subsidiaries have methodological support from Ecopetrol S.A. when ~~it is~~ requested. Ecopetrol S.A. also performs preventive monitoring in selected subsidiaries to assure all the components and principles of their Internal Control Systems are present and operating.

Ecopetrol S.A. has a dedicated management team focused on information security issues such as risk analysis, treatment of information, safe information management practices and classification of critical business information, control systems compliance and effectiveness of available information security technologies, all of which are articulated with the ERM system at the enterprise level.

Ecopetrol S.A. has included cybersecurity risk as one of the key enterprise risks. Based on that, a working group formed in 2014, coordinated by the ~~information security~~cybersecurity area with the participation of industrial control systems specialists, has been understanding the new challenges of cybersecurity ~~risk;~~risk, developing activities to identify and protect critical digital ~~assets and its security threats.~~ assets.

During ~~2016,~~2018, Ecopetrol S.A., as a NOC (National Oil Company), ~~reported~~provided updates to the Cyber Defense Command Unit (~~Comando Conjunto Cibernético~~~~, an~~(an entity under the control of the Colombian Ministry of Defense) the ~~first basic~~ inventory of its critical cybernetic infrastructure ~~to be~~that was included in the classified catalogue of national critical cybernetic infrastructure.

~~Although Ecopetrol S.A. is still at an early stage of managing its~~Ecopetrol’s cybersecurity ~~risks, the working group has developed some activities in order~~team established a plan to ~~advance in~~continue the incorporation of cybersecurity practices to enhance the awareness about these risks at an operational level and adjust current information security practices considering the ~~new cyberthreat~~cyber-threat context. Likewise, as a result of this process, we are currently ~~incorporating~~continuing the incorporation of elements relative to management of the cyber security threat, including ~~among others,~~ policies, ~~cybersecurity insurance coverage, and~~ specialized monitoring and control ~~mechanisms.~~mechanisms, vulnerability management and cybersecurity insurance coverage, among others.

~~Currently,~~ Ecopetrol S.A. has ~~incorporated~~ a Security Operations Center service, ~~which enhances our~~in order to enhance the ability to foresee and identify trends in attacks in Ecopetrol S.A.’s information technology infrastructure and to monitor Ecopetrol’s reputation on the internet.

While there were cyber-attacks during 2018, there were no material effects on processes, equipment, products, services, relationships with customers or suppliers, competitive conditions or critical information. Ecopetrol S.A. does not have any current proceedings that relate to cybersecurity issues.

Furthermore, during 2018, the internal audit department conducted an audit on cybersecurity processes with an emphasis on the exploration area and follow up on our prior enhancement plans. As a result of such audit, an action plan was established to be implemented in 2019. The primary goal of the plan is to reinforce our cybersecurity strategy and refine certain technical components of our cybersecurity program.

In connection therewith, Ecopetrol updated its cybersecurity risk profile and its cybersecurity strategy, by naming the management team of the Cybersecurity unit to oversee information technology, operational technology and activities at the Ecopetrol Group level. In addition, the Cybersecurity unit was placed within the Digital Vice Presidency, reporting directly to senior management.

Ecopetrol adopted the ONG-C2M2 (Oil & Gas - Cybersecurity Capability Maturity Model) as a framework to manage its cybersecurity profile. Finally, Ecopetrol updated its cybersecurity policies and cyber-incidents response procedure.

We are exposed to certain risks associated with the nature of our operations and the financial instruments we use. Among the risks that affect our financial assets, liabilities and expected future cash flows are changes in commodity prices, currency exchange rates, interest rates and the credit quality of our counterparties.

Commodity price risk is associated with our day-to-day operations as we export and import crude oil, natural gas and refined products. We occasionally use hedges to partially protect our financial results from price fluctuations taking into account that part of our financial exposure under purchase contracts for crude oil and refined products depends on international oil prices. We believe that the risk of such exposure is partially naturally hedged since we are an integrated group (with operations in the upstream, midstream and downstream segments) and either export crude oil at international market prices or sell refined products at prices that are correlated to international market prices. We do not use derivative financial instruments for speculative or profit-generating purposes.

Currency risk arises in our operations given the fact that most of our revenues are derived from sales of products quoted in or with reference to U.S. dollars. Therefore when the Colombian Peso depreciates against the U.S. dollar, our revenues converted into Colombian Pesos increase. Conversely, when the Colombian Peso appreciates against the U.S. dollar, our revenues decrease. On the other hand, imported goods, oil services and the debt, which is mainly denominated in U.S. dollars, become less expensive when the Colombian Peso appreciates against the U.S. dollar and more expensive when the Colombian Peso depreciates against the U.S. dollar.

As of December 31, ~~2016~~2018 our U.S. dollar-denominated total debt was US$~~15.2~~10.5 billion, which we recognize in our consolidated financial statements at its amortized cost, which corresponds to the present value of cash flows, discounted at the effective interest rate. Out of this total, US$129.7 billion relate to Ecopetrol S.A., whose functional currency is the Colombian Peso. Therefore, when the Colombian Peso depreciates against the U.S. dollar, Ecopetrol S.A. is exposed to an exchange rate loss. In contrast, when the Colombian Peso appreciates against the U.S. dollar, Ecopetrol S.A. is exposed to an exchange rate gain. Some of the Ecopetrol Group’s subsidiaries have the U.S. dollar as functional currency and are not exposed to a material exchange rate risk resulting from fluctuations in the Colombian Peso against the U.S. dollar. On the asset side, when the financial statements of the Group are consolidated, the exchange rate differential of the subsidiaries’ assets and liabilities whose functional currency is the U.S. dollar is recognized directly in equity, as part of other comprehensive income.

Taking previous considerations into account, Ecopetrol seeks to identify and manage currency risk in a comprehensive manner, using an integrated analysis of natural hedges in order to benefit from the correlation between income or investments in a foreign ~~operations~~operation and debt denominated in foreign currency. In addition, the risk management strategy of the Company may involve the use of financial derivative instruments, and non-derivative financial instruments. ~~On October 1, 2015, Ecopetrol S.A. adopted hedge accounting as~~As a part of its risk management strategy, using the natural hedge between exports and dollar-denominated ~~debt.~~debt, on October 1, 2015, US$5.4 billion of Ecopetrol S.A.’s debt in U.S. dollars was designated as hedge instrument of its future export sales for the period 2015 – 2023. On June 8, 2016, Ecopetrol ~~S.A.~~ continued its hedge accounting strategy, using the natural hedge between some of its foreign investments and its dollar-denominated debt in an amount of US$5.2 billion. As of December 31, 2018, the outstanding value of the natural accounting hedges was US$6.5 billion. The remaining portion ~~12%~~ of ~~Ecopetrol S.A.’s~~our dollar-denominated debt, as well as the financial assets and liabilities denominated in foreign currency continue to be exposed to the fluctuation of the exchange rate, which means that an appreciation of the Colombian peso against the ~~U.S~~U.S. dollar could generate a loss if companies whose functional currency is the Colombian peso have an active net position in U.S. dollars or a gain if they have a net liability position in U.S. dollars. Conversely, a depreciation of the Colombian peso against the U.S. dollar could generate a gain if companies whose functional currency is the Colombian peso have a net active position in U.S. dollars or a loss if they have a net liability position in U.S. dollars. Finally, the Company maintains enough cash in Colombian pesos and U.S. dollars to meet its expenses in each currency (see Note 4.1.5 to our financial statements for further explanation of ~~the~~our accounting policy and Note ~~31.2~~28.1 for details of the hedge accounting adopted). With the adoption of hedge accounting, the effect of volatility of foreign exchange rate on the effective hedged portion of the debt is recognized directly in equity, as part of other comprehensive income. Our hedge management strategy is completely focused on our accounting, reason why the ultimate effect will only be determined when the hedge operations come to an end. Nevertheless, it is important to bear in mind that for Ecopetrol ~~S.A’s~~S.A.’s cash flow, the effect of the Colombian peso appreciation against the ~~U.S~~U.S. dollar is positive given the fact that we habitually convert our income in foreign currency to Colombian pesos.

Interest rate risk arises from our exposure to changes in interest rates mainly as a result of the issuances of floating rate debt linked to LIBOR, DTF and CPI (with a participation of ~~18.9%~~4.6%, ~~8.2%~~5.0% and ~~3.5%~~4.2%, respectively, of the nominal debt balance as of December 31, ~~2016)~~2018). Thus, volatility in interest rates may affect the fair value of and cash flows related to our investments and floating rate debt. In ~~2016,~~2018, our analysis of credit risk events and global financial markets drove us to decide not to hedge interest rate risk. Nevertheless, our ~~treasury~~capital markets office continuously monitors the performance of interest rates and the effect of interest rates on our financial statements.

The trust funds linked to Ecopetrol S.A.’s pension obligations (PAP) are also exposed to changes in interest rates, as they include fixed- and floating-rate instruments that are mark to market. This exposure is continuously monitored by our treasury office given the potential impact volatility may have on our financial results. The treasury office’s information is gathered from reports provided by the asset managers. These reports refer to regulatory limits as well as market, credit and liquidity risks. The investment guidelines with respect to the PAPs are issued by the Colombian regulation for pension funds, as stipulated in the Decree ~~941~~1833 of ~~2002~~2016 and Decree ~~1861~~1913 of ~~2012,~~2018, where it is indicated that they have to follow the same regime as the regular obligatory pension funds in their moderate ~~(i.e.~~(i.e., neither conservative nor aggressive) portfolio. For further information regarding the trust funds linked to the pension obligations of the company, see Note ~~22.2~~20.2 Plan assets to our consolidated financial statements.

Finally, counterparty risk is the potential probability that a borrower or counterparty defaults on any obligation. In our case, we are exposed to this risk as we invest in different financial instruments and receive letters of credit in order to mitigate our exposure with our commercial counterparties. We manage this risk ~~through an analysis of an issuer’s~~by monitoring and analyzing the counterparty’s creditworthiness, stock price behavior, spreads on credit default swaps, ~~and the~~ probability of ~~default.~~default, among others.

~~Following the promulgation of Decree 1525 of 2008, which provides general rules on investments for public entities,~~ Ecopetrol S.A.’s management established guidelines for our investment portfolios. These guidelines determine that investments in Ecopetrol S.A.’s U.S. dollar portfolio are generally limited to investments of our excess cash in fixed-income securities issued by entities rated A or higher in the long term and A1/P1/F1 or higher in the short term (international scale) by Standard & Poor’s Ratings Services, Moody’s Investors Service or Fitch Ratings. In addition, Ecopetrol S.A. may also invest in securities issued or guaranteed by the U.S. government or Colombian government, without regard to the ratings assigned to such securities. In Ecopetrol S.A.’s Colombian Peso portfolio, it must invest our excess cash in fixed-income securities of issuers rated AAA in the long term, and F1+/BRC1+ in the short term (local scale) by Fitch Ratings Colombia or BRC Standard & Poor’s. In addition, Ecopetrol S.A. may also invest in securities issued or guaranteed by the Colombian government without rating restrictions.

~~In order~~On December 2018, Ecopetrol S.A.’s management approved an update to ~~diversify risk~~the investment guidelines applicable for both U.S. Dollars and Colombian Pesos, that has been effective since January 1, 2019. The guidelines were updated in ~~our Colombian Peso portfolio, Ecopetrol S.A. does not invest more than 10%~~light of the ~~excess of cash in one specific issuer. In~~following: the ~~case of our U.S. dollar portfolio, it does not invest more than 5%~~current reality of the ~~excess~~financial markets, alignment with the practices of ~~cash in one specific issuer~~comparable companies in the ~~short term (up~~oil sector, the Ecopetrol Group’s current corporate structure and the need to ~~one year), or 1% in~~have a larger investment universe with the ~~long term.~~objective of generating higher returns on resources with an acceptable level of risk. The primary changes are:

Ecopetrol S.A.’s investment portfolio in U.S. dollars is segmented into four tranches, each one matching our liquidity needs. The working capital tranche is calculated taking into account our cash flow needs for the next 60 days. The liquidity tranche is calculated as the contingent cash flow needs over the working capital, taking into account the development of capital expenditures related to projects. The asset liability tranche is built to match our long-term debt. The investment tranche includes the remaining amount of the total portfolio after deducting the amounts pertaining to the above mentioned tranches and after subtracting the Colombian Peso portfolio.

Ecopetrol S.A.’s investment portfolio in Colombian Pesos is segmented in two tranches, each one matching our liquidity needs. The first tranche is calculated taking into account our cash flow needs for the next 30 days, and the second tranche is built for investment purposes.

We are a party to various legal proceedings in the ordinary course of business. Other than the proceedings disclosed in this annual report, we are not involved in any pending (or, to our knowledge, threatened) litigation or arbitration proceeding that we believe will have a material adverse effect on our Company. Other legal proceedings that are pending against or involve us and our subsidiaries are incidental to the conduct of our and their business. We believe that the ultimate disposition of such other proceedings individually or in an aggregate basis will not have a material adverse effect on our consolidated financial condition or results of operations.

As of December 31, ~~2016,~~2018, Ecopetrol S.A. was a party to ~~2774~~4,681 legal proceedings relating to civil, administrative, environmental, tax and labor claims, of which 3,279 were filed against us in the Colombian courts and arbitration tribunals, of which ~~341~~386 had an accrual provision. We allocate sufficient amounts of money and time to defend these claims. Historically, we have been successful in defending lawsuits filed against us. Other than the environmental administrative proceedings described in the last paragraph of this section, based on the advice of our legal advisors, it is reasonable to assume that the litigation procedures brought against us will not materially affect our financial position or solvency regardless of the outcome. See Note ~~23 – Accrued liabilities and provisions~~21 to our consolidated financial statements included in this annual report for a discussion of our legal proceedings.

On December 11, 2011, the Caño Limón-Coveñas oil pipeline ruptured and caused the spill of approximately 3,267 barrels of crude oil into the Iscala creek, which connects with the Pamplonita River that provides water to the city of Cúcuta. The incident did not cause any fatalities or injuries.

A class action lawsuit has been filed against Ecopetrol S.A. and against employees of the company, and the First Administrative Court ~~of Cucuta~~ has jurisdiction to conduct the case, which is in the probatory stage.

The Regional Environmental authority of Norte de Santander, or ~~Coporació~~Corporación Autónoma Regional de la Frontera Nororiental (CORPONOR) has filed a lawsuit against Ecopetrol at the ~~First~~ Administrative Court of ~~Cucuta~~Norte de Santander claiming for (i) the environmental loss caused by the incident and (ii) for compensation costs relating to the environment damage for approximately COP$33 billion. Ecopetrol’s legal counsel filed to dismiss the lawsuit on June 2, 2014, based on three grounds: (i) there is no proof of environmental loss, (ii) CORPONOR does not have the authority to file this lawsuit and (iii) CORPONOR’s petition for direct compensation is not the proper legal action according to the applicable procedural rules. Currently this lawsuit is in ~~probatory~~the evidentiary stage.

Ecopetrol and national and local authorities ~~are developing~~convened to develop a project ~~for the development~~consisting of an alternative to the water supply in the intake of the aqueduct in Cúcuta, ~~which was approved by the~~The Company’s Board of Directors in December 2011 approved the participation of Ecopetrol in the project as part of the strengthening of its contingency plans and its relationship with its stakeholders. ~~Currently local authorities are attempting~~On November 10, 2017, the relevant parties entered into an agreement with the purpose of building the alternative water supply at a cost of approximately COP$385 billion. According to ~~acquire~~ the ~~necessary economic resources for~~agreement Ecopetrol will be in charge of the construction of the above mentioned infrastructure. As of the date of this annual report, Ecopetrol has awarded one construction contract. For the initial segment of the project and ~~Ecopetrol~~a second construction contract for a subsequent segment is soon to be awarded. The corresponding auditing contract has ~~finalized the basic and detailed engineering.~~also been awarded.

On October 22, 2014, we were served with a class action suit against us seeking monetary damages of approximately COP$7.4 trillion related to an incident that occurred on August 21, 2014, during the loading operations of the BT Energy Challenger vessel. The claimants alleged possible damage to the port area of Ecopetrol’s terminal in Coveñas, as well as of marine and submarine areas and beaches that form the geographical area of the Morrosquillo Gulf. This allegation is currently under investigation by the Harbor Master of Coveñas. Ecopetrol filed a motion requesting the judge to require the claimants to amend their claim to more precisely set forth the facts and evidence it believes establishes Ecopetrol’s liability.

On March 3, 2015, Ecopetrol filed its statement of defense arguing the exclusive fault of a third party. On October 20, 2015, the Court denied a class action of more than 100 informal traders in the region because there is no common identity with the initial class (hotel employees). However, during 2016 the Sucre Administrative Tribunal accepted another ~~1208~~1,208 informal traders and fishermen as claimants.

On March 10, 2017, a mandatory conciliatory hearing was held in order to seek an agreement but it failed.

In January 2018, a judicial order was ~~declared unsuccessful.~~issued to commence the evidence gathering process, a decision which was objected by the parties.

In September 2018, all the ordered statements were made, the evidentiary stage was finalized and the parties filed their final closing briefs. As of the date of this annual report the case remained pending.

As highlighted in previous 20-F and 6-K filings, on January 6, 2014, the United States Department of Justice (DOJ) announced the unsealing of charges against two former co-chief executive officers (CEOs) and the former general counsel of PetroTiger Ltd. (PetroTiger), alleging, among other things, violations of the U.S. Foreign Corrupt Practices Act (FCPA) and conspiracy to commit violations of the FCPA and money laundering in connection with payments made to an Ecopetrol employee. By the time of the DOJ announcement, that employee no longer worked at the Company. The DOJ alleged the payments were made to secure Ecopetrol’s approval for PetroTiger’s entry into an oil services contract with Mansarovar Energy Colombia Ltd. Ecopetrol participated in the Mansarovar project as non-operating partner in a joint operating agreement. Also on January 6, 2014, the DOJ announced that the general counsel of PetroTiger had pled guilty on November 8, 2013, to one count of conspiracy to violate the FCPA and to commit wire fraud. One of the charged former co-CEOs pleaded guilty on February 18, 2014, to the same charge. On May 9, 2014, the DOJ charged the other former co-CEO with conspiracy to violate the anti-bribery provisions of the FCPA, conspiracy to commit wire fraud, conspiracy to launder money, and substantive FCPA anti-bribery and money laundering violations. On June 15, 2015, that co-CEO pleaded guilty to conspiracy to violate the FCPA.

After the DOJ unsealed its charges on January 6, 2014, Ecopetrol filed a complaint the same month, jointly with the Transparency Secretariat of the Presidency of the Republic, to Colombia’s Attorney General’s office requesting the investigation of individuals who may have been involved in the wrongdoing related to the Mansarovar contract. Colombian authorities initiated a proceeding related to PetroTiger, and on March 11, 2015, arrested four current Ecopetrol employees and two former Ecopetrol employees related to their investigation of the Mansarovar project and five other contracts involving PetroTiger and Ecopetrol. To date, four investigations of the control entities ~~investigations are ongoing. Throughout 2016, Colombia~~continue in course. During 2017 and 2018 to date, Colombian authorities ~~issued several judgments~~have resolved an appeal confirming the conviction of a former Ecopetrol employee and another person involved in ~~connection~~the case but not linked with ~~former PetroTiger directors, a retired employee of~~Ecopetrol. Likewise, another appeal submitted by Ecopetrol and ~~other persons involved.~~the Prosecutor’s Office is in progress in a case in which a former Ecopetrol employee was acquitted.

Ecopetrol has responded to information requests from the DOJ and Colombian authorities in connection with their investigations of PetroTiger. Ecopetrol has been designated with the formal status of victim in the local Colombian proceedings. It has terminated the employment of the four charged individuals who were Ecopetrol employees at the time of the arrests. Ecopetrol has concluded an internal investigation and has not identified any new issues relating to PetroTiger.

On December 23, 2011 our Salgar-Cartago pipeline ruptured. Internal and external experts believe this incident occurred as a result of creep movement of soil caused by severe weather conditions, causing the soil surrounding the pipeline to exert strong pressure on the pipeline and rupture it. As of the date of this annual report, 13there are eight lawsuits related to this incident ~~are active for an~~with possible damages of approximately ~~worth of~~ COP$~~16.2~~7.7 billion.

On April 2, 2018, a class action lawsuit was filed against Ecopetrol and CENIT by the Inda Guacaray and Inda Sabaleta reservations of the AWA Indigenous community who claim damages to their communities by environmental contamination and damage to natural resources that the defendants supposedly caused by act or omission during various environmental incidents. In August 2018 Ecopetrol answered the complaint. The parties are currently waiting for the evidentiary stage to start.

Although the plaintiffs did not clearly determine the amount of their claims, Ecopetrol and the National Agency for Legal Defense (Agencia Nacional de Defensa Jurídica del Estado or ANDJE) have initially calculated the amount to be up to COP$358,201,371,800.

As of December ~~2016,~~2018, Ecopetrol S.A. was party to ~~209~~218 environmental administrative proceedings, of which ~~193~~206 were initiated before ~~2015,~~2018, and 1612 during ~~2016.~~2018. During ~~2016,~~2018, six proceedings were concluded, in ~~four~~two of them we were subject to monetary fines through Resolutions ~~Corporinoquía Resolution 200.41-16-0551 of May 3, 2016, Corporinoquía Resolution 200.41-16-0873~~200.36.18.0999 of July ~~18, 2016, Cam Resolution 2134~~16, 2018 and 200.36.18-1028 of July ~~25, 2016 and Corpoamazonía Resolution 1162 of September 9, 2016.~~17, 2018. However, ~~these four proceedings were~~another proceeding was suspended due to the replenishment of resources. It is not possible for us to determine whether the pending proceedings could have a material effect on Ecopetrol.

~~Ecopetrol~~Reficar is a ~~corporation~~wholly owned subsidiary of Ecopetrol. According to Colombian regulations, Ecopetrol’s and Reficar’s employees are considered public servants, and as such can be held liable for negligent use or management of public resources. In this context, given that Ecopetrol is majority owned by the Colombian Government ~~that administers public resources~~ and Reficar is a wholly owned subsidiary of ~~Ecopetrol. Ecopetrol’s employees have a statutory responsibility to ensure the proper use of public resources. Reficar’s employees also have a duty for proper management of~~Ecopetrol, Ecopetrol and Reficar administer public resources.

~~The conduct of Ecopetrol’s~~As a result, Ecopetrol and ~~Reficar’s~~Reficar employees are generally subject to the control and supervision of the following control entities, among others:

The following are the most significant investigations and proceedings carried out by the aforementioned state entities:

~~As a result~~
1.1 Because of the modifications of the schedule and budget related to Reficar’s expansion and modernization project (the “Project”), the Office of the Comptroller General initiated a special audit investigation of the Project in 2016 and delivered a final report to Reficar on December 5, 2016. The report made 36 findings most of which were related to increased costs compared to budget for services, labor and materials. As required, on January 18, 2017, Reficar submitted an action plan exposing and addressing the 36 findings in the following areas: (i) contract management, (ii) supervision of engineering standards contracted with third parties, and (iii) documentation of the control, reporting and monitoring mechanisms of subcontracts.

These actions were initiated based on the Office of the ~~General~~ Comptroller ~~initiated a special audit investigation~~General’s theory that lower than expected profitability at Reficar could have been caused by (i) modifications to the schedule and, (ii) the increase of the ~~Project in 2016 and delivered a final report to Reficar on December 5, 2016. The report made 36 findings most of which were related to increased costs compared to~~ budget for ~~services, labor and materials. As required, on January 18, 2017, Reficar submitted an action plan exposing and addressing~~ the 36 findings in the following areas: (i) contract management, (ii) supervision of engineering standards contracted with third parties, and (iii) documentation of the control, reporting and monitoring mechanisms of subcontracts.Project.

~~As a result of the findings described above~~On June 5, 2018, the Office of the Comptroller General split the initial proceeding in two. The first one is related to the increase of the Project’s budget and the second one is related to the modifications in the Project’s schedule.

Regarding the first proceeding, on June 5, 2018, the Office of the Comptroller ~~recently opened actions~~General issued charges for financial responsibility (proceso de responsabilidad ~~fiscal)~~fiscal) against 36(i) 15 individuals, ~~and the six companies involved in the Project, including current and former members of Ecopetrol’s Board of Directors;~~which include former members of Reficar’s Board of ~~Directors;~~Directors, a current ~~and former employees~~employee of ~~Ecopetrol;~~Ecopetrol, and former employees of Reficar, as well as against (ii) Chicago Bridge & Iron Company N.V., CBI - Chicago Bridge & Iron company (CB&I) Americas Ltd., Chicago Bridge & Iron Company CB&I UK Limited, CBI Colombiana S.A., Foster Wheeler USA Corporation and Process Consultants ~~Inc. The current members of Ecopetrol’s board~~Inc, and ~~senior management subject to these proceedings are Juan Carlos Echeverry Garzón, Chief Executive Officer; and Joaquín Moreno Uribe, Horacio Ferreira and Mauricio Cárdenas Santamarí~~the following insurance companies, Compañía ~~all of them members of the Board of Directors. These actions pertain to an eventual reduction of the value of state assets due to~~ Aseguradora de Fianzas S.A, CHUBB de Colombia, Compañía ~~lower than expected profitability at Reficar~~de Seguros S.A., Mapfre Seguros, as ~~a result of the modifications of the schedule and budget of the project.~~

~~On January~~As for the other 21 individuals initially investigated in 2017, the Office of the Comptroller General ~~Comptroller initiated another special audit~~closed the investigations. Therefore, as of the date of this annual report, no current or former member of Ecopetrol’s Board of Directors was charged in ~~Reficar.~~ the first proceeding relating to the increase in the Project’s budget.

As of the date of this annual report, no charges have been issued in the ~~audit is~~second proceeding relating to the modifications in the Project’s schedule.

While the content and status of the proceedings remains confidential, we can report that Reficar and several of its ~~preliminary stage.~~employees have cooperated with and provided the information required by the department of the Office of the Comptroller General in charge of leading the proceedings.

As of the date of this annual report, Reficar has no liability under these proceedings.

~~The Attorney General’s Office currently has two ongoing investigations relating to~~On February 2, 2018, the Project: (i) the first, initiated in 2012 against members of Reficar’s Board of Directors at the time, as well as certain current and former officers of Reficar; and (ii) a more recent investigation regarding delays in the completionLegal Accounts Commission of the ~~Project, focusing on~~National House of Representatives of the ~~role~~Republic of ~~current~~Colombia informed Reficar that the House of Representatives decided, through Resolution No. 2713, that it would not close the General Budget and ~~former officers~~Treasury Account and the National Balance Sheet for the 2016 fiscal year, since the 2016 Financial Statements of ~~Ecopetrol, as well as current and former members~~several state entities, among them Reficar, had received a negative opinion from the Office of ~~Ecopetrol’s Board of Directors.~~the Comptroller General. Pursuant to Resolution No. 2713, Colombian control entities were ordered to initiate the corresponding disciplinary, fiscal and/or criminal investigations.

~~The Prosecutor’s Office is conducting a confidential investigation. In connection therewith, on April 27, 2017,~~On February 6, 2019, the ~~Prosecutor’s Office announced in a press release its intention to pursue charges~~Legal Accounts Commission of the National House of Representatives of the Republic of Colombia informed Reficar that the House of Representatives decided, through Resolution No. 3135, that it would not close the General Budget and Treasury Account and the National Balance Sheet for the ~~alleged crimes~~2017 fiscal year, since the 2017 Financial Statements of ~~document forgery, illegal interest~~several state entities, among them Reficar, had received a negative opinion from the Office of the Comptroller General. Pursuant to Resolution No. 3135, Colombian control entities were ordered to initiate the corresponding disciplinary, fiscal and/or criminal investigations.

In respect of the special audits mentioned in ~~the execution of agreements, misappropriation of public funds~~sections 1.3 and unjust enrichment against: (i) four former executives and officials of Ecopetrol and Reficar (ii) one current employee of Ecopetrol who was assigned to work in Reficar between 2012 and 2016, (iii) two executives of CB&I and (iv) Reficar’s statutory auditor from 2013-2015. According to the announcement the total amount involved in the alleged charges is estimated at COP 610 billion pesos (equivalent to approximately US$ 209 million at the Representative Exchange Rate1.4 above, as of ~~May 26,~~the date of this annual report, Reficar has no knowledge of any procedural action carried out by any of the Colombian control entities regarding the disciplinary, fiscal and/or criminal investigations ordered neither by the Resolution No. 2713 nor by the Resolution No. 3135.

Reficar’s external auditors issued an unqualified opinion on Reficar’s financial position as of December 31, 2016, 2017 and 2018. As of ~~COP 2,911.66 per US$).~~the date of this annual report, such auditors have not informed Reficar that there has been any change to their opinion.

The Ecopetrol and Reficar executives and officials are: Orlando José Cabrales Martínez (Reficar CEO, 2009-12); Reyes Reinoso Yañez (Reficar CEO, 2012-16), current employee of Ecopetrol; Felipe Laverde Concha (Reficar General Counsel, 2009-March 2017); Pedro Alfonso Rosales Navarro (Ecopetrol Downstream Executive Vice President, 2008-15); and Nicolás Isaksson Palacios (Reficar Lead Legal Counsel, 2013-January 2017).

The Prosecutor’s Office has not yet made public the factual basis for such charges, and accordingly we are not in a position to predict the outcome of the Prosecutor’s Office’s investigation or the disposition of any charges that the Prosecutor’s Office may bring. As of the date of this annual report, to the best of Ecopetrol’s knowledge, the financial statements continue to fairly represent the financial and operational condition of the Company in all material aspects and its internal controls remain effective.

Reficar has been officially informed that the ~~press release, the Prosecutor’s~~Attorney General’s Office ~~also announced that in order to conclude the next phases of the~~currently has five ongoing investigation related to ~~among others,~~ the ~~selection~~Project.

Regarding one of these five investigations, on September 12, 2017, the Attorney General’s Office issued a list of charges against certain former members of Reficar’s Board of Directors, as well as certain former officers of Reficar. The charges were related to the failure to fulfill some of their duties as administrators and/or for acting “ultra vires” in the exercise of their functions against: (i) Javier Genaro Gutiérrez (Ecopetrol CEO, 2007-2015); (ii) Felipe Laverde (Reficar General Counsel, 2009-March 2017); (iii) Pedro Rosales (Ecopetrol Downstream Executive Vice President, 2008-2015); (iv) Diana Constanza Calixto (Ecopetrol Head of the ~~strategic partner,~~Corporate Finance Unit, 2009-2014) and (v) Reyes Reinoso Yañez (Reficar CEO, 2012-2016). The Attorney General’s Office closed the ~~exit~~case against the rest of ~~Glencore~~the members of Reficar’s Board of Directors and the ~~selection~~rest of the ~~contractor, it would be interviewing executives~~former officers of ~~Ecopetrol, Reficar, Glencore~~Reficar.

The specific content and status of the ~~supervisory joint venture conformed~~remaining four ongoing investigations remains confidential.

The Prosecutor’s Office has been conducting the following legal proceedings:

The Prosecutor’s Office has already made public the factual basis for such charges, which is based on the theory that: (i) executing a cost reimbursable engineering, procurement and construction contract (EPC) and not a lump sum agreement favored CBI interests, and (ii) executing special invoicing procedures (MOA –Memorandum of Agreement and PIP –Project Invoicing Procedure) with CBI allowed the payments of unreasonable amounts not duly verified by Foster Wheeler USA ~~Corporation and Process Consultants Inc.~~Corporation. The defense attorneys have not yet had an opportunity to present their case against such facts in a court of law.

On May 9, 2017, ~~the~~Ecopetrol’s Audit and Risk Committee ~~of the Board of Directors~~ retained a U.S.-based outside law firm to commence a third-party investigation into the matters set forth in the Prosecutor’s Office announcement. The results were presented in December 2017 to Ecopetrol’s Audit and Risk Committee. This investigation concluded that to date there has been no evidence of possible unlawful acts that affect Ecopetrol’s internal control over the financial reporting of the Company, on the allegations made by the Prosecutor’s Office.

Considering the current stage of these legal proceedings, we are not in a position to predict the outcome of the Prosecutor’s Office’s investigation or the disposition of any of the charges brought by the Prosecutor’s Office.

Ecopetrol and Reficar have cooperated closely and extensively with the control entities in furthering their investigations and will continue to monitor the status and development of these investigations.

In March 2016, Reficar filed a Request for Arbitration before the International Chamber of Commerce (the “ICC”), against Chicago Bridge & Iron Company N.V., CB&I (UK) Limited, and CBI Colombiana S.A. ~~with respect~~(jointly, “CB&I”) concerning a dispute related to the Engineering, Procurement, and Construction ~~Contract~~Agreements entered into by and between Reficar and CB&I for the expansion of the Cartagena Refinery in Cartagena, Colombia. Reficar is the Claimant in the ICC arbitration ~~proceeding~~ and seeks no less than US$2 billion in damages plus lost ~~profits from CB&I.~~ profits.

On May 25, 2016, CB&I filed ~~an answer~~its Answer to the Request for Arbitration and ~~counterclaim of~~Counterclaim for approximately ~~USD $213~~US$106 million and COP$324,052 million. On June 27, 2016, Reficar filed its reply to CB&I’s counterclaim denying ~~any liability to~~and disputing the declarations and relief requested by CB&I. On April 28, 2017, ~~Reficar submitted its Non-Exhaustive Statement of Claim and~~ CB&I submitted its Statement of ~~Counterclaim.~~ Counterclaim increasing its claims to approximately US$116 million and COP$387,558 million. On March 16, 2018, CB&I submitted its Exhaustive Statement of Counterclaim further increasing its claims to approximately US$129 million and COP$432,303 million (including in each case interest).

The ~~ICC proceeding~~date for the filing of the Third Written Submission is ~~currently in its preliminary stage~~to be set by the Arbitral Tribunal and the oral hearing is scheduled ~~for a~~to begin in April 2020. After the hearing, ~~in October 2018. The~~the Tribunal will analyze the parties’ arguments to render its final decision on Reficar’s and CB&I’s claims. Until then, the outcome of ~~these actions~~this arbitration is unknown.

The Office of the Comptroller General, ~~Comptroller,~~ in exercise of its fiscal monitoring duties and authority as set forth in Article 267 of the Political Constitution, ~~and the law,~~ has undertaken audits of the performance of the Bioenergy ~~S.A~~S.A.S. and Bioenergy Zona Franca S.A.S. investments.

On February 6, 2017 the Office of the Comptroller General ~~Comptroller~~ initiated a Special Intervention (Special Audit) in order to evaluate the use of public funds in the project carried out by Bioenergy Zona Franca S.A.S. and Bioenergy S.A. ~~The Company is cooperating~~On July 10, 2017 the Office of the Comptroller General issued its final report with 15 findings related to: (i) acquisition, lease payments and the use of agricultural lands, (ii) loss of profits due to the project’s delay; and (iii) execution of contracts related with the ~~oversight~~building, commissioning and ~~control entities~~start-up of the industrial plant and ~~has responded~~the agricultural component of the project. On December 28, 2018, Bioenergy completed all of the activities set forth in the remediation plan to address the ~~information requirements that have been requested to date.~~15 findings.

As of the date of this annual report, the Office of the Comptroller General had initiated a financial audit of Bioenergy’s financial statements for the year ended December 31, 2018.

Our Shareholders’ General Assembly was held on March ~~31, 2017~~29, 2019 and the following matters were approved:

In ~~2016,~~2018, the Board of Directors approved as a dividend policy ~~under which we are to distribute~~consisting of the ordinary distribution of between 40% and 60% of the adjusted net income ~~before~~of the ~~effect~~Company of ~~impairment~~each fiscal year. For this purpose, the Board of ~~non-current assets (net of taxes) at~~Directors shall assess overall delivery against the ~~corporate group level. This policy cannot exceed~~Company’s financial targets, as well as the ~~maximum amount to be distributed~~macroeconomic environment, projected cash requirements for delivering on our Business Plan and ~~should keep~~strategy, while maintaining appropriate financial flexibility in keeping the Company’s debt metrics in line with an investment grade rating. The policy does not preclude the distribution of extraordinary dividends above the 40% to 60% range, under exceptional circumstances and with due consideration of the above criteria. The maximum amount to be distributed is the profits available to shareholders (net income after release and appropriation for legal, fiscal and occasional reserves).

Pursuant to Colombian law, dividend distribution to our shareholders must be approved by a 78% majority of the shares represented in the corresponding ~~shareholders’ meeting.~~General Shareholders Assembly. In the absence of this special majority, at least 50% of the net profits must be distributed.

On March 29, 2019, our shareholders at the ordinary General Shareholders Assembly approved an ordinary dividend of 60% of our net income or COP$169 per share (within the dividend policy of 40% and 60% of net income), for the fiscal year ended December 31, 2018 and an extraordinary dividend of 20% of our net income or COP$56 per share, given our strong operational and robust cash position in 2018,for a total dividend per share of COP$225. On March 23, 2018, our shareholders at the ordinary General Shareholders Assembly approved an ordinary dividend of 55% of our net income for the fiscal year ended December 31, 2017. On March 31, 2017, our shareholders at the ordinary ~~general shareholders’ meeting~~General Shareholders Assembly approved an ordinary dividend of 40% of our net income before the impairment of non-current assets (net of taxes) for the fiscal year ended December 31, 2016. Given that the fiscal year ended December 31, 2015 resulted in a net loss for Ecopetrol S.A., our shareholders at the ~~Ordinary~~ General ~~Stockholder Meeting~~Shareholders Assembly held on March 31, 2016, approved that there was no distribution of profits for the fiscal year ended December 31, 2015. Pursuant to Article 456 of the Code of Commerce the Company absorbed the net loss for the fiscal year ended December 31, 2015 through its legal reserve. In 2014 and 2015, the shareholders approved the distribution of 80.1% and 70% of 2013 and 2014 net income, respectively. See ~~the~~ sectionFinancial Review—Liquidity and Capital Resources—Dividends.

Ecopetrol S.A. is required to have legal reserves equal to 50% of its subscribed capital. If the legal reserves are less than 50% of subscribed capital, we will contribute 10% of net income to our legal reserves every year until our legal reserves meet the required level.

~~Starting on~~On August 2010, our ADSs began trading on the Toronto Stock Exchange (“TSX”) under the symbol “ECP.” On February 17, 2016, we announced the application for voluntary delisting from the Toronto Stock Exchange ~~after in an ordinary meeting held on January 27, 2016, during which~~following the Board of ~~Directors made the~~Directors’ decision to delist from the TSX. ~~This~~The decision was based on the Board of Director’s assessment of, ~~among other factors,~~ the limited trading activity of our ADRs in Canada, a liquid market for our ADRs on the NYSE and for our ordinary shares on the local Colombian Stock Exchange (Bolsa de Valores de Colombia), ~~both of which enable interested investors to acquire a participation in Ecopetrol S.A.~~among other factors. The time and administrative efforts associated with maintaining the listing of the ADRs on the TSX were also taken into account. On March 2, 2016, ~~Ecopetrol’s ADRs~~our ADR’s were officially delisted from the TSX. ~~After~~On December 7, 2017, we applied to the Alberta Securities Commission and the Ontario Securities Commission to cease our reporting requirements, due to our delisting ~~from~~process. On September 4, 2018, we announced that effective August 29, 2018, we had ceased to be a reporting issuer in each of the ~~TSX, the~~provinces of Alberta and Ontario and hence were no longer a reporting issuer in any jurisdiction in Canada. Accordingly, Ecopetrol no longer has any continuous disclosure obligations in Canada. The ADRs have continued to trade on the NYSE and the ordinary shares have continued to trade in the Colombian stock market. Therefore, the Company continues to be subject to United States, as well as Colombian, reporting and corporate governance obligations.

The following table sets forth reported high and low closing prices in Colombian Pesos for our shares and the reported average daily trading volume of our shares on the BVC for the periods indicated. The table also sets forth information on the trading price of our shares in Colombian Pesos and U.S. dollars, as well as the average trading volume.

~~Minister~~Germán Eduardo Quintero Rojas (43) has served as Managing Director of Fogafin, President of the National Hydrocarbons Agency, General Secretary and Advisor to the Ministry of Trade, Industry and Tourism, and General Secretary of the Ministry of Mines and Energy. He has been an advisor to the General Secretary of the Office of the President of the Republic of Colombia, General Secretary of the Ministry of Internal Affairs, General Director and General Secretary of Acción Fiduciaria S.A., and Head of the Legal Office of the Ministry of Finance and Public ~~Credit, Mauricio Cárdenas Santamarí~~Credit. Mr. Quintero is a ~~(54)is the Minister of Finance and Public Credit since September, 2012. He was the Minister of Mines and Energy of Colombia~~lawyer from ~~September 26, 2011 to September 3, 2012. He has served as Senior Fellow and Director at the Latin America Initiative of the Brookings Institution~~Sergio Arboleda University, with studies in Washington D.C. Previously, Mr. Cárdenas served as Executive Director of Fundación para la Educación Superior y el Desarrollo (FEDESARROLLO), CEO of Empresa de Energía Eléctrica de Bogotá, Minister of Economic Development, Minister of Transport, and Director of the National Planning Agency of Colombia. Mr. Cárdenas holds a B.A. and master degree in economics from the University AndesAdministrative Law and a ~~Ph.D.~~degree from Javeriana Pontifical University. He also carried out studies in ~~economics~~a Doctorate in Administrative Law from ~~the~~San Pablo CEU University of ~~Berkeley, California. In 2001, Mr. Cárdenas~~Madrid, from where he was a ~~visiting scholar at Harvard University’s Center for International Development. Mr. Cárdenas has also served as~~doctorate candidate. To date, he is a member of the board of directors ~~of various organizations, including the Latin American~~at Fiduciaria La Previsora S.A., Central de Inversiones S.A. and ~~Caribbean Economic Association (LACEA), University Andes and the Colombia Stock Exchange (BVC). Currently he is a Director of Banco de la República.~~Gecelca S.A. E.S.P. Mr. ~~Cárdenas~~Quintero has served as a ~~Director~~non-independent member of ~~Ecopetrol´s~~Ecopetrol’s Board of Directors since March ~~27, 2008.~~29, 2019. Currently, Mr. ~~Cárdenas~~Quintero is a non-independent ~~Director~~member of ~~Ecopetrol´s Board.~~Ecopetrol’s Board of Directors as the General Secretary of the Ministry of Finance and Public Credit.

~~Mauricio Cabera Galvis (65)~~Orlando Ayala Lozano (62) has 40 years of experience in the global technology industry, 25 years of which he spent working for Microsoft in Seattle, Washington, where he served in a number of managerial positions, including Vice President for the Intercontinental Region, covering all countries of the southern hemisphere region, Executive World Vice President for Sales, Marketing and Support, and World President for Emerging Markets. Before joining Microsoft, he worked for NCR Corp., where he held the position of Sales Director for NCR Mexico and Senior Product Manager in Dayton, Ohio. His studies include the Information Systems Administration program at Jorge Tadeo Lozano University in Bogotá in 1981, with a Doctorate Honoris Causa granted by the same university in 1998, where he is member of the Management Board. Mr. Ayala was honored by the Antioquia newspaper El Colombiano with its 18th annual “Exemplary Colombian Citizen Living Abroad” award in 2013. Mr. Ayala is currently an independent director of the Executive Council of Centene Corp. (CNC). Currently, Mr. Ayala serves as an independent member of Ecopetrol’s Board of Directors and also serves as an international consultant and speaker on matters of leadership and technology trends.

Luis Guillermo Echeverri Vélez (61) has over 20 years of experience in the development, marketing, promotion and conducting of international business, imports and exports, the formulation and implementation of public and corporate policies, the development and implementation of conventional projects and information technology ventures, strategic planning, the financing of public and private projects and raising cooperation funds. He served as Executive Director of the Inter-American Development Bank, the Inter-American Investment Corporation and the Multilateral Investment Fund on behalf of the governments of Colombia, Peru and Ecuador. He was CEO of Trade Winds Network Inc., a company he also founded, and was Director and Founder of Amarilas.com. He served as Commercial Attaché in Colombia’s diplomatic mission to the US and as Director of Proexport’s Miami Regional Office. Mr. Echeverri is an attorney who graduated from the ~~firm Cabrera & Bedoya Investment Bankers.~~Bolivarian Pontifical University of Medellín, and earned a Master’s degree in Agricultural Economics from Cornell University, New York. Mr. Echeverri is an advisor in international businesses and has successfully led business initiatives and processes involving change, and methodological and technological innovation and implementation in companies of various sizes and large organizations. He is currently a member of the Boards of Directors of the Chamber of Commerce of Bogota, Telefonica, Pragma, Colmedica and Aliansalud. Currently, Mr. Echeverri is an independent member of Ecopetrol’s Board of Directors.

Juan Emilio Posada Echeverri (60) has been ~~President~~a director of the ~~FES Foundation~~companies Puerto Brisa S.A., Grupo Fast S.A. and ~~Banco de Occidente.~~Fast Colombia S.A.S. – VivaAir (formerly VivaColombia); Founder and CEO of Stratis Ltda. and Corporate Director-in-Chief of Synergy Aerospace. He has served as ~~Director~~Chairman of ~~INCORBANK S.A.~~Avianca, Alianza Summa (Avianca-Aces-Sam) and Aces S.A and is currently serving as ~~Public Credit Director in~~Executive Chairman of the ~~Finance and Public Credit Ministry~~Board of ~~Colombia. He has been Technical Vice~~Directors of Táximo Ltd., President of the ~~Banking Association~~Board of ~~Colombia and Head~~Directors of Direktio S.A.S., member of the ~~Global Programming Unit~~Board of ~~the National Planning Department. He was Dean~~Directors of ~~the Faculty~~Grupo Odinsa S.A. (infrastructure multi-latina affiliate of ~~Economics~~Grupo Argos), of ~~the Universidad Externado~~Sociedad Hotelera Tequendama S.A. (7 hotels in Colombia) and Computec Outsourcing de ~~Colombia and an economist in the Western Hemisphere Department of the International Monetary Fund.~~Documentos S.A. He holds a degree in ~~Philosophy~~Business Administration from ~~the Universidad Javeriana~~EAFIT University in Medellín, with an MBA from Pace University in New York and ~~holds~~ a ~~Master’s Degree~~degree in ~~Economics~~International Financial Law from ~~Universidad de los Andes. He attended the Ph.D. program at~~ the London School of Economics. He is also a ~~Director~~member of ~~Industrias de Licores~~the Advisory Councils of Grupo Empresarial del ~~Valle, Clínica DIME, ASTORGA and Fabricato. Mr. Cabrera has served as a Director of Ecopetrol’s Board since March 31, 2017. Currently Mr. Cabrera is an independent Director of Ecopetrol´s Board.~~

~~Yesid Reyes Alvarado (58)~~~~has been a professor at the Universities Externado, Libre, Santo Tomás, Autónoma of Madrid and Los Andes. He has acted as Associate Judge in the Tribunal Superior de Bogotá~~Sector Defensa (GESED), ~~Consejo Superior~~Disán S.A., C.I. Flores de la ~~Judicatura, Supreme Court~~Campiña (producer and ~~Constitutional Court. He has also been a columnist for the newspaper El Espectador. He served as Minister~~exporter of ~~Justice~~fresh flowers), of YPO Gold Colombia (global network of CEO’s) and ~~Law~~NT3 (developers of ~~Colombia during august 2014 to April 2016.~~real estate projects). He is ~~currently Director~~President of the Center for Research in Philosophy and Law at the University Externado. Mr. Reyes holds a degree in law and a specialization and Master in Criminal, Criminological and Criminalistics Sciences in the same university. He holds a PhD in Law from the University AutónomaBoard of ~~Madrid and had a research fellowship in Alexander von Humboldt Stiftug at the University~~Directors of ~~Bonn (Germany). Mr. Reyes has served as a Director of Ecopetrol’s Board since September 14, 2016. Currently Mr. Reyes is an independent Director of Ecopetrol’s Board.~~

~~Ana Milena López Rocha~~ (36) serves as the Director of Public Credit and National Treasury at the Colombian Ministry of Finance since April 2015. She was a Partner at asset manager Newfoundland Capital Management and an external advisor to Fiduciaria Alianza and Alianza Valores. She held leadership positions at Sociedades Bolivar S.A. and J.P. Morgan Chase Bank. Ms. López holds a B.A. in Economics from Harvard University and a Master´s Degree in Business from Columbia Business School. She isFundación Plan, a member of the Board of Directors of ~~Interconexión Eléctrica S.A. E.S.P. - (ISA)~~Plan International Brazil, a member of the Nominations and ~~Financiera de Desarrollo Nacional. Ms. López has served~~Government Committee of the global assembly for Plan International Inc. and is a part of the International Advisory Board of Polimath Ventures. Currently, Mr. Posada serves as ~~a Director~~an independent member of Ecopetrol’s Board ~~since September 14, 2016. Currently Ms. López is a non-independent Director~~ of ~~Ecopetrol´s Board.~~Directors.

~~Jaime Ardila Gómez (61)~~Sergio Restrepo Isaza (57)~~was president of General Motors for South America and has held various positions within General Motors. Among these, he acted~~served in the Bancolombia Group as Vice President for ~~Brazil~~Capital Markets and ~~Mercosur; CFO~~Executive Vice President for ~~Latin America, Africa~~Corporate Development. He initiated his professional career at Corporación Financiera Corfinsura, where he held the positions of Company President, Vice President for Investment Banking and ~~the Middle East; CEO~~Vice President for Investments and ~~Managing Director in Argentina; CEO and Managing Director in COLMOTORES, CEO and Managing Director in Ecuador; Omnibus BB, CFO in Chile; and Treasurer in Mexico, among others.~~International. He also served ~~as Managing Director~~ in ~~Colombian Operations for N.M Rothschild and Sons and Secretary General of the Ministry of Industry and Trade in Colombia. Mr. Ardila holds~~ several boards including Cementos Argos, Compañía B.A. in economics from the University of Bogota Jorge Tadeo Lozano and a master degree in economics from the London School of Economics. He is a member of the Board of Directors of Goldman Sachs BDC, Accenture, Council of the Americas and the Chamber of Commerce of Brazil. Mr. Ardila has served as a Director of Ecopetrol’s Board since March 31, 2016. Currently Mr. Ardila is an independent Director of Ecopetrol´s Board.

~~Carlos Alfredo Cure Cure (72)~~~~was Ambassador of~~Nacional de Chocolates, Conavi, Asobancaria, Bolsa de Valores de Colombia, ~~to Venezuela. He was CEO of Bavaria~~Conglomerado Financiero Internacional Banagrícola S.A., Suramericana Asset Management SUAM and several others in the largest brewery in Colombia. He also served as an advisor to the Board of the Olympic Group S.A. and member of the Board of Avianca S.A. (Colombia’s national airline).He acted as deputy financial manager of Cementos del Caribe, CEO of Cementos Toluviejo and CEO of Astilleros Unión Industrial.community sector. Mr. ~~Cure holds~~Restrepo graduated with a degree in ~~Civil Engineering~~Business Administration from ~~the National~~EAFIT University of ~~Medellin. Mr. Cure has served as~~Medellín, with a ~~Director of Ecopetrol´s Board since September 5, 2015. Currently Mr. Cure is an independent Director of Ecopetrol´s Board.~~

~~Joaquín Moreno Uribe (68)~~~~earned a~~master’s degree in ~~civil engineering~~Business Administration from ~~Universidad Industrial~~Stanford University in California. He is currently a partner at Exponencial Banca de ~~Santander~~Inversión S.A.S., a member and completed a The Advanced Management Program (AMP) at The Harvard University Business School. Mr. Moreno worked initially as Director for Constructions and Engineering of Urbanas, in Bucaramanga, Colombia. He then joined the Royal Dutch/Shell Group of companies for more than 33 years. His career with Shell included various positions at technical, managerial and leadership levels, in different sectorschairman of the Oil & Gas Industries (Upstream and Downstream), Chemicals, Metals and Coal. He worked in different countries in America and Europe, including several appointments at regional, global and corporate levels at the Headquartersboards of directors of the ~~RDS~~BIOS SAS Group ~~in London~~ and ~~The Hague. Mr. Moreno has also served as Country Chairman and President for Shell in Mexico,~~Duratex S.A. Colombia, and Venezuela, as well as Regional CEO for the Northern Latin American Region. On his return to Colombia, he was appointed by the Presidency of the Country, as High Presidential Commissioner –Ad Honorem- in charge of coordinating the reconstruction of the areas affected by the heavy rain season and floods of early 2005, in the Region of Santander and Northern Santander. Mr. Moreno has been a member of the boards of directors of ~~various local~~Odinsa S.A., Consorcio Financiero and ~~international companies, as well as educational and leadership institutions and initiatives. Mr. Moreno has served as a Director of Ecopetrol´s Board since March 27, 2008.~~Coquecol. Currently, Mr. ~~Moreno is~~Restrepo serves as an independent ~~Director~~member of ~~Ecopetrol´s Board.~~Ecopetrol’s Board of Directors.

~~Horacio Ferreira Rueda (47)~~Santiago Perdomo Maldonado (61) ~~is an executive leader with more than 20~~has over 30 years of ~~international~~senior management experience in the ~~oil industry. His knowledge and expertise stem from positions~~Colombian banking industry, including as ~~CEO and~~ President of ~~an oilfield services company in Houston, TX to application of state of art technologies in the oil industry.~~Banco Colpatria, Scotiabank Group. He has ~~led~~been a member of various boards of directors at Colombian and ~~executed numerous reservoir engineering~~Latin American companies in a range of economic sectors, such as finance and mining and agriculture, including Bladex, Deceval, CESA, the Asociación Nacional de Empresarios de Colombia (ANDI), and the Asociación Nacional de Instituciones Financieras (ANIF), and he was a founding member of the Colombian Institute of Corporate Governance. Mr. Perdomo holds a degree in Business Administration from the CESA School of Advanced Studies in Administration. He is currently Executive Director of the Colpatria Group and a member of the Boards of Directors of Scotiabank Perú, Colfondos and Mineros S.A. Currently, Mr. Perdomo serves as an independent member of Ecopetrol’s Board of Directors.

Esteban Piedrahita Uribe (47) previously served as General Director of the National Planning Department, advisor for the President, Senior Specialist for the Inter-American Development Bank and as an economics editor of the magazine Semana, among other positions. He has served on the boards of directors of Banco Agrario, Metrocali, Amalfi S.A. Carvajal Educación and Alianza Valores. Mr. Piedrahita graduated with a degree in Economics from Harvard University and earned a master’s degree in Philosophy and the History of Science from the London School of Economics and Political Science. Mr. Piedrahita currently serves as President of the Chamber of Commerce of Cali. He is currently a member of the Boards of Directors of Cementos Argos and Centro de Eventos Valle del Pacífico, as well as a member of the Executive Council of Fedesarrollo. Currently, Mr. Piedrahita serves as an independent member of Ecopetrol’s Board of Directors.

Hernando Ramírez Plazas (65) has held positions at Universidad Surcolombiana as Dean of the Faculty of Engineering, Academic Vice-Principal, Principal, and Professor. He has worked at the National Institute of Health and at the Ministry of Health. He had a role as an external evaluator for Colciencias in technology development and innovation projects in the ~~Americas, Europe, Africa, Middle East~~area of natural gas. Additionally, he has acted as a trainer in gas issues for production personnel at Canacol Energy Inc., and ~~Far East~~he currently provides professional services to Comfamiliar Huila. Mr. Ramirez is a chemical engineer who graduated from Universidad Nacional de Colombia, with a master’s degree in Public Health from the same university, and ~~has conducted research~~a specialization in optimization of multiphase meters, underbalanced reservoir engineering, real time reservoir and production analysis, reservoir simulation and waterflood techniques with horizontal wells. He holds a BS in PetroleumGas Engineering from Universidad ~~América, master and doctoral degrees in Petroleum Engineering from Texas A&M University and a business graduate degree in Management of International Corporations from Texas A&M University.~~de Zulia (Venezuela). Mr. ~~Ferreira~~Ramírez has served as ~~a Director of Ecopetrol´s Board, nominated by the hydrocarbon producing provinces of Colombia, since January 23, 2014. Currently Mr. Ferreira is~~ an independent Director in Ecopetrol’s Board of ~~Ecopetrol´s~~Directors, since March 23, 2018. Currently, Mr. Ramírez serves as an independent member of Ecopetrol’s Board ~~nominated by the hydrocarbon producing provinces~~ of ~~Colombia.~~Directors.

Carlos Gustavo Cano Sanz ~~(70)~~(72) ~~currently serves as Professor in~~has been President of the ~~Master of Corporate Finance at CESA. He was~~Colombian Agriculture Association (SAC), Founder and Director of ~~Banco de la República from February 4, 2005 to January 31, 2017.~~Corporación Colombia Internacional (CCI), President of the Agrarian Fund, and President of the newspaper El Espectador. He was Minister of Agriculture between August 7, 2002 and February 3, ~~2005.~~2005 and Co-Director of Banco de la República between February 4, 2005 and January 31, 2017. He served as an external consultant to the Alternative Development and Competitiveness for the Andean Region from 1999 to 2002. He represented Colombia at the Inter-American Institute for Cooperation on Agriculture (IICA) from 1997 to 1999. He acted as President of COMUNICAN S.A. from 1996 to 1997, Caja Agraria from 1995 to 1996 and Sociedad de Agricultores de Colombia (SAC) from 1990 to 1991. He was General Manager of the National Federation of Rice Growers (FEDEARROZ) and the Agroindustrial Complex of Tolima S.A. (CATSA). Mr. Cano is an Economist from ~~the University of Los~~Universidad de los Andes in Bogotá with a ~~master~~master’s degree in Economics from the University of Lancaster ~~England. He has~~in England and a postgraduate degree in Government, Business and International Economics from Harvard University in Boston and ~~from~~undertook further postgraduate studies at the ~~Institute~~Instituto de Alta Dirección Empresarial (INALDE) of ~~Higher Business Management (INALDE)~~Bogotá. He ~~has served as~~currently teaches in the Master of Corporate Finance program at CESA University and in the Business School at Universidad de los Andes. He is a member of ~~various boards~~the Superior Council of ~~directors, including~~ the ~~Comisió~~EAFIT University of Medellín, ~~Nacional de Crédito Agropecuario, FINAGRO, Banco Agrario, ICA, CORPOICA,~~ the ~~National Coffee Growers~~Consultative Committee ~~among others. He doesn’t serve as a Director~~for Agriculture of ~~joint-stock company.~~Bancolombia, and the Group on Earth Observations Global Water Sustainability (GEOGLOWS) in the United States. Mr. Cano has served as aan independent Director ofin Ecopetrol’s Board ~~nominated by the minority shareholders with the greatest share participation,~~of Directors, since March 31, 2017. Currently, Mr. Cano isserves as an independent ~~Director~~member of ~~Ecopetrol´s~~Ecopetrol’s Board ~~nominated by the minority shareholders with the greatest share participation.~~of Directors.

Our Board of Directors is composed of nine members and is responsible for, among other things, establishing our general business policies. The majority of the Board of Directors must be independent, and must be elected pursuant to the criteria set out in paragraph two, Article 44, Law 964, 2005, and in accordance with the procedure determined in Decree 3923, 2006, or any other provisions that regulate, amend, replace or add such regulations. In addition, pursuant to our bylaws and in accordance with the procedures described therein, our majority shareholder must include, in its list of candidates for the last two seats in the Board of Directors, the name of one individual jointly proposed by departments that produce hydrocarbons and one individual jointly proposed by the ten minority shareholders with the highest equity participation. According to Colombian law, the members of the Board of Directors must be elected by the ~~shareholders’ meeting~~General Shareholders Assembly in accordance with a proportional representation system similar to cumulative voting (through an electoral quota voting system). The number of votes required to fill each position is calculated by dividing the number of possible votes by the number of open board positions. The members of the Board of Directors may be elected without an electoral quota voting system when there is unanimity. Pursuant to our bylaws, (i) positions on our Board of Directors ~~are elected for a one-year term, and the positions~~ are filled either by person or by ~~position. Members of~~position, (ii) at least three members appointed for a specific period must be nominated for the ~~Board may~~following period, and (iii) beginning in 2019, Directors will be ~~reelected indefinitely.~~elected for a two-year term. Currently, we have one Director appointed by his position: The General Secretary of the ~~Minister~~Ministry of Finance and Public Credit. Our current Directors were elected at the ~~ordinary shareholders’ meeting~~General Shareholders Assembly held on March ~~31, 2017. Directors~~29, 2019. Members of the Board may be ~~removed without cause at any moment by a majority of the shareholders present at a general shareholders’ meeting.~~reelected indefinitely.

Our CEO is appointed by the Board of Directors and ~~has~~will have at least two alternates. The CEO is elected for a two-year term, may be reelected indefinitely and freely removed prior to the expiration of his term. In accordance with our bylaws, the Board of Directors must evaluate the annual performance of the CEO, and such results must be published in Ecopetrol’s web page or in an alternative media vehicle.

The compensation of our Directors is set exclusively by the shareholders at the ~~general shareholders’ meeting.~~General Shareholders Assembly. Directors are compensated for attending board meetings and committee meetings. A Board meeting requires a quorum of at least five members and decisions are approved with a majority of the Directors present. In the practice a consensus decision making operates in the Board.

Under Colombian law, a director or executive officer must abstain from participating in any transaction that may result in a conflict of interest or that involves ~~competition~~competing with the company, unless authorized at a ~~general shareholders’ meeting.~~General Shareholders Assembly. The general shareholders may approve or reject the transaction giving rise to the conflict of interest with the vote of the majority of the shares present at the ~~shareholders’ meeting.~~General Shareholders Assembly. If the director or executive officer who has the conflict is a shareholder, his or her vote must be excluded. We disclose the number of conflicts of interest of our employees, executive officers and Directors in our annual reports.

Neither our bylaws nor our corporate governance code provide a retirement age for our Directors. Under our bylaws, there is no requirement for a person to have a minimum number of shares to be elected as a Director. Colombian law provides that Directors willing to sell or purchase shares in our Company need prior authorization from the entire Board of Directors. Colombian law does not impose any limitation as to the number of shares that may be acquired by a Director.

Pursuant to our bylaws, our Board of Directors has ~~four~~the ability to constitute the committees it considers necessary. The Board of Directors currently has five committees (audit and risk committee, corporate governance and sustainability committee, compensation and nomination committee, business committee and ~~business~~HSE (health, security and environment) committee)~~, which~~. These committees establish guidelines, set specific actions and evaluate and submit proposals designed to improve performance in the areas under their supervision and control. ~~These~~The committees are comprised of members of the Board of Directors who are also appointed by the ~~members of the Board of Directors and the~~same members. The chairman of each of the committees must be an independent Director. In addition to applicable regulations, the committees also have their own specific regulations that establish their purposes, duties and responsibilities.

Table 6557 – Composition of committees of the Board of Directors as of ~~April 20, 2017~~March 29, 2019

Our audit and risk committee, which must be comprised of at least three members, all of them independent Directors, is our highest internal control body and provides support to our Board of Directors on risk, accounting and financial matters. It is in charge of guaranteeing the design, implementation and supervision of our internal control over financial reporting. It also ratifies the annual hydrocarbons reserves report and provides support for our Board on analyzing topics related to financial matters, risks, control environment and the assessment of the Company’s internal and external auditors.

All committee members are required to be knowledgeable in accounting matters and at least one of them is required to be an expert in financial and accounting matters.

Our Board of Directors has determined that Jaime Ardila Gómez qualifies as an “audit committee financial ~~expert,”~~expert” and he is independent under the definition of “independent” applicable to us under the rules of the NYSE.

The audit and risk committee approves on a case-by-case basis any engagement of our external independent auditors to provide services different than those related to auditing our financial statements. ~~Occasionally, the~~The audit and risk committee ~~will have no doubt~~reviews that ~~these~~the additional services do not ~~compromise~~affect the external auditor’s independence. ~~When in doubt, the committee will request the opinion of the internal auditor.~~

Our compensation and nomination committee, which must be comprised of at least three members, including at least one independent director, provides general guidelines for the selection and compensation of our executive officers and employees.

Our corporate governance and sustainability committee, which must be comprised of at least three members, including at least one independent director, makes proposals to our Board of Directors to ensure and supervise the fulfillment of our good corporate governance and sustainability practices in accordance with our corporate governance code.

Our business committee, which must be comprised of at least five members, including at least one independent Director, assists our Board in analyzing potential business ventures. Based on its delegation of power, the committee studies and analyzes capital expenditure policies, major investment projects, strategy, new business and other matters that would help us move forward in our efforts toward the consolidation of our strategy. The primary criteria used in the committee’s decision-making process are the optimization of our portfolio and the proper allocation of our resources.

Our HSE Committee, which must be comprised of at least three members, the majority of which must be independent, supports the management of the Board of Directors in respect of the monitoring and management of risks associated with the health and safety of our employees, contractors and partners, as well as the performance of the Ecopetrol Group’s environmental management.

The following is a summary of the significant differences between our corporate governance practices and those required for U.S. companies under the NYSE listing standards.

The following presents information concerning our executive officers and senior management. Unless otherwise noted, the majority of these individuals are Colombian citizens.

~~Juan Carlos Echeverry (54)~~Felipe Bayon Pardo (53)has served as the Chief Executive Officer of Ecopetrol ~~Colombia’s National Oil Company,~~ since April 2015. From 2010 to 2012, he was Colombia’s Minister of Finance. During his mandate, four international publications (The Banker, América Economía, Emerging Markets, and Institutional Investor) awarded him as Best Finance Minister of the Americas.September 2017. Prior to ~~his current role,~~being appointed Chief Executive Officer, Mr. ~~Echeverry represented Colombia in the Board of Directors of the Inter–American Development Bank (Washington D.C.). He also~~Bayón served as Dean of Economics at University of the Andes (Bogotá). From 2000 to 2002 he was the Director of Economic Planning of Colombia. In 2002, Mr. Echeverry founded Econcept, a Bogotá based economics and business consultancy, and was partner of Global Source, a New York based consultancy. He is the author of several books about the Colombian economy and co-author of publications focusing on developing economies. Mr. Echeverry received a Ph.D. in Economics from New York University, a graduate studies degree in International Economics from Kiel Institute of the World Economy and B.A. in Economics from the University of the Andes (Bogotá).

~~Felipe Bayon Pardo (51)~~ ~~has served as the Executive Vice-President~~Chief Operating Officer of Ecopetrol ~~since~~from February ~~2016.~~2016 to September 2017. Mr. Bayon holds a degree in Mechanical Engineering from the Universidad de Los Andes (Bogotá). He has over 2527 years of experience in the oil and gas industry. For more than 20 years, he worked at BP plc, most recently as Senior Vice-President of BP America and Head of Global Deepwater Response. From 2005 to 2010, he was the Regional President of BP Southern Cone (South America), and prior to 2005 he worked in BP’s headquarters as Chief of Staff to the Upstream CEO and Head of the Executive Office for Exploration and Production. He began his career in 1995 in BP Colombia, as a Project Engineer, where he held various positions until becoming Vice-President of Operations in Colombia. Prior to this, he worked for Shell.

~~Marí~~Alberto Consuegra Granger (58) has served as Chief Operating Officer of Ecopetrol since March 1, 2019. Prior to being appointed as Chief Operating Officer, he was deputy CEO of Cenit S.A.S., Ecopetrol’s midstream subsidiary, since February 2018 and Vice-President of Supply and Services of Ecopetrol S.A. since August 2016. Mr. Consuegra holds a ~~Fernanda Suárez (42)~~degree in Civil Engineering from Universidad de Cartagena and a master’s degree in Pavements and Construction Management from Texas A&M University. Before joining Ecopetrol, he was Vice-President of Exploration and Production at Equion Energia Limited, where he also served as the Vice-President for Projects and Production during the 2011 – 2016 period. Mr. Consuegra began his professional career in 1984 by working for Morrison Knudsen International as a contract coordinator during the construction of the Cerrejon project. In 1993 he joined Ecopetrol S.A., working in the Projects Group, and then went to BP Exploration, where he worked for 16 years, first as a contract coordinator, then as procurement and contract manager, then human resource manager for the Andean area, and finally as leader of the Colombian Performance Unit until end of 2010.

Jaime Caballero Uribe (44) has served as the Chief Financial Officer of Ecopetrol since August ~~2015. Ms. Suárez~~2018. Mr. Caballero has over 20 years of international experience in the oil and gas sector. He joined the Ecopetrol Group in 2016 and was the Chief Financial Officer for the Downstream Segment prior to his appointment as the Ecopetrol Group CFO. Previously, his experience includes 17 years at BP, where he held leadership positions in North and South America, Africa and Europe, and most recently as Regional CFO for Brazil, Uruguay, Colombia and Venezuela. Mr. Caballero holds a law degree from Universidad de los Andes (Bogotá), an MBA in Energy Business from Fundação Getulio Vargas (Rio de Janeiro) and has completed executive programs in advanced financial management from Duke University and the Wharton School of Business.

Jorge Elman Osorio Franco (57) has served as the Development and Production Vice-President of Ecopetrol since March 1, 2019. Prior to his appointment as Development and Production Vice-President, he served as Regional Development and Production Vice-President since June 2017. He holds a degree in Chemical Engineering from the National University of Colombia and has over 30 years of experience in engineering, projects and operations in the oil and gas industry. He spent 24 years of his career at BP, where he served as Operations Manager, Senior Operations Manager in Major Projects, Technical Director and Operations Excellence Director, among other leadership positions including managerial positions in Colombia, Trinidad & Tobago and Indonesia.

Jorge Arturo Calvache Archila (59)has served as Vice-President of Exploration since February 1, 2019. He has more than 30 years of experience. He has served in companies such as Shell and Hocol, where he led exploration projects in the Netherlands, the United States and Colombia. Mr. Calvache holds a degree in Geology from Universidad Nacional, a master’s degree in Geophysics from the same university, and studied Management at Universidad de Los Andes.

Rubén Darío Moreno Rojas (54)has served as Vice-President of Transport Operations and Maintenance since March 1, 2019. Prior to his appointment as Vice-President of Transport Operations and Maintenance, he served as deputy Vice-President of Transport Operations and Maintenance since April 2018. He has a 30-year career at Ecopetrol S.A., where he has held several managerial positions in the Vice-Presidency of Transportation as Operations Manager, Technical Superintendent, Head of Maintenance and Head of Operations. Mr. Moreno holds a degree in Electronic Engineering from Universidad Antonio Nariño and an Executive MBA from Universidad la Sabana.

Rodrigo Andres Dalle Fiore (40)has served as Development Vice-President since March 2019. Prior to his appointment as Development Vice-President, he served as Development General Manager (A), Reservoir Development Strategy Manager (A) and Enhanced Oil Recovery Manager at Ecopetrol. He has over 14 years of international experience in the oil and gas sector. Prior to joining Ecopetrol, he was Operations Manager at Bridas Corp (Colombia) and Productions and Operations Manager at Pan American Energy (Argentina). Mr. Dalle Fiore holds a degree in Chemical Engineering from the National University of Córdoba – Argentina, a specialization in Oil & Gas Reservoirs from the U.N.P.S.J.B. Comodoro Ridavia, Chubut Argentina and a specialization in Gas and Oil Technologies at the Technologic Institute of Buenos Aires (ITBA) - Buenos Aires, Argentina.

Tomas Hernandez (64) has served as Vice-President of Refining and Industrial Processes in Ecopetrol since February 2016. He has over 39 years of multinational experience in the field of oil and gas sector. He has worked as Business Manager at Chevron’s Pascagoula refinery in the United States, General Manager for Marketing Operations for Chevron Texaco in Latin America and Africa-Europe-Pakistan Regions and has spent over 20 years in managerial positions in various refineries at Chevron. Prior to joining Ecopetrol, he was Deputy Upgrader Manager at Petropiar, a non-operated joint venture in which Chevron holds a 30% interest. Mr. Hernandez graduated from the University of Missouri – Rolla (University of Science and Technology Missouri) in 1978 with a Bachelor of Science degree in chemical engineering.

Jurgen Gerardo Loeber Rojas (61)has served as the Projects & Engineering Vice-President of Ecopetrol since May 2016. Mr. Loeber holds a degree in Business Administration from ~~CESA~~“Universidad del Norte” and a ~~master’s degree~~specialization in ~~Policy Management from Georgetown University. Ms. Suárez~~Project Management. He joined the Army Corps of Engineers as reserve officer and reached the rank of captain. He has 20over 30 years of experience in the ~~public~~oil and ~~private sectors. She~~ gas industry. He began his career in 1985 in Exxon as financial analyst. From 1992 to 2001, he worked for BP in various countries as project manager, construction manager and project control engineer. For the last 10 years, he worked at Equion Limited (formerly BP Exploration Colombia) as Project Director. From 2001 to 2006, he was Project Director for Wood Group Colombia.

Pedro Fernando Manrique Gutierrez (54)has ~~held various positions~~served as Commercial and Marketing Vice-President since April 2017. Mr. Manrique holds a bachelor’s degree in ~~these sectors, including Director~~Electrical Engineering from the Universidad Industrial de Santander, Colombia. He has a master’s degree in Industrial and Systems Engineering from the University of ~~Public Credit~~Florida and ~~National Treasury at Ministry~~an MBA from the IE Business School in Madrid, Spain. Mr. Manrique has 27 years of ~~Finance and Public Credit~~experience in the ~~Treasury Department, Investment Chief Officer~~oil and gas industry. He previously was the Commercial and Business Planning Manager for Chevron Latin America in Caracas, Venezuela. At Chevron, he also served as Commercial and Business Development Manager in Chevron Colombia in Bogotá, Colombia. During his career he also worked for Enron Energy Services as Risk Manager at ~~Porvenir~~their headquarters in Houston, Texas. He has also served as a member of the Leadership Team of Chevron Latin America and as a member of the national operations council of natural gas in Colombia, among many other ~~high-level positions at Citibank, ABN AMRO and Bank of America. She has served on the board of directors for ISA, Isagen, XM, FEN, Cenit, among others.~~responsibilities.

Hector Manosalva Rojas (57)~~(54)~~ has served as CEO of Cenit S.A.S., Ecopetrol’s midstream subsidiary, since March 1, 2019. He joined Ecopetrol in 1986 and ~~has~~prior to his appointment as CEO of Cenit, he served as Vice-President for Development and Production since July 2014. Mr. Manosalva holds a degree in Petroleum Engineering from the Universidad de America (Bogotá), completed post-graduate studies in finance at the Universidad EAFIT and Executive Management at the Universidad de los Andes. Over the course of his career at Ecopetrol, Mr. Manosalva has held various positions, including Executive Vice-President for Production and Exploration, Vice-President of Production, Production Manager of the Central Region, President of Colombia’s Advisor for Safety and Security of National Energy Infrastructure, Director of HSE and Corporate Social Responsibility, Production Manager of the Southern Region and Head of the Production Planning Division. Mr. Manosalva holds a degree in Petroleum Engineering from the Universidad de America (Bogotá) and postgraduate degrees in Finance at the Universidad EAFIT and Executive Management at the Universidad de los Andes.

~~Max Torres (59)~~Juan Manuel Rojas Payán (47)has served as ~~Exploration~~ Vice-President for Strategy and New Business since ~~September 2014. Mr. Torres holds~~August 2018. Prior to his appointment as Vice-President for Strategy and New Business, he served as Corporate Manager for New Business since 2016. He graduated with a ~~B.S.~~ degree in ~~Geology~~Economics from Universidad ~~Nacional~~de los Andes and holds two master’s degrees in Public Policy from Harvard University and in Economics from Universidad de los Andes. He was previously Vice-Minister of ~~Tucumán in Argentina~~Mines and ~~an M.S. in Stratigraphy from Georgia State University. He has more than 28 years~~Energy, Chief Executive Officer of ~~experience in oil~~Bridas Corporation, Manager of New Business at Pan American Energy, and ~~gas exploration and production and is a proven world class oil and gas finder and a champion~~Director of Latin American oil and gas exploration. Among his many professional accomplishments, Mr. Torres was directly responsible for the 16 Tcfg Perla gas field discovery in Venezuela, the 275 Tcfg super giant Galkynysh gas field discovery in Turkmenistan, as well asEnergy at Sideco Americana/Socma, among other oil and gas discoveries. Prior to joining Ecopetrol, Mr. Torres worked at Repsol from 1997 to 2013 as Exploration Director for Europe and the Middle East, Exploration Director for Europe and Africa and Exploration Director for Latin America.

Marly Aracelly Castillo Areiza (41)has served as Vice-President of ~~Transportation~~Transformation since ~~September 2016. Mr. Espinosa holds a bachelor’s degree~~January 2019. Ms Castillo helped launch and develop the transformation program in Civil Engineering from Universidad Santo Tomas in Colombia and a MBA from University of the Andes (Bogotá). He has worked for Ecopetrol for the last 23 years and has held various positions within the company, including Operations and Maintenance General Manager, Pipelines Manager, Central Operation Superintendent, Chief of Operations Department, Plant Coordinator, Pipeline Maintenance Engineer and Community Relationships Engineer.

~~Rafael Guzman (50)~~ joined Ecopetrol in 2010 and has served as Technical Vice-President since May 2013. Mr. Guzman holds a B.S. degree in Petroleum Engineering from Universidad America in Colombia (1995), a M.S. in Petroleum Engineering and a PhD in Petroleum Engineering with minor in Mathematics both from Stanford University. Mr. Guzman has been with Ecopetrol since ~~October 2010, where he~~joining in 2009. Ms. Castillo has ~~held several positions as regional production manager. Prior to that, Mr. Guzman worked with ENI~~17 years of experience in ~~managerial positions~~the public and private sectors in ~~Europe~~strategy and ~~Latin America.~~

~~Luisa Fernanda Lafaurie (56)~~~~has served as Cenit’s Chief Executive Officer since September 2016.~~performance mesurement. Ms. ~~Lafaurie~~Castillo holds a degree in Economics from the Universidad ~~Javeriana with a Master’s Degree in Business Administration and a Degree~~Santo Tomás, Bogotá, completed post-graduate studies in Finance at the Universidad Externado and ~~Senior Management from Los Andes University (Bogotá). Ms. Lafaurie has accumulated extensive experience in~~an MBA at the energy sector, both in the public and private sector, serving as Minister of Mines and Energy (2001-2002) and Deputy Minister of Mines and Energy (1998-2000), and in the private sector as an external advisor to mining and fuel distributors companies. She was a founding member of Sumatoria, a firm where she worked as an advisor on corporate strategies and business issues. As chief executive officer of HJDK (2009-2013), German Efromovich´s business group in Colombia, Ms. Lafaurie led the development of hospitality and agribusiness companies. She was also an advisor for the Synergy Group corporations in Colombia with the exception of Avianca. Ms. Lafaurie worked at Carbocol (1985-1996) and has served as a member of the board of different companies such as Ocensa, Ecopetrol, Carbocol, Minercol, Ecogas, ISA, Almacenes Exito, ISAGEN, and Conconcreto in Colombia, and CTEEP in Brazil. Currently, she is member of the board of directors of Avianca, FinancieraUniversidad de ~~Desarrollo Nacional (FDN), Emgesa, Ocensa and Oleoducto Bicentenario.~~

~~Tomas Hernandez (62)~~ has served as Vice-President of Refining and Industrial Processes since February 2016. He has over 37 years of international experience in the oil and gas sector. He has served as Business Manager at Chevron’s Pascagoula refinery in the United States, General Manager for Marketing Operations for Chevron Texaco in Latin America and Africa-Europe-Pakistan Regions and has spent over 20 years in managerial positions in various refineries at Chevron.los Andes. Prior to joining Ecopetrol, ~~he was Deputy Upgrader Manager~~she worked on academy and research at ~~Petropiar,~~the School of Management at the Universidad de los Andes as a ~~joint venture~~consultant and teacher. Ms Castillo has published two books: “Valuation of projects through real options” and “Measurement Customer Value,” in ~~which Chevron participates. Mr. Hernandez holds~~addition to other case studies that focus on a ~~degree in Chemical Engineering from the University~~diversity of ~~Missouri – Rolla (University of Science and Technology Missouri).~~

~~Jürgen Loeber (59)~~ has served as the Projects & Engineering Vice-President of Ecopetrol since May 2016. Mr. Loeber holds a degree in Business Administration from Universidad del Norte and specialization in Project Management. He joined the Army Corps of Engineers as reserve officer and reached a captain rank. He has over 30 years of experiencemanagement dilemmas in the ~~Oil & Gas industry. For~~areas of leadership, organizational change and strategy. Ms. Castillo will be the last 10 years, he worked at Equion Limited (formerly BP Exploration Colombia) as Project Director. From 2001 to 2006, he was Project Director for Wood Group Colombia. From 1992 to 2001 he worked for BP in various countries as project manager, construction manager and project control engineer. He began his career in 1985 in Exxon as financial analyst.

~~Pedro Manrique (52)~~ was named Commercial and Marketing Vice President as of April 2017. Mr. Manrique holds a bachelor’s degree in Electrical Engineering from the Industrial University of Santander, Colombia. He has a Master’s degree in Industrial and Systems Engineering from the University of Florida and an MBA from the IE Business School in Madrid, Spain. Mr. Manrique has 27 years of experience in the oil and gas industry. His previous position was as the Commercial and Business Planning Manager for Chevron Latin America, in Caracas, Venezuela. At Chevron he also served as Commercial and Business Development Manager in Chevron Colombia based in Bogotá, Colombia. During his career he also worked Enron Energy Services as Risk Manager, out of their headquarter offices in Houston, Texas. He has also served as member of the Leadership Team of Chevron Latin America and as member of the national operations council of natural gas in Colombia, among many other responsibilities.

~~Carlos Alberto Vargas Medina (47)~~ ~~has served as~~ Vice-President of Transformation ~~since December 2015. Mr. Vargas holds a degree in Petroleum Engineering from America University. He has 23 years of experience across~~until June 17, 2019, upon which Orlando Díaz Montoya will assume the integrated oil and gas value chain with a focus in drilling and well interventions and an expertise in exploration, appraisal, development and production onshore and offshore wells. He has held management positions in the United Kingdom, Argentina, Bolivia and Colombia, where he has developed key skills in strategy, performance management systems, risks management, HSE and integration of multicultural and multidisciplinary teams. Prior to taking his current position, he was the Vice-President of Drilling and Completions at Equion.position.

Fernán Ignacio Bejarano Arias ~~(60)~~(63)has served as Vice-President of Legal Affairs and General Counsel at Ecopetrol since March 2016. Mr. Bejarano Arias holds a bachelor’s degree in Law from Universidad Javeriana in Bogotá and an LLM from ~~the~~ American University ~~(Washington~~in Washington D.C.). In his more than thirty years of professional experience, he has been a partner at the law firms of Estudios Palacios Lleras S.A, Bejarano Cárdenas y Ospina y Asociados Ltda and OPEBSA Compañía de Abogados S.A.S. and has worked for several years atin important positions in the public sector, such as the Vice-Minister of Foreign Affairs, Secretary of the Monetary Board, Secretary of the Board of Directors of the Banco de la República (Colombian Central Bank), Office of Legal Affairs Counselor at the Presidency of the Republic of Colombia, and Vice-President of Legal Affairs and General Counsel at Corporación Finaciera Colombiana. Mr. Bejarano Arias has been a professor at the Faculty of Law of the Universidad Javeriana, and has been an arbitrator before the Center for Arbitration and Conciliation of the Bogotá Chamber of Commerce.

Mónica Jiménez González (43) has served as Secretary General of Ecopetrol S.A. since July 2016. Ms. Jiménez holds a law degree from University of the Andes (Bogotá) and has practiced as a foreign lawyer in Canada. She holds a post-graduate degree in Civil and State Responsibility from the Universidad Externado de Colombia and a Master of Science in Development Studies from the London School of Economics and Political Science. Ms. Jimenez has practiced in Colombia and Canada on matters related to corporate social responsibility, cross-border transactions, and corporate law, and has acted as counsel and tribunal secretary in complex international commercial and investment arbitrations. She lived in Canada for 13 years, during which time she worked as a lawyer in a boutique law firm that specialized in international law and then in a major Canadian law firm in Vancouver, BC. Ms. Jimenez is also a Member of the International Court of Arbitration of the International Chamber of Commerce (ICC).

María Juliana ~~Albá~~Alban Durán ~~(41)~~(43)has served as Compliance Vice-President and Compliance Officer since July 2015. Ms. Alban holds a law degree from Universidad Sergio Arboleda with a specialization in Commercial and Financial Law from the same institution. ~~Since~~Beginning in 2007, Ms. Alban ~~has~~previously worked in the Attorney General’s Office (Procuraduría General de la Nación) as Attorney General for State Contracts, General Secretary and Chief of Legal Office, among other positions within the institution.

Alejandro Arango ~~(57)~~Lopez (59)has served as Vice-President of Human Resources at Ecopetrol S.A. since October 2014. He has more than 20 years of professional experience around the world and has worked as a Vice-President of Human Resources at Banco Santander in Colombia and as Human Resources Director of the Consumer Finance Division, Strategy Division and Cards Division at Banco Santander in Spain. Mr. Arango has also served as Human Resources Director for the Asia Pacific region at Banco Santander in Hong Kong and as a Global Human Resources Division T&O, among others. Mr. Arango holds a degree in Strategic Marketing from CESA School of Business, ~~and~~ a bachelor’s degree in Theology from the Universidad Hochschule Sankt Georgen (Frankfurt) and a bachelor’s degree in Philosophy from Javeriana University.

~~Andrés~~Andres Eduardo Mantilla ~~(46)~~Zarate (48) has served as the Director of the Colombian Petroleum Institute of Ecopetrol, the technology development center of the company, since September 2013. He holds a degree in Petroleum Engineering from Universidad Industrial de Santander, Colombia, a Master of Science degree in Petroleum Engineering from Stanford University, and a Ph.D. in Geophysics from Stanford University. His professional work includes the leadership and management of oil and gas technology development, demonstration and implementation teams. He had previously worked for Ecopetrol holding various positions between 1994 and 2006. Before rejoining Ecopetrol in 2013, he worked for BP Colombia, Marathon Oil Company and Maersk Oil. During his professional career, he has had exposure to exploration and production projects and the evaluation of new ventures in Colombia, the Gulf of Mexico, the North Sea, West Africa, South America and the Middle East.

~~Eduardo Uribe Botero (57)~~Aníbal Fernández de Soto Camacho (40)has served as Vice-President of Sustainable Development ~~and Environmental~~at Ecopetrol since ~~August 2015. Mr. Uribe~~September 2018. He is a lawyer who specializes in Economics from Los Andes University, and holds a master’s degree in ~~Agricultural Engineering~~Political Action, Institution-Building and Citizen Participation from ~~Caldas~~Francisco Vitoria University and Rey Juan Carlos I University, Madrid-Spain. Educated in government affairs and public policies, Mr. Fernández de Soto served as an advisor of the Government and Congress of the Republic, as well as for management of political projects and as a ~~master’s~~representative of ~~science in Soil Chemistry and a Ph.D. in Fertility and Management of Tropical Soils. He has over 25 years of experience~~the private sector in the ~~private and public sectors. In 1994, he was appointed the first Vice-Minister of the Environment in Colombia. In recent years he~~trade field. He has served as ~~a strategic, environmental~~Deputy Minister for Policy and ~~social advisor to companies and organizations~~International Affairs in the ~~fields~~Ministry of ~~hydrocarbons, mining, energy, forestry, environmental~~Defense, Deputy Minister for Rural Development in the Ministry of Agriculture, Deputy Minister for Participation and ~~agribusiness through~~Rights Equality in the ~~consulting firm Optim Consulting.~~Ministry of Internal Affairs, and Director of Security in the Ministry for Post-Conflict. In the private sector, he was executive director of the Chamber of Beverage Industry of ANDI,Corporación Pensamiento Siglo XXI andFundación Democracia y Libertad.

~~Alberto Consuegra Granger (57)~~Carlos Andrés Santos Nieto (42)has served as Vice-President of Supply and Services since August ~~2016.~~7, 2018. Prior to his appointment as Vice-President of Supply and Services, he was Procurement and Supply Chain Manager at Ecopetrol. Mr. ~~Consuegra~~Santos is an Economist from Universidad Externado de Colombia and holds a postgraduate degree in ~~Civil Engineering~~International Economics from ~~Cartagena University~~the same institution and a college diploma course in Advanced Negotiations from Universidad CESA, and has ~~a master’s degree~~completed other negotiations training provided by BP in ~~Pavements~~Colombia, Alaska and ~~Construction Management from Texas A&M University. His latest position was Vice-President of Exploration~~London. Prior to joining the Company, he served as Offshore Business Unit General Manager in Coremar Group and ~~Production at~~Procurement & Supply Chain Manager Drilling, Wells, Subsurface and Offshore in Equion Energia Limited ~~where he~~(Former BP Exploration Colombia). He also served as ~~the Vice-President~~Latin America Procurement Sourcing Manager for ~~Projects~~Merck Sharp & Dhome and ~~Production. Alberto began his professional career~~Procurement & Supply Chain Manager Specialist for Quala Colombia S.A. He has held various positions within BP as PSCM Drilling & Wells Category Lead, Iraq SPU in ~~1984 by working for Morrison Knudsen International as a contract coordinator during the construction of the Cerrejon project. In 1993 he joined Ecopetrol, working~~London, PSCM Market Intelligence Lead & Deflation Project Lead in ~~the project group, afterwards, he went on to BP Exploration, where he worked for 16 years starting as a contract coordinator, then as procurement~~Alaska, PSCM Specialist D&W in Alaska, PSCM Specialist O&M in Colombia, PSCM Commercial Analyst in Colombia and ~~contract manager, then human resource manager for the Andean area, and finally as leader of the Colombian Performance Unit.~~PSCM Specialist Business Support in Colombia.

~~Mónica Jiménez González (41)~~Ernesto Gutiérrez de Piñeres (45) has served as ~~Secretary General of Ecopetrol SA~~Digital Vice-President since ~~July 2016. Ms. Jiménez holds~~October 2018. Mr. Gutierrez de Piñeres is a ~~law degree~~Systems Engineer and Information Systems Management Specialist from University of Norte de Barranquilla, and holds an Executive MBA from Los Andes University. He has more than 19 years of experience as Director and Manager (CIO) of information technology areas in different multinational companies on multiple industry sectors, leading and developing high performance teams in Colombia, USA, Central and South America. Mr. Gutierrez de Piñeres is an executive with experience in transforming technology areas into business partners and generators of value for the ~~Andes (Bogotá)~~organizations through technology-based innovation, team development and ~~has been allowed to practice as a foreign lawyer in Canada. She holds a post-graduate degree in Civil~~technology strategies that leverage corporate strategy and State Responsibility from the Universidad Externado de Colombia and a Master of Science in Development Studies from the London School of Economics and Political Science (LSE). Before studying abroad, Ms. Jimenez worked as a lawyer at a Colombian law firm and then as lawyer advising the Minister and the Deputy Minister of Defense of Colombia in matters related to international law. Prior to returning to Colombia, she lived in Canada for 13 years, time during which she worked as a lawyer in a boutique law firm specialized in international law and then, in a major Canadian law firm in Vancouver, BC.competitive business.

None of our Directors, Executive Officers or ~~executive officers~~members of senior management has any familial relationship with any Director, Executive Officer or ~~executive officer.~~member of senior management.

Based on a resolution adopted at our annual shareholders’ meeting in 2012, compensation for Directors’ attendance in person at meetings of the Board of Directors and/or committee meetings increased from the equivalent of four to six minimum monthly wage salaries, which totals approximately COP$~~4.1~~4.9 million for ~~2016~~2019 and COP$~~3.9~~4.6 million for ~~2015. Fees~~2018. See Note 29.1 to our consolidated financial statements for ~~attendance at virtual meetings are set at 50% of the in-person meeting fee.~~more details.

The total compensation paid to our Directors, executive officers and senior management active as of December 31, ~~2016~~2018 during ~~2016~~2018 amounted to COP$~~13,901 million.~~23.73 billion. This includes amounts paid to certain of our Directors, executive officers and senior management pursuant to a bonus plan under which such persons are entitled to receive contingent compensation based on our company results for each full year. The contingent compensation ranges from 0% to 150% of each person’s base compensation based on our company performance.

Only one member of our ~~executive officers~~management team is eligible to receive pension and retirement benefits from us. The total amount ~~set aside~~recorded as of December 31, 2018 to provide pension and retirement benefits amounted to ~~our eligible executive officers totals~~ COP$~~4,674~~5,491 million.

No individual Director or executive officer beneficially owns more than 1% of our outstanding shares.

~~Table 59 –~~The following ~~Directors and~~ executive officers own shares of Ecopetrol:

Under Colombian law, all of our shareholders have the same economic privileges and voting rights.

As required by Rules 13a-15(e) and 15d-15(e) under the Securities Exchange Act of 1934, as of December 31, ~~2016,~~2018, we evaluated the design and effectiveness of our financial disclosure controls and procedures under the supervision and participation of our management, including our Chief Executive Officer and Chief Financial Officer. There are inherent limitations to the effectiveness of any system of disclosure controls and procedures, including the possibility of human error and the circumvention or overriding of the controls and procedures. Accordingly, even if effective, disclosure controls and procedures can only provide reasonable assurance of achieving their control objectives.

Based upon this evaluation, our Chief Executive Officer and Chief Financial Officer concluded that as of the end of the period covered by this annual report, our disclosure controls and procedures were effective to provide reasonable assurance that the information required to be disclosed in the reports that we file and submit under the Securities Exchange Act of 1934 is recorded, summarized and reported as and when required and is accumulated and communicated to our management, including our Chief Executive Officer and Chief Financial Officer, or persons performing similar functions, as appropriate to allow timely decisions regarding required disclosure.

Our management is responsible for establishing and maintaining adequate internal control over financial reporting as defined in Rules 13a-15(f) and 15(d)-15(f) under the Securities Exchange Act of 1934. Our internal control over financial reporting is a process designed under the supervision of our Chief Executive Officer and Chief Financial Officer, and ~~affected~~monitored by our board of directors, management and other personnel, to provide reasonable assurance regarding the reliability of financial reporting and the preparation of our financial statements for external reporting purposes in accordance with generally accepted accounting principles, and it includes those policies and procedures that:

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Therefore, effective control over financial reporting cannot, and does not, provide absolute assurance of achieving our control objectives. Also, projection of any evaluation of the effectiveness of the internal controls to future periods is subject to the risk that controls may become inadequate because of changes in conditions or that the degree of compliance with the policies or procedures may deteriorate.

As of the year ended December 31, ~~2016,~~2018, our management conducted an assessment of the effectiveness of our internal control over financial reporting in accordance with the criteria established in the publication “Internal Control – Integrated Framework (2013),”, issued by the Committee of the Sponsoring Organizations of the Treadway Commission, as well as the rules set by the SEC in its Final Rule “Management’s Report on Internal Control Over Financial Reporting and Certification of Disclosure in Exchange Act Periodic Reports.”

Based on the assessment performed, management concluded that our internal control over financial reporting was effective as of the end of the period covered by this annual report.

The effectiveness of our internal control over financial reporting has been audited by Ernst & Young Audit S.A.S., an independent registered public accounting firm, as stated in their audit report accompanying our consolidated financial statements.

Our consolidated financial statements for the fiscal ~~year~~years ended December 31, 2018, 2017 and 2016 were audited by Ernst & Young Audit S.A.S. ~~Our consolidated financial statements for the fiscal years ended December 31, 2015 were audited by PricewaterhouseCoopers Ltda.~~

The following table sets forth the fees billed to us by Ernst & Young Audit S.A.S. during the fiscal ~~year~~years ended December 31, ~~2016.~~2018 and December 31, 2017.

Audit Fees. The audit fees listed in the table above are the aggregated fees billed by Ernst & Young Audit S.A.S. in connection with their audits of our annual consolidated financial statements (IFRS), interim consolidated financial statements (under IFRS), statutory audits of Ecopetrol S.A. and its consolidated subsidiaries and some of its associate entities (under local GAAP) and review of periodic documents filed with the SEC. In addition, these audit fees include fees related to our independent auditors’ audits of our internal controls over financial reporting.

Audit-related Fees. The audit-related fees listed in the table above are the fees billed by Ernst & Young Audit S.A.S. in connection with their agreed-upon procedures of our variable compensation bonus system and its review procedures in connection with the offering document related to the SEC-registered bonds we reopened in 2016.

Tax Fees. ~~The~~For 2018 the tax fees listed in the table above correspond to ~~(i) advising some subsidiaries~~a conceptual analysis for a subsidiary about the tax consequences associated with new or proposed legislation ~~and (ii) rendering advice to some subsidiaries~~based on the ~~likely tax consequences of proposed transactions and~~economic models prepared by the ~~appropriate methods of structuring and reporting.~~subsidiary.

~~The following table sets forth the fees billed to us by PricewaterhouseCoopers Ltda. during the fiscal year ended December 31, 2015.~~

~~Audit Fees~~. The audit fees listed in the table above are the aggregated fees billed by PricewaterhouseCoopers Ltda. in connection with their audits of our annual consolidated financial statements (IFRS), interim consolidated financial statements (under IFRS), subsidiary audits (under local GAAP) and review of periodic documents filed with the SEC. In addition, these audit fees include fees related to our independent auditors’ audits of our internal controls over financial reporting.

~~Audit-related Fees~~. The audit-related fees listed in the table above are the fees billed by PricewaterhouseCoopers Ltda. in connection with their agreed-upon procedures of our variable compensation bonus system as well as the audit of the joint operation agreement of ECP Oil and Gas Germany GmbH.

~~Tax Fees~~. The tax fees listed in the table above correspond to (1) assisting some subsidiaries in the preparation and filing of appropriate tax returns with the tax authorities (including electronic filings), (2) advising some subsidiaries about the tax consequences associated with new or proposed legislation and (3) rendering advice to some subsidiaries on the likely tax consequences of proposed transactions and the appropriate methods of structuring and reporting.

There were no changes made in our internal control over financial reporting during the year ended December 31, ~~2016~~2018 that have materially affected or are reasonably likely to materially affect the Company’s internal controls over financial reporting.

Ernst & Young Audit S.A.S.’s attestation report on our internal control over financial reporting is included in their audit report accompanying our consolidated financial statements. SeeReport of Independent Registered Public Accounting Firm to the consolidated financial statements.

For a description of significant events since December 31, ~~2016,~~2018, please see Note ~~36 – Subsequent eventsto~~32 to our consolidated financial statements.

At December 31, 2018 and 2017 and for three years ended December 31, 2018, 2017 and 2016

~~At December 31, 2016 and 2015 and for three years ended December 31, 2016, 2015 and 2014~~Index

			~~F-1~~
Exhibit 2 – Conditions of the most significant loans			F-108

~~Report~~Report of Independent Registered Public Accounting Firm

~~The~~To the Shareholders and the Board of Directors ~~and Shareholders~~ of Ecopetrol S.A. ~~and subsidiaries~~

Opinion on the Financial Statements

We have audited the accompanying consolidated ~~statement~~statements of financial position of Ecopetrol S.A. ~~and subsidiaries~~(the Company) as of December 31, ~~2016~~2018 and 2017, the related consolidated statements of profit or loss, ~~other~~ comprehensive income, changes in equity, and cash flows, for each of the ~~year~~three years in the period ended December 31, ~~2016. These financial statements are~~2018, and the ~~responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audit.~~

~~We conducted our audit in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan~~related notes and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement ~~presentation. We believe that our audit provide a reasonable basis for our opinion.~~

schedules listed in exhibits 1 and 2 (collectively referred to as the consolidated financial statements). In our opinion, the consolidated financial statements ~~referred to above~~ present fairly, in all material respects, the ~~consolidated~~ financial position of ~~Ecopetrol S.A. and subsidiaries~~the Company at December 31, ~~2016,~~2018 and 2017, and the ~~consolidated~~ results of ~~their~~its operations and ~~their~~its cash flows for each of the ~~year~~three years in the period ended December 31, ~~2016,~~2018, in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), ~~Ecopetrol S.A. and its subsidiaries’~~the Company's internal control over financial reporting as of December 31, ~~2016,~~2018, based on criteria established in Internal Control-Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ~~“(2013~~(2013 framework)” and our report dated ~~May 30, 2017~~April 5, 2019 expressed an unqualified opinion thereon.

~~/s/ Ernst & Young Audit S.A.S.~~

~~Bogota, Colombia~~

~~May 30, 2017~~Basis for Opinion

These financial statements are the responsibility of the Company‘s management. Our responsibility is to express an opinion on the Company‘s financial statements based on our audits. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audits in accordance with the standards of the PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement, whether due to error or fraud. Our audits included performing procedures to assess the risks of material misstatement of the financial statements, whether due to error or fraud, and performing procedures that respond to those risks. Such procedures included examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. Our audits also included evaluating the accounting principles used and significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that our audits provide a reasonable basis for our opinion.

/s/ Ernst & Young Audit S.A.S.	~~F-2~~
We have served as the Company‘s auditor since 2016.
Bogota, Colombia
April 5, 2019

~~Report~~Report of Independent Registered Public Accounting Firm

~~The~~To the Shareholders and the Board of Directors ~~and Shareholders~~ of Ecopetrol S.A. ~~and subsidiaries~~

Opinion on Internal Control over Financial Reporting

We have audited Ecopetrol S.A. ~~and subsidiaries’~~’ internal control over financial reporting as of December 31, ~~2016,~~2018, based on criteria established in Internal Control—Integrated Framework issued by the Committee of Sponsoring Organizations of the Treadway Commission ~~“(2013~~(2013 framework)” (the COSO criteria). In our opinion, Ecopetrol, S.A. (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2018, based on the COSO criteria.

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States) (PCAOB), the consolidated statements of financial position of the Company as of December 31, 2018 and ~~subsidiaries’~~2017, the related consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for each of the three years in the period ended December 31, 2018, and the related notes and financial statement schedules listed in exhibits 1 and 2, and our report dated April 5, 2019 expressed an unqualified opinion thereon.

Basis for Opinion

The Company’s management is responsible for maintaining effective internal control over financial reporting and for its assessment of the effectiveness of internal control over financial reporting included in the accompanying Management’s Annual Report on Internal Control over Financial Reporting. Our responsibility is to express an opinion on the ~~Ecopetrol S.A. and subsidiaries’~~Company’s internal control over financial reporting based on our audit. We are a public accounting firm registered with the PCAOB and are required to be independent with respect to the Company in accordance with the U.S. federal securities laws and the applicable rules and regulations of the Securities and Exchange Commission and the PCAOB.

We conducted our audit in accordance with the standards of the ~~Public Company Accounting Oversight Board (United States).~~PCAOB. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether effective internal control over financial reporting was maintained in all material respects.

Our audit included obtaining an understanding of internal control over financial reporting, assessing the risk that a material weakness exists, testing and evaluating the design and operating effectiveness of internal control based on the assessed risk, and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion.

Definition and Limitations of Internal Control Over Financial Reporting

A company’s internal control over financial reporting is a process designed to provide reasonable assurance regarding the reliability of financial reporting and the preparation of financial statements for external purposes in accordance with generally accepted accounting principles. A company’s internal control over financial reporting includes those policies and procedures that (1) pertain to the maintenance of records that, in reasonable detail, accurately and fairly reflect the transactions and dispositions of the assets of the company; (2) provide reasonable assurance that transactions are recorded as necessary to permit preparation of financial statements in accordance with generally accepted accounting principles, and that receipts and expenditures of the company are being made only in accordance with authorizations of management and directors of the company; and (3) provide reasonable assurance regarding prevention or timely detection of unauthorized acquisition, use, or disposition of the company’s assets that could have a material effect on the financial statements.

Because of its inherent limitations, internal control over financial reporting may not prevent or detect misstatements. Also, projections of any evaluation of effectiveness to future periods are subject to the risk that controls may become inadequate because of changes in conditions, or that the degree of compliance with the policies or procedures may deteriorate.

~~In our opinion, Ecopetrol S.A. and subsidiaries maintained, in all material respects, effective internal control over financial reporting as of December 31, 2016, based on the COSO criteria.~~

We also have audited, in accordance with the standards of the Public Company Accounting Oversight Board (United States), the consolidated statements of financial position of Ecopetrol S.A. and subsidiaries as of December 31, 2016 and the related consolidated statements of profit or loss, other comprehensive income, changes in equity and cash flows for the year ended December 31, 2016 of Ecopetrol S.A. and subsidiaries and our report dated May 30, 2017 expressed an unqualified opinion thereon.

~~/s/ Ernst & Young Audit S.A.S.~~

~~Bogota, Colombia~~

~~May 30, 2017~~

/s/ Ernst & Young Audit S.A.S.	~~F-3~~
Bogota, Colombia
April 5, 2019

~~Report of Independent Registered Public Accounting Firm~~Ecopetrol S.A.

~~To the Board of Directors~~

~~And Shareholders of Ecopetrol S. A.~~

~~In our opinion, the accompanying consolidated~~Consolidated statement of financial position and the related consolidated statement of profit and loss, other comprehensive income, changes in equity and cash flows present fairly, in all material respects, the financial position of Ecopetrol S. A. and its subsidiaries (the ¨Company¨) at December 31, 2015, and the results of their operations and their cash flows for each of the two years in the period ended December 31, 2015 in conformity with International Financial Reporting Standards as issued by the International Accounting Standards Board. These financial statements are the responsibility of the Company’s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits of these statements in accordance with the standards of the Public Company Accounting Oversight Board (United States). Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

~~As discussed in Note 2.8 to the consolidated financial statements, the Company has elected to change the manner in which it presents dry wells in the consolidated statements of cash flows in 2016.~~

~~/s/ PricewaterhouseCoopers Ltda.~~

~~Bogotá, Colombia~~

April 28, 2016, except for the change in the manner in which the company presents dry wells in the consolidated statements of cash flows in 2016 as discussed in Note 2.8 to the consolidated financial statements, as to which the date is May 30, 2017.

~~F-4~~

~~Ecopetrol S.A.~~

~~Consolidated statements of financial position~~

(~~Figures expressed in~~In millions of Colombian pesos)

As of December 31,
Notes 2016 2015
Assets
Current assets
Cash and cash equivalents 6 8,410,467 6,550,450
Trade and other receivables, net 7 4,212,701 3,427,412
Inventories, net 8 3,841,901 3,057,958
Other financial assets 9 5,315,537 329,227
Tax assets 10 1,129,098 4,501,734
Equity instruments measured at fair value 11 51,610 913,488
Other current assets 12 1,035,632 1,090,324
23,996,946 19,870,593
Assets held for sale 13 132,216 242,745
Total current assets 24,129,162 20,113,338

Non-current assets
Investments in associates and joint ventures 14 1,552,694 1,931,934
Trade and other receivables, net 7 729,410 584,571
Property, plant and equipment 15 62,328,502 65,105,073
Natural and environmental resources 16 22,341,047 24,043,297
Intangibles 18 272,132 388,051
Deferred tax assets 10 5,726,961 8,239,472
Other financial assets 9 1,371,358 1,256,152
Goodwill 19 1,159,922 1,159,922
Other non-current assets 12 826,736 766,380
Total non-current assets 96,308,762 103,474,852
Total assets 120,437,924 123,588,190

Liabilities
Current liabilities
Loans and borrowings 20 4,126,203 4,573,620
Trade and other payables 21 6,854,363 7,757,277
Provisions for employee benefits 22 1,974,496 1,392,266
Tax liabilities 10 2,130,940 2,803,559
Accrued liabilities and provisions 23 821,954 653,497
Other financial liabilities - 101,319
Other liabilities 439,274 144,441
16,347,230 17,425,979
Liabilities related to assets held for sale 13 40,128 17,628
Total current liabilities 16,387,358 17,443,607

Non-current liabilities
Loans and borrowings 20 48,095,824 48,649,718
Trade and other payables 21 23,893 6
Provisions for employee benefits 22 3,901,082 2,459,849
Deferred tax liabilities 10 3,118,650 6,026,050
Accrued liabilities and provisions 23 5,095,916 5,423,850
Other non-current liabilities 254,700 484,147
Total non-current liabilities 60,490,065 63,043,620
Total liabilities 76,877,423 80,487,227

Equity
Ecopetrol shareholders’ equity 24 42,026,858 41,225,908
Non-controlling interests 1,533,643 1,875,055
Total equity 43,560,501 43,100,963
Total liabilities and equity 120,437,924 123,588,190

	As of December 31,
	Note		2018		2017
Assets
Current assets
Cash and cash equivalents		6		6,311,744		7,945,885
Trade and other receivables, net		7		8,194,243		6,098,918
Inventories, net		8		5,100,407		4,601,396
Other financial assets		9		5,321,098		2,967,878
Current tax assets		10		1,031,307		625,374
Other assets		11		1,020,428		880,425
				26,979,227		23,119,876
Assets held for sale				51,385		104,140
Total current assets				27,030,612		23,224,016
Non–current assets
Investment in associates and joint ventures		12		1,844,336		1,330,460
Trade and other receivables, net		7		755,574		777,132
Property, plant and equipment		13		62,799,983		61,404,374
Natural and environmental resources		14		23,075,450		21,308,265
Intangible assets		15		410,747		380,226
Deferred tax assets		10		3,879,427		4,016,161
Other financial assets		9		2,826,717		3,565,847
Goodwill		17		1,159,922		1,159,922
Other assets		11		860,730		681,009
Total non–current assets				97,612,886		94,623,396
Total assets				124,643,498		117,847,412
Liabilities
Current liabilities
Loans and borrowings		18		4,019,927		5,144,504
Trade and other payables		19		8,945,790		6,968,207
Provisions for employee benefits		20		1,816,882		1,829,819
Current tax liabilities		10		1,751,300		2,005,688
Accrued liabilities and provisions		21		814,409		558,828
Other liabilities				476,314		339,565
Total current liabilities				17,824,622		16,846,611
Non–current liabilities
Loans and borrowings		18		34,042,718		38,403,331
Trade and other payables		19		30,522		29,469
Provisions for employee benefits		20		6,789,669		6,502,475
Deferred tax liabilities		10		1,337,943		1,333,280
Accrued liabilities and provisions		21		6,939,603		5,978,621
Other liabilities				570,641		537,926
Total non–current liabilities				49,711,096		52,785,102
Total liabilities				67,535,718		69,631,713
Equity		22
Subscribed and paid in capital				25,040,067		25,040,067
Additional paid in capital				6,607,699		6,607,700
Reserves				5,138,895		2,177,869
Other comprehensive income				8,380,761		7,399,015
Retained earnings				9,970,492		5,210,302
Equity attributable to owners of parent				55,137,914		46,434,953
Non–controlling interest				1,969,866		1,780,746
Total equity				57,107,780		48,215,699
Total liabilities and equity				124,643,498		117,847,412

~~F-5~~

Ecopetrol S.A.

Consolidated ~~statements~~statement of profit or loss

(~~Figures expressed in~~In millions of Colombian pesos, except for the ~~net~~ earnings ~~(loss)~~ per share, which are expressed in Colombian pesos)

For the years ended December 31,
Notes 2016 2015 2014
Sales revenue 25 48,485,561 52,347,271 65,971,888
Cost of sales (before impairment of non-current assets) 26 34,251,423 36,994,516 42,975,128
Gross profit (excluding impairment) 14,234,138 15,352,755 22,996,760

Administration expenses 27 1,923,268 1,700,985 1,031,035
Operation and project expenses 27 2,751,687 4,034,268 5,520,325
Impairment of non-current assets 28 928,747 7,864,875 2,304,567
Other operating income and (expenses), net 29 (274,112 ) (378,538 ) (308,194 )
Operating income 8,904,548 2,131,165 14,449,027

Financial result, net 30
Financial income 1,311,743 621,924 399,818
Financial expenses (3,463,540 ) (2,718,414 ) (1,640,294 )
Foreign exchange gain (loss), net 976,430 (5,566,614 ) (2,270,193 )
(1,175,367 ) (7,663,104 ) (3,510,669 )

Share of profit (loss) of associates and joint ventures 14 61,345 (46,687 ) 166,070
Income before income tax expense 7,790,526 (5,578,626 ) 11,104,428

Income tax expense 10 (4,543,046 ) (710,353 ) (5,434,855 )
Net income (loss) for the period 3,247,480 (6,288,979 ) 5,669,573

Net income (loss) attributable to:
Company’s shareholders 2,447,881 (7,193,859 ) 5,046,517
Non-controlling interests 799,599 904,880 623,056
3,247,480 (6,288,979 ) 5,669,573
Earnings (loss) per share (basic and diluted) 24.6 59.5 (175.0 ) 122.7

	For the years ended December 31,
	Note		2018			2017			2016
Sales revenue		23		68,603,872			55,954,228			48,485,561
Cost of sales		24		(41,184,379	)		(36,908,325	)		(34,251,423	)
Gross profit				27,419,493			19,045,903			14,234,138
Administrative expenses		25		(1,653,858	)		(1,764,524	)		(1,923,268	)
Operations and project expenses		25		(2,903,132	)		(2,926,065	)		(2,751,687	)
(Impairment loss) impairment reversal of long–lived assets, net		16		(368,634	)		1,311,138			(928,747	)
Other operating (expenses) income, net		26		(35,455	)		505,403			274,112
Operating income				22,458,414			16,171,855			8,904,548
Financial results, net		27
Finance income				1,129,563			1,159,356			1,311,743
Finance expenses				(3,512,161	)		(3,660,601	)		(3,463,540	)
Foreign exchange gain				372,223			5,514			976,430
				(2,010,375	)		(2,495,731	)		(1,175,367	)
Share of profits of associates and joint ventures		12		165,836			93,538			61,345
Profit before income tax expense				20,613,875			13,769,662			7,790,526
Income tax expense		10		(8,258,485	)		(5,800,268	)		(4,543,046	)
Net profit for the year				12,355,390			7,969,394			3,247,480
Net profit attributable to:
Owners of parent				11,381,386			7,178,539			2,447,881
Non–controlling interest				974,004			790,855			799,599
				12,355,390			7,969,394			3,247,480
Basic and diluted earnings per share			COP$	276.8		COP$	174.6		COP$	59.5

~~F-6~~

Ecopetrol S.A.

Consolidated ~~statements~~statement of other comprehensive income

(~~Figures expressed in~~In millions of Colombian pesos)

For the years ended December 31,
Notes 2016 2015 2014

Net income (loss) of the year 3,247,480 (6,288,979 ) 5,669,573

Other comprehensive income
Items that may be reclassified subsequently to profit or loss (net of tax):

Unrealized gain (loss) on hedges:
Cash flow hedge for future exports 31 461,424 (217,291 ) -
Hedge of a net investment in a foreign operation 31 (155,359 ) - -
Cash flow hedge with derivative instruments 31 33,869 (60,083 ) -
Gain (loss) on equity instruments measured at fair value 11 126,205 (106,911 ) 76,435
Realized gain on proceeds from sales of equity instruments measured at fair value (68,497 ) (19,405 ) -
Foreign currency translation (925,981 ) 5,979,644 3,398,374
(528,339 ) 5,575,954 3,474,809
Items that will not be reclassified subsequently to profit or loss (net of tax):

Remeasurement (loss) gain on defined benefit plans (1,153,442 ) 1,404,602 743,793
Others (losses) gains (46,826 ) 58,643 -
(1,200,268 ) 1,463,245 743,793
Other comprehensive income (1,728,607 ) 7,039,199 4,218,602
Total comprehensive income 1,518,873 750,220 9,888,175

Attributable to:
Ecopetrol shareholders 784,658 (328,604 ) 9,114,221
Non-controlling interests 734,215 1,078,824 773,954
1,518,873 750,220 9,888,175

	For the years ended December 31,
	2018			2017			2016
Net profit for the year		12,355,390			7,969,394			3,247,480
Other comprehensive income
Other comprehensive income that may be reclassified to profit or loss in subsequent periods (net of taxes):
Unrealized gain (loss) on hedges:
Cash flow hedge for future exports (Note 28.1.2)		(533,374	)		(84,837	)		461,424
Hedge of a net investment in a foreign operation (Note 28.1.3)		(971,954	)		57,997			(155,359	)
Cash flow hedge with derivative instruments (Note 28.1.4)		(52,174	)		35,768			33,869
Equity instruments measured at fair value:
Unrealized (loss) gain		-			(7,828	)		126,205
Realized loss		-			–			(68,497	)
Foreign currency translation		2,599,242			(257,147	)		(925,981	)
		1,041,740			(256,047	)		(528,339	)
Other comprehensive income that will not to be reclassified to profit or loss in subsequent periods (net of taxes):
Remeasurement loss on defined benefit plans (Note 20.1)		(4,290	)		(1,548,043	)		(1,153,442	)
Other losses		-			(11,817	)		(46,826	)
		(4,290	)		(1,559,860	)		(1,200,268	)
Other comprehensive income (loss) for the year, net of tax		1,037,450			(1,815,907	)		(1,728,607	)
Total comprehensive income for the year, net of tax		13,392,840			6,153,487			1,518,873
Comprehensive income attributable to:
Owners of parent		12,363,132			5,353,778			784,658
Non–controlling interest		1,029,708			799,709			734,215
		13,392,840			6,153,487			1,518,873

~~F-7~~

Ecopetrol S.A.

Consolidated ~~statements~~statement of changes in equity

(~~Figures expressed in~~In millions of Colombian pesos)

	Notes	Subscribed and paid-in capital		Additional paid-in capital		Reserves (1)			Other comprehensive income			Retained earnings (1)			Equity attributable to Company’s shareholders			Non- controlling interests			Total equity					Attributable to owners of parent
Balance as of December 31, 2015			25,040,067		6,607,699		5,546,570			10,846,004			(6,814,432	)		41,225,908			1,875,055			43,100,963
Net income			-		-		-			-			2,447,881			2,447,881			799,599			3,247,480
																								Note		Subscribed and paid– in capital		Additional paid–in capital			Reserves		Other comprehensive income			Retained earnings			Total			Non– controlling interest			Total equity
Balance as of December 31, 2017																											25,040,067		6,607,700			2,177,869		7,399,015			5,210,302			46,434,953			1,780,746			48,215,699
Net profit																											–		–			–		–			11,381,386			11,381,386			974,004			12,355,390
Dividends declared																			(1,029,612	)		(1,029,612	)		22.4		–		–			–		–			(3,659,386	)		(3,659,386	)		(840,626	)		(4,500,012	)
Legal reserve used to offset previous year loss	24		-		-		(3,869,907	)		-			3,869,907			-			-			-
Appropriation of reserves, net			-		-		(117,819	)		-			117,819			-			-			-					–		–			2,961,026		–			(2,961,026	)		–			–			–
Other movements													(23,637	)		(23,637	)		(6,086	)		(29,723	)				–		(1	)		–		–			(784	)		(785	)		38			(747	)
Other comprehensive income
Other comprehensive income:
Gain (loss) on hedging instruments:
Cash flow hedge for future exports	31		-		-		-			461,424			-			461,424			-			461,424					–		–			–		(533,374	)		–			(533,374	)		–			(533,374	)
Hedge of a net investment in a foreign operation	31		-		-		-			(155,359	)		-			(155,359	)		-			(155,359	)				–		–			–		(971,954	)		–			(971,954	)		–			(971,954	)
Cash flow hedge with derivative instruments			-		-		-			24,546			-			24,546			9,323			33,869					–		–			–		(37,904	)		–			(37,904	)		(14,270	)		(52,174	)
Net fair value gain on equity instruments measured at fair value	11		-		-		-			57,708			-			57,708			-			57,708
Foreign currency translation			-		-		-			(811,345	)		-			(811,345	)		(114,636	)		(925,981	)				–		–			–		2,529,268			–			2,529,268			69,974			2,599,242
Actuarial valuation losses	22		-		-		-			(1,153,442	)		-			(1,153,442	)		-			(1,153,442	)
Other movements			-		-		-			(46,826	)		-			(46,826	)		-			(46,826	)
Balance as of December 31, 2016			25,040,067		6,607,699		1,558,844			9,222,710			(402,462	)		42,026,858			1,533,643			43,560,501
Remeasurement loss on defined benefit plans																											–		–			–		(4,290	)		–			(4,290	)		–			(4,290	)
Balance as of December 31, 2018																											25,040,067		6,607,699			5,138,895		8,380,761			9,970,492			55,137,914			1,969,866			57,107,780

Notes Subscribed and
paid-in capital Additional
paid-in
capital Reserves
(1) Other
comprehensive
income Retained
earnings
(1) Equity
attributable
to Company’s
shareholders Non-
controlling
interests Total equity
Balance as of December 31, 2014 10,279,175 6,607,612 17,963,370 3,980,749 8,192,040 47,022,946 1,511,282 48,534,228
Net income (loss) - - - - (7,193,859 ) (7,193,859 ) 904,880 (6,288,979 )
Dividends declared 24 - - - - (5,468,521 ) (5,468,521 ) (715,051 ) (6,183,572 )
Appropriation of reserves, net - - 2,344,095 (2,344,095 ) -
Capitalization of reserves 14,760,895 - (14,760,895 ) - - - - -
Other movements (3 ) 87 - - 3 87 - 87
Other comprehensive income
Loss on hedging instruments:
Cash flow hedge for future exports 31 - - - (217,291 ) - (217,291 ) - (217,291 )
Cash flow hedge with derivative instruments - - - (43,590 ) - (43,590 ) (16,493 ) (60,083 )
Net fair value (loss) on equity instruments measured at fair value 11 - - - (126,316 ) - (126,316 ) - (126,316 )
Foreign currency translation - - - 5,789,207 - 5,789,207 190,437 5,979,644
Actuarial valuation gains 22 - - - 1,404,602 - 1,404,602 - 1,404,602
Other movements - - - 58,643 - 58,643 - 58,643
Balance as of December 31, 2015 25,040,067 6,607,699 5,546,570 10,846,004 (6,814,432 ) 41,225,908 1,875,055 43,100,963

~~(1) For comparative purposes, the initial balances of reserves and accumulated profits were reclassified, without changing the equity attributable to the shareholders of Ecopetrol. See note 2.8.~~

			Attributable to owners of parent
	Note		Subscribed and paid– in capital		Additional paid–in capital		Reserves		Other comprehensive income			Retained earnings			Total			Non– controlling interest			Total equity
Balance as of December 31, 2016				25,040,067		6,607,699		1,558,844		9,222,710			(402,462	)		42,026,858			1,533,643			43,560,501
Net profit				–		–		–		–			7,178,539			7,178,539			790,855			7,969,394
Dividends declared		22.4		–		–		–		–			(945,684	)		(945,684	)		(551,494	)		(1,497,178	)
Appropriation of reserves, net				–		–		619,025		–			(619,025	)		–			–			–
Other movements				–		1		–		2			(1,066	)		(1,063	)		(48	)		(1,111	)
Other comprehensive income:
Gain (loss) on hedging instruments
Cash flow hedge for future exports				–		–		–		(84,837	)		–			(84,837	)		–			(84,837	)
Hedge of a net investment in a foreign operation				–		–		–		57,997			–			57,997			–			57,997
Cash flow hedge with derivative instruments				–		–		–		25,984			–			25,984			9,784			35,768
Loss on equity instruments measured at fair value				–		–		–		(7,828	)		–			(7,828	)		–			(7,828	)
Foreign currency translation				–		–		–		(255,153	)		–			(255,153	)		(1,994	)		(257,147	)
Remeasurement loss on defined benefit plans				–		–		–		(1,548,043	)		–			(1,548,043	)		–			(1,548,043	)
Other movements				–		–		–		(11,817	)		–			(11,817	)		–			(11,817	)
Balance as of December 31, 2017				25,040,067		6,607,700		2,177,869		7,399,015			5,210,302			46,434,953			1,780,746			48,215,699

~~F-8~~

Ecopetrol S.A.

Consolidated ~~statements~~statement of changes in equity

(~~Figures expressed in~~In millions of Colombian pesos)

Notes Subscribed
and paid-
in capital Additional
paid-in
capital Reserves
(1) Other
comprehensive
income Retained
earnings (1) Equity
attributable
to Company’s
shareholders Non-
controlling
interests Total equity
Balance as of January 1st, 2014 10,279,175 6,607,540 15,300,725 (86,956 ) 16,498,512 48,598,996 1,265,573 49,864,569
Net income - - - - 5,046,517 5,046,517 623,056 5,669,573
Dividends declared 24 - - - - (10,690,342 ) (10,690,342 ) (516,331 ) (11,206,673 )
Appropriation of reserves, net 24 - - 2,662,645 - (2,662,645 ) - - -
Other movements - 72 - - (2 ) 70 (11,914 ) (11,844 )
Other comprehensive income
Net fair value gain (loss) on equity instruments measured at fair value 11 - - - 76,435 - 76,435 - 76,435
Foreign currency translation - - - 3,247,477 - 3,247,477 150,898 3,398,375
Actuarial valuation gains 22 - - - 743,793 - 743,793 - 743,793
Balance as of December 31, 2014 10,279,175 6,607,612 17,963,370 3,980,749 8,192,040 47,022,946 1,511,282 48,534,228

~~(1) For comparative purposes, the initial balances of reserves and accumulated profits were reclassified, without changing the equity attributable to the shareholders of Ecopetrol. See note 2.8.~~

		Attributable to owners of parent
	Note	Subscribed and paid–in capital		Additional paid–in capital		Reserves			Other comprehensive income			Retained earnings			Total			Non– controlling interest			Total equity
Balance as of December 31, 2015			25,040,067		6,607,699		5,546,570			10,846,004			(6,814,432	)		41,225,908			1,875,055			43,100,963
Net profit			–		–		–			–			2,447,881			2,447,881			799,599			3,247,480
Dividends declared																			(1,029,612	)		(1,029,612	)
Legal reserve used to offset previous year loss			–		–		(3,869,907	)		–			3,869,907			–			–			–
Appropriation of reserves, net			–		–		(117,819	)		–			117,819			–			–			–
Other movements			–		–		–			–			(23,637	)		(23,637	)		(6,086	)		(29,723	)
Other comprehensive income
Gain (loss) on hedging instruments:
Cash flow hedge for future exports			–		–		–			461,424			–			461,424			–			461,424
Hedge of a net investment in a foreign operation			–		–		–			(155,359	)		–			(155,359	)		–			(155,359	)
Cash flow hedge with derivative instruments			–		–		–			24,546			–			24,546			9,323			33,869
Net fair value gain on equity instruments measured at fair value			–		–		–			57,708			–			57,708			–			57,708
Foreign currency translation			–		–		–			(811,345	)		–			(811,345	)		(114,636	)		(925,981	)
Remeasurement loss on defined benefit plans			–		–		–			(1,153,442	)		–			(1,153,442	)		–			(1,153,442	)
Other movements			–		–		–			(46,826	)		–			(46,826	)		–			(46,826	)
Balance as of December 31, 2016			25,040,067		6,607,699		1,558,844			9,222,710			(402,462	)		42,026,858			1,533,643			43,560,501

~~F-9~~

Ecopetrol S.A.

Consolidated ~~statements~~statement of cash flows

(~~Figures expressed in~~In millions of Colombian pesos)

For the years ended December 31,
Note 2016 2015 2014
Cash flow provided by operating activities:
Net income (loss) for the period 3,247,480 (6,288,979 ) 5,669,573
Adjustments to reconcile net income (loss) to cash provided by operating activities:
Income tax 10 4,543,046 710,353 5,434,855
Depreciation, depletion and amortization 15,16,18 7,607,000 6,770,358 6,417,207
Foreign exchange loss 30 (976,430 ) 5,566,614 2,270,193
Finance costs recognised in profit or loss 3,345,515 2,396,445 1,405,331
Dry wells 2.8 - 16 342,691 1,266,440 1,563,384
Loss on disposal of non-current assets 78,990 59,932 231,899
Impairment of assets 1,003,140 7,856,177 2,381,413
Fair value (gain) loss on financial assets valuation (59,593 ) (109,673 ) 135,427
(Gain) loss on share of profit of associates and joint ventures 14 (61,345 ) 46,687 (166,070 )
(Gain) on sale of equity instruments measured at fair value (47,129 ) (72,339 ) -
Realized foreign exchange cash flow hedges 25 (33,074 ) (7,646 ) -
Net changes in operating assets and liabilities -
Accounts and notes receivable (1,400,583 ) 751,031 1,507,923
Inventories (217,198 ) (183,231 ) 610,843
Accounts payable (619,131 ) (2,202,808 ) (322,819 )
Taxes payable 2,547,232 (1,964,995 ) (3,124,887 )
Labor obligations (11,677 ) (206,444 ) (259,043 )
Estimated liabilities and provisions (827,153 ) (216,939 ) (146,499 )
Other assets 118,523 654,960 (653,196 )
Income tax paid (4,347,364 ) (3,148,028 ) (4,819,169 )
Net cash provided by operating activities 14,232,940 11,677,915 18,136,365

Cash flows from investing activities:
Investment in property, plant and equipment 15 (3,646,929 ) (8,548,933 ) (8,923,568 )
Investment in natural and environmental resources 2.8 - 16 (2,121,295 ) (6,856,761 ) (6,601,680 )
Additions to intangibles 18 (69,253 ) (112,255 ) (112,018 )
Proceeds from sales of equity instruments measured at fair value 11 966,715 613,998 -
(Purchases) sales of other financial assets (5,446,507 ) 1,208,898 1,313,837
Interest received 386,001 293,507 286,527
Dividends received 437,803 423,856 720,217
Proceeds from sales of property, plant and equipment 109,896 166,211 184,424
Net cash used in investing activities (9,383,569 ) (12,811,479 ) (13,132,261 )

Cash flows from financing activities:
Proceeds from borrowings 4,594,640 10,985,933 9,094,818
Repayment of borrowings (3,149,917 ) (4,903,592 ) (2,693,104 )
Interest paid (2,495,446 ) (1,981,127 ) (1,231,392 )
Capitalizations - 3 41
Dividends paid 24 (1,712,298 ) (5,493,400 ) (12,516,566 )
Net cash used in financing activities (2,763,021 ) (1,392,183 ) (7,346,203 )

Exchange difference in cash and cash equivalents (226,333 ) 1,458,019 1,155,187
Net increase (decrease) in cash and cash equivalents 1,860,017 (1,067,728 ) (1,186,912 )
Cash and cash equivalents at the beginning of the year 6 6,550,450 7,618,178 8,805,090
Cash and cash equivalents at the end of the year 8,410,467 6,550,450 7,618,178
Non-cash transactions
Capitalization of reserves - 14,760,895 -
Payment of income tax through offset of recoverable balances 656,121 894,451 -

			For the years ended December 31,
	Note		2018			2017			2016
Cash flow provided by operating activities:
Net profit for the period				12,355,390			7,969,394			3,247,480
Adjustments to reconcile the net profit to net cash provided by operating activities:
Income tax expense		10		8,258,485			5,800,268			4,543,046
Depreciation, depletion and amortization		13,14,15		7,704,850			8,281,347			7,607,000
Foreign exchange loss		27		(372,223	)		(5,514	)		(976,430	)
Finance cost of loans and borrowings		27		2,399,414			2,385,994			2,765,024
Finance cost of post–employment benefits and abandonment costs		27		668,782			753,047			580,491
Dry wells		14		898,924			898,264			342,691
(Gain) loss on disposal of non–current assets				75,835			26,686			78,990
Loss (gain) on acquisition of interests in joint operations		30.3		12,065			(451,095	)		–
Loss on impairment of short–term assets				136,044			30,600			74,393
Impairment loss (impairment reversal) of long–lived assets		16		368,634			(1,311,138	)		928,747
Gain on fair value adjustment of financial assets				(92,906	)		(104,706	)		(59,593	)
Share of profit of associates and joint ventures		12		(165,836	)		(93,538	)		(61,345	)
Net gain on the sale of assets held for sale				–			(166,389	)		–
Gain on sale of equity instruments measured at fair value				–			(13,236	)		(47,129	)
Hedge ineffectiveness				35,239			8,918			–
Realized foreign exchange cash flow hedges		23		(128,404	)		(160,772	)		(33,074	)
Income tax paid				(6,650,116	)		(4,217,303	)		(4,347,364	)
Net change in operational assets and liabilities:
Trade and other receivables				(2,039,161	)		(2,189,473	)		(1,400,583	)
Inventories				(448,135	)		(323,626	)		(217,198	)
Trade and other payables				1,355,175			21,417			(619,131	)
Tax assets and liabilities				(1,413,915	)		(493,533	)		2,547,232
Provisions for employee benefits				(181,060	)		(227,384	)		(11,677	)
Provisions and contingencies				(89,345	)		104,135			(827,153	)
Other assets and liabilities				(218,542	)		451,263			118,523
Net cash generated by operating activities				22,469,194			16,973,626			14,232,940
Cash flow from investing activities:
Investment in property, plant and equipment		13		(3,302,929	)		(2,363,283	)		(3,646,929	)
Investment in natural and environmental resources		14		(5,051,828	)		(3,426,405	)		(2,121,295	)
Acquisition of interests in joint operations				-			(141,950	)		–
Acquisitions of intangibles		15		(105,669	)		(175,868	)		(69,253	)
(Purchases) sales of other financial asset				(843,612	)		564,754			(5,446,507	)
Interests received				383,624			405,562			386,001
Dividends received				108,991			270,136			437,803
Proceeds from sales of assets held for sale				–			159,041			–
Proceeds from sales of equity instruments measured at fair value				–			56,930			966,715
Proceeds from sales of property, plant and equipment				92,620			267,324			109,896
Net cash used in investment activities				(8,718,803	)		(4,383,759	)		(9,383,569	)
Cash flow used in financing activities:
Proceeds from borrowings				517,747			444,827			4,594,640
Repayment of borrowings				(9,270,262	)		(9,007,340	)		(3,149,917	)
Interest payments				(2,610,562	)		(2,696,979	)		(2,495,446	)
Dividends paid				(4,427,701	)		(1,504,647	)		(1,712,298	)
Net cash used in financing activities				(15,790,778	)		(12,764,139	)		(2,763,021	)
Exchange difference in cash and cash equivalents				406,246			(290,310	)		(226,333	)
Net (decrease) increase in cash and cash equivalents				(1,634,141	)		(464,582	)		1,860,017
Cash and cash equivalents at the beginning of the year				7,945,885			8,410,467			6,550,450
Cash and cash equivalent at the end of the year		6		6,311,744			7,945,885			8,410,467

Non-cash transactions
Offsetting of income tax through the use of balances in favor				–			–			656,121

~~F-10~~

Ecopetrol S.A.

Notes to ~~Consolidated Financial Statements~~the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Reporting entity

Ecopetrol S.A. (“Ecopetrol”) is a mixed economy company, ~~with~~of a commercial nature, ~~formed~~incorporated in 1948 in Bogotá – Colombia, ~~headquarters~~parent company of the Ecopetrol Business Group. Its corporate purpose is to ~~develop~~conduct commercial or industrial activities ~~arising from or~~ related to the exploration, exploitation, production, refining, transportation, storage, distribution and ~~selling~~commercialization of hydrocarbons and their ~~by-products~~derivatives and ~~associated~~ products, ~~on its own~~directly or through its subsidiaries ~~(hereafter “Ecopetrol”, the “Company” or Ecopetrol~~(collectively referred to as “Ecopetrol Business ~~Group)~~Group”).

An 11.51% of Ecopetrol ~~S.A.’s~~ shares are publicly traded on the Stock Exchanges of Colombia and New ~~York, USA and Lima, Peru.~~York. The remaining shares (88.49% of the total outstanding shares) are owned by the Colombian Ministry of Finance and Public Credit.

The address of the main office of Ecopetrol ~~S.A.~~ is Bogotá – Colombia, Carrera 13 No. 36 -– 24.

Basis offor presentation

2.1

Statement of compliance and authorization of ~~the~~ financial statements

~~These~~The consolidated financial statements of Ecopetrol and its subsidiaries as of December 31, 2018 and 2017 and for the years ended on December 31, ~~2016, 2015~~2018, 2017 and ~~2014~~2016 have been prepared in accordance with International Financial Reporting Standards (IFRS) ~~and their interpretations,~~, as issued by the International Accounting Standards Board (IASB). ~~The Ecopetrol Business Group adopted IFRS starting January 1, 2015, with a transition date of January 1, 2014.~~

Accounting policies described in Note 4 have been applied consistently in all ~~periods.~~years presented.

These consolidated financial statements were approved and authorized for issuance by ~~Ecopetrol’s Management~~the Board of Directors of Ecopetrol on ~~May 30, 2017.~~April 5, 2019.

2.2

Basis for consolidation

The consolidated financial statements were prepared by consolidating all companies set out in Exhibit 1, which are those ~~where~~over which Ecopetrol exercises direct or indirect control. Control is achieved when the ~~Company:~~Ecopetrol Business Group:

§·

~~Has~~has power over the investee (including rights to manage relevant activities);

§·

Isis exposed, or has the rights, to variable returns from its involvement with the investee; and

§·

~~Has~~has the ability to use its power to affect its operational returns. This instance occurs when the ~~Company~~Ecopetrol Business Group has less than a majority of the voting rights of an investee, and it still has the power over the investee to provide it with the practical ability to direct the relevant activities of the investee unilaterally. The ~~Company~~Ecopetrol Business Group considers all relevant facts and circumstances in assessing whether or not the Company’s voting rights in an investee are sufficient or not to give it power, including:

~~The~~the percentage of the ~~Company's~~Ecopetrol Business Group’s voting rights ~~regarding~~relative to the size and ~~division~~apportionment of the shares of other vote ~~holders~~;holders;

~~Potential~~potential voting rights held by the ~~Company,~~Ecopetrol Business Group, other vote holders or other ~~parties~~;parties;

~~Rights~~rights arising from other contractual arrangements; and

~~Any~~any additional facts and circumstances that indicate that the ~~Company~~Ecopetrol Business Group has, or does not have, the current ability to direct the relevant activities, at the time that decisions need to be made,, including voting patterns at previous shareholders’ ~~meetings~~meetings.

Subsidiaries are consolidated from the date on which control is obtained until the date that such control ~~ceases, using consistent accounting policies.~~ceases.

All ~~inter-company~~inter–company assets and liabilities, equity, income, expenses and cash flows relating to transactions between entities of the Ecopetrol Business Group were eliminated on consolidation. Unrealized losses are also eliminated. ~~Non-controlling~~Non–controlling interest represents the proportion of profit, other comprehensive income and net assets in subsidiaries that are not attributable to ~~Ecopetrol’s~~Ecopetrol shareholders.

~~F-11~~

Ecopetrol S.A.

Notes to ~~Consolidated Financial Statements~~the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

In 2015, the Board of Directors of Ecopetrol S.A authorized the creation of a Colombian company indirectly wholly owned by Ecopetrol S.A. This Company will develop offshore activities in Colombia, which the company currently carries out as operator and non-operator, and take advantage of the benefits of Decree 2682/14, “pursuant to which the conditions and requirements are established for declaring the existence of Permanent Offshore Free Trade Zones”. At December 31, 2015, the legal proceedings were pending to formalize the establishment of the subsidiary.

The following ~~are the~~ subsidiaries ~~that~~ were incorporated in ~~2016:~~the years indicated:

2018

a)§

Ecopetrol ~~Costa Afuera~~Energía S.A.S. E.S.P: ~~Subsidiary engaged~~ whose corporate purpose is the commercialization of electric power for the Ecopetrol Business Group. Ecopetrol holds a 99% direct interest in the ~~production~~subsidiary, and ~~exploration segment with a 100% ownership by~~indirect interest of the ~~Group~~remaining 1% through Andean Chemicals Ltd.

2017

Esenttia Resinas del Perú SAC: wholly–owned subsidiary whose corporate purpose is the commercialization of polypropylene resins and ~~that was created with the purpose of carrying out offshore activities~~master batches in ~~Colombia, which Ecopetrol is currently conducting as operator and non-operator of permits.~~Peru.

b)§

~~Sento S.A.S.~~ECP Hidrocarburos México S.A. de CV:~~Subsidiary~~ wholly–owned subsidiary, engaged in ~~the transport segment that was created for transferring 100%~~operating oil contracts in Mexico, starting with blocks 6 and 8 of ~~the equity share held by Equion~~Round 2.1 in ~~Oleoducto de Colombia S.A.~~shallow waters.

2.3

Measurement basis

The consolidated financial statements have been prepared on a historical cost basis, except for financial assets and liabilities that are measured at fair value through profit or loss ~~and /~~ and/or ~~through~~changes in other comprehensive income at the end of each reporting period, as explained in the accounting policies included below.

Historical cost is generally based on fair value of the consideration given in exchange for goods and ~~services~~.services.

The fair value is the price that would be received from selling an asset or that would be paid for transferring a liability among market participants, in an orderly transaction, on the date of measurement. When estimating the fair value, the Ecopetrol Business Group uses assumptions that market participants would use for pricing an asset or liability at current market conditions, including risk assumptions.

2.4

Functional and presentation currency

The ~~functional currency of each group’s company is determined in relation to the main economic environment where they operate. The~~ consolidated financial statements are presented in Colombian ~~pesos,~~Pesos, which is the ~~Group’s~~Ecopetrol’s functional ~~and presentation~~ currency. For each Ecopetrol Business Group entity its functional currency is determined based of the main economic environment where it operates.

The ~~statement~~statements of profit or loss and ~~statement of~~ cash flows of subsidiaries with functional currencies different from ~~Ecopetrol’s~~Ecopetrol S.A.’s functional currency are translated at the exchange rates on the dates of the transaction or atbased on the monthly average exchange rate. Assets and liabilities are translated at the closing rate, and other equity items are translated at exchange rates at the time of the transaction. All resulting exchange differences are recognized in other comprehensive income. ~~Upon~~On disposal of all or significant part of ~~an interest in~~ a ~~subsidiary, the portion of~~foreign operation, the cumulative translation adjustment related to the ~~company~~particular foreign operation is ~~recognized in the consolidated statement of~~reclassified to profit or loss.

The financial statements are presented in Colombian pesos rounded up to the closest million unit (COP 000,000) except when otherwise indicated.

~~F-12~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

2.5

Foreign currency

InTransactions in foreign currencies are initially recorded by the ~~preparation of the financial statements of~~ Ecopetrol ~~transactions in currencies other than the Company’s~~Business Group’s entities at their respective functional currency ~~are recognized~~spot rates at the ~~rates of exchange prevailing at the date of the transactions. At the end of each reporting period, monetary~~transactions date. Monetary items denominated in foreign currencies are translated at the functional currency spot rates prevailing at the ~~period end and variations presented~~reporting date. Differences arising on settlement or translation or monetary items are recognized in profit or loss, in financial results, net, except those resulting from the conversion of loans and borrowings designated as cash flow hedges or net investment in a ~~business abroad,~~foreign operation hedge, which are recognized in other comprehensive income within equity. When the hedged item affects the financial results, exchange differences accumulated in equity are reclassified to ~~the consolidated statement of~~ profit or loss as part of operating results.

Ecopetrol S.A.

Notes to the ~~operating result.~~consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~Non-monetary~~Non–monetary items ~~carried~~measured at fair value that are denominated in a foreign ~~currencies~~currency are translated using the exchange rates prevailing aton the date when the fair value ~~was~~is determined.

~~Net investment in foreign operations includes equity financing and long-term inter-company loans for which settlement is neither planned nor likely to occur in the foreseeable future.~~ The ~~exchange differences derived from the~~gain or loss arising on translation of ~~net investment~~non–monetary items measured at fair value is treated in ~~a foreign operation are accumulated~~line with the recognition of the gain or loss on the change in fair value of the ~~other comprehensive income.~~item.

2.6

Classification of assets and liabilities as current and ~~non-current~~non–current

InThe Ecopetrol Business Group presents assets and liabilities in the consolidated statement of financial position based on whether assets are classified as current or non–current.

An asset or liability is classified as current when:

It is expected to be realized or intended to be sold or consumed (or expected to be settled, in the case of liabilities) in the ordinary course of business;

Held mainly for the purpose of trading;

Expected to be realised (or to be settled, in the case of liabilities) within twelve months after the reporting perior; or

In the case of the assets, it is cash or a cash equivalent, unless restricted from being exchanged or used to settle a liability for at least twelve months after the reporting period ; or

In the case of a liabilities, there is no unconditional right to defer settlement of the liability for at least twelve months after the reporting period.

Other assets and liabilities are classified ~~in accordance with their maturities between~~ as non–current.

Deferred tax assets and liabilities are classified as non–current ~~those with maturity equal to or less than twelve months,~~assets and ~~non-current, those with maturity exceeding twelve months.~~liabilities.

2.7

Earnings ~~(loss)~~ per share (basic and diluted)

Basic earnings ~~(loss)~~ per share is calculated by dividing the profit for the year attributable to ~~ordinary~~ equity holders of Ecopetrol S.A., the parent company, by the weighted average number of ordinary shares outstanding during the year. There is no potential dilution of shares.

~~2.8~~

~~Changes in presentation policies and reclassifications~~

Subsequent to the issuance of the consolidated financial statements as of December 31, 2015, the Company modified its presentation policy in the cash flows statements to dry wells, for better understanding and comparability respect to the amount invested in exploration activities; the above is aligned with the policy of successful efforts described in Note 4.7 which states that the costs of exploratory wells are initially capitalized until it is determined if they are commercially viable, additionally, it allows alignment of the information presented with the annual investment budget published by the Company, which includes investments to be made during the period, whether commercially viable or not. With this change, starting in 2016, investments that could result in dry wells are added back to net income in determining cash flows provided by operations and are included in cash flows used in investing activities. The following is the detail of the mentioned change:

~~F-13~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

December 31,
2015 as
previously
reported Reclassifications December 31,
2015 as
adjusted
Cash provided by operating activities:
Dry wells - 1,266,440 1,266,440
Total cash provided by operating activities 10,411,475 1,266,440 11,677,915
Cash provided by operating activities::
Investment in natural and environmental resources (5,590,321 ) (1,266,440 ) (6,856,761 )
Total cash used in investing activities (11,545,039 ) (1,266,440 ) (12,811,479 )
Cash and cash equivalents at the end of the year 6,550,450 - 6,550,450

December 31,
2014 as
previously
reported Reclassifications December 31,
2014 as
adjusted
Cash provided by operating activities:
Dry wells - 1,563,384 1,563,384
Total cash provided by operating activities 16,572,981 1,563,384 18,136,365
Cash provided by operating activities:
Investment in natural and environmental resources (5,038,296 ) (1,563,384 ) (6,601,680 )
Total cash used in investing activities (11,568,877 ) (1,563,384 ) (13,132,261 )
Cash and cash equivalents at the end of the year 7,618,178 - 7,618,178

For comparison purposes, the Company reclassified certain amounts from prior periods, in the concepts that comprise the statement of changes in equity, as well as, the reconciliation of the income tax expense related in the note 10 - Taxes, to allow better comparability with the current period. These reclassifications do not impact either profit or loss or equity.

Significant estimates and accounting judgments

The preparation of the consolidated financial statements requires ~~estimates from Company~~ management to ~~quantify some~~make judgements, estimates and assumptions that affect the reported amounts of assets, liabilities, sales revenues, costs and commitments recognized in the financial ~~statements. These estimates have been made~~statements and the accompanying disclosures. The Ecopetrol Business Group based ~~on the best available data for realized facts. Uncertainty on the~~its assumptions and ~~estimations~~estimates on parameters available when these consolidated financial statements were prepared. Uncertainty about these assumptions and estimates could result ~~into~~in outcomes that required a material ~~future changes that could affect~~adjustment to the ~~value~~carrying amount of assets or ~~liabilities. The changes to such~~liabilities affected in future periods. Changes in estimates are ~~recognized~~adjusted prospectively in ~~a prospective manner during~~ the period in which the estimate is ~~reviewed.~~revised.

~~The~~In the process of applying the Ecopetrol Business Group’s accounting policies, management has made the following ~~are accounting~~ judgments and estimates ~~with~~which have the most significant ~~effect for preparing~~impact on the amounts recognized in the consolidated financial statements:

3.1

Oil and ~~Gas~~gas reserves

~~Measurements relating to depreciation, depletion, amortization, impairment~~Hydrocarbon reserves are estimates of the amount of hydrocarbons that can be economically and ~~asset abandonment obligations are determined, in part, based on~~legally extracted from the ~~Company's estimated reserves of~~Ecopetrol Business Group’s oil and ~~natural gas. Reserves estimation is an inherently complex process and it involves professional judgments.~~

gas properties.

~~F-14~~

Ecopetrol S.A.

Notes to ~~Consolidated Financial Statements~~the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The reserves estimation is ~~conducted~~performed annually atas of December 31 in accordance with the United States Securities and Exchange Commission (SEC) definitions and rules set forth in Rule ~~4-10(a)~~4–10(a) of SEC Regulation ~~S-X~~S–X and the disclosure guidelines contained in the SEC final rule -– Modernization of Oil and Gas Reporting.

As required by current regulations, the future estimated date inon which a field will no longer produce for economic reasons, is based on actual costs and average of crude prices (calculated as the arithmetical average of prices on the first day of the past 12 months). The estimated date for end of production will affect the amount of reserves, unless the prices have been defined by contractual agreements; therefore, if the prices and costs change from one year to the ~~other,~~next, the proved reserves estimate also changes. Generally, our ~~prove~~proved reserves decrease as prices go down and increase when prices go up.

Reserves estimation is an inherently complex process and it involves professional judgments. Reserves estimations are prepared using geological, technical and economic factors, including projections of future production rates, oil prices, engineering data and ~~length~~duration and amount of future investments, ~~with~~and they imply a certain degree of uncertainty. These estimations reflect the regulatory and market conditions existing on the date of reporting, which could significantly differ from other conditions during the year or in future periods. Any changes in regulatory and/or market conditions and assumptions could materially affect the reserves estimation.

Impact of oil reserves and natural gas in depreciation and depletion

Changes ~~in estimates of proved~~to estimations for proven developed reserves may affect the carrying amounts of exploration and production assets, natural resources and environment, goodwill, liabilities for dismantling and depreciation, depletion and amortization. With all other variables remaining unchanged, a decrease in estimated ~~proved~~proven reserves would increase, prospectively, depreciation, depletion and amortization ~~expenses,~~costs, while an increase in reserves would reduce depreciation and amortization expenses, as depreciation, depletion and amortization charges are calculated using the units of production method.

Information about the carrying amounts of exploration and production assets and the amounts charged to income, including depreciation, depletion and amortization, is presented in Notes 1513 and ~~16.~~14.

3.2

~~Asset~~Assets impairment ~~(recovery)~~

~~The Company~~Management uses its professional judgment in assessing the existence of evidence of an impairment loss or reversal, based on internal and external factors. If

When an indicator of impairment ~~indicators exist, Company estimated~~or reversal of a prior periods impairment exists, the Ecopetrol Business Group estimates the recoverable amount of the cash generating units (CGU), which is considered ~~to be~~ the ~~higher~~greater of ~~the~~ fair value less costs of disposal and the value in use.

The assessments require the use of estimates and assumptions, ~~including:~~such as, among other factors: (1) ~~Estimation~~estimation of the volumes and market value of oil and natural gas reserves; (2) production profiles for oilfields and the future production of refined and ~~chemical~~petrochemical products; (3) investments, taxes and future costs; (4) useful life of assets; (5) ~~future prices, and~~long–term prices; (6) the discount rate, which is revised annually and determined as the weighted average cost of capital (WACC),; and (7) changes in environmental ~~regulation, among other factors.~~regulation. The recoverable amount is compared to the carrying amount of the asset, ~~or the cash generating unit, to determinate if~~thus determining whether the asset is ~~impaired.~~impaired or if the impairment recognized in prior periods should be reversed.

A previously recognized impairment loss is reversed only if there has been a change in the assumptions used to determine the assets or in the CGU’s recoverable amount since the last impairment loss was recognized. The reversal is limited so that the carrying amount of an asset or CGU, other than goodwill, does not exceed either its recoverable amount, or the carrying amount that would have been determined (net of amortization or depreciation) had no impairment loss been recognized for the asset or CGU in prior periods.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Future oil price assumptions are estimated at current market conditions. Expected production volumes, which comprise ~~proved~~proven unproved, probable and ~~unproved~~possible reserves are used for impairment testing because management believes this to be the most appropriate indicator of expected future cash flows, which would also be considered by market participants. Reserves estimates are inherently imprecise and subject to risk and uncertainty. Furthermore, projections about unproved volumes are based on information that is necessarily less robust than ~~that~~what is available for mature reservoirs.

~~Changes in~~These estimates and ~~judgments may~~assumptions are subject to risk and uncertainty. Therefore, there is a possibility that changes in circumstances will impact these projections, which may also impact the recoverable amount of ~~the cash generating units and, as a consequence,~~assets and/or CGUs, hence, may also ~~impact~~affect the recognition of an impairment loss or ~~recovery~~the reversal of ~~asset~~prior period impairment

amounts.

~~F-15~~

Ecopetrol S.A.

Notes to ~~Consolidated Financial Statements~~the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

3.3

Exploration and evaluation costs

The application of the Ecopetrol Business Group’s accounting policy for exploration and evaluation costs requires judgment in order to determine whether future economic benefits are likely, either from future exploitation or sale, or whether activities have not reached a stage which permits a reasonable assessment of the existence of reserves. Certain exploration and evaluation costs are initially capitalized when it is expected that ~~an economically~~commercially viable ~~extraction operation can be established.~~reserves will result. The ~~Company~~Ecopetrol Business Group uses its professional judgment of future events and circumstances and makes estimates in order to annually assess ~~annually~~ the generation of future economic benefits for extracting ~~the~~ oil resources, as well as technical and commercial analyses to confirm ~~intent~~its intention of continuing their development. Changes regarding available information, such as drilling success level or changes in the ~~project's~~project’s economics, production costs, and investment levels, ~~and others,~~as well as other factors, may result in capitalized exploration drilling costs being recognized ~~as a cost~~ in profit or loss for the period. ~~Since 2016,~~The expenses for dry wells ~~are treated as investment~~is included in operating activities in the consolidated statement of cash flows.

~~3.4 Determination of cash generating units (CGU)~~

3.4

Determination of cash generating units (CGU)

The allocation of assets in cash generating units requires significant judgment, as well as ~~interpretations~~assessments regarding ~~the~~ integration ~~between~~among assets, the existence of active markets, and similar exposure to market risk, shared infrastructure, and the way in which management monitors the operations. See Note 4.12 ~~- Impairment in the value~~–impairment of non–financial assets for more information.

3.5

~~Asset retirement obligation~~Abandonment and dismantling costs of fields and other facilities

According to environmental and oil regulations, the ~~Company must recognize~~Ecopetrol Business Group is required to bear the costs for the abandonment of oil extraction and transportation facilities, which include the cost of plugging and abandoning wells, dismantling facilities, and environmental remediation in the affected areas.

~~The estimated~~Estimated abandonment and dismantling costs ~~of dismantling and abandonment of these facilities~~ are recorded ~~in the functional currency of each company~~ at the time of the installation of ~~assets. The estimated obligation created for~~ the ~~abandonment~~assets and ~~dismantling~~ are subject to annual reviews and adjusted to reflect the best available estimation due to technological changes, political, economic, and environmental and security issues, as well as relationships with stakeholders.reviewed annually.

The ~~determination of~~calculations for these estimations isare complex and involve significant ~~judgment~~judgments by ~~Management, such as~~Management. The ultimate decommissioning costs are uncertain and cost estimates can vary in response to many factors, including changes to relevant legal requirements, the emergence of new restoration techniques or experience at other production sites. The expected timing, extent and amount of expenditure may also change, for example, in response to changes in internal cost projections, ~~of costs,~~ changes in reserve estimates, future inflation rates and discount rates. The ~~Company~~Ecopetrol Business Group considers that the abandonment and dismantling costs are reasonable, based on the experience of the Ecopetrol Business Group and market conditions; nevertheless, significant variations in external factors used for the calculation of the estimation could significantly impact the amounts recorded in the financial statements.

3.6

Pension plan and other benefits

The ~~calculation~~determination of expenses, liabilities and adjustments relating to pension plans and other defined retirement benefits ~~requires~~makes it necessary for management to use its judgment in the application of actuarial assumptions ~~used~~made in ~~such~~the actuarial calculation. The actuarial assumptions include estimates regarding future mortality, retirement, changes in compensation and discount rate in order to reflect the time value of money, ~~over time,~~ in addition to the rate of return on the ~~plan's~~plan’s assets. Due to the complexity ofin the valuation of these variables, as well as ~~the long term~~their long-term nature, the ~~obligations that are defined~~estimated amounts are quite sensitive to any change ofin these assumptions.

These assumptions are reviewed on an annual basis ~~for purposes of actuarial valuations~~ and may differ materially from actual results due to ~~changing~~changes in economic and market conditions, regulatory ~~events,~~changes, judicial rulings, higher or lower retirement rates, or longer or shorter life expectancies among employees. ~~The calculation of pension bonds is maintained for compliance with the Company's pension obligations, in accordance with current regulations.~~

~~F-16~~

Ecopetrol S.A.

Notes to ~~Consolidated Financial Statements~~the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

3.7

Goodwill impairment

~~The Company~~

In December of each year, the Ecopetrol Business Group performs an annual impairment test ofon goodwill to assess if itits carrying amount ~~is recoverable. Goodwillis allocated to each of the cash-generating units (or groups of cash generating units) expecting to benefit from the synergies of the combination.~~may be impaired.

The determination of the recoverable ~~value~~amount is described in ~~note~~Note 4.12, and its calculation requires assumptions and ~~estimations.~~estimates. The ~~Company~~Ecopetrol Business Group considers that the assumptions and estimations used are reasonable and supportable based on the current market conditions and are aligned to the risk profile of the related assets. However, if different assumptions and estimations ~~may be~~are used, ~~which would~~they could lead to different results. Valuation models used to determine fair value are sensitive to changes in the underlying assumptions. For example, sales volumes and prices that will be paid for the purchase of raw materials are assumptions that may vary in the future. Adverse changes in any of these assumptions could lead to the recognition of goodwill impairment.

3.8

Litigation

The ~~Company~~Ecopetrol Business Group is subject to claims ~~for~~relating to regulatory and arbitration proceedings, tax assessments and other claims arising in the ~~ordinary~~normal course of business. Management evaluates these claims based on their nature, the likelihood that they materialize and the amounts involved, to decide on ~~any changes to~~ the amounts ~~accrued~~recognized and/or disclosed in the financial statements.

This analysis, which may require considerable judgment, includes the assessment of current legal proceedings brought against the ~~Company~~Ecopetrol Business Group and claims not yet initiated. A provision is recognized when the ~~Company~~Ecopetrol Business Group has a present obligation ~~as a result of~~derived from a past event, it is ~~probable~~likely that an outflow of resources ~~embodying~~of economic benefits will be required to settle the obligation, and a reliable estimate ~~can be made~~ of the amount of ~~the obligation.~~such obligation can be made.

3.9

Taxes

Calculation of the income tax provision requires interpretation of ~~the~~ tax law in the jurisdictions where the Ecopetrol Business Group operates. Significant judgment is required to determine estimates for income tax on taxable profits and to evaluate the recoverability of deferred tax assets, which isare based on ~~estimates of future taxable income and~~ the ability to generate sufficient ~~results~~taxable income during the periods in which such deferred taxes ~~are deductible. Liabilities for deferred taxes are recorded in accordance with estimates of net assets that in the future will not~~could be ~~tax deductible.~~used or deduct.

To the extent that ~~actual~~ future cash flows and taxable income differ significantly from the estimates, the ~~Company's capacity recover recorded~~Ecopetrol Business Group’s ability to realize the deferred tax assets recorded could be affected.

~~Additionally,~~Furthermore, changes in tax rules could limit the capacity of the ~~Company~~Ecopetrol Business Group to obtain tax deductions in future years, as well as the recognition of new ~~potential~~tax liabilities resulting from ~~questioning~~auditing conducted by the ~~reviews of~~ tax authorities.

Tax positions ~~used imply~~taken involve a thorough ~~evaluation~~assessment by Management, and ~~these~~ are reviewed and adjusted in response to situations such as ~~expiry~~expiration in ~~application~~the applicability of laws, closing of tax audits, additional disclosures caused by any legal issue or a court decision ~~related~~relevant to a particular tax issue. The ~~Company creates~~Ecopetrol Business Group records provisions based on ~~the estimation of a~~estimated potential ~~adverse decision~~liabilities that could be derived from a tax audit. The amount of these provisions depends on factors such as previous experience in tax audits and different interpretations of tax ~~rules by tax paying entities and tax authorities.~~legislation. The actual results may differ from ~~recorded amounts.~~the estimates recorded.

~~F-17~~3.10

Hedge accounting

The process of identifying hedging relationships between hedged items and the underlying instruments (derivative and non–derivative, such as long–term, foreign currency–denominated debt), and their corresponding effectiveness, requires the use of judgment by management. The Ecopetrol Business Group periodically monitors the alignment between its hedge instruments and its risk management policy.

Ecopetrol S.A.

Notes to ~~Consolidated Financial Statements~~the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~3.10~~

~~Hedge Accounting~~

The process of identifying hedge relations among hedging elements and instruments (derivative and non-derivative such as long term debt in foreign currency), and the related effectiveness requires management judgment. The Company periodically assesses alignment between identified hedges and its risk management policy.

Accounting policies

The accounting policies indicated below have been applied consistently ~~applied in~~for all the periods ~~presented, unless otherwise indicated.~~presented.

4.1

Financial instruments

A financial instrument is any contract that gives rise to a financial asset of one entity and a financial liability or equity instrument of another entity.

The classification of financial instruments depends on the nature and purpose for which the financial assets or liabilities were acquired and is determined at the time of initial recognition. Financial assets and financial liabilities are initially measured at their fair value.

Transaction costs that are directly attributable to the acquisition or issue of financial assets and financial liabilities (other than financial assets and financial liabilities at fair value through profit or loss) are added to or deducted from the fair value of the financial assets or financial liabilities, as appropriate, on initial recognition. Transaction costs directly attributable to the acquisition of financial assets or financial liabilities at fair value through profit or loss are recognized immediately in ~~the statement of~~ profit or loss.

~~Financial~~All financial assets ~~with changes in profit or loss and other comprehensive income~~ are ~~stated~~initially recorded at fair value. ~~Financial instruments such as, loans~~Loans and trade receivables, other receivables and financial assets ~~held-to-maturity~~held–to–maturity are ~~stated~~measured subsequently measured at amortized cost using the effective interest method.

~~Available~~Equity investments available for sale ~~equity investments~~ that do not have a market ~~quoted~~quotation price and for which fair value cannot be reliably measured are measured at cost less any ~~loss for~~ impairment identified at the end of each reporting period.

~~Fair~~Measurements at fair value ~~measurement~~

Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value measurement is based on the presumption that the transaction to sell the asset or transfer the liability takes place ~~either~~ in the principal market ~~for~~of the asset or liability or in the absence of a principal market in the most advantageous market for the asset or liability.

The fair value of an asset or a liability is measured using the assumptions that market participants would use when pricing the asset or liability, assuming that market participants act in their economic best interest.

A fair value measurement of a non-financial asset takes into account a market participant's ability to generate economic benefits by using the asset in its highest and best use or by selling it to another market participant that would use the asset in its highest and best use.

The Group uses valuation techniques that are appropriate in the circumstances and for which sufficient data are available to measure fair value, maximizing the use of relevant observable inputs and minimizing the use of unobservable inputs.

All assets and liabilities for which fair value is measured or disclosed in the financial statements are ~~categorized~~classified within the ~~fair value hierarchy,~~following scale, based on the lowest level input that is significant to the fair value measurement as a whole, as follows::

Level 1: Quoted (unadjusted) market prices in active markets for identical assets ~~and~~or liabilities. ~~For~~The fair value of the ~~Company, level-1 inputs include~~Ecopetrol Business Group’s marketable securities ~~that are actively traded.~~with a quoted market price is based on Level 1 inputs.

Level 2: ~~Entries different from those of Level 1~~Valuation techniques for which the lowest level input that ~~are observable, either~~is significant to the fair value measurement is directly or ~~indirectly. For the Company, Level-2 entries~~indirectly observed. Level 2 inputs include prices of similar assets, prices obtained through quotations made by stockbrokers, and prices that can be substantially corroborated with other observable data with the same ~~term of the contract.~~contractual terms.

For derivative contracts for which a quoted market price is not available, fair value estimations are generally determined using models and other valuation methods, the key inputs for which include future prices, volatility estimates, price correlation, counterparty credit risk and market liquidity, as appropriate. For other assets and liabilities, fair value estimations are generally based on the net present value of expected future cash.

Level 3: ~~Unobservable inputs.~~Valuation techniques for which the lowest level input that is significant to the fair value measurement is unobservable. The ~~Company~~Ecopetrol Business Group does not use ~~Level-3~~Level–3 inputs for the measurement of financial assets and liabilities. The ~~Company~~Ecopetrol Business Group may use ~~Level-3~~Level–3 inputs for the ~~determination~~calculation the recoverable amount of ~~fair value associated with~~ certain ~~measurements~~non–financial assets for the purpose of ~~non-financial assets to determine their recoverable amount.~~impairment testing.

~~F-18~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Effective interest rate method

The effective interest rate method is a method of calculating the amortized cost of a financial instrument and accounting of income or financial cost over the relevant period. The effective interest rate is the discount rate that exactly discounts estimated future cash receipts or payments (including all fees, transaction costs and other premiums or discounts) through the expected life of the financial instrument (or, when appropriate, at a shorter period), to the net carrying amount on initial recognition.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Impairment

The ~~Company assesses, at each reporting date, whether~~Ecopetrol Business Group evaluates if there is objective evidence that a financial asset or ~~a groupof~~group of financial assets isare impaired. Financial assets are ~~assessed~~evaluated for the impairment indicators at the end of each reporting period. Financial assets are considered to be impaired when there is objective evidence that, as a result of one or more events that occurred after initial recognition, the estimated future cash flows of the asset have been affected. For financial assets measured at amortized cost, the amount of the impairment loss recognized is the difference between the asset’s carrying amount and the present value of estimated future cash flows, discounted at the financial asset’s original effective interest rate.

~~De-recognition of financial assets and liabilities~~

Ecopetrol derecognizes a financial asset only upon expiration of the contractual rights to receive cash flows from the financial asset or, when it has transferred its rights to receive cash flows from the asset or has assume an obligation to pay the received cash flows in full without material delay to a third party and either (a) it has transferred substantially all the risks and rewards inherent in the ownership of the financial asset or (b) it has neither transferred nor retained substantially all the risks and rewards of the asset, but has transferred control of the asset.

When the Company neither transfer nor retain substantially all the risks and rewards of the asset nor transferred control of the asset, the Company continues recognizing the transferred asset, to the extent of it continuing involvement, and also recognizes an associated liability.

4.1.1

Cash and cash equivalents

Cash and cash equivalents include cash on hand, financial investments that are highly liquid, bank deposits and ~~at banks and short-term investments~~special funds with original maturity dates of 90ninety days or less which are subject to an insignificant ~~risks~~risk of changes in value.

4.1.2

Financial assets

The ~~Company~~classification of financial assets at initial recognition depends on the financial asset’s contractual cash flow characteristics and the Group’s business model for managing them. With the exception of trade receivables that do not contain a significant financing component or for which the Ecopetrol Business Group has applied the practical expedient, the Ecopetrol Business Group initially measures a financial asset at its fair value plus, in the case of a financial asset not at fair value through profit or loss, transaction costs. Trade receivables that do not contain a significant financing component or for which the Ecopetrol Business Group has applied the practical expedient are measured at the transaction price determined under IFRS 15.

The Ecopetrol Business Group classifies its financial assets in the following categories:

~~Financial assets measured at fair value through profit or loss~~

a) Financial assets measured at fair value through profit or loss

Financial assets at fair value through profit or loss are financial assets held for trading and financial assets designated at the time of the initial recognition at fair value through profit or loss. Financial assets are classified as held for trading if they are acquired to be sold or repurchased in the short term. ~~Financial assets at fair value through profit or loss are carried at fair value with net changes in fair value recognized in the statement of profit or loss.~~

~~Financial assets measured at fair value with changes in other comprehensive income~~

These are equity instruments of other non-controlled and non-strategic companies not allowing for any type of control or material influence thereon and where the Company management is not intended to negotiate with them in the short-term. These instrumentsThey are recognized ~~for~~at their fair value and ~~unrealized~~ losses or ~~gains are recognized in other comprehensive income. The sales revenues received by these equity instruments are recognized as financial sales revenues in the period results.~~

~~F-19~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Atprofits arising at the time of ~~sale or recognition of losses for impairment in its value, the cumulative adjustment for valuation in the other comprehensive income and the profit or loss in sale~~re–measurement are recognized in the statement of profit or loss.

~~Loans and receivables~~

b) Financial assets measured at fair value with changes in other comprehensive income

These are equity instruments of other non–controlled and non–strategic companies not allowing for any type of control or significant influence thereon and where the Ecopetrol Business Group’s management does not intend to negotiate with them in the short term. These investments are recorded at their fair value and unrealized gains or losses are recognized in other comprehensive income and credited to the available for sale reserve until the investment is derecognized, at which time, the cumulative gain or loss is recognized in other operating income, or the investment is determined to be impaired, when the cumulative loss is reclassified from the available to sale reserve to the statement of profit or loss.

c) Financial assets at amortized cost

Loans and receivables are ~~non-derivative~~non–derivative financial assets with fixed or determinable payments that are not quoted in an active market. Loans and receivables, are classified as current, except when their maturity is longer than twelve months as of the date of the statement of financial position, in which case they are classified as non-current. Loans and receivables, including trade and other receivables, are measured initially ~~measured~~ at fair value and ~~subsequently~~then at amortized cost using the effective interest rate method, less impairment.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Loans to employees are initially ~~recognized~~recorded using the present value of the future cash flows, discounted at the current market rate for similar loans. If the interest rate is less than the current market rate, fair value will be less than the amount of the loan. This difference is recorded as a benefit to employees.

This category is the most relevant to the Group. The Group measures financial assets at amortized cost if both of the following conditions are met:

The financial asset is held within a business model with the objective to hold financial assets in order to collect contractual cash flows

The contractual terms of the financial asset give rise on specified dates to cash flows that are solely payments of principal and interest on the principal amount outstanding

Financial assets at amortized cost are subsequently measured using the effective interest (EIR) method and are subject to impairment. Gains and losses are recognized in profit or loss when the asset is derecognized, modified or impaired.

The Group’s financial assets at amortized cost includes trade receivables, other receivables, loan to an associate, and loan to employees. For loan to employees if the interest rate is less than the current market rate, fair value will be less than the amount of the loan. This difference is recorded as a benefit to employees.

De–recognition of financial assets

The Ecopetrol Business Group derecognizes a financial asset only upon the expiration of the contractual rights to the cash flows of the asset or, when it has transferred its rights to receive such cash flows or has assumed the obligation to pay the cash flows received in full without material delay to a third party and (a) it has transferred substantially all the risks and benefits inherent in the ownership of the financial asset or (b) it has neither transferred nor retained substantially all the risks and benefits of the asset, but has transferred control of the asset.

When the Ecopetrol Business Group does neither transfer nor retain substantially all the risks and benefits of the asset or transfer control of the asset, the Ecopetrol Business Group continues to recognize the transferred asset, to the extent of its continuing participation, and it also recognizes the associated liability.

4.1.3

Financial liabilities

Financial liabilities correspond to the financing obtained by the ~~Company~~Ecopetrol Business Group through bank credit facilities and bonds, accounts payable to suppliers and creditors.

Bank credit facilities and bonds (this is the category most relevant to the Group) are initially recognized at their fair value, net of directly attributable transactions ~~costs incurred. The difference between the amount received~~cost. After initial recognition, interest–bearing credit facilities and ~~its nominal value is recognized in the results of the period during the time of amortization of the financial obligation,~~bonds are subsequently measured at amortized cost, using the effective interest rate (EIR) method. The effective interest method amortization is included as a financial expense in the statement of profit or loss. Gains and losses are recognized in profit or loss when the liabilities are derecognized as well as through the EIR amortization process. Amortized cost is calculated by taking into account any discount or premium on acquisition and fees or costs that are an integral part of the EIR. The EIR amortization is included as finance costs in the statement of profit or loss.

Accounts payable to suppliers and creditors are ~~short~~ short–term financial liabilities recorded at ~~their~~ nominal value, ~~which~~since it does not significantly differ ~~significantly~~ from ~~their~~ fair value.

Derecognition

A financial liability is derecognized when the obligation ~~under~~specified in the ~~liability~~contract is discharged or cancelled or expires. When an existing financial liability ishas been replaced by another from the same lender, onunder substantially different terms, or the terms of an existing liability are substantially modified, such an exchange or modification is treated as the ~~derecognition~~de–recognition of the original liability and ~~the~~ recognized as a new liability. The difference inbetween the respective carrying amounts is recognized in the statement of profit or loss.

4.1.4

Derivative financial instruments and hedging activities

Financial ~~derivative~~ instruments are initially recognized ~~in the statement of financial position as assets or liabilities and are measured~~ at fair value on the date ~~the~~on which a derivative contract is entered into and are subsequently ~~measured~~remeasured at fair value. Changes in the fair value of derivatives are recognized as ~~gain~~gains or ~~loss~~losses in the statement of profit or loss, except for the effective portion of cash flow hedges, which is ~~recognize~~recognized in other comprehensive income and later reclassified to profit or loss when the hedge item affects profit or loss.

~~The profit or loss~~Changes in fair value of derivative contracts, ~~neither qualified nor~~which do not qualify or are not designated as hedges, including forward ~~sale~~contracts for the purchase and ~~purchase contracts~~sale of commodities ~~in trading~~under negotiation for physical delivery or ~~physical receiving~~receipt of the commodity are ~~registered~~recorded in profit or loss.

~~Embedded~~Derivatives embedded in the host contract are accounted for as separate derivatives ~~in contracts that do not yet require being recognized~~ at fair value ~~and that are not directly related to the host contract in terms of economics~~if their economic characteristics and risks are ~~separated from their~~not closely related to those of the host ~~contract~~contracts and ~~recognized~~the host contracts are not held for trading or designated at fair ~~value; associated gains and losses~~value through profit or loss. These embedded derivatives are measured at fair value with changes in fair value recognized in profit or loss.

~~F-20~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

4.1.5

Hedging operations

For ~~purpose~~purposes of hedge accounting, hedges are classified as:

~~Fair value hedges,~~Derivatives not designated as hedging instruments, when hedging the exposure to changes in the fair value of a recognized asset or liability or an unrecognized firm commitment ~~or an identifiable portion of such asset, liability or firm commitment.~~

~~Cash flow hedges~~Derivatives are designated as hedging instruments, when hedging of the exposure to variability in cash flows that is either attributable to a particular risk associated with a recognized asset or liability or a highly probable forecast transaction.

~~Hedges of a net investment in a foreign operation.~~

At the inception of a hedge relationship, the ~~Company~~Group formally designates and documents the hedge relationship to which it wishes to apply hedge accounting ~~including the relationship between the hedging instrument~~ and ~~the hedged item,~~ the risk management ~~objectives~~objective and strategy ~~to perform hedging transactions. Furthermore, such~~for undertaking the hedge. Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and are assessed on an ongoing basis to determine ~~that~~whether they ~~actually~~ have been highly effective throughout the financial reporting periods for which they were designated.

Ecopetrol S.A.

~~Hedging instruments are classified as non-current assets or liabilities when their expiration is more than 12 months from~~Notes to the ~~statement~~consolidated financial statements

(Figures expressed in millions of ~~financial position date,~~Colombian pesos, unless otherwise ~~they are classified as current assets or liabilities.~~stated)

4.1.5.1

Cash flow hedge

The effective portion of the gain or loss on the hedging instrument is recognized in ~~other comprehensive income,~~Other Comprehensive Income (OCI) in the cash flow hedge reserve, while any ineffective portion is recognized immediately in the statement of profit or ~~loss, in the net financial results line item.~~loss.

The amounts ~~previously recognized~~accumulated in ~~other comprehensive income~~OCI are ~~transferred to profit or loss. When~~accounted for, depending on the nature of the underlying hedged transaction. If the hedged ~~item is~~transaction subsequently results in the recognition of a non-financial ~~asset or liability,~~item, the ~~amounts previously recognized~~amount accumulated in ~~other comprehensive income are transferred~~equity is removed from the separate component of equity and included in the initial cost or other carrying amount of the ~~cost of the non-financial~~hedged asset or liability.

If the hedging instrument expires or is sold, terminated or exercised without replacement or rollover, or if itits designation as a hedge is revoked or when the hedge no longer meets the criteria for hedge accounting, any cumulative gain or loss previously recognized in other comprehensive income remains separately in equity until the forecast transaction occurs is recognized in the consolidated statement of profit or loss. When it is no longer expected that the initially hedged transaction ~~occurs, any profit or loss accumulated in equity is immediately recognized in profit or loss.~~will occur.

Ecopetrol designates ~~long~~ long–term loans as hedging ~~instrument~~instruments for ~~their~~its exposure to the exchange risk in future oil exports. See Note 3128 for further information.

4.1.5.2

Hedge of a net investment in a foreign operation

Hedges of a net investment in a foreign operation, including a hedge of a monetary item that is accounted for as part of the net investment, are accounted for in a way similar to ~~the~~ cash flow hedges.

Gains or losses on of the hedging instrument ~~related~~relating to the effective portion of the hedge are recognized ~~in other comprehensive income,~~as OCI while any gains or losses relating to the ineffective portion are recognized in the statement of profit or loss. ~~Cumulative~~On disposal of the foreign operation, the cumulative value of any such gains or losses recorded in equity is transferred to the statement of profit or ~~loss when the foreign subsidiary is partially or totally disposed of.~~loss.

~~F-21~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Ecopetrol ~~uses long~~ allocates long–term loans as ~~a hedge of~~hedging instruments for its exposure to foreign exchange risk on its investment in subsidiaries whose functional currency is the U.S. dollar. See Note 3128 for further information.

4.2

Inventories

Inventories are stated at the lower of cost and net realizable value.

Inventories mainly comprise crude oil, fuels and petrochemicals and consumable inventories (spares and supplies).p.

The cost of crude oil is the production costs, including transportation costs.

The ~~crude~~cost required to bring ~~the~~a pipeline into working order, is treated as part of the related pipeline.

The cost of other inventories is determined based on the weighted average cost method, which includes acquisition costs (deducting commercial discounts, rebates and other similar items), transformation, and other costs incurred to bring inventory to their current location and condition, such as transportation costs.

Consumable inventories (spares and supplies) are recognized as inventory and then charged to expense, maintenance or project to the extent that such items are consumed.

Ecopetrol estimates the net realizable value of inventories at the end of the period. When the circumstances that previously caused inventories to be written down below cost no longer exist, or when there is clear evidence of an increase in the net realizable value because of a change in economic circumstances, the amount of the ~~write-down~~write–down is ~~reversed.The~~reversed. The reversal cannot be greater than the amount of the original ~~write-down,~~write–down, so that the new carrying amount will always be the lower of the cost and the revised net realizable value.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

4.3

Related parties

Related parties are considered those in which one party has the ability to control, or has joint control of the other, or exercises significant influence over the other party in making financial or operational decisions, or is a member of key management personnel (or close relative of a member). The ~~Company has considered as~~Ecopetrol Business Group considers related parties to be associates, joint ventures, key management executives, entities managing resources for payment of employee ~~post-employment~~post–employment benefit plans and ~~some relevant transactions with~~ Colombian government entities for the purposes of certain relevant transactions, such as the purchase of hydrocarbons and the fuel price stabilization ~~fund. See note 4.16.~~fund (see Note 29 – Related parties).

4.3.1

Investments in associates

An associate is an entity over which the Ecopetrol Business Group has significant influence but not control. Significant influence is the power to participate in the financial and ~~operating~~operational policy decisions of the investee, but it is not control or joint control over those policies. Generally, these entities are those in which the Ecopetrol Business Group holds an equity interest ~~is maintained from~~with voting rights of 20% to 50% ~~of the voting rights.~~. See Exhibit I - –Consolidated companies, associates and joint ventures for further ~~details..~~details.

Investments in associates are accounted for using the equity method. Under ~~the equity~~this method, the investment in an associate is initially recognized at cost. The carrying amount of the investment is adjusted to recognize changes in ~~associates includes goodwill identified on~~the Ecopetrol Business Group’s share of net assets of the associate since the acquisition ~~which~~date. Goodwill related to the associate is included in the carrying amount of the investment and it is not tested for impairment separately.

~~F-22~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

The ~~Company's~~Ecopetrol Business Group’s share of the results of operations of the associate is recognized in the consolidated statement of profit or loss. Any ~~changes~~change in other comprehensive income is recognized in other comprehensive income of the ~~associates is recognized in the Company’s other comprehensive income.~~Ecopetrol Business Group.

After application of the equity method, the ~~Company~~Ecopetrol Business Group determines if it is necessary to recognize an impairment ~~loss~~ on its investment in its associate. ~~At each reporting date, the Company~~The Ecopetrol Business Group determines whether there is objective evidence that the investment ~~in the associate~~ is impaired. If there is such evidence, the ~~Company calculates the~~ amount of the impairment is calculated as the difference between the recoverable amount ~~of the associate~~ and its carrying value, and then ~~recognizes~~ the ~~loss~~impairment is recognized in the consolidated statement of profit or loss.

When necessary, the ~~Company~~Ecopetrol Business Group makes adjustments to the accounting policies of associates to ensure consistency with the policies adopted by the ~~Company. In addition,~~Ecopetrol Business Group. Additionally, the equity method of these companies is measured on their most recent financial statements.

4.3.2

Joint ventures

A joint venture is a type of joint arrangement whereby ~~two or more~~the parties that have joint control of the arrangement have rights to the net assets of the joint arrangement. Joint control exists only when decisions about the relevant activities require unanimous consent of the parties sharing such control. The accounting treatment for the recognition of joint ventures is the same as investments in associates.

4.4

Joint operations

A joint operation is a type of joint arrangement whereby the parties that have joint control of the arrangement have rights to the assets and obligations for the liabilities, relating to the arrangement.

Joint operation contracts are entered into between Ecopetrol and third parties ~~in order~~ to share risk, secure capital, maximize operating efficiency and optimize the recovery of reserves. In these joint operations, one party is designated as the operator to execute the ~~expense and investment budget~~operations and report to partners according to their ~~participation~~participating interests. ~~Furthermore,~~Likewise, each party takes its share of the produced hydrocarbons (crude oil or gas) ~~produced~~, according to their ~~production share.~~share in production.

When Ecopetrol participates as a ~~non-operator~~non–operator partner, it records the assets, liabilities, sales revenues, cost of sales and expenses based on the operator’s report. When Ecopetrol is the direct operator of joint venture contracts, it records its percentage of assets, liabilities, sales revenues, costs and expenses, based on the ~~operators' report. When Ecopetrol is the direct operator~~participation of ~~the joint venture contracts, it records its percentage of the assets, liabilities, sales revenues, costs and expenses, based on~~ each ~~partner’s participation interests~~partner in the items corresponding to assets, liabilities, ~~expenses,~~sales revenues, costs and ~~sales revenues.~~expenses.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

When the Ecopetrol Business Group acquires or increases its participation in a joint operation in which the activity constitutes a business combination, such transaction is recorded applying the acquisition method in accordance with IFRS 3 – Business combination. The acquisition cost is the sum of the consideration transferred, which corresponds to the fair value, on the date of acquisition of the assets transferred and the liabilities incurred. Any transaction cost related to the acquisition or increased share in the joint operation that constitutes a business combination is recognized in the consolidated statement of profit or loss.

The excess of the sum of the consideration transferred and the amount paid in the operation is recognized as goodwill. If the result is in an excess value of the net assets acquired over the amount paid in the operation, the difference is recognized as income in the consolidated statement of profit or loss on the date of recognition of the transaction.

4.5

~~Non-current~~Non–current assets held for sale

~~Non-current~~Non–current assets are classified as held for sale if their carrying values will be recovered principally through a sale transaction rather than through continued use. ~~Non-current~~Non–current assets are classified as held for sale only when the sale is highly probable within one year from the classification date ~~of classification~~ and the asset (or group of assets) is available for immediate sale in its present condition. These assets are measured at the lower of their carrying amount and fair value less related ~~disposal costs.~~costs of disposal.

~~F-23~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

4.6

Property, plant and equipment

Recognition and measurement

Property, plant and equipment are stated at cost less accumulated depreciation and accumulated impairment losses. Tangible components related to natural and environmental resources are part of property, plant and equipment.

The initial cost of an assets comprises its purchase price or construction cost, including import duties and ~~non-refundable~~non–refundable purchase taxes, any costs directly attributable to bringing the asset into operation, costs of employee benefits arising directly from the construction or acquisition, borrowing costs incurred that are attributable to the acquisition and construction of qualifying assets and the initial estimate of the costs of dismantling and abandonment of the item.

Spare parts and servicing equipment are recorded as inventories and recognized as an expense as they are used. Major spare parts and ~~stand-by~~stand–by equipment that the entity expects to use during more than one period are recognized as property, plant and equipment.

Any gain or loss arising from the disposal of a property, plant and equipment ~~item~~ is recognized in profit or loss of the period.

Subsequent disbursements

~~They~~Subsequent disbursements correspond to all payments to be made on existing assets in order to increase or extend the initial expected useful life, increase productivity or productive efficiency, allow for significant reduction of operating costs, increase the level of reserves in exploration or production areas or replace a part or component of an asset that is considered critical for the operation.

The costs of repair, conservation and maintenance of a day to day nature are expensed ~~when~~as incurred. However, disbursements related to major maintenance are capitalized.

Depreciation

Property, plant and equipment is depreciated using the ~~straight-line~~straight–line method, except for those associated with exploration and production activities which are depreciated using the ~~units-of-production~~units–of–production method. Technical useful lives are updated annually considering factors such as: additions or improvements (due to parts replacement or critical components for the asset’s operation), technological advances, obsolescence and other factors; the effect of this change is recognized from the period in which it was executed. Depreciation of an asset starts when it is ready to be used.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Useful lives are determined based on the period over which an asset is expected to be available for use, physical exhaustion, technical or commercial obsolescence and legal limits or restrictions over the use of the asset.

The estimated useful life ~~are as follows:~~of assets fluctuates in the following ranges:

Plant and equipment	~~7 - 56~~11 – 60 years
~~Ducts,~~Pipelines, networks and lines	~~10 - 53~~11 – 50 years
Buildings	~~19 - 72~~11 – 50 years
Other	~~3 - 38~~6 – 40 years

Land is recorded separately from buildings and facilities and ~~they are~~it is not subject to depreciation.

Depreciation methods and useful lives are reviewed annually and adjusted if appropriate.

~~F-24~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

4.7

Natural and environmental resources

Recognition and measurement

Ecopetrol uses the successful efforts method to account for exploration and production of crude oil and gas activities, following the provisions of IFRS 6 – Exploration for the evaluation of mineral resources.

Exploration costs

Acquisition and exploration costs are recorded as exploration and evaluation assets until the determination of whether the exploration drilling is successful or not; if determined to be unsuccessful, all costs incurred are recognized as expenses in the consolidated statement of profit or loss.

Exploration costs are those incurred with the objective of identifying areas that are considered to have prospects of containing oil and gas reserves, including geological and geophysical, seismic costs, viability, and others, which are recognized as expenses when incurred. Furthermore, disbursements associated with the drilling of exploratory wells and those related to stratigraphic wells of an exploratory nature are charged as assets until it is determined if they are commercially viable; otherwise, they are expensed in the consolidated statement of profit or loss as as dry wells expense. Other expenditures are recognized as expenses when incurred.

An exploration and evaluation asset ~~shall~~is no longer be classified as such when the technical feasibility and commercial viability of extracting a mineral resource are demonstrable. Exploration and evaluation assets ~~shall be~~are reclassified to the natural and environmental resources account after being assessed for ~~impairment, and any impairment loss recognised, before reclassification.~~impairment.

All capitalized costs are subjected to technical and commercial revisions at least once a year to confirm ~~continuity to develop~~the evaluation and ~~produce such~~exploration efforts continue on the fields; otherwise, these costs are ~~transferred~~written off through to profit or loss.

Exploration costs are net of the revenues obtained from the sale of crude oil during the extensive testing period, net of cost of sales, since they are considered necessary to complete the asset.

Development ~~Costs~~costs

Development costs correspond to those costs incurred to obtain access to proved reserves and to provide facilities for extracting, treating, gathering and storing. When a project is approved for development, the ~~accumulated~~corresponding capitalized acquisition and exploration costs isare classified as natural and environmental resources and costs subsequent to the exploration phase are capitalized as development costs of the properties that contain such natural resources. All development costs are capitalized, including drilling costs of unsuccessful development wells.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Production costs

Production costs are those incurred to operate and maintain productive wells, and are part of the corresponding equipment and facilities. ~~The production~~Production activity includes extraction of oil and gas to the surface, its gathering, treatment and processing as well as storage in the field. Production costs are expenses recorded in the consolidated statement of profit ~~and~~or loss as incurred unless they add oil and gas reserves, in which case they are capitalized.

Production and support equipment is recognized at cost and is part of property, plant and equipment subject to depreciation.

Capitalized costs also include decommissioning, dismantling, retiring and restoration costs, as well as the estimated cost of future environmental obligations. The estimation includes plugging and abandonment costs, facility dismantling and environmental recovery of areas and wells. Changes arising in new abandonment liability estimations and environmental remediation are capitalized in the carrying amount of the related asset.

~~F-25~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Depletion

Depletion of natural and environmental resources is determined using the ~~unit-of-production~~unit–of–production method per field, using proved developed reserves as a ~~base. Amortization factors~~base, except in limited exceptional cases that require greater judgment by Management to determine a better amortization factor of future economic benefits over the useful life of the asset. Depreciation rates are reviewed annually, based on ~~the reserve report~~reserves reports and the impact of any changes ~~of such factors on the amortization~~ is recognized prospectively in the financial statements.

Reserves are ~~audited~~independently estimated by internationally recognized external consultants and approved by ~~the Company’s~~Ecopetrol’s Board of Directors. Proved reserves consist of the estimated quantities of crude oil and natural gas demonstrated with reasonable certainty by geological and engineering data to be recoverable in future years from known reserves under existing economic and operating conditions, that is, at the prices and costs that apply at the date of the estimation.

Impairment

Assets associated to exploration, evaluation and production are subject to review for possible impairment in their ~~recoverable~~carrying amount. See ~~notes~~Notes 3.2 – —Asset impairment (recovery) and 4.12 - —Impairment ~~in the value~~ of ~~assets.~~non–financial assets.

4.8

Capitalization of borrowing costs

Borrowing costs related to the acquisition, construction or production of a qualifying asset that requires a substantial period of time to get ready for its intended use are capitalized as part of the cost of such asset when it is probable that future economic benefits associated with the item will flow to the ~~Company~~Ecopetrol Business Group and costs can be measured reliably. Other borrowing costs are recognized as finance ~~costs in the period in which they are incurred.~~costs. Projects that have been suspended but that the ~~Company~~Ecopetrol Business Group intends to continue to pursue their ~~developing~~development in the future, are not considered qualifying assets for the purpose of capitalization of borrowing costs.

4.9

~~Intangibles~~Intangible assets

Intangible assets with a defined useful life, ~~which were acquired separately,~~ are stated at cost less accumulated amortization and any impairment loss. Intangible assets are amortized under the ~~straight~~ straight–line method, over their estimated useful lives. The estimated useful lives and amortization method are revised at the end of each reporting period; any change in ~~the~~ estimates is recognized on a prospective basis.

The disbursements in relation to research activities are expensed as incurred.

4.10

Goodwill

Goodwill is initially measured at cost (being the excess of the aggregate of the consideration transferred and the amount ~~recognised~~recognized for ~~non-controlling interests~~non–controlling interest and any previous interest held over the net identifiable assets acquired and liabilities assumed). After initial recognition goodwill is measured at cost less any accumulated impairment loss. Goodwill is not amortized but ~~annually~~ tested for ~~impairment.~~impairment annually.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

4.11

Leases

Leases are classified as finance leases whenever the terms of the lease transfer substantially all the risks and rewards of ownership. All other leases are classified as operating leases.

Assets held under finance leases, when Ecopetrol is the lessee, are recognized in the consolidated statement of financial position at an amount equal to the fair value of the leased asset or, if lower, the present value of the minimum lease payment. These assets are depreciated over the ~~asset's~~asset’s useful life. When there is no reasonable certainty that the company will obtain ownership of the asset at the end of the contract, the leased assets are depreciated in the shortest period between the asset estimated useful life and the lease term.

~~F-26~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

The corresponding liability to the lessor is included in the consolidated statement of financial position as a finance lease obligation, in the loans and financing line item.

Lease payments are apportioned between financial charges and reduction of lease liabilities in order to achieve a constant rate of interest on the liability remaining balance. Interest ~~expenses are~~expense is recognized ~~immediately~~ in ~~the statement of~~ profit or loss.

Operating lease payments are recognized as an expense on a ~~straight-line~~straight–line basis over the lease term, except where another systematic prorating basis is more representative of the time pattern of economic benefits from the lease. Contingent rentals arising under operating leases are recognized as an expense in the period in which they are incurred.

4.12

Impairment ~~in the value~~ of non–financial assets

In order to evaluate ~~the recoverable amount of~~if any tangible ~~and~~or intangible assets are impaired, Ecopetrol compares ~~the~~its carrying amount with its recoverable amount at the end of each reporting period or earlier, if there is any indicator that an asset may be impaired.

~~In order to make an~~

For purposes of impairment ~~analysis,~~testing, the assets are grouped into cash generating units (CGU), provided that those assets individually considered do not generate cash inflows that, to a greater extent, are independent from those generated by other assets or CGUs. The ~~group~~grouping of assets in different CGUs requires the exercise of professional judgment and the consideration, among other parameters, of the business segments. In this sense, in the ~~segment of~~ Exploration and Production segment, each CGU corresponds to each one of the different contractual areas commonly called ~~“fields”;~~“fields;” by exception, in those cases ~~in which~~where the cash inflows generated by several fields are interdependent onfrom each other, those fields are grouped into a single CGU. In the case of the Refining and Petrochemicals, ~~segment, the CGU´s correspond~~each CGUs corresponds to each one of the refineries and companies in this segment of the ~~group~~Ecopetrol Business Group and for the ~~segment of~~ Transportation segment; each pipeline system is ~~taken as~~considered an independent CGU.

The recoverable amount of the asset is the higher amount of the fair value less costs of disposal or its value in use. If the recoverable amount of an asset (or of a CGU) is lower than its net carrying amount, such amount (or that of the CGU) is reduced to its recoverable amount, recognizing aan impairment loss ~~for impairment of value~~ in ~~the results of the period.~~profit or loss.

~~The fair~~Fair value less costs of disposal ~~will be greater~~is usually higher than the value in use for the asset’s in the production segment due to ~~use of the value in use methodology has~~ some significant restrictions ~~included~~ in the estimation of future cash flows, ~~as the following:~~such as: a) future capital expenses that improve the CGU performance, which could result in expected increase of net cash flows, and b) items before taxes that reflect specific business risks, resulting onin a higher discount ~~rate.. The recoverable amount of assets in the business segments is the highest between the fair value less costs of disposal and value in use.~~rate.

~~The fair~~Fair value less costs of disposal is determined as the sum of the future discounted cash flows adjusted to the estimated risk. The estimations of expected future cash flows used in the ~~evaluation~~assessment of impairment of the assets ~~are made with projections~~include estimates of futures commodity prices, supply and demand estimations, and the margins of the products. In case of assets or cash generating units engaged in the evaluation and exploration of reserves, proved, probable and possible reserves are considered, with a risk factor associated to them also being considered.

~~The calculations are verified with~~Fair value less costs of disposal, as described above, is compared to valuation multiples and quoted prices of ~~stock~~shares in companies comparable to ~~Ecopetrol.~~Ecopetrol, in order to determine if it is reasonable.

~~Once a~~When an impairment loss ~~for impairment of value has been~~is recorded, future amortization ~~expense is~~expenses are calculated on the basis of the adjusted recoverable amount. Impairment losses may be ~~reversed~~recovered only if the ~~reversal~~recovery is related to a change in estimations used after ~~the~~impairment loss ~~for impairment~~ was recognized. These ~~reversals shall~~recoveries do not exceed the carrying amount of the assets net of depreciation or amortization that would have been determined if ~~neither the~~such impairment had ~~ever~~not been ~~recognized, nor the recoverable amount on the date of assessment of the impairment.~~recognized.

~~F-27~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~In the reclassification of any non-current asset to assets held-for-sale, the~~The carrying amount of ~~these~~non–current assets reclassified as assets held–for–sale is ~~revised~~compared to its fair value less costs of disposal. No other provision for depreciation, depletion or amortization is recorded if the fair value less costs of ~~disposal~~sale is lower than the carrying amount.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

4.13

Provisions and contingent liabilities

Provisions are recognized when the Ecopetrol Business Group has a current obligation (legal or ~~implied)~~constructive) as a result of a past event, it is probable that Ecopetrol will be required to settle the obligation, and a reliable estimation can be made of the amount of the obligation. Where applicable, they are recorded at present value, using a rate reflecting the ~~liability~~risk specific ~~risk.~~to the liability.

~~Disbursements~~Future environmental decommissioning costs related to ~~the conservation of the environment for~~ current or future operations, are accounted for as expenses or assets, as the case may be. ~~Disbursements~~Expenditures related to past operations ~~of the past~~ that do not contribute to the obtaining of current or future ~~income,~~benefits, are ~~charged to expenses.~~expensed as incurred.

The ~~creation~~recognition of these provisions coincides with the identification of an obligation related to environmental remediation and Ecopetrol ~~has adequate~~uses available information to determine a reasonable estimation of the related cost.

~~Contingent liabilities~~Provisions for which a negative outcome is assessed as possible are not recognized but are ~~subject to disclosure~~disclosed in the explanatory ~~Notes whenever the outflow of resources is possible;~~notes; including those for which ~~values~~the amount cannot be estimated.

~~Whenever expected~~If there is an expectation that the provision iswill be reimbursed, either in whole or in part, for example by virtue of an insurance contract, the ~~reimbursement is~~amounts expected to be reimbursed are recognized as a separate asset only ~~in cases in which~~when such reimbursement is almost certain. The expense corresponding to any provision is presented in the profit or loss statement in the line that best reflects the nature of the provision, net of any related reimbursement, to the extent that it is almost certain.

If the effect of the time value of money is significant, the provisions are discounted using the current market rate before taxes reflecting, as applicable, the liability specific risks. When recognizing the discount, the increase of the provision resulting from time elapsed is recognized as financial cost in the profit or loss statement.

Asset retirement obligation

Liabilities associated towith the retirement of assets are recognized when there are current obligations, either legal or ~~implied,~~constructive, related to the abandonment and dismantling of wells, facilities, pipelines, buildings and equipment.

The obligation is usually ~~acquired~~recorded when the assets are installed or when the surface or the environment are altered at the operating sites. These liabilities are ~~recognized~~calculated using the discounted cash flow method, ~~at all~~using a pre–tax rate ~~before taxes~~ reflecting current market ~~evaluations of a~~conditions similar ~~risk liability~~liabilities and considering the economic limits of the field or the useful life of the respective asset. When it is not possible to determine a reliable estimation in the period in which the obligation originates, a provision is recognized when there is ~~sufficient~~enough information available to make the best estimation.

The carrying amount of the provision is reviewed and adjusted annually considering changes in the ~~variables~~assumptions used for its estimation, using a rate that reflects the ~~liability~~risk specific ~~risk.~~to the liability. Any change in the present value of the estimated expenditure is reflected as an adjustment to the provision and the corresponding property, plant and equipment and natural and environmental resources. When a decrease in the asset retirement obligation related to a producing asset exceeds the carrying amount of the asset, the excess is ~~recognised~~recognized in the ~~Consolidated~~consolidated statement of profit or loss. The ~~financial cost~~increase in the provision due to the passage of ~~updating these liabilities~~time is recognized in results for the period as a financial expense.

~~F-28~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

4.14

Income tax and other taxes

Income tax expense is comprised of income tax payable for the period (including, income tax and income tax for equality -– CREE, as appropriate) and the effect of deferred taxes in each period.

Current income taxes are recognized in income except when they relate to items recognized in other comprehensive income, in which case the corresponding tax effect is also recognized in ~~equity.~~other comprehensive income. Income tax assets and liabilities are presented separately in the ~~Consolidated Statement~~consolidated statement of ~~Financial Position~~financial position, except where there is a right of ~~set-off~~setoff within fiscal jurisdictions and an intention to settle such balances on a net basis.

Income tax is paid by each legal entity and not on a consolidated basis.

4.14.1

Current income tax

The ~~Company~~Ecopetrol Business Group determines the provision for income tax based on the highest amount between taxable income and presumptive income (the minimum estimated amount of taxable profit on which the law expects to quantify and collect ~~the~~ income ~~tax)~~taxes). Taxable income differs from profit before tax as reported in the consolidated statement of profit or loss, because of: items of income or expense that are taxable or deductible in other periods, special taxable deductions, tax losses and income and line items measured that, according to applicable tax laws in each jurisdiction, are considered nontaxable or nondeductible.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

4.14.2

Deferred income tax

Deferred tax is ~~accounted for according to~~provided using the liability ~~method. Deferred tax assets and liabilities are recognized~~method for ~~future tax consequences attributable to~~temporary differences between the carrying amounts of existing assets and liabilities in the consolidated financial statements and their respective tax bases. A deferred tax liability is recognized for all taxable temporary differences. A deferred tax asset is recognized for all deductible temporary differences and for all accumulated tax losses, ~~to be amortized, insofar as~~if there is a reasonable expectation that the ~~Company~~Ecopetrol Business Group will ~~have~~generate future tax profits ~~with~~against which ~~it may offset such temporary differences.~~they will be used.

Deferred taxes on assets and liabilities are calculated based on the tax rates that ~~will be applied~~are expected to ~~taxable income~~apply during the years in which temporary differences between the carrying amounts and tax bases are expected to be reversed.

The carrying amount of a deferred tax asset is subject to review at the end of each reporting period, and it is reduced to the extent it is ~~estimated~~no longer probable that ~~there~~the corresponding legal entity will ~~not be~~generate enough future taxable profit ~~that allows the total or partial recovery of the~~to realize such deferred tax asset.

~~Consolidated~~In the statement of financial position, deferred tax ~~is calculated~~assets are reflected net and as ~~the sum of the~~an offset against deferred tax liabilities, depending on the overall tax position in a particular jurisdiction and on the individual financial statements of the companies of the Ecopetrol Business Group adjusted by deferred taxes on business combinations, inter-company transactions or other adjustments at a consolidated level.same taxable entity.

Deferred taxes are not recognized when they arise in the initial recognition of an asset or liability in a transaction (except in a business combination) and at the time of the transaction, ~~does~~do not affect the accounting or tax profit, or in respect of the taxes on the possible future distribution of accumulated profits of subsidiaries or investments accounted for by the equity method, if at the time of the distribution it may be controlled by Ecopetrol and it is probable that the retained earnings will be reinvested by the Ecopetrol Business Group companies and, therefore, will not be distributed to Ecopetrol.

4.14.3

Other taxes

The ~~Company~~Ecopetrol Business Group recognizes in profit or loss the costs and expenses related to other taxes than the income tax, such as the wealth tax, which is determined based on the tax equity, the industry and commerce tax on income obtained in the municipalities for performance of commercial, industrial and service activities, and the transport tax on volumes loaded in the transport systems. Taxes are calculated in accordance with current tax regulations. For more details, see Note 10.

~~F-29~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

4.15

Employee benefits

Salaries and benefits ~~for Ecopetrol staff~~of the Ecopetrol’s employees are governed by the Colombian Collective Labor (Agreement 01 of 1977), and, by the Colombian Substantive Labor Code. In addition to the ~~legally mandated~~ benefits determined by labour laws, employees are entitled to fringe benefits which are subject to the place of work, type of work, length of service, and basic salary. An annual interest of 12% is recognized on accumulated severance amounts for each employee, and the payment of ~~compensations~~compensation is provided for when special circumstances arise resulting in the ~~non-voluntary~~non–voluntary termination of the contract, without ~~just~~justified cause, and in periods other than the probationary period.

Ecopetrol belonged to the special pension regime under which ~~allowances~~pension liabilities are ~~a Company’s~~Ecopetrol’s responsibility and not ~~a Pension Fund’s~~pension fund’s responsibility. However, Law 797 of January 29, 2003 and Legislative Act 001 of 2005 determined that Ecopetrol will no longer belong to the said regime and that from ~~thereon~~that point on employees would be part of the General Pension Regime. Consequently, ~~allowances for~~pension obligations related to employees pensioned until July 31, 2010 are still Ecopetrol’s responsibility. ~~Likewise, these employees~~Employees are entitled to such pension bonus if they worked with Ecopetrol prior to January 29, 2003, but whose labor agreement expired without renewal before that date.

All labor benefits of employees who joined ~~the Company~~Ecopetrol before 1990 are Ecopetrol’s responsibility, without the involvement of any social security entity or institution. ~~The~~Service cost ~~of health services~~ for the employee and his/her relatives registered with ~~the Company~~Ecopetrol is determined by means of a mortality table, prepared based on facts occurring during the year.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

For employees who joined Ecopetrol after the ~~Company subsequent to the entry into effect of~~ Act 50 of 1990 ~~the Company~~went in effect, Ecopetrol makes periodic contributions for severance payments, pensions and labor risks to the respective funds.

In 2008, Ecopetrol partially ~~commuted~~settled the value corresponding to monthly pension payments from its pension liabilities, transferring such liabilities and their underlying amounts to ~~pension-related~~ autonomous ~~equities~~pension funds (PAP, for its acronym in Spanish). The funds transferred, and returns on those funds, cannot be redirected, nor can they ~~can~~ be returned to the ~~Company~~Ecopetrol Business Group, until all of the pension obligations have been fulfilled. The ~~commuted~~settled obligation covers allowances and pension bonds payments; while health and education ~~remains~~remained under ~~the labor liability in charge~~responsability of Ecopetrol.

~~Employee-benefits~~Employee benefits are divided into four groups comprised as follows:

~~Short-term employee benefits and post-employment defined benefits~~

a) Short–term employee benefits and post–employment defined benefits:

Benefits to employees in the short term mainly correspond to those which payment will be made in the term of twelve months following the closing of the period in which the employees have rendered their services. These mainly include salaries, severance payments, vacation, bonuses and other benefits.

~~Post-employment~~Post–employment benefits of defined contributions plans correspond to the periodic payments for severance, pensions and labor risk payments that the ~~Company~~Ecopetrol Business Group makes to the respective funds that assume these obligations in their entirety.

The above benefits are recognized as an expense with an associated liability after deducting any already paid amounts.

b) Post–employment defined benefit plans:

~~F-30~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~Post-employment defined benefit plans~~

In the defined benefits plan, the ~~Company~~Ecopetrol Business Group provides the benefits agreed to current and former employees and assumes the actuarial and investment risks.

The following benefits are classified as ~~long-term~~long–term defined benefit plans recognized in the financial statements according to the calculations of an independent actuary:

Pensions

Pension bonds

Health

Educational plan

Retroactive severances

Liabilities recognized in the statement of financial position inwith respect ofto these benefit plans are determined base on the present value of the defined benefit obligation at the date of the statement of financial position less the fair value of plan assets.

The defined benefit obligation is calculated annually by independent actuaries using the projected credit unit method, which takes into account employees’ years of service and, for pensions, average or final pensionable remuneration. This obligation is discounted at its present value using interest rates of ~~high-quality~~high–quality government bonds denominated in the currency in which the benefits will be paid and of a duration consistent with the plan obligations.

These actuarial calculations involve several assumptions that could differ from the events that will effectively take place in the future. Said assumptions include the determination of ~~the~~a discount rate, future salary increases, mortality rates and future pension ~~increase.~~increases. Because of the complexity of the calculation, the underlying assumptions and ~~long-term~~long–term nature of these plans, the obligations for defined benefits are extremely sensitive to changes in assumptions. All key ~~variables~~assumptions are revised at the ~~close~~end of the reported period.

~~When~~In determining the appropriate discount rate, in absence of a broad high quality bond market, Management considers interest rates corresponding to the class B TES bonds issued by the Colombian Government as its best reference, at an appropriate discount rate with maturities extrapolated in line with the term expected for each benefit plan. The mortality rate is based on the particular country’s rate, ~~which~~the latest version of which is the RV08 mortality table published in resolution 1555 of October 2010. The future salary and pension increases are linked to the ~~country's~~country’s future inflation rates. Note 22 - –Provisions for employee benefits provides further details on key assumptions used.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The amounts recognized in the consolidated statement of profit or loss related to employees defined benefit plans are comprised mainly by service cost and the net ~~interest.~~financial expense. Service cost includes mainly the increase in present value of the benefit obligation during the period (current service cost) and the amount resulting from a new benefit plan. Plan amendments corresponds to changes in benefits and are usually recognized when all legal and regulatory approvals have been obtained and the effects have been conveyed to the employees involved. The net ~~interest~~financial expense is calculated using the net liability for defined benefits as compared with the yield curve of the discount rate at the beginning of each year for each plan. The net defined benefit ~~liability~~obligation or asset resulting from actuarial profits and losses, the asset ceiling effect and the asset profitability, excluding the value of recognized in the consolidated statement of profit or loss, are recognized in other comprehensive income.

There is no service cost for the pension plan of employees because in their capacity as pensioners there is no service time to which the pension benefit can be charged; in other words, the benefit is 100% cost and is not in the cumulative stage.

When the plan assets exceed the gross obligation, the recognized asset is limited to the lower of the surplus in the defined benefits plan and the ceiling of assets determined using a discount rate based on Colombian Government bonds.

(a) Others long-term benefits

~~F-31~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~Other long term benefits~~

~~Other long-term benefit is~~Others long–term benefits include the ~~five-year~~five–year term bonus which also considered in the actuarial calculation. This benefit is a cash bond that accumulates annually and is paid every five years to employees. The ~~Company~~Ecopetrol Business Group recognizes in the consolidated statement of profit or loss the service cost, the net financial cost and the adjustment to the obligation of the defined benefit plan.

~~Termination benefits~~

(b) Termination benefits

Termination benefits are recognized only when a detailed plan exists ~~for such process~~ and there is no possibility to withdraw the offer. The ~~Company~~Ecopetrol Business Group recognizes a liability and an expense for termination benefits at the earliest date between the date when the offer of such benefits cannot be withdrawn and the date when the restructuring costs are recognized.

4.16

~~Sales revenue recognition~~

Revenue from contracts with customers

~~Sales~~The Ecopetrol Business Group’s business is based on three principal sources of revenue from contracts with customers: 1) sales of crude oil and natural gas, 2) services associated with the transport of hydrocarbons, and 3) sales of refined products, petrochemicals and biofuels. Revenue from contracts with customers is recognized when control of the goods or services are transferred to the customer at amount that reflects the ~~time~~consideration that the Ecopetrol Business Group expects to be entitled in exchange for those goods or services.

Sales of crude oil and natural gas

Revenue from sales of crude oil and natural gas is recognized upon transfer of ~~title~~control to the buyer, ~~including risks~~this generally occurs when the product is physically transferred into a vessel, pipe or other delivery methods.

For some natural gas supply contracts with a replacement period, a distinction is made between quantities of gas consumed and ~~rewards~~not consumed in order to recognize the respective revenue or liability relating to quantities that will be requested in the future. Once the customer claims such natural gas, the revenue is recognized.

Services associated with hydrocarbons transport

Revenue from transport services is recognized when the service is provided to the customer and there are no contractual conditions that prevent recognition of ~~ownership.~~ the revenue. Ecopetrol Business Group companies is the principal in providing these services.

Ship/ Take-or-Pay contracts for the sale of refined products, storage and transport specify minimum quantities of products or services for which a customer will pay, even if the latter does not receive them or use them (“deficient quantities”). Although the Ecopetrol Business Group expects customers to recover all deficient quantities to which they are contractually entitled, any load revenue received related to temporary shortfalls that will be offset in a future period will be deferred and that amount recognized as revenue in the event any of the following scenarios occurs:

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

a)The customer exercises its right to deficient volumes or services, or

b) The possibility is remote that the customer will exercise its right to deficient volumes or services.

Refined products and biofuels

In the case of refined products, petrochemicals and ~~petrochemical products, sales~~biofuels, such as fuel oil, asphalt, polyethylene, LPG and propane and gasoline, etc., revenue is recognized when the products are shipped and delivered by the ~~refinery and~~refinery; subsequently, they are adjusted ~~in accordance with~~for price changes, ~~when dealing~~in the case of products with regulated ~~price products. Sales~~prices.

In other cases, Ecopetrol Business Group recognize revenue ~~from transportation services is recognized~~ when ~~products are transported and delivered~~satisfies the performance obligation, giving rise to the ~~buyer in accordance with sale terms. In all other cases, sales revenue is recognized at the time it is earned and a true,~~certain, probable and quantifiable right to demand ~~its payment arises.~~payment.

Under current ~~regulations,~~local regulation, Ecopetrol ~~and Refinería de Cartagena S.A., sell~~sells regular gasoline and ~~mid-distillates~~ACPM in Colombia at a regulated price.

In accordance with Decree 1068 of 2015, the Ministry of Mines and Energy calculates ~~semi-annually~~semiannually and settles Ecopetrol’s net position to be stabilized for each fuel by the Fuel Price Stabilization Fund (FEPC, for its acronym in Spanish). The net position ~~is calculated by adding all differentials~~corresponds to the sum of the spreads throughout the ~~six-month period and~~semester, the result ~~is an~~of which will be the amount in ~~Colombian~~ pesos in favor of the Company ~~and chargeable~~charged to the resources of the FEPC. The differential ~~is calculated as~~corresponds to the product between the volume reported by the Company at the time of sale ~~multiplied by~~and the difference between the ~~international~~ parity price and the ~~regulated price. The international~~reference price, the parity price isbeing that which corresponds to the daily ~~price~~prices of ~~gasoline~~the motor and diesel ~~oil~~gasoline observed during the month, expressed in pesos, referenced to the Gulf of ~~the respective month in Colombian pesos, indexed to~~ the United States ~~of America Gulf~~ market, calculated ~~in accordance with~~by applying Resolution 18 0522 of 2010, and the reference price is the Producer ~~Price reference~~Income defined by the Ministry of Mines and ~~Energy.~~Energy for these purposes. Therefore, this ~~difference represents~~differential constitutes a ~~higher~~greater or ~~lower~~lesser value of ~~sale~~ sales ~~revenues~~revenue for Ecopetrol.

According to the risk profiles, the Ecopetrol ~~and~~~~Refinerí~~Business Group manages advance payment systems for some of its contracts with customers.

Significant financing component

Generally payments received from customers are short term. Using the practical expedient in IFRS 15, the Group does not adjust the promised amount of consideration for the effects of a ~~de Cartagena~~significant financing component if it expects, at contract inception, that the period between the transfer of the promised good or service to the customer and when the customer pays for that good or service will be one year or less.

Variable considerations

Upon fulfillment of the obligations set forth in agreements with customers, via delivery of the product or provision of the service, variable components of the transaction price may exist, such as the exchange rate for crude exports or international price fluctuations. In these cases, the Ecopetrol Business Group will make its best estimate of the transaction price that reflects the goods and services transferred to customers.

Agreements signed with customers do not include variable considerations like rebates, refunds or discounts.

Non-cash considerations

Agreements signed in the Ecopetrol Business Group does not consider non-cash transactions.

Customer advances

These correspond to contractual obligations in which the Ecopetrol Business Group receives advances from customers. These advances by customers form part of the policies and risk assessment defined by the Business Group.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

4.17

Costs and expenses

Costs and expenses are presented according to their nature; they are detailed in the related disclosures in cost of sales, and administrative, operating, projects and other associated expenses.

4.18

~~Financial~~Finance income (expenses)

~~The financial~~Finance income and expenses include mainly: a) ~~cost of interest~~borrowings costs on loans and financing, except for those that are capitalized ~~as part of the~~on qualifying asset, ~~cost,~~ b) ~~valuation of profits~~gains and losses on changes in fair value of financial instruments measured at fair value ~~with changes in~~through profit or loss, c) currency exchange differences of financial assets and liabilities, except for debt instruments designated as hedging instruments, d) interest expenses ~~for financial updating~~as a result of ~~long~~ discounting long–term liabilities (abandonment costs and pension liabilities), e) dividends derived from equity instruments measured at fair value with changes in other comprehensive income.

Ecopetrol S.A.

~~F-32~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

4.19

Information by business segment

Ecopetrol presents the ~~respective disclosures relative~~information related to its business segments in its consolidated financial statements in accordance with paragraph 4 of IFRS 8 -– Operation segments.

The ~~operation~~operations of the Ecopetrol Business Group isare performed through three business segments: 1) Exploration and ~~production,~~Production, 2) Transport and ~~logistics,~~Logistics and 3) Refining, ~~petrochemical~~Petrochemical and ~~biofuels. This segmentation is~~Biofuels. Segments are determined based on management of objectives and corporate strategic ~~plan,~~plans, considering that these businesses: (a) are engaged in ~~differential~~different commercial activities, which generate sales ~~revenues~~revenue and incur costs and expenses; (b) the operational results are revised regularly by the ~~Group's~~Ecopetrol Business Group’s Governance that makes operational decisions to allocate resources to the various segments and assess their performance; and (c) there is differentiated financial information available. Internal transfers represent sales to ~~inter-company~~inter–company segments and are ~~registered~~recorded and presented at market prices.

1)a)

Exploration and production.: This segment includes activities related to the exploration and production of oil and gas. ~~Sales revenues~~Revenues are derived from sales of oil and natural gas at market prices to other segments and to third parties (domestic and foreign distributors). Costs include costs incurred in production. Expenses include all exploration costs that are not capitalized.

2)b)

Transport and ~~logistics-~~logistics: This segment includes sales ~~revenues~~revenue and costs associated with the transport and distribution of hydrocarbons, derivatives and products operation.

3)c)

Refining, petrochemicals and ~~petrochemicals-~~biofuels: This segment mainly includes activities performed at the Barrancabermeja and Cartagena refineries, where crude oil from production fields is ~~transformed. The sales revenues~~refined or processed. Revenue are derived from the sale of products ~~are realized~~ to other segments and to domestic and foreign customers and include refined and petrochemical products at market prices and some fuels at regulated price. This segment also includes industrial service sales to customers.

See information by segments in Note 31.

~~F-33~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~New standards~~Standards issued ~~by the IASB~~but not yet effective

The ~~following rules,~~new and amended standards and interpretations that are issued, but not yet effective, up to the date of issuance of the Ecopetrol Business Group’s financial statements are disclosed below. The Ecopetrol Business Group intends to adopt these new and ~~amendments~~amended standards and interpretations, if applicable, when they become effective.

- IFRS 16 “Leases: was issued in January 2016 and replaces IAS 17“Leases”, IFRIC 4“Determining whether an Agreement contains a lease” SIC-15“Operational leases – Incentives” and SIC-27,“Evaluating the Substance of Transactions involving the Legal Form of a Lease”. IFRS 16 sets out the principles for the recognition, measurement, presentation and disclosure of leases and requires lessees to account for all leases under a single on-balance sheet model similar to the accounting for finance leases under IAS 17. The standard includes two recognition exemptions for lessees - leases of “low value” assets (e.g., personal computers) and short-term leases (i.e., lease with a lease term of 12 months or less). At the commencement date of a lease, a lessee will recognize a liability to make lease payments (i.e., lease liability) and an asset representing the right to use the underlying asset during the lease term (i.e., the right-to-use asset). Lessees will be required to separately recognize interest expense on the lease liability and the depreciation expense on the right-of-use asset.

Lessees will be also required to remeasure the lease liability upon the occurrence of certain events (e.g., a change in lease term, a change in future lease payments resulting from a change in an index or rate used to determine those payments). The lessee will generally recognize the amount of the remeasurement of the lease liability as an adjustment to the right-of-use asset.

Lessor accounting under IFRS 16 is substantially unchanged from today’s accounting under IAS 17. Lessors shall continue to classify all leases using the same classification principle as in IAS 17 and distinguish between two types of leases: operating and financial leases.

IFRS 16, which is effective for annual periods beginning on or after January 1, 2019, requires lessees and lessors to make more extensive disclosures than under IAS 17.

Transition to IFRS 16

Ecopetrol Business Group will adopt IFRS 16 as of January 1, 2019, using a modified retrospective approach on contracts previously identified as leases under IAS 17 and IFRIC 4.

The Ecopetrol Business Group will elect to use the exemptions proposed by the ~~IASB are applicable~~standard on lease contracts for which the lease terms ends within 12 months as of the date of initial application, and lease contracts for which the underlying asset is of low value (e.g., computers, mobile telephones, printers, photocopiers, etc.).

During 2018 the Ecopetrol Business Group has performed an assessment of the impact IFRS 16 upon initial application and concluded that it will not have a significant impact in its consolidated financial statements.

Leases in which Ecopetrol Business Group is a lessee

Ecopetrol Business Group will recognize right-of-use assets and a lease liability, currently accounted for as operating leases, primarily on the following leased assets:

Lands

Vehicles

Power plants

Water treatment plants

Helicopters

Ecopetrol S.A.

Notes to ~~yearly periods commencing~~the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Prior to the adoption of IFRS 16, Ecopetrol Business Group, recognized operating lease expenses on a straight-line basis during the lease term. Upon application of IFRS 16, Ecopetrol Business Group will instead recognize a depreciation charge on the right-of-use asset and a financial expense related to the lease liability.

Based on currently available information, upon application of IFRS 16, the Ecopetrol Business Group estimates it will recognize a right-to-use asset for approximately COP$430,000 as of January 1, ~~2017~~2019, and ~~thereon:~~a lease liability for the same amount, which are not considered material. The actual impact upon adoption could be different.

~~IFRS 9 "Financial Instruments" gathers all~~IAS 40 “Investment Properties: Transfers of investment properties” modifies paragraph 57 of IAS 40 to reflect the ~~phases~~principle that a change of use involves: (a) an assessment as to whether a property complies or has ceased to comply with the ~~financial instruments project~~definition of investment property; and (b) requires evidence that supports the change of use that has occurred. By applying this principle, an entity will ~~replace IAS 39 "Financial Instruments: Recognition~~transfer properties under construction or development to or from investment properties if and ~~Measurement"; it~~only if there is ~~effective for annual periods starting on January 1, 2018. IFRS 9 introduces new requirements~~a change of ~~classification, measurement, impairment, derecognition and hedge accounting. This standard does not require retroactive application or modify comparative information.~~use of this property supported by evidence.

IFRS ~~15 "Sales revenues from Ordinary Activities in Contracts with Customers" and its amendments provide a five-step model to measure sales revenues derived from contracts with customers. In accordance~~4 “Insurance Policies: Application of IFRS 9 (Financial Instruments) with IFRS ~~15,~~4 (Insurance Policies)” addresses concerns as to the ~~sales revenue is recognized as an amount reflecting the offsetting that an entity expects to be entitled to in exchange for transferring goods or services to a customer. The principles~~various validity dates of IFRS ~~15 suppose~~9 and the next standard on insurance policies. Changes include a ~~more structured approach~~temporary exemption from IFRS 9 for insurers who meet specific criteria and an option for them to ~~value and register sales revenues. A full or partial retroactive application is required for periods commencing on January 1, 2018. The Company plans~~apply the focus of the overlap to ~~adopt the new standard by using the modified retrospective method and keeps assessing its impact on the consolidated~~designated financial ~~statements.~~

~~This new standard is applicable to all entities and will derogate all previous standards on sales revenue recognition.~~

IFRS 16 "Leases", which will be effective as of January 2019, with limited possibilities for early implementation. It provides a comprehensible model for identification of lease agreements and their treatment in the financial statements, both of lessees and lessors. Oil and gas companies must recognize more assets and liabilities, derived mostly from rental of construction equipment and offices.assets.

~~Amendments~~IFRIC 23 “Uncertainty with regard to treatment of the capital gains tax” clarifies how to apply the recognition and measurement requirements of IAS 12 when there is uncertainty regarding treatment of the capital gains tax.

When there is uncertainty regarding treatment of the capital gains tax, the Company must determine whether it considers each uncertain tax treatment separately or in combination with one or more other uncertain tax treatments based on the focus that best predicts resolution of the uncertainty. Ecopetrol will re-assess a decision or estimate required by this interpretation if the facts and circumstances on which the decision or estimate was based change, or as a result of new information affecting the decision or estimate.

Additionally, upon assessing whether and how an uncertain tax treatment affects determination of the tax gain (tax loss), tax bases, unused tax losses, unused tax credits and tax rates, an entity will assume that a tax authority will inspect the amounts it is entitled to examine and have complete knowledge of all related information when those reviews are carried out.

This interpretation must be applied for years starting January 1, 2019.

Annual Improvements to the IFRS 10Regulations, 2014 – 2016 Cycle:

IFRS 1 - First-time adoption of International Financial Reporting Standards: Elimination of short-term exemptions for entities that adopt IFRS Standards for the first time.

IFRS 12 - Information to be disclosed on stakes in other entities. Clarification of the scope of the regulation.

IAS 28 - Investments in related companies and ~~IAS 28: Asset sale or contribution between the investor and its associates~~joint ventures: Measurement at reasonable value of a related company or joint ~~ventures. The amendments address the conflict between I FRS 10 and IAS 28 as to the treatment of control loss of a subsidiary that is sold or contributed to an associate or joint~~ venture. The amendments clarify that the gain or loss resulting from the asset sale or contribution that is a business, as defined in IFRS 3, between the investor and its associate or joint venture, is recognized in its entirety. Any gain or loss resulting from an asset sale or contribution that is not a business; however, is recognized only up to the interests of investors who are not related to the associate or joint venture. The effective date is still to be defined by the IASB.

Amendments to IAS ~~12:Recognition of Assets for Deferred Taxes for Unrealized Losses. These amendments~~28 - Long-term interests in associates and joint ventures. The changes clarify that companies recognize long-term interests in an associate or joint venture to which the equity method does not apply, using IFRS 9. The IASB also provides an example that illustrates how companies apply the IFRS 9 and IAS 28 requirements to ~~register assets for deferred taxes corresponding to debt instruments measured at fair value. This rule is effective for annual periods commencing on January 1, 2017.~~long-term interests in an associate or joint venture.

Ecopetrol ~~is not expecting~~S.A.

Notes to adopt the aforementioned standards before their date of implementation. The impact from these standards is being evaluated by Company Management, particularly IFRS 16, which could affect the recognition of assets and liabilities in the financial situation statement, as well as the recognition of lease charges in the profit or loss of the period.

~~There are no new or amended standards or interpretation adopted in 2016 that had a material impact on~~ the consolidated financial ~~statements.~~

~~F-34~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Amendments to IFRS 9 - Prepayment Features with Negative Compensation. Changes to IFRS 9 allow companies to measure financial assets canceled in advance with negative offset to amortized cost or reasonable value, through another comprehensive result if a specific condition is met, instead of doing so at reasonable value with gain or loss.

Annual Improvements to IFRS Standards 2015–2017 Cycle:

Amendments to IAS 12 – Capital Gains Tax: Consequences to the capital gains tax of payments for financial instruments classified as net equity.

Amendments to IAS 23 - Loan costs. Loan costs subject to compounding.

Amendments to IFRS 3 – Business combinations and changes to IFRS 11 – Joint agreements. Stakes previously held in a joint venture.

5.2

Impact of the adoption of new regulations (IFRS 16)

IFRS 16 “Leases” was issued in January 2016 and replaces IAS 17 “Leases,” IFRIC 4 “Determination as to whether an agreement contains a lease contract,” SIC-15 “Operational leases – Incentives” and SIC-27 “Assessment of the share of transactions that legally involve a lease.”

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The new accounting policies are subject to change until the Ecopetrol Business Group presents its first financial statements under IFRS 16 in 2019.

Cash and cash equivalents

~~The balance of cash~~Cash and cash equivalents atdetails as of December 31, ~~2016~~2018 and ~~2015~~2017 is ~~comprised~~ as follows:

2016 2015
Banks and corporations 3,319,465 4,483,900
Short-term investments 5,090,048 2,065,731
Cash 954 819
8,410,467 6,550,450

	2018		2017
Banks		4,511,078		5,484,981
Short–term investments		1,799,597		2,459,438
Cash		1,069		1,466
		6,311,744		7,945,885

As of December 31, ~~2016, it includes~~2018, cash and cash equivalents balance included COP$92,331 and COP$96,758 as of December 31, 2017, of restricted cash ~~for COP$114,206 (2015 - COP$108,348), intended~~to be used exclusively for the ~~exclusive~~ payment of loans principal and interest ~~on loans contracted~~obtained by Oleoducto Bicentenario and Oleoducto de los Llanos. The use of ~~short-term~~short–term financial investments depends on the liquidity ~~requirements~~needs of the ~~Company.~~Ecopetrol Business Group.

The fair value of cash and cash equivalents approximates their ~~carrying amount~~book value due to their ~~short-term nature and their high liquidity.~~short–term nature.

The ~~average~~ return on cash and cash equivalents ~~as of~~for the year ended December 31, ~~2016~~2018 was ~~3.5% (2015 - 2.6%~~approximately 3% (2017 – 4.2%).

The following table reflects the credit quality of issuers ~~and counterparties~~of investments included in ~~transactions involving~~ cash and cash ~~equivalents is described~~equivalents:

Rating	2018		2017
AAA		3,092,236		2,807,170
BBB		1,305,037		-
A1		907,453		2,922,714
BRC1+		470,623		1,152,593
F1+		222,454		-
A-2		147,186		27,350
AA		107,520		-
F1		48,566		896,231
Aa3		-		99,029
Aa2		-		27,868
F2		-		180
Other		10,669		12,750
		6,311,744		7,945,885

See credit risk policy in Note ~~31.3 – Credit risk.~~28.2.2

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Trade and other receivables, net

The balance of trade and other receivables, net of provision allowance for doubtful accounts, is comprised as follows atas of December 31, ~~2016~~2018 and ~~2015:~~2017:

2016 2015
Current
Customers
Foreign 1,366,322 1,126,511
Domestic 1,180,577 1,731,547
Fuel price stabilization fund (1) 1,203,811 155,789
Related parties (Note 32) 97,730 64,724
Industrial services 60,025 34,987
Employee loans (2) 42,407 50,667
Other 261,829 263,187
Total current 4,212,701 3,427,412

Non-current
Employee loans (2) 425,468 432,450
Related parties (Note 32) 170,121 -
Fuel price stabilization fund (1) 77,510 77,510
Other 56,311 74,611
Total non-current 729,410 584,571

	2018		2017
Current
Customers
Foreign		2,404,531		2,052,829
Domestic		1,512,821		1,533,058
Fuel price stabilization fund⁽¹⁾		3,828,691		2,256,312
Industrial services		154,152		26,223
Accounts receivable from employees		78,459		34,461
Related parties (Note 29)		23,480		23,013
Other		192,109		173,022
		8,194,243		6,098,918
Non–current
Accounts receivable from employees		470,609		484,504
Related parties (Note 29)		117,824		154,810
Other		167,141		137,818
		755,574		777,132

(1)

Accounts receivable from the Ministry of Finance and Public Credit, arising from the differences between the international parity price of regular motor gasoline and diesel ~~price differentials pursuant to~~and the prices charged by the Ecopetrol Business Group, in accordance with Resolution 180522 issued on March 29, ~~2010.~~2010, as amended. The Ministry of Finance and Public Credit ~~makes~~actually settles the payment based on the resolution for the net liquidation position in favor of Ecopetrol of receivables for months with pending payments.During the month of March 2017, the Company received COP$542,718 of this amount.payments.

~~(2)~~

The administration, management and control of loans granted to employees by Ecopetrol were transferred to Cavipetrol (“Corporación de los trabajadores de la Empresa Colombiana de Petróleos Ecopetrol S.A.”), which manages the details per employee of such loans and their related conditions.

~~F-35~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

The following shows the changes in the allowance for doubtful accounts ~~related to trade~~for the year ended December 31, 2018 and ~~other receivables, provisioned in full, at December 31:~~2017:

	2016			2015			2018			2017			2016
Opening balance		160,406			245,114			170,016			144,329			160,406
Additions (recovery) of allowances		19,438			(74,378	)
Accounts receivable write-off and uses		(35,515	)		(10,330	)
Additions, net								107,725			35,229			19,438
Accounts receivable write–off and uses								(9,087	)		(9,542	)		(35,515	)
Closing balance		144,329			160,406			268,654			170,016			144,329

Inventories, net

The balance of ~~Inventories,~~inventories, net allowances for losses, as of ~~a provision at~~ December 31, ~~2016~~2018 and ~~2015~~2017 is ~~comprised~~ as follows:

	2016		2015		2018		2017
Crude		1,557,267		1,007,275
Crude oil						1,958,572		1,836,363
Fuels and petrochemicals		1,270,870		1,487,217		1,524,548		1,481,777
Materials for the production of goods		1,013,764		563,466		1,617,287		1,283,256
Total		3,841,901		3,057,958
						5,100,407		4,601,396

The following ~~shows a breakdown~~is the changes of the ~~changes in~~allowances for losses for the ~~provisions for inventories:~~years ended December 31, 2018 and 2017:

	2016			2015			2018			2017			2016
Opening balance		198,539			151,997			194,507			265,435			198,539
Additions (recoveries), net		41,957			53,205
(Reversals) additions, net								(115,778	)		9,134			41,957
Foreign currency translation		50,053			13,670			9,717			(4,266	)		50,053
Uses		(25,114	)		(20,333	)		(1,508	)		(75,796	)		(25,114	)
Closing balance		265,435			198,539			86,938			194,507			265,435

Ecopetrol S.A.

~~F-36~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Other financial assets

The balance of other financial assets atas of December 31, ~~2016~~2018 and ~~2015~~2017 is ~~comprised~~ as follows:


	2016		2015		2018		2017
Assets measured at fair value through profit or loss
Investment portfolio – Local currency		2,519,311		385,992
Investment portfolio – Foreign currency		4,116,987		1,189,667
Investment Portfolio – Local currency						3,389,869		3,310,338
Investment Portfolio – Foreign currency						4,754,369		3,194,287
		6,636,298		1,575,659		8,144,238		6,504,625
Assets measured at amortized cost		4,152		9,364		3,577		3,636
Hedging instruments		46,445		356		-		25,464
Total		6,686,895		1,585,379
						8,147,815		6,533,725

Current		5,315,537		329,227		5,321,098		2,967,878
Non-current		1,371,358		1,256,152
Non–current						2,826,717		3,565,847
		6,686,895		1,585,379		8,147,815		6,533,725

The average return ~~on investments~~of the investment portfolio in Colombian pesos and USU.S. dollars ~~portfolio~~ was ~~8.1% (2015 - 5.5%~~approximately 5.4% (2017 – 7.4%) and ~~0.8% (2015 - 0.5%~~approximately 2.1% (2017 – 1. 1%), respectively. ~~The credit quality of issuers and counterparties in transactions involving the other financial assets is described in Note 31.3 – Credit risk.~~

~~The~~Changes in fair value ~~measured is~~are recognized ~~against~~in financial ~~result (see note 30)~~results (Note 27).

9.1

Restrictions

As of December 31, ~~2016,~~2018 and 2017, there were no ~~resource of the investment portfolio was restricted. As of December 31, 2015, COP$699,832 related to the Santiago de las Atalayas process were restricted.~~

On November 6, 2016, through the Ministries of Mines and Energy and Finance and Public Credit the termination of Ecopetrol's condition as sequester in the process for nullity and re-establishment of rights filed against the Comuneros de Santiago de las Atalayas was confirmed. In view of the foregoing, theinvestments with restricted ~~resources related to this case belong to Ecopetrol (see Note 23.3 - Provisions and contingencies, for further information).~~use.

9.2

Maturity

The following are the maturities of other financial assets atas of December 31, ~~2016~~2018 and ~~2015:~~2017:

	2016		2015		2018		2017
Up to 1 year		5,315,537		329,227		5,321,098		2,967,878
1 - 2 years		838,786		739,337
2 - 5 years		497,204		470,375
1 – 2 years						1,847,241		1,588,145
2 – 5 years						823,425		1,817,558
> 5 years		35,368		46,440		156,051		160,144
		6,686,895		1,585,379		8,147,815		6,533,725

9.3

Fair value

The ~~classification~~following is the balance of other financial assets atby fair value ~~corresponding to the investment portfolio is~~hierarchy level as ~~follows at~~of December 31, ~~2016~~2018 and ~~2015:~~2017:

2016 2015
Level 1 25,066 975,262
Level 2 6,611,232 600,397
6,636,298 1,575,659

~~F-37~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

	2018		2017
Level 1		372,636		317,912
Level 2		7,771,602		6,186,713
		8,144,238		6,504,625

There were no transfers between hierarchy levels ~~during~~for the years ~~2016~~ended December 31, 2018 and ~~2015.~~2017.

The securities comprising ~~Ecopetrol's~~Ecopetrol’s portfolio are valued on a daily basis ~~pursuant~~according to the ~~provisions~~instructions issued by the Financial Superintendence of Colombia. To this end, the ~~Company uses the~~ information provided by ~~the~~authorized entities ~~authorized for this purpose,~~is used, which ~~collect~~includes data from active markets. For cases in which market data is not available, other directly or indirectly observable data is used.

For ~~dollar-denominated~~U.S. dollar–denominated investments, ~~the~~fair value is based on information ~~provider is~~released by Bloomberg, while for investments denominated in Colombian pesos, fair value is provided by Infovalmer, an entity authorized by the Financial Superintendence of ~~Colombia.~~Colombia to provide this service.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~For~~Within the investment valuation hierarchy process, ~~of establishing levels of the fair value for investments, in addition to the information used for valuation,~~ other relevant aspects are ~~also~~ taken into account, such as the ~~issuer~~issuer’s rating, investment rating and ~~issuer~~the risk analysis of the issuer performed by the Ecopetrol ~~thus making it possible to establish the appropriate hierarchy level for investments.~~Business Group.

9.4

Credit rating

The following table reflects the credit quality of the issuers of other financial assets measured at fair value through profit or loss:

	2018		2017
A1		3,148,043		1,149,606
AAA		3,105,894		3,175,727
BRC1+		611,905		-
F1+		353,175		-
AA-		455,584		233,668
AA+		193,747		1,067,989
A+		161,160		175,767
A		80,334		300,179
AA		15,430		-
BBB+		18,731		-
BBB		-		21,835
BBB-		-		378,939
No rating available		235		915
		8,144,238		6,504,625

See credit risk policy in Note 28.2.2

10.

Taxes

10.1

Current tax assets and ~~tax~~ liabilities

The balance ~~at December 31, 2016 and 2015~~ of current tax assets and tax liabilities as of December 31, 2018 and 2017 is ~~comprised~~ as follows:

	2018		2017
Current tax assets
Income tax⁽¹⁾		765,399		165,437
Credit tax balance⁽²⁾		54,350		234,410
Other taxes		211,558		225,527
		1,031,307		625,374
Current tax liabilities
Income tax⁽¹⁾		1,065,688		1,305,011
National tax and surcharge on gasoline		141,408		136,706
Carbon tax		48,520		51,383
Other taxes⁽³⁾		495,684		512,588
		1,751,300		2,005,688

2016 2015
Current tax assets
Income tax 308,868 3,403,190
Credit tax balance (1) 598,140 1,098,544
Other taxes 222,090 -
Total 1,129,098 4,501,734

Current tax liabilities
Income tax 1,478,294 2,120,398
National tax on gasoline and surtax on gasoline 324,402 314,723
Other taxes (2) 328,244 368,438
Total 2,130,940 2,803,559

(1)

~~Consists primarily~~The main variation compared to the previous period corresponds to the favorable balance of ~~VAT balance~~the income tax that was generated by the anticipated voluntary payment made in ~~favor.~~November and December 2018 by Ecopetrol S.A., in accordance with the Decree 2146 of November 22, 2018 and the decrease in non-deductible expenses.

(2)

~~Consists primarily of~~Includes mainly the value added tax (VAT) receivable balance.

(3)

Mainly includes VAT payable balances, industry and commerce tax ~~payable.~~and royalties and monetary compensations.

~~Income tax asset is related with prepayments made by~~Ecopetrol S.A.

Notes to the ~~group companies which cannot be offset with the income tax liability because they are generated by different companies.~~consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

10.2

Income tax

~~The current~~In December 2016, the Colombian Congress adopted Law 1819, which introduced more changes to the Colombian tax ~~regulations~~system, applicable ~~to Ecopetrol for~~beginning in 2017 including the ~~taxable year 2016 establish that:~~following aspects:

~~(a)~~a)

AsA unified income tax rate was set, which will be 34% for 2017 and 33% for 2018 and subsequently.

An income tax surtax for profits above COP$800 million is set which will be 6% for 2017 and 4% for 2018.

The income tax for tax free trade zone users will increase from 15% to 20% in 2017. The tax rate of ~~January 1, 2013~~companies located in a free trade zone with the legal stability agreement is 15% during term of the said agreement.

The presumptive income rate will increase from 3% to 3.5% from 2017. Tax losses accumulated until December 31, 2016 ~~taxable income in Colombia is taxed at 25% on account of income tax plus 9% as the surtax on income for equality-CREE, excluding tax payers who, based on specific provisions~~that have not been compensated, are subject to ~~special rates and a 10% capital gains tax;~~may be carried forward in accordance to the ~~companies~~formula provided in the ~~free trade zone pay 15%; and those not generating net income or net income that is lower than the presumptive rate declare over presumptive income at 3% on equity at beginning~~article 290 of ~~the year.~~Law 1819/2016.

~~F-38~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

On December 23, 2014, through Law 1739, a surtax on income for equality - CREE was established for the years 2015, 2016, 2017 and 2018, which is applicable for taxpayers with taxable base above COP$800 million, at rates of 5%, 6%, 8% and 9% per year, respectively.

For taxable year 2016, the Ecopetrol Group has companies that measure taxes at the ordinary income tax rate of 40%. Companies in free trade zones are subject to tax at 15%, some have taxable income calculated based on presumptive income, as explained above, and others with foreign income are taxed at the respective foreign income tax rates.

~~(b)~~e)

~~Regarding~~For fiscal year 2018, the Ecopetrol Business Group has subsidiaries that are subject to ~~current expense for~~a 37% income tax ~~as of December 31, 2016 and 2015, Bioenergy S.A., Bionergy Zona Franca and the Cartagena Refinery are companies~~rate, subsidiaries in free trade zones that are ~~part~~subject to a 15% or 20% income tax rate depending upon whether or not the comply with the CEJ rules, and other subsidiaries that are subject to statutory income tax rates in the country where they are incorporated in.

Depreciation and amortization methods and annual percentages are limited to the established in the tax rule and depends on the type of asset. For example, machinery and equipment depreciate at 10%, infrastructure (including pipelines) at 2.22% and vehicles and computers at 20%, among others.

The cost of acquisition of exploration rights, geology and geophysic (G&G), exploratory drilling, etc., is capitalized for tax purposes until the technical and commercial feasibility of extracting the resource is achieved.

Tax losses may be offset against ordinary net income obtained in the following 12 taxable years.

Refinería de Cartagena, Bioenergy, Ecopetrol ~~Group~~Costa Afuera and ~~present~~Andean Chemicals Ltd have tax losses ~~carryforwards with~~generated between 2009 and 2017 to carry forward, for a net value of COP$~~3,384,346~~4,292,418 as of December 2018 and COP$1,524,148, respectively, originated between 2009 and 2016. In accordance with current tax rules, tax losses incurred from the year 2007 can be offset, or tax adjusted, at any time, with future net taxable income without limitation. Corporation losses will not be transferred to the partners. However, in accordance with article 2904,288,957 as of ~~Law 1819 of 2016, the tax losses accumulated up to~~ December ~~21, 2016, which have not been offset, are subject for offsetting to the application of a formula contained in said article.~~2017.

~~The impact of~~In 2018, tax losses ~~in the Bioenergy and Bioenergy Zona Franca with respect to~~without a deferred tax ~~is mentioned~~base expiration date amount to COP$4,078,439 with a deferred tax of COP$792,452, attributable to the Refinería de Cartagena, and COP$47,803 attributable to Bioenergy.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in ~~this Note under the chapter titled "Deferred Tax on Income".~~millions of Colombian pesos, unless otherwise stated)

Effective for the year 2015, in accordance with that provided for in Law 1739 of December 2014, tax losses and minimal CREE base surplus can be offset with future income originated in the income tax for equality - CREE, considering the same rules set out for income and supplementary taxes.In accordance with article 290 of Law 1819 of 2016, the presumptive income surplus and minimal base surplus generated before 2017 on income tax and CREE that have not been offset, are subject for offsetting to the application of a formula contained in said article and subject to the term established in article 189 of the Tax Code.

The Colombian government issued Law 1819 of 2016 (Structural Tax Reform), whereby it is established that companies can offset tax losses originated on or after 2017 with ordinary net income to be obtained in the next twelve (12) taxable periods. Reficar and Bioenergy ZF, as they entered into a legal stability agreement that included offsetting tax losses, do not have time limits and are not subject to this restriction insofar as the contract is still in force.

Statute of ~~limitation of~~limitations on review of tax returns

Tax returns may be reviewed by the tax authorities ~~within the next 5~~for 6 years following the filing date and/or amendment, ~~considering that~~if the returns reflected tax losses.

~~According to law 1819 the general rule extended from 2 to 3 years~~Starting 2017, the statute of ~~limitation~~limitations covering tax returns is 3 years as of ~~tax returns. Tax returns extemporarily~~the date of expiration or as of the filing date, when these have been filed ~~will have a 3 year~~extemporaneously. With respect to transfer pricing, the statute of limitations ~~from~~is 6 years.

With respect to tax returns with favorable balances, the ~~day the tax return was filed. The~~ statute of limitations ~~for income tax returns subject to the transfer pricing regime is 6 years. Tax returns with balances in favor, the statute of limitation~~ will be 3 years ~~starting from~~as of the filing date ~~when~~of the ~~offset~~request for refunds or ~~refund request is filed. Tax~~offsetting.

With regard to tax returns in which tax losses are ~~originated,~~carried forward, these will ~~have a~~be considered determined after 6 years counted as of their filing date. With respect to tax returns where tax losses are calculated, the statute of ~~limitation period of~~limitations will be 12 years ~~which will be extended to 15 years~~and if the losses are ~~offset~~carried forward within the last 2 years of the 12 12–year ~~period.~~period, the statute of limitations will be extended up to 3 additional years from the year of offsetting.

~~Tax returns in which tax losses are offset will have a 6-year statute of limitation period.~~

~~F-39~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~Presumptive income~~

~~The taxable income of the tax payer cannot be lower than 3% of its net equity as of December 31 of immediately preceding taxable period. As of the year 2017, it will be at a rate of 3.5%.~~

Income tax expense

The following ~~table shows~~is a ~~breakdown~~detail of the income tax recognized in profit or loss for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

	2016		2015			2014			2018			2017		2016
Current income tax		4,517,336		3,510,546			6,389,978			7,539,093			5,108,549		4,376,706
Deferred income tax		25,710		(2,800,193	)		(955,123	)		783,136			472,772		25,710
Income tax expense		4,543,046		710,353			5,434,855
Adjustments to prior years’ current and deferred tax										(63,744	)		218,947		140,630
Income tax expenses										8,258,485			5,800,268		4,543,046

Reconciliation of the income tax ~~expense~~expenses

The reconciliation between the income tax ~~expense~~expenses and the tax determined based on the ~~official~~statutory tax rate applicable to the ~~Company~~Ecopetrol Business Group in Colombia is as follows:

2016 2015 2014
Net income (loss) before income tax 7,790,526 (5,578,626 ) 11,104,428
Statutory rate 40 % 39 % 34 %
Income tax at statutory rate 3,116,210 (2,175,664 ) 3,775,506

ETR reconciliation items:
Effect in changes in tax rates and effect in tax base (CREE) 807,989 2,063,782 (151,244 )
Non deductible wealth tax 229,375 253,422 (21,233 )
Foreign currency translation and exchange difference (234,316 ) 310,657 609,130
Prior year taxes 140,630 (21,233 )
Non deductible expenses 486,300 251,246 378,218
Valuation of investments - 48,129 922,028
Non taxable income (3,142 ) (19,986 ) (17,352 )
Others - - (60,198 )
Income tax calculated 4,543,046 710,353 5,434,855

Current 4,517,336 3,510,546 6,389,978
Deferred 25,710 (2,800,193 ) (955,123 )
4,543,046 710,353 5,434,855

	2018			2017			2016
Net income before income tax		20,613,875			13,769,662			7,790,526
Statutory rate		37	%		40	%		40	%
Income tax at statutory rate		7,627,134			5,507,865			3,116,210
ETR reconciliation items:
Foreign currency translation and exchange difference		751,210			(186,787	)		(234,316	)
Effect Leon well (Ecopetrol America Inc.)		281,912			–			–
Effect in changes in tax rates and tax base		172,352			186,588			807,989
Non–deductible expenses		56,061			211,042			486,300
Non–deductible wealth tax		–			85,872			229,375
Prior years’ current and deferred tax		(63,744	)		218,947			140,630
Non–taxable income		(78,303	)		(47,509	)		(3,142	)
Impairment of long–term assets		(128,461	)		(175,750	)		–
Effect of tax reform		(359,676	)		–			–
Income tax calculated		8,258,485			5,800,268			4,543,046
Current		7,416,038			5,076,692			4,517,336
Deferred		842,447			723,576			25,710
		8,258,485			5,800,268			4,543,046

The effective tax rate ~~(ETR)~~ as of December 31, 2018 is 40.1% (2017 - 42.1% and 2016 ~~was~~- 58.3% ~~(2015: 12.7%~~). The ~~increase~~decrease compared to the previous year is ~~mainly~~mostly due to the ~~following:~~following concepts: a) ~~The effect~~Decrease in the nominal rate 40% in 2017 to 37% in 2018; b) improvement of the ~~increase~~results before taxes of ~~unrecognized~~the Ecopetrol Business Group; c) Effect for tax reform d) Adjustment for differential taxable bases; e) adjustment for differential tax rates of the Ecopetrol Business Group different from the nominal 37%, with a rate lower than the nominal rate; f) application of a lower rate for the long-term amortizable deferred tax ~~assets on tax carryforwards in the group that according~~asset; and g) elimination of wealth tax.

Ecopetrol S.A.

Notes to the consolidated financial ~~projections will not be able to be recovered~~statements

(Figures expressed in ~~a predictable future, and b) the increase in non-deductible expenses due to the amendment~~millions of ~~the 2015 income tax.~~Colombian pesos, unless otherwise stated)

Income and supplementary tax returns for taxable years 2011, 2012, to2014, 2015, 2016 and 2017 and CREE of the taxable years ~~2013~~2014, 2015 and 2016 of Ecopetrol Business Group companies are subject to ~~2015 are open to~~acceptance and review ~~in accordance with~~by the ~~applicable statute of limitations. The auditing of those~~ tax ~~returns may result in additional taxes, or interest, or penalties which could give rise to administrative proceedings with applicable~~ authorities. Management of the Ecopetrol Business Group ~~Companies~~companies considers that the amounts ~~accounted~~recognized as a liability for ~~the tax~~taxes payable isare supported by ~~tax~~the regulations, doctrine and case law ~~regulations and official opinion in order~~applicable to ~~address~~ any ~~legal~~ claim that could be ~~requested by the~~eventually filed with respect to such years. The Ecopetrol Business Group's strategy is not making tax ~~authority. The strategy's Company is do not take~~decisions based on aggressive or ~~risk tax~~less-assured positions that could put into question ~~these~~its tax returns.

Deferred income tax

The following is the detail of the deferred tax balance as of December 31, 2018 and 2017:

	2018			2017
Deferred tax assets		3,879,427			4,016,161
Deferred tax liabilities		(1,337,943	)		(1,333,280	)
Net deferred income tax		2,541,484			2,682,881

The deferred income tax assets and liabilities as of December 31, 2018 and 2017, is as follows:

	2018			2017
Deferred tax assets (liabilities)
Provisions⁽¹⁾		1,994,762			1,840,988
Employee benefits⁽²⁾		1,161,860			1,373,561
Loss carry forwards⁽³⁾		1,002,062			611,766
Accounts payable		1,193,098			208,618
Accounts receivable		79,591			94,864
Property plant and equipment and Natural and environmental resources⁽⁴⁾		(2,304,140	)		(1,006,299	)
Goodwill		(404,394	)		(408,932	)
Investments and derivative instruments		(170,960	)		(49,258	)
Others		(10,395	)		17,573
		2,541,484			2,682,881
Deferred tax assets		3,879,427			4,016,161
Deferred tax liabilities		(1,337,943	)		(1,333,280	)
		2,541,484			2,682,881

~~F-40~~(1)

The most representative item corresponds to the asset retirement obligation (ARO).

~~Ecopetrol S.A.~~

~~Notes~~

(2)

Actuarial calculations for health, retirement pensions, education, pension bonds and other benefits to ~~Consolidated Financial Statements~~long–term employees.

(3)

The increase is because of the tax reform that allows a greater recognition of deferred tax on tax losses and excess presumptive income in Refinería de Cartagena mainly.

(4)

For tax purposes, natural and environmental resources and property, plant and equipment have a useful life and a depreciation and amortization calculation methodology different from those determined as per international accounting standards, within this item occasional gains of 10% is included, corresponding to lands. The main variation corresponds to the tax rate reduction from 33% to 30%.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The following is the detail of the deferred tax assets (liabilities), net for the years ended December 31, 2018 and 2017:

	Property plant and equipment and Natural resources			Provisions			Employee benefits			Loss carry forwards		Accounts payable
As of December 31, 2016		(220,315	)		1,875,965			656,997			477,808		311,607
Recognized in profit or loss		(785,984	)		(34,977	)		(22,818	)		133,958		(102,989	)
Recognized in OCI		–			–			739,382			–		–
As of December 31, 2017		(1,006,299	)		1,840,988			1,373,561			611,766		208,618
Recognized in profit or loss		(1,297,841	)		153,774			(178,160	)		390,296		984,480
Recognized in OCI		–			–			(33,541	)		–		–
As of December 31, 2018		(2,304,140	)		1,994,762			1,161,860			1,002,062		1,193,098

	Goodwill			Borrowings and other financial liabilities			Accounts receivable			Investments and derivative instruments and Others			Total
As of December 31, 2016		(345,288	)		(113,497	)		133,840			(168,806	)		2,608,311
Recognized in profit or loss		(63,644	)		113,497			(38,976	)		78,357			(723,576	)
Recognized in OCI		–			–			–			58,764			798,146
As of December 31, 2017		(408,932	)		–			94,864			(31,685	)		2,682,881
Recognized in profit or loss		4,538			–			(15,273	)		(884,261	)		(842,447	)
Recognized in OCI		–			–			–			734,591			701,050
As of December 31, 2018		(404,394	)		–			79,591			(181,355	)		2,541,484

The Ecopetrol Business Group offsets assets and liabilities for deferred taxes only if it has a legally enforceable right to offset current tax liabilities and assets; and in the case of deferred tax on assets and liabilities, to the extent that they also correspond to income taxes required by the same tax jurisdiction and the same tax authority.

Deferred tax assets related to the tax losses generated by the subsidiaries Bioenergy S.A. Ecopetrol Costa Afuera and Andean Chemicals Ltd for an amount of COP$70,393, and excess presumptive income of Bioenergy SA, Ecopetrol Costa Afuera, Hocol Petroleum Company, Andean for an amount of COP$31,863 were not recognized, as Management believes it is not likely that these deferred tax assets would be recoverable in the short term.

Deferred tax assets have been recognized for an amount of COP$1,002,063 related to excesses of presumptive income and the accumulated tax losses of Refinería de Cartagena amount to COP$948,671 and Bioenergy Zona Franca S.A.S. amount to COP$53,392, as management expects these amounts will be realized in future periods.

The recognition of this deferred tax asset is supported with the tax projections and the elimination of presumptive income from the year 2021, contemplated in Law 1943/2018.

In accordance with the tax regulation applicable until December 31, 2016, excess presumptive income and minimum base excesses generated before 2017 in income and supplementary taxes and in income tax for equality – (CREE, as its acronym in Spanish) respectively, they may be compensated with the ordinary taxable income obtained by each Company within the following five years, using for this purpose, the formula established the article 290 of law 1819/ 2016.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~Deferred income tax~~

~~The balance at December 31, 2016 and 2015 of deferred taxes is comprised as follows:~~

2016 2015
Deferred tax asset 5,726,961 8,239,472
Deferred tax liability 3,118,650 6,026,050
Total deferred income tax 2,608,311 2,213,422

~~Deferred tax is measured at the tax rates that are expected to be applied to temporary differences when they reverse, using taxrates enacted or substantively enacted at the reporting date.~~

~~The table below shows an analysis of the Company´s deferred tax assets and liabilities:~~

2016 2015
Deferred tax assets
Property, plant and equipment and Natural and environmental resources (1) 2,185,792 4,094,250
Provisions 1,875,964 1,867,461
Employee benefits (2) 656,997 -
Loss carry forwards 477,808 238,193
Accounts payable 311,646 726,256
Borrowings and other financial liabilities - 986,689
Accounts receivable 135,092 17,927
Others (3) 83,662 308,696
Total 5,726,961 8,239,472

2016 2015
Deferred tax liabilities
Property, plant and equipment and Natural and environmental resources (1) 2,406,106 3,888,751
Goodwill 345,288 262,291
Borrowings and other financial liabilities 113,497 1,527,501
Others (3) 253,759 347,507
Total 3,118,650 6,026,050

~~(1)~~

For tax purposes, natural resources and property, plant and equipment have specific useful lives and a methodology of capitalization different from those determined under IFRS. This difference will result in a difference in the depreciable basis for accounting and tax purposes.

~~(2)~~

~~Difference in valuation of the actuarial liability.~~

~~(3)~~

~~Investments, inventories and intangible assets.~~

~~F-41~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~The movements of deferred income tax for the years ended December 31, 2016 and 2015 is as follows:~~

~~Deferred tax assets:~~

Property, plant
and equipment
and natural
resources Provisions Employee
benefits Tax losses Accounts
payable Accounts
receivable Borrowings
and other
financial
obligations Others Total
December 31, 2014 1,007,559 1,814,433 352,720 227,078 111,300 113,889 268,210 350,227 4,245,416
Recognized in deferred income tax expense 3,086,691 53,028 370,863 11,115 614,956 (95,962 ) 718,479 (41,531 ) 4,717,639
Recognized in other comprehensive income - - (723,583 ) - - - - - (723,583 )
December 31, 2015 4,094,250 1,867,461 - 238,193 726,256 17,927 986,689 308,696 8,239,472
Recognized in deferred income tax expense (1,908,458 ) 8,503 40,300 239,615 (414,610 ) 117,165 (986,689 ) 18,282 (2,885,892 )
Recognized in other comprehensive income - - 616,697 - - - - (243,316 ) 373,381
December 31, 2016 2,185,792 1,875,964 656,997 477,808 311,646 135,092 - 83,662 5,726,961

~~Deferred tax liabilities:~~

Property, plant and
equipment and natural
resources Goodwill Financial
obligations Others Total
December 31, 2014 2,933,009 473,293 571,105 190,737 4,168,144
Recognized in deferred income tax expense 1,074,825 (211,002 ) 788,797 264,826 1,917,446
Recognized in other comprehensive income - - 167,599 - 167,599
Foreign exchange (119,083 ) - - (108,056 ) (227,139 )
December 31, 2015 3,888,751 262,291 1,527,501 347,507 6,026,050
Recognized in deferred income tax expense (1,482,645 ) 82,997 (1,414,004 ) (46,530 ) (2,860,182 )
Foreign exchange - - - (47,218 ) (47,218 )
Recognized in other comprehensive income - - - - -
December 31, 2016 2,406,106 345,288 113,497 253,759 3,118,650

Deferred tax assets and liabilities are offset if there is a legally enforceable right to offset current tax liabilities and assets, andthey relate to taxes levied by the same tax authority on the same taxable entity, or on different tax entities, but they intend to settlecurrent tax liabilities and assets on a net basis or their tax assets and liabilities will be realized simultaneously.

In accordance with the current tax law losses generated in income and supplementary taxes and/or income tax for equality - CREE before 2017 must be offset with the net income obtained in 2017 and subsequent periods, taking into account the formula set out in article 290 of Law 1819 of 2016. Tax losses determined must not be tax re-adjusted.

Starting in 2017 companies can offset tax losses obtained in the current period, with taxable income generated through the next 12 taxable periods, following the attainment of said tax losses, without prejudice of the period's presumptive income.

The asset for deferred tax related to tax losses generated by Bioenergy S.A. and Bioenergy Zona Franca were written off in 2016 because, even though they can be offset in the long term, Management concluded that it is not likely that the asset deferred tax related to such tax losses would be recoverable in the short term. If the Ecopetrol Group could have recognized the deferred tax asset that was not recognized the income for the period ended on December 31, 2016 would have increased by COP$83,595.

~~F-42~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

As per Colombian tax law, excess of presumptive income can be carried forward for 5 years. As of December 31, 2016, Ecopetrol Group has unrecognized deferred tax assets on cumulative excess of presumptive income of COP 49,155, which expires between 2017 and 2020.~~The~~ ~~Deferred tax assets have not been recognized in respect of these carryforwards, as they may not be used to offset taxable profits in the Group.~~

In accordance with tax provisions applicable until December 31, 2016 the surplus of presumptive income and minimal base generated before 2017 in income and supplementary taxes and in the income tax for equality - CREE, respectively, can be offset with ordinary net income obtained by the Company in the next five years, using for such purpose the formula set out in number 6, article 290 of law 1819 of 2016.

The movements of deferred income tax for the years ended December 31, ~~2016~~2018 and ~~2015~~2017 are as follows:

2016 2015
Opening balance 2,213,422 77,272
Deferred tax recognized in profit or loss (25,710 ) 2,800,193
Deferred tax recognized in other comprehensive income (a) 420,599 (664,043 )
Closing balance 2,608,311 2,213,422

	2018			2017			2016
Opening balance		2,682,881			2,608,311			2,213,422
Deferred tax recognized in profit or loss^(a)		(842,447	)		(723,576	)		(25,710	)
Deferred tax recognized in other comprehensive income^(b)		701,050			798,146			420,599
Closing balance		2,541,484			2,682,881			2,608,311

(a)

This amount includes deferred income tax and adjustments to prior years’.

(b)

The following is the ~~breakdown~~detail of the income tax recorded ~~against~~in other comprehensive income:

December 31, 2016 Pre-tax Deferred tax After tax
Actuarial valuation gains (losses) 1,770,139 (616,697 ) 1,153,442
Cash flow hedging for future crude oil exports (757,469 ) 296,047 (461,422 )
Derivative financial instruments (56,448 ) 22,579 (33,869 )
Others - (47,217 ) (47,217 )
956,222 (345,288 ) 610,934

December 31, 2018	Pre–tax			Deferred Tax			After tax
Actuarial valuation gains (losses)		(29,250	)		33,540			4,290
Cash flow coverage for crude exports		2,258,734			(701,231	)		1,557,503
Other		–			(33,359	)		(33,359	)
		2,229,484			(701,050	)		1,528,434

December 31, 2015 Pre-tax Deferred tax After tax
Actuarial valuation gains (losses) (2,128,184 ) 723,582 (1,404,602 )
Cash flow hedging for future crude oil exports 344,836 (127,545 ) 217,291
Derivative financial instruments 100,134 (40,051 ) 60,083
Others - 108,057 108,057
(1,683,214 ) 664,043 (1,019,171 )

December 31, 2017	Pre–tax		Deferred Tax			After tax
Actuarial valuation gains (losses)		2,251,656		(739,382	)		1,512,274
Cash flow coverage for crude exports		80,896		(54,056	)		26,840
Other		12,119		(4,708	)		7,411
		2,344,671		(798,146	)		1,546,525

December 31, 2016	Pre-tax			Deferred tax			After tax
Actuarial valuation gains (losses)		1,770,139			(616,697	)		1,153,442
Cash flow hedging for future crude oil exports		(537,353	)		220,596			(316,757	)
Derivative financial instruments		(56,804	)		22,722			(34,082	)
Other		-			(47,220	)		(47,220	)
		1,175,982			(420,599	)		755,383

Deferred tax assets (liabilities) not recognized

As of December 31, 2018, deferred tax assets are not recognized on the difference between the accounting and tax basis associated with the investments in associates and joint ventures of Ecopetrol (Base: COP$2,981,901 million - Tax: COP$298,190 million), as the Ecopetrol Business Group does not have any intention to sell any of these investments in the foreseeable future.

10.3

Other taxes

10.3.1

Tax on dividends

~~The new~~Dividends related to profits generated from the year ended December 31, 2017, will be subject to withholding at a rate of 5%. Further, if the earnings against which the dividends are distributed were not subject to corporate tax, said dividends are taxable by the income tax applicable during the distribution period (for 2018 the rate is 35%). In this scenario, the 5% tax on dividends will be applicable to ~~foreign companies and entities on profits generated starting 2017.~~the distributed amount, once it is reduced with the 35% income tax rate.

~~Dividends~~The non-taxed dividends that the Company will ~~be taxed at 5%. For Colombian individuals the rate would be up to 10%. Profits that did~~receive will not ~~pay tax at the corporate level, would~~ be subject to ~~a 35%~~ withholding tax atdue to the ~~time~~express provision of ~~distribution. In this case,~~ the ~~distribution, after being reduced by~~regulation that establishes the ~~35% withholding tax, would~~dividends that are distributed within the business groups duly registered with the Chamber of Commerce and decentralized entities, they will not be subject to the retention at the source for this concept.

There are no effects on income tax related to dividend ~~tax. Dividends tax will be applicable~~payments made by the Company to ~~profits generated as~~its shareholders during 2018 and 2017.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of ~~2017.~~Colombian pesos, unless otherwise stated)

10.3.2

Transfer prices

According to the Colombian ~~Taxpayers carrying out operations~~tax law, income taxpayers who enter into transactions with related parties or related parties located ~~abroad~~in foreign jurisdictions and in free trade zones or with residents located in jurisdictions considered tax havens, are ~~required~~obliged to ~~submit~~determine their ordinary and extraordinary income for purposes of the ~~disclosure~~income and supplementary tax, its costs and deductions, considering for these operations the arm's length principle.

Ecopetrol submitted its transfer pricing informative return ~~of transactions with related parties. For these taxpayers it is necessary to prepare~~for the 2017 taxable year and ~~maintain~~its corresponding supporting documentation, ~~only for those types of operations, if~~as well as the ~~annual amount accumulated in the relevant tax year exceeds ten thousand units of taxable value units (10.000 UVT) (For 2016: COP$ 29,753).~~

~~F-43~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~The Companies are required to file their transfer pricing information~~country by country notification for the ~~taxable year 2015~~years 2016 and 2017 and the ~~related supporting documents.~~master file for the year 2017, in accordance with current tax regulations.

For fiscal year ~~2016~~2018, the transactions performed with ~~foreign economically~~ related parties in foreign jurisdictions, as well as the business conditions ~~for such~~under which said operations were carried out and ~~their~~the general structure, did not vary significantly ~~as compared~~with respect to the previous year. For this reason, it is possible to infer that these transactions were carried out in accordance with the ~~previous year.~~arm's length principle. It is estimated that ~~no adjustments~~there will be ~~required~~no need for adjustments derived from the analysis of transfer ~~pricing in 2016~~prices for 2018, which imply ~~amendments of~~changes in the income provision of the taxable year ~~2016.~~2018.

10.3.3

Value added tax (VAT)

General VAT rate ~~increased from 16% in 2016 to~~is 19% and a differential rate of 5% for certain goods and services is maintained. The modification on the general rate is effective from January 1st, 2017.

VAT taxable event is expanded to all goods in general, including intangible goods (related to intellectual property) and real estate property (unless provided otherwise).

Fixed assets are still not levied with VAT, except for real estate property for residential use, automobile and other fixed assets sold on the ordinary course of business in the name and on behalf of third parties. For this purposes, real estate has been excluded unless the value of the first sale is higher than 26.800 tax value unit (“UVT” by its acronyms in Spanish), approximately COP $854 million, which will be taxed at a 5% rate.

Unless expressly excluded, services rendered from abroad will be levied with VAT. The assignment of rights is included as a form of service.

Periods for filing VAT returns and payments will be only two, bimonthly and quarterly. The statute of limitations for the request of VAT credit tax balance is increased to three bimonthly periods following the period of causation.

10.3.4

Wealth tax

Law 1739 of 2014 ~~stablished~~established the wealth tax ~~(“impuesto a la riqueza”)~~ for natural and legal persons whose possession as of January 1, 2015 exceeds COP$1,000. The taxable base for legal persons is the ~~years 2015-2018. According to~~value of the ~~Law, entities that own wealth in Colombia –exceeding~~gross equity owned as of January 1, 2015, 2016, and 2017 minus the ~~limits established to be considered taxpayers, this is COP$ 1,000 million- have~~current liabilities outstanding at the ~~obligation to file and pay the wealth tax.~~same dates.

The applicable rate will depend on the taxable base of each ~~tax payer~~taxpayer and the value paid ~~value~~ will not be deductible ~~nor discountable on~~or deductible in the income tax and ~~supplementary taxes for~~complementary or in the income tax for ~~equality~~equity - CREE, nor can they be ~~offset~~compensated with these ~~nor any~~or with other taxes.

~~In 2016,~~For the year 2018 and following, there is no wealth tax, in the case of domestic companies. During 2017, the tax on wealth paid by the Ecopetrol Business Group amounted to COP$~~569,756,~~226,778, which was recognized as an expense infor the ~~period (2015 - COP$649,800).~~year.

~~F-44~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~11.~~10.4

~~Equity instruments measured at fair value~~Tax reform

The ~~balance at~~Government issued the Law 1943/2018, which makes numerous changes to the Colombian tax rules. The Tax Reform reduces the corporate income tax (CIT) rate from 33% in 2018 to 32% for 2020, 31% for 2021 and 30% for 2022 and onwards.

The presumptive income tax rate (i.e., an alternative tax based on a percentage of the net equity of the last year) is reduced from 3.5% to 1.5% in 2019 and 2020 and 0% for 2021 and onwards.

The thin capitalization rule ratio is modified from 3:1 (which includes all debt that generates interest with local and foreign entities, related or unrelated) to a 2:1 ratio that only considers debt transactions involving related local and foreign parties (including back-to-back transactions involving foreign third parties).

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Dividend tax

The Tax Reform increases the dividend tax on distributions to foreign nonresident entities and individuals from 5% to 7.5%. In addition, the Tax Reform establishes a 7.5% dividend tax on distributions between Colombian companies. The tax will be charged only on the first distribution of dividends between Colombian entities and may be credited against the dividend tax due once the ultimate Colombian company makes a distribution to its shareholders (nonresident shareholders (entities or individuals) or to Colombian individual residents). The dividend tax on local distributions does not apply if the Colombian companies are part of a registered economic group, or the distribution is to a Colombian entity qualifying for the new Colombian holding company (CHC) regime.

Normalization tax

The Tax Reform establishes a tax amnesty to “normalize” (i) unreported assets; or (ii) nonexistent liabilities that were included on a tax return. The amnesty will apply only for 2019 (25 September 2019 is the due date for filing the normalization tax). The applicable tax rate is 13% of the value of the unreported assets or nonexistent liabilities. For money that is repatriated to Colombia before December 31, ~~2016~~2019, and ~~2015 of equity instruments measured at fair value~~kept in the country for two years, the tax rate is ~~comprised as follows:~~reduced to 6.5%. The normalization tax has a far-reaching scope and applies to assets in private foundations, assets in trusts, insurance with savings components, investment funds and other fiduciary business activities.

2016 2015

Empresa de Energía de Bogotá (1) 51,522 478,618
Interconexión Eléctrica S.A (2) - 434,870
Other 88 -
51,610 913,488

Value Added Tax (VAT)

~~(1)~~

~~Through Decree 2305 of November 13, 2014, the Company obtained authorizations from the Government to start the alienation program of its equity holding in Empresa de Energía de Bogotá S.A. E.S.P.~~

~~For~~Concerning VAT, changes have been made to the ~~period~~list of ~~authorization~~goods and ~~December 31, 2016~~ services excluded from VAT as set forth in Articles 424, 426 and 476 of the Tax Code, adding Article 437 to the Tax Code, with regard to guidelines on compliance with formal duties concerning VAT by service providers abroad, and it has been noted that VAT withholding may be up to 50% of the tax amount, subject to regulation by the National Government. The VAT rate remains at 19%.

Tax procedure

With regards to procedure, changes have been made: (i) declarations for withholding at source which, that being inefficient, will be enforceable, (ii) electronic notification of administrative actions; (iii) payment of the entire amount covered by a statement of objections to avoid delinquent interest at the current rate plus two points; and (iv) elimination of the extension of enforcement to three (3) additional years to offset tax losses.

Additionally, an audit benefit was included for fiscal years 2019 to 2020. Under this benefit, private settlement by taxpayers of income tax and supplements that increase net income tax by a minimum of at least 30% or 20% over the net income tax of the immediately preceding year shall be considered firm for six (6) or twelve (12) months, respectively after the date of presentation if not notified of a deadline for correction or special requirement, or a special deadline or provisional settlement, provided that the return is filed timely and the payment is made within the established deadlines.

The above benefit does not apply to: (i) taxpayers who enjoy tax benefits due to their location in a specified geographic region; (ii) if it is demonstrated that declared withholdings at source are non-existent; (iii) if the net income tax is less than 71 UVT (COP$2,433,170). The deadline stipulated in this law does not extend to declarations of withholdings at source nor to the sales tax, which shall be established by the general regulation.

Ecopetrol ~~sold~~S.A.

Notes to the consolidated financial statements

(Figures expressed in ~~three auctions 95.5%~~millions of ~~its equity share equivalent to 602,632,965 shares for COP$1,067,313 as follows:~~Colombian pesos, unless otherwise stated)

~~On July 27, 2015, the sale of 352,872,414 shares took place at a selling price of COP$1,740 per share. The operation amounted to $613,998.~~

~~On June 7, 2016, the second auction was performed for 191,639,698 shares at a price of COP$1,815 for a total of COP$347,827.~~

~~On December 6, 2016, the third auction was performed for the sale of 58,120,853 shares, at a price of COP$1,815 for a total of COP$105,489.~~

~~In December 2016, the Council of Ministers approved a one extension for the terms of the alienation program, period in which Ecopetrol expects to sell the remaining 28,465,035 shares it holds.~~

~~(2)~~

On April 13, 2015, as part of Law 226 of 1995, the Government issued a favorable opinion on the alienation program of Ecopetrol's equity holding in Interconexión Eléctrica S.A. E.S.P, following the recommendation of Ecopetrol's Board of Directors. At December 31, 2016, Ecopetrol sold in two auctions 100% of its equity holding, which amounted to 58,925,480 shares for COP$513,399 as follows:

~~On April 12, 2016, the sale of 45,295,034 shares was performed at a price of COP$8,325 each for a total of COP$377,081.~~

~~On December 14, 2016, the last auction was performed for the sale of 13,630,446 shares at a price of COP$10,001 for a total of COP$136,318.~~

~~The proceeds from the sale of these shares have been used to finance the Company's investment plan.~~

~~The movement of non-current assets held for sale at December 31, 2016 and 2015 is as follows:~~

2016 2015
Opening balance 913,488 1,581,466
Fair value adjustments 126,205 (106,911 )
Proceeds from sales of shares (966,715 ) (613,998 )
(Loss) gain on sale of shares (1) (21,368 ) 52,931
Closing balance 51,610 913,488

~~F-45~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

These equity instruments are measured at fair value with changes in fair value recorded in the other comprehensive income. Its hierarchy level is 1 using the price quoted in the Stock Exchange of Colombia as a reference.

~~(1)~~

As of December 31, 2016 and 2015 the sale of shares of EEB and ISA generated a profit of COP$47,129 and COP$72,339, respectively; which corresponds to the amount of loss or gain on sale describe in the previous table plus the gains realization of the fair value measurements that had been accumulated in equity for COP$68,497 in 2016 and COP$19,405 in 2015.

~~12.~~11.

Other assets

The balance atas of December 31, ~~2016~~2018 and ~~2015~~2017 of other assets is ~~comprised~~ as follows:

2016 2015
Current
Partners in joint operations 735,032 431,523
Advanced payments to contractors and suppliers 151,871 370,269
Prepaid expenses 140,606 226,842
Related parties (Note 32) 7,135 28,668
Other advances and agreements 988 33,022
Total current 1,035,632 1,090,324

Non-current
Abandonment and pension funds (1) 312,423 274,938
Employee benefits 187,969 91,625
Judicial deposits and attachments 140,338 146,701
Trust funds (2) 87,602 125,720
Advances and deposits 63,402 18,405
Other assets 35,002 108,991
Total non-current 826,736 766,380

	2018		2017
Current
Partners in joint operations⁽¹⁾		519,460		583,656
Advanced payments to contractors and suppliers		221,767		103,762
Prepaid expenses		191,168		115,866
Related parties (Note 29)		19,214		7,716
Other assets		68,819		69,425
		1,020,428		880,425
Non–current
Abandonment and pension funds⁽²⁾		392,084		323,621
Employee benefits		213,645		202,012
Trust funds		147,471		32,748
Advanced payments and deposits		61,556		74,225
Judicial deposits and attachments		43,137		43,248
Other assets		2,837		5,155
		860,730		681,009

(1)

Corresponds to the net amount of cash calls and cutbacks generated in relation to the operations carried out with partners through Exploration and Production (E&P) contracts, Technical Evaluations (TEA) contracts and agreements entered in to with the National Hydrocarbons Agency (ANH), as well as through association contracts and other types of contracts.

(2)

Corresponds to Ecopetrol’s share in trusts established to support ~~the~~ costs of abandonment of wells and dismantling of facilities, ~~and~~as well as the payment of future retirement ~~pensions.~~pensions in some association contracts.

~~(2)~~

~~Consists primarily of deposits to the Oil Savings and Stabilization Fund (from the Spanish~~~~Fondo de Ahorro y Estabilización Petrolera - FAEP~~) in Ecopetrol’s favor to address the remainder of the National Royalties Fund. Its sole purpose is the payment of debts and financing development programs and projects in hydrocarbon producing and non-producing municipalities and departments. Ecopetrol will make disbursements as the Ministry of Finance issues the respective approvals.

~~At the close of 2015, the pension resources managed by~~~~Fiduciaria Bancolombia~~ (equivalent to COP$342,951, from the termination of the Cravo Norte Partnership agreement with Occidental de Colombia) were returned to Ecopetrol S.A., since the pension obligation arising from such agreement is supported by the pension trusts described in note 22 - Provisions for employee benefits.

~~F-46~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~13.~~12.

~~Assets held for sale and their related liabilities~~

~~At December 31, 2016, the balance of assets classified as non-current assets held for sale amounted to COP$132,216 and it was comprised of:~~

~~Assets remaining from the expansion of the oil pipeline to transport extra-heavy crude oil conducted by Oleoducto Central S.A. - Ocensa, for COP$65,703.~~

~~Andean assets related to Louisiana Green Fuels for COP$36,902 corresponding to ethanol and water plants and a harvester.~~

~~Ecopetrol’s oil fileds: Sogamoso, Rio Zulia, Rio de Oro and Puerto Barco, Santana, Nancy-Maxine-Burdine and Valdivia Almagro, awarded through auction offered in November 2016 for COP $29,611.~~

~~The balance of related liabilities as of December 31, 2016 amounts to COP$40,128 and corresponds mainly to abandonment costs and environmental commitments of these assets.~~

Assets held for sale at December 31, 2015 for COP$242,745 and its related liabilities for COP$17,628 corresponded to fields La Hocha and La Cañada, owned by Hocol S.A., on which the sale was abandoned in 2016 because the offer did not meet economic expectations.

~~F-47~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~14.~~

Investments in associates and joint ventures

~~14.1~~

~~Composition and movements~~

The ~~balance at December 31, 2016 and 2015 of~~details on the ~~investments in associates and joint ventures is as follows:~~

2016 2015
Investments in joint ventures
Equion Energía Limited 1,156,430 1,430,206
Offshore International Group (1) 937,938 1,097,929
Ecodiesel Colombia S.A. 39,525 37,161
2,133,893 2,565,296
Less impairment:
Equion Energía Limited (253,683 ) (172,528 )
Offshore International Group (577,053 ) (530,350 )
1,303,157 1,862,418
Investments in associates
Invercolsa S.A. 243,156 61,503
Serviport S.A. 5,255 8,490
Sociedad Portuaria Olefinas 1,126 649
249,537 70,642
Less impairment: Serviport S.A. - (1,126 )
249,537 69,516
1,552,694 1,931,934

~~(1)~~

According to the assessment of control carried out as of December 31, 2016, the investment in Offshore International Group was classified as joint venture from an associate, due to the existence of joint control. For comparative purposes, the balance was reclassified as of December 31, 2015 to joint ventures.

~~The detail of the investments,~~participations, economic activity, ~~domicile,~~address, area of ~~operation~~operations and financial information of the investments in joint ventures and associates ~~is shown~~can be found in Exhibit I.1.

12.1

Composition and movements

	2018			2017
Investment in joint ventures
Equion Energy Limited		1,364,933			1,057,466
Offshore International Group		727,194			845,325
Ecodiesel Colombia SA		41,304			38,383
		2,133,431			1,941,174
Less impairment:
Equion Energy Limited		(187,636	)		(296,427	)
Offshore International Group		(346,121	)		(539,465	)
		1,599,674			1,105,282
Investments in associates
Invercolsa S.A.		243,294			223,963
Serviport S.A.		11,212			9,905
Sociedad Portuaria de Oleofinas y Derivados S.A.		1,368			1,214
		255,874			235,082
Less impairment: Serviport S.A.		(11,212	)		(9,904	)
		244,662			225,178
		1,844,336			1,330,460

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The following is the movement of ~~these investments:~~investments in associates and joint ventures:

For the year ended December 31, 2018:

	Associates			Joint ventures			Total
Opening balance		225,178			1,105,282			1,330,460
Effects of equity method through:
Profit or loss		105,908			59,928			165,836
Other comprehensive income		1,731			135,831			137,562
Dividends declared		(86,847	)		(3,503	)		(90,350	)
Impairment (Note 16.1.2)		(1,308	)		302,136			300,828
Closing balance		244,662			1,599,674			1,844,336

For the year ended December 31, 2017:

	Associates			Joint ventures			Total
Opening balance		249,537			1,303,157			1,552,694
Effects of equity method through:
Profit or loss		46,669			46,869			93,538
Other comprehensive income		–			(14,752	)		(14,752	)
Dividends declared		(61,124	)		(224,837	)		(285,961	)
Impairment (Note 16.1.2)		(9,904	)		(5,155	)		(15,059	)
Closing balance		225,178			1,105,282			1,330,460

For the year ended December 31, 2016:

	Associates			Joint ventures			Total			Associates			Joint ventures			Total
Opening balance		69,516			1,862,418			1,931,934			69,516			1,862,418			1,931,934
Effects of equity method through:
Profit or loss		48,299			13,046			61,345			48,299			13,046			61,345
Other comprehensive income		173,772			(49,127	)		124,645			173,772			(49,127	)		124,645
Dividends declared		(42,050	)		(384,787	)		(426,837	)		(42,050	)		(384,787	)		(426,837	)
Impairment		-			(127,858	)		(127,858	)
Impairment (Note 16.1.2)											-			(127,858	)		(127,858	)
Reclassifications		-			(10,535	)		(10,535	)		-			(10,535	)		(10,535	)
Closing balance		249,537			1,303,157			1,552,694			249,537			1,303,157			1,552,694

12.2

Restrictions on investments

Regarding the legal process related to the shares of Inversiones de Gases de Colombia S.A. acquired by Fernando Londoño in 1997, Ecopetrol as of the date of this report exercises rights over 11.59% (of the 20.11% that was acquired by Fernando Londoño) and Arrendadora Financiera Internacional Bolivariana (AFIB) exercises them over 8.52%, participation that was protected by the Constitutional Court through an action for the protection of a fundamental right and that are in judicial discussion in the ordinary process, at the place of cassation.

~~F-48~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~For the year ended December 31, 2015:~~

Associates Joint ventures Total
Opening balance 64,710 2,325,479 2,390,189
Effects of equity method through:
Profit or loss 45,988 (92,675 ) (46,687 )
Other comprehensive income - 508,968 508,968
Dividends declared (41,182 ) (291,210 ) (332,392 )
Impairment - (588,144 ) (588,144 )
Closing balance 69,516 1,862,418 1,931,934

~~14.2~~

~~Impairment on the value of investments in companies~~

Investments in associates and joint ventures are recorded under the equity method. Ecopetrol evaluates if such investments were impaired during the period, and assesses if there is objective evidence of a potential impairment, particularly for companies that were acquired with goodwill.

~~As a result, the Company recognized impairment expense in the value of its investments in companies at December 31, as follows:~~

2016 2015 2014
Equion Energía Limited 81,155 172,528 -
Offshore International Group 46,703 415,616 114,734
Total 127,858 588,144 114,734

~~The main assumptions used for determining the fair value less costs to sell of the investments, which perform hydrocarbon exploration and production activities, include:~~

-12.3

Financial projections for the above companies were made taking into account the fair value less cost of disposal based on the discounted cash flow after taxes, that are derived from business plans approved by the company's management. The plans are developed based on long term macroeconomic factors such as price curves and fundamental supply and demand assumptions. The fair value category is level 3.

The forecasts include US$56.8/barrel for 2017, US$67.9/barrel average for the next six years and US$80/barrel in the long-term. Prices are based on information from recognized suppliers well known by the market and by management analysts. In 2015, the assumptions made used a price of US$40/barrel in 2016 reaching US$60 in the long-term. The production profiles were estimated based on third-party perspectives, which rely on their companies’ vision.

The rates used for discounting cash flows are based on the WACC methodology and reflect the specific risk of the business segment. The rate used for 2016 was 8.9% for Equion Energía Limited (2015 – 8.4%) and 8% for Offshore International Group (2015 – 8.4%).

~~Certified reserves balances, in addition to prove, probable and possible reserves were also considered adjusted by different risk factors.~~

The impairment recognized in 2015 was caused mostly by the adverse economic context of the hydrocarbon industry, which translated into the reduction of oil price forecast and increase in the market and country risks reflected on the discount rate. For 2016, despite of better forecasts for long term oil prices, the Company recognized an additional impairment in the investment in the Offshore International Group and Equion for the return to local authorities of low-prospectively exploration blocks, high geological risk and low economic viability with respect to a new price scenario.

~~F-49~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~14.3~~

~~Restrictions on investments~~

The number of shares held by Ecopetrol in Invercolsa S.A. has been subjected to a legal dispute with another shareholder of this company. The Courts decided in favor of Ecopetrol through ruling of 2011, whereby it was determined that 324 million shares, equivalent to 11.58% of Invercolsa’s social capital should be returned to Ecopetrol. The Ecopetrol’s equity share in said company is 43.35%. The dividends paid in relation with the shares returned to Ecopetrol are also subject to controversy, as well as the ownership of the shares that represent 8.53% of Invercolsa. At December 31, 2016, the settlement of these claims is still pending.

~~F-50~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~14.4~~

Additional information about associates and joint ventures

The ~~balance~~following is the breakdown of assets, liabilities and results of ~~most relevant~~the two main investments in associates and joint ventures, atEquion Energy Limited and the Offshore International Group, as of December 31, ~~2016~~2018 and ~~2015 is comprised as follows:~~2017:

	2016				2015				2018				2017
	Equion Energía Limited		Offshore International Group		Equion Energía Limited		Offshore International Group		Equion Energy Limited		Offshore International Group		Equion Energy Limited		Offshore International Group
Statement of financial position
Current assets		712,078		317,700		854,445		310,677		2,083,614		354,959		909,927		289,618
Non-current assets		1,406,510		1,693,947		2,114,689		2,089,841
Non–current assets										484,336		1,523,549		955,849		1,568,395
Total assets		2,118,588		2,011,647		2,969,134		2,400,518		2,567,950		1,878,508		1,865,776		1,858,013
Current liabilities		417,203		147,090		549,281		477,611		550,933		221,606		430,130		192,513
Non-current liabilities		170,527		671,577		352,182		409,946
Non–current liabilities										77,331		885,410		98,835		657,746
Total liabilities		587,730		818,667		901,463		887,557		628,264		1,107,016		528,965		850,259
Equity		1,530,858		1,192,980		2,067,671		1,512,961		1,939,686		771,492		1,336,811		1,007,754

Other complementary information
Cash and cash equivalents		300,689		22,224		340,797		25,760		185,762		96,592		170,618		32,490
Financial obligations, short-term		328,497		21,408		423,132		337,506
Financial obligations, long-term		309		356,353		751		33,025
Current financial liabilities										3,176		95,633		2,256		97,960
Non–current financial liabilities										–		137,708		2,921		214,259

	2018						2017						2016
	Equion Energy Limited			Offshore International Group			Equion Energy Limited			Offshore International Group			Equion Energy Limited			Offshore International Group
Statement of profit or loss
Sales revenue		1,490,177			653,054			1,213,692			393,210			1,204,301			379,811
Costs		(755,656	)		(585,192	)		(793,999	)		(508,461	)		(969,318	)		(502,107	)
Administrative expenses and others		29,136			(353,010	)		12,188			(103,340	)		(44,810	)		(221,238	)
Financial income (expenses)		(3,659	)		(21,227	)		2,373			(20,264	)		59,143			(12,010	)
Income tax		(338,487	)		(16,594	)		(180,546	)		60,575			30,199			107,507
Financial year results		421,511			(322,969	)		253,708			(178,280	)		279,515			(248,037	)
Other comprehensive results		1,095,090			–			913,728			–			935,847			–
Other complementary information
Dividends paid to the Ecopetrol Business Group		–			–			217,075			–			375,035			–
Depreciation and amortization		511,615			243,601			557,970			232,953			678,488			228,250

2016 2015
Equion Energía
Limited Offshore
International
Group Equion Energía
Limited Offshore
International
Group
Statement of profit or loss
Sales revenue 1,204,301 379,811 1,218,796 463,660
Costs (969,318 ) (502,107 ) (958,467 ) (654,095 )
Administration and other expenses (44,810 ) (221,238 ) (74,258 ) (128,895 )
Financial income (expenses) 59,143 (12,010 ) 37,970 (8,528 )
Income tax 30,199 107,507 (209,221 ) 90,294
Net income for the period 279,515 (248,037 ) 14,820 (237,564 )

~~F-51~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~Included below, there~~This is a reconciliation of equity ~~between~~of the ~~most~~ significant ~~participations~~investments and the carrying amount of investments atas of December 31:

	2016						2015						2018						2017
	Equion Energía Limited			Offshore International Group			Equion Energía Limited			Offshore International Group			Equion Energy Limited			Offshore International Group			Equion Energy Limited			Offshore International Group
Equity of the associate		1,530,858			1,192,980			2,067,671			1,512,961
Equity of the joint venture														1,939,686			771,492			1,336,811			1,007,754
% of Ecopetrol’s ownership		51	%		50	%		51	%		50	%		51	%		50	%		51	%		50	%
Ecopetrol’s ownership		780,738			596,490			1,054,513			756,482			989,240			385,746			681,773			503,877
Additional value of the investment		375,693			341,448			375,693			226,713			375,693			341,448			375,693			341,448
Less Impairment expense		(253,684	)		(577,053	)		(172,528	)		(415,616	)
Impairment														(187,636	)		(346,121	)		(296,427	)		(539,465	)
Carrying amount of the investment		902,747			360,885			1,257,678			567,579			1,177,297			381,073			761,039			305,860

~~F-52~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~15.~~13.

Property, plant and equipment

The following shows a breakdown of the changes in property, plant and equipment and ~~its~~ depreciation and impairment for the years ended December 31, ~~2016~~2018 and ~~2015:~~2017:

Plant and
equipment Pipelines,
networks and
lines Work in
progress (1) Buildings Lands Other Total

Cost
Balance at December 31, 2015 37,360,222 26,856,085 11,015,010 6,479,356 4,068,951 3,653,798 89,433,422
Additions/capitalizations 1,457,547 1,383,352 (107,181 ) 360,596 41,202 511,413 3,646,929
(Decrease) increase in abandonment costs (84,780 ) (78,712 ) - - - 6,137 (157,355 )
Capitalized interest - - 205,662 - - 37,116 242,778
Exchange differences capitalized - - 8,639 - - - 8,639
Disposals (158,193 ) (21,814 ) (16,031 ) (12,540 ) 713 (15,455 ) (223,320 )
Foreign currency translation (42,870 ) (298,750 ) (1,629,613 ) (9,832 ) (69,878 ) 12,416 (2,038,527 )
Other (reclassifications) (2) 4,076,350 1,247,621 (4,602,080 ) 94,177 (146,768 ) (722,986 ) (53,686 )
Balance at December 31, 2016 42,608,276 29,087,782 4,874,406 6,911,757 3,894,220 3,482,439 90,858,880

Accumulated depreciation and impairment
Balance at December 31, 2015 (13,469,749 ) (8,572,373 ) (19,566 ) (1,698,791 ) (13,689 ) (554,181 ) (24,328,349 )
Depreciation expense (1,869,604 ) (1,426,659 ) - (392,294 ) - (102,621 ) (3,791,178 )
Impairment (Note 17) (659,223 ) 33,048 (3,270 ) 57,157 24,067 (13,517 ) (561,738 )
Disposals 121,382 14,022 - 7,021 15 11,524 153,964
Foreign currency translation 272,582 138,611 38,904 12,658 - 8,007 470,762
Other (reclassifications) (2) 92,617 (152,203 ) (278,665 ) (74,229 ) (37,245 ) (24,114 ) (473,839 )
Balance at December 31, 2016 (15,511,995 ) (9,965,554 ) (262,597 ) (2,088,478 ) (26,852 ) (674,902 ) (28,530,378 )

Net balance at December 31, 2016 27,096,281 19,122,228 4,611,809 4,823,279 3,867,368 2,807,537 62,328,502

	Plant and equipment				Pipelines, networks and lines			Work in progress(1)			Buildings			Lands			Other			Total
Cost
Balance as of December 31, 2017		42,561,894				32,000,049			3,866,318			7,618,586			3,839,355			2,806,696			92,692,898
Additions/capitalizations		1,196,520				944,797			993,817			147,005			14,909			5,881			3,302,929
Increase in abandonment costs		85,580				209,028			-			-			-			-			294,608
Capitalized financial interests (2)		48,351				34,399			14,853			14,350			6,703			5,316			123,972
Exchange differences capitalized		4,107				2,922			1,262			1,219			569			451			10,530
Disposals		(135,468	)			(112,171	)		(14,723	)		(11,997	)		(9,763	)		(56,734	)		(340,856	)
Foreign currency translation		2,324,744				849,868			32,585			100,091			124,903			55,983			3,488,174
Transfers (3)		388,641				420,391			(269,409	)		(16,976	)		7,900			28,209			558,756
Balance as of December 31, 2018		46,474,369				34,349,283			4,624,703			7,852,278			3,984,576			2,845,802			100,131,011

Accumulated depreciation and impairment losses
Balance as of December 31, 2017		(14,779,973	)			(12,461,626	)		(553,420	)		(2,668,562	)		(39,522	)		(785,421	)		(31,288,524	)
Depreciation expense		(2,008,348	)			(1,465,429	)		-			(347,510	)		-			(123,792	)		(3,945,079	)
(Losses) recoveries of impairment (Nota 16)		(752,534	)			(311,080	)		55,979			(64,279	)		5,220			(16,591	)		(1,083,285	)
Disposals		116,225		��		84,217			-			8,996			-			40,957			250,395
Foreign currency translation		(677,901	)			(313,311	)		-			(27,782	)		-			(23,804	)		(1,042,798	)
Transfers (3)		117,115				(310,561	)		-			(23,386	)		-			(4,905	)		(221,737	)
Balance as of December 31, 2018		(17,985,416	)			(14,777,790	)		(497,441	)		(3,122,523	)		(34,302	)		(913,556	)		(37,331,028	)

Net balance as of December 31, 2017		27,781,921				19,538,423			3,312,898			4,950,024			3,799,833			2,021,275			61,404,374
Net balance as of December 31, 2018		28,488,953				19,571,493			4,127,262			4,729,755			3,950,274			1,932,246			62,799,983

(1)

The balance of work in progress atas of December 31, ~~2016,~~2018, mainly includes the works executed in production by facilities of the Castilla field, facilities in Cupiagua, air injection pilot facilities in the Chichimene field and secondary recovery of Yarigui, and in refining by the modernization project of Barrancabermeja.

(2)

Financial interests are capitalized based on the weighted average rate of borrowing costs. See Note 18 - Loans and financing.

(3)

Transfers corresponds mainly to: i) recognition of financial leasing contracts, ii) transfers from natural resources and the environment.

Guarantees

The Esperanza 1 and 2 farms were pledged as guarantee for the loan obtained by Bioenergy S.A.S. for the financing of the project (see Note 18.6 – Guarantees and covenants).

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

	Plant and equipment			Pipelines, networks and lines			Work in progress⁽¹⁾			Buildings			Lands			Other			Total
Cost
Balance as of December 31, 2016		42,608,276			29,087,782			4,874,406			6,911,757			3,894,220			3,482,439			90,858,880
Additions/capitalizations		904,854			876,940			(102	)		363,836			14,631			203,124			2,363,283
Increase in abandonment costs		51,619			105,097			–			–			–			–			156,716
Capitalized financial interests		38,847			33,875			8,501			6,941			1,027			20,113			109,304
Exchange differences capitalized		2,636			2,299			577			471			70			672			6,725
Disposals		(67,326	)		(56,147	)		(26,991	)		(6,539	)		(23	)		(2,727	)		(159,753	)
Foreign currency translation		(136,501	)		(49,800	)		(13,302	)		(4,904	)		(7,850	)		(3,394	)		(215,751	)
Transfers⁽²⁾		(840,511	)		2,000,003			(976,771	)		347,024			(62,720	)		(893,531	)		(426,506	)
Balance as of December 31, 2017		42,561,894			32,000,049			3,866,318			7,618,586			3,839,355			2,806,696			92,692,898
Accumulated depreciation and impairment losses
Balance as of December 31, 2016		(15,511,995	)		(9,965,554	)		(262,597	)		(2,088,478	)		(26,852	)		(674,902	)		(28,530,378	)
Depreciation expense		(1,996,614	)		(1,479,792	)		–			(416,698	)		–			(106,878	)		(3,999,982	)
Recovery (losses) for impairment (Note 16)		1,014,613			316,360			(372,804	)		11,538			(7,794	)		16,006			977,919
Disposals		54,244			13,464			–			807			–			2,583			71,098
Foreign currency translation		15,166			32,729			–			3,929			–			3,802			55,626
Transfers⁽²⁾		1,644,613			(1,378,833	)		81,981			(179,660	)		(4,876	)		(26,032	)		137,193
Balance as of December 31, 2017		(14,779,973	)		(12,461,626	)		(553,420	)		(2,668,562	)		(39,522	)		(785,421	)		(31,288,524	)
Net balance as of December 31, 2016		27,096,281			19,122,228			4,611,809			4,823,279			3,867,368			2,807,537			62,328,502
Net balance as of December 31, 2017		27,781,921			19,538,423			3,312,898			4,950,024			3,799,833			2,021,275			61,404,374

(1)

The balance of work in progress as of December 31, 2017, mainly includes investments ~~for development projects~~ in production at the Castilla ~~and Chichimene,~~field, the integral plan of ~~electric~~electrical energy ~~(PIEE, for its acronym in Spanish),primary~~ and secondary ~~development~~recovery of Yarigui and the ~~project Tibú-Socuabo and~~ modernization project of the Barrancabermeja refinery.

(2)

~~Corresponds~~Correspond mainly to transfers to: a) inventory of project materials for use in the operation for COP$~~(712,967) mainly Ecopetrol and Reficar,~~250,239, b) ~~opening~~classification of the intangible part of projects to natural resources for COP$~~68,750~~7,222 and c) ~~other~~others for COP$~~116,692.~~31,852.

Ecopetrol S.A.

~~F-53~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Plant and
equipment Pipelines,
networks and
lines Work in
progress (1) Buildings Lands Other Total
Cost
Balance at December 31, 2014 16,109,035 19,938,115 24,009,694 5,199,417 3,614,237 3,135,873 72,006,371
Additions 2,720,120 2,213,663 2,446,904 755,565 112,972 299,709 8,548,933
Increase (decrease) in abandonment costs 242,815 (115,608 ) 14,184 - - - 141,391
Capitalized interest - - 553,061 - - - 553,061
Exchange differences capitalized - - 110,485 - - - 110,485
Disposals (94,227 ) (187,964 ) (32,842 ) (5,060 ) (9,786 ) (70,445 ) (400,324 )
Foreign currency translation 5,093,932 2,526,312 159,154 258,070 354,898 190,381 8,582,747
Other (reclassifications) 13,288,547 2,481,567 (16,245,630 ) 271,364 (3,370 ) 98,280 (109,242 )
Balance at December 31, 2015 37,360,222 26,856,085 11,015,010 6,479,356 4,068,951 3,653,798 89,433,422

Accumulated depreciation and Impairment
Balance at December 31, 2014 (7,446,991 ) (6,071,305 ) (1,209,229 ) (1,146,453 ) (70,332 ) (397,054 ) (16,341,364 )
Depreciation expense (1,168,864 ) (1,300,687 ) - (329,396 ) - (124,309 ) (2,923,256 )
Impairment (Nota 17) (2,787,539 ) (584,736 ) (509,195 ) (161,431 ) (13,689 ) (88,164 ) (4,144,754 )
Disposals 75,305 90,389 - 4,208 - 64,283 234,185
Foreign currency translation (219,358 ) (481,180 ) (404,872 ) (37,259 ) - (10,491 ) (1,153,160 )
Other (reclassifications) (1,922,302 ) (224,854 ) 2,103,730 (28,460 ) 70,332 1,554 -
Balance at December 31, 2015 (13,469,749 ) (8,572,373 ) (19,566 ) (1,698,791 ) (13,689 ) (554,181 ) (24,328,349 )
Net balance at December 31, 2015 23,890,473 18,283,712 10,995,444 4,780,565 4,055,262 3,099,617 65,105,073

~~(1)~~

In October 2015, the Refinería de Cartagena project started its operations. Part of the investment in this project, which had been accumulated under Construction in progress ($13,853,231), was reclassified to different fixed asset classes to begin depreciation thereof.

The balance for projects in progress at December 31, 2015, primarily consists of investments for development projects in the Castilla, Rubiales and Chichimene fields as well as projects to modernize the Barrancabermeja refinery and the industrial services master plan.

~~F-54~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~16.~~14.

Natural and environmental resources

The following ~~shows a breakdown~~is the movement of ~~the changes in Natural and environmental~~natural resources and ~~its depletion~~amortization and impairment for the years ended December 31, ~~2016~~2018 and ~~2015. The depletion method used is units of production.~~2017:

Oil and gas
investments Asset retirement
cost Exploration and
evaluation (1) Total
Cost
Balance at December 31, 2015 44,148,353 1,762,374 6,189,142 52,099,869
Additions/capitalizations 3,045,474 10,391 (934,570 ) 2,121,295
Increase (decrease) in abandonment costs - 566,213 (4,062 ) 562,151
Disposals (26,548 ) (37,942 ) (121,032 ) (185,522 )
Dry wells (2) - - (342,691 ) (342,691 )
Capitalized interest - - 98,431 98,431
Capitalized exchange differences - - 7,259 7,259
Foreign currency translation (352,766 ) (8,049 ) (103,728 ) (464,543 )
Other (reclassifications) 264,583 11,928 29,375 305,886
Balance at December 31, 2016 47,079,096 2,304,915 4,818,124 54,202,135

Accumulated depletion and impairment
Balance at December 31, 2015 (26,874,774 ) (1,181,798 ) - (28,056,572 )
Depletion expense (3,496,998 ) (208,769 ) - (3,705,767 )
Impairment (Note 17) (239,151 ) - - (239,151 )
Disposals 26,320 37,942 - 64,262
Foreign currency translation 218,898 5,171 - 224,069
Others (104,710 ) (43,219 ) - (147,929 )
Balance at December 31, 2016 (30,470,415 ) (1,390,673 ) - (31,861,088 )
Net balance at December 31, 2016 16,608,681 914,242 4,818,124 22,341,047

	Oil investments			Asset retirement cost			Exploration and evaluation⁽¹⁾			Total
Cost
Balance as of December 31, 2017		50,183,858			2,215,263			4,508,808			56,907,929
Additions/capitalizations		3,579,982			(27,839	)		1,499,685			5,051,828
Acquisition of interests in joint operations (2)		(12,065	)		-			-			(12,065	)
Increase in abandonment costs		-			733,609			34,063			767,672
Disposals		(79	)		(2,080	)		(87,953	)		(90,112	)
Dry wells (3)		(1,563	)		-			(897,361	)		(898,924	)
Capitalized financial interests (4)		70,186			-			6,675			76,861
Exchange differences capitalized		5,961			-			567			6,528
Foreign currency translation		773,678			24,574			75,203			873,455
Transfers		(663,917	)		(24,381	)		(333,687	)		(1,021,985	)
Balance as of December 31, 2018		53,936,041			2,919,146			4,806,000			61,661,187

Accumulated amortization and impairment losses
Balance as of December 31, 2017		(34,014,963	)		(1,584,701	)		-			(35,599,664	)
Depletion expense		(3,471,803	)		(196,286	)		-			(3,668,089	)
Recovery (losses) for impairment (Nota 16)		414,208			(106	)		-			414,102
Disposals		79			-			-			79
Foreign currency translation		(563,229	)		(19,080	)		-			(582,309	)
Transfers		829,041			21,103			-			850,144
Balance as of December 31, 2018		(36,806,667	)		(1,779,070	)		-			(38,585,737	)
Net balance as of December 31, 2017		16,168,895			630,562			4,508,808			21,308,265
Net balance as of December 31, 2018		17,129,374			1,140,076			4,806,000			23,075,450

(1)

The balance of oil investments in progress includes mainly investments made in the Purple Angel, Tayrona and unconventional hydrocarbons projects. In the developing fields, the most representative correspond to Castilla, Chichimene pilot and CPO09 re sanction.

(2)

Adjustment in the acquisition value of the participation of MCX Exploration USA LLC (see note 30.3).

(3)

Includes dry wells: 1) Ecopetrol America Inc: Leon 2) Hocol: Payero, Bonifacio, Pegaso-1 and Ocelote.

(4)

Borrowing costs are capitalized at the weighted average rate of borrowing costs. See Note 18 - Loans and financing.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

	Oil investments			Asset retirement cost			Exploration and evaluation⁽¹⁾			Total
Cost
Balance as of December 31, 2016		47,079,096			2,304,915			4,818,124			54,202,135
Additions/capitalizations		2,422,203			59,345			944,857			3,426,405
Acquisition of interests in joint operations (Note 30.3)		141,950			–			–			141,950
Adjustment to fair value of participation in joint operations(Note 30.3)		451,095			–			–			451,095
Increase (decrease) in abandonment costs		224			(143,241	)		25,935			(117,082	)
Disposals		(38,072	)		(629	)		(214,850	)		(253,551	)
Dry wells⁽²⁾		–			–			(898,264	)		(898,264	)
Capitalized financial interests		72,395			–			9,952			82,347
Exchange differences capitalized		4,913			–			675			5,588
Foreign currency translation		(62,446	)		(573	)		(14,504	)		(77,523	)
Transfers⁽³⁾		112,500			(4,554	)		(163,117	)		(55,171	)
Balance as of December 31, 2017		50,183,858			2,215,263			4,508,808			56,907,929
Accumulated amortization and impairment losses
Balance as of December 31, 2016		(30,470,415	)		(1,390,673	)		–			(31,861,088	)
Depletion expense		(3,979,179	)		(194,140	)		–			(4,173,319	)
Recovery (losses) for impairment (Note 16)		376,934			–			–			376,934
Disposals		37,808			290			–			38,098
Foreign currency translation		42,114			245			–			42,359
Transfers⁽³⁾		(22,225	)		(423	)		–			(22,648	)
Balance as of December 31, 2017		(34,014,963	)		(1,584,701	)		–			(35,599,664	)
Net balance as of December 31, 2016		16,608,681			914,242			4,818,124			22,341,047
Net balance as of December 31, 2017		16,168,895			630,562			4,508,808			21,308,265

(1)

The balance of exploration and evaluation includes mainly ~~includes~~ investments made in ~~production projects of direct operation in Castilla, Chichimene and Piedemonte. Additionally, it includes offshore exploration projects: Fuerte Sur, Kronos and~~the Purple Angel, Tayrona and ~~Onshore: Caño Sur block, CPO 10~~unconventional hydrocarbons projects and ~~non-conventional hydrocarbons program.~~in the developing fields, Piedemonte, Castilla y Tibú.

(2)

Includes mainly dry wells in operation of: 1) Ecopetrol ~~COP$302,965, ECP Oil~~S.A. for (COP$450,524): Kronos, Brama, Catfish and ~~Gas Germany GmbH COP$26,273,~~Venus, among others, 2) Ecopetrol America Inc ~~COP$5,032, Hocol S.A COP$5,049,~~for (COP$312,684): Warrior # 2 and Parmer and 3) Ecopetrol ~~Brasil COP$3,372.~~Costa Afuera for (COP$57,877): Molusco.

(3)

Corresponds mainly to transfers ~~to: a) non-current assets held for sale COP$244,387 and b)~~to property, plant and ~~equipment COP$(68,898) and c) other COP$(17,532).~~equipment.

~~F-55~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Oil and gas
investments Asset retirement
cost Exploration and
evaluation (1) Total
Cost
Balance at December 31, 2014 37,168,922 1,895,149 6,114,019 45,178,090
Additions/capitalizations 5,776,253 9,520 1,070,988 6,856,761
Decrease in abandonment costs - (139,670 ) - (139,670 )
Disposals (13,475 ) - (56,962 ) (70,437 )
Dry wells (2) - - (1,266,440 ) (1,266,440 )
Capitalized interest - - 191,365 191,365
Capitalized exchange differences - - 39,416 39,416
Foreign currency translation 1,031,595 6,299 272,890 1,310,784
Other (reclassifications) 185,058 (8,924 ) (176,134 ) -
Balance at December 31, 2015 44,148,353 1,762,374 6,189,142 52,099,869

Accumulated depletion and impairment
Balance at December 31, 2014 (20,223,671 ) (833,755 ) - (21,057,426 )
Depletion expense (3,424,212 ) (300,650 ) - (3,724,862 )
Impairment (Note 17) (2,865,077 ) - - (2,865,077 )
Disposals 9,040 - - 9,040
Foreign currency translation (356,815 ) (61,432 ) - (418,247 )
Others (14,039 ) 14,039 - -
Balance at December 31, 2015 (26,874,774 ) (1,181,798 ) - (28,056,572 )
Net balance at December 31, 2015 17,273,579 580,576 6,189,142 24,043,297

~~(1)~~

The balance for exploration and evaluation primarily includes investments in production projects (direct operation) in Castilla, Chichimene, Apiay, Tibu and Piedemonte. It also includes exploration projects: Kronos, unconventional hydrocarbons and Tayrona.

~~(2)~~

~~It mainly includes dry wells in Ecopetrol S.A. operations for COP$ 912,695, Ecopetrol America Inc. for COP$131,447, Hocol S.A. for COP$139,362 and ECP Oil and Gas Germany GmbH for COP$82,936.~~

~~F-56~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Accounting for suspended exploratory wells

The following table shows the classification by ~~ages,~~age, from the completion date, of the exploratory wells that are suspended as of December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~

2016 2015 2014
Between 1 and 3 years 611,682 490,184 416,687
Between 3 and 5 years 197,997 100,316 25,703
More than 5 years 153,552 161,392 41,621
Total suspended exploratory wells 963,231 751,892 484,011
No. of projects exceeding 1 year 24 59 42
Wells under 1 year of suspended 90,486 280,801 259,932

~~It corresponds mainly to exploratory wells of Ecopetrol, OIG and Hocol.~~2016:

	2018		2017		2016
Between 1 and 3 years^(a)		496,871		600,767		1,300,874
Between 3 and 5 years^(b)		375,371		791,261		197,997
More than 5 years^(c)		273,764		250,219		153,552
Total suspended exploratory wells		1,146,006		1,642,247		1,652,423
Number of projects exceeding 1 year		24		24		24
Wells under 1 year of suspension		9,511		2,480		528,313

~~F-57~~(a)

As of December 2018, suspended exploratory wells correspond mainly to Ecopetrol: Purple Angel, Caronte and discovery wells of Ecopetrol America Inc: Warrior 1. As of December 31, 2017 suspended exploratory wells correspond mainly to discovery wells of Ecopetrol America Inc: Leon 2 and Warrior 1, which were under evaluation.

(b)

For 2018, the balance corresponds mainly to wells of Ecopetrol S.A.: Orca 1, Tiribita 1A and Tiribita 3, which are under evaluation.

~~Notes~~
(c) Correspond mainly to ~~Consolidated Financial Statements~~i) Ecopetrol S.A.: Quifa, Purple Angel-1 and Gordon-1, which are under evaluation; and ii) Offshore International Group, temporarily abandoned for future production plans.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

15.

Intangible assets

The following is the movement of intangibles and their amortization and impairment for the years ended December 31, 2018 and 2017:

	Licenses and software			Other intangibles⁽¹⁾			Total
Cost
Balance as of December 31, 2017		960,556			168,552			1,129,108
Acquisitions		69,442			36,227			105,669
Disposals		(46,007	)		(5,643	)		(51,650	)
Foreign currency translation		25,339			2,955			28,294
Transfers		6,390			(4,808	)		1,582
Balance as of December 31, 2018		1,015,720			197,283			1,213,003
Accumulated amortization
Balance as of December 31, 2017		(665,415	)		(83,467	)		(748,882	)
Amortization of the period		(75,818	)		(15,864	)		(91,682	)
Disposals		46,004			5,546			51,550
Foreign currency translation		(20,501	)		(184	)		(20,685	)
Transfers		3,401			4,042			7,443
Balance as of December 31, 2018		(712,329	)		(89,927	)		(802,256	)
Net balance as of December 31, 2017		295,141			85,085			380,226
Net balance as of December 31, 2018		303,391			107,356			410,747
Useful life		<5 years			<7 years

	Licenses and software			Other intangibles⁽¹⁾			Total
Cost
Balance as of December 31, 2016		784,320			138,982			923,302
Acquisitions		169,545			6,323			175,868
Disposals		(9,469	)		–			(9,469	)
Foreign currency translation		(1,414	)		(92	)		(1,506	)
Transfers		17,574			23,339			40,913
Balance as of December 31, 2017		960,556			168,552			1,129,108
Accumulated amortization
Balance as of December 31, 2016		(583,680	)		(67,490	)		(651,170	)
Amortization of the period		(89,216	)		(18,830	)		(108,046	)
Disposals		8,744			–			8,744
Foreign currency translation		979			–			979
Transfers		(2,242	)		2,853			611
Balance as of December 31, 2017		(665,415	)		(83,467	)		(748,882	)
Net balance as of December 31, 2016		200,640			71,492			272,132
Net balance as of December 31, 2017		295,141			85,085			380,226
Useful life		<5 years			<7 years

(1)

Corresponds mainly to easements.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

16.

Impairment of non-financial assets

As mentioned in Note 4.12, each year the Ecopetrol Business Group assesses whether there is an indication that an asset or cash–generating unit may be impaired or if impairment losses recognized in previous periods should be reversed (except for goodwill impairment losses).

The impairment of non–financial assets includes property, plant and equipment and natural resources, investments in companies, goodwill and other non–current assets. The Ecopetrol Business Group is exposed to future risks derived mainly from variations in: (i) the estimate of future oil prices, (ii) refining margins and profitability, (iii) cost profile, (iv) investments and maintenance expenses, (v) amounts of recoverable reserves, (vi) market and country risk assessments reflected in the discount rate and (vii) changes in domestic and international regulations, among others.

Any changes in the above estimates used to calculate the recoverable amount of a non–current asset can have a material impact on the recognition impairment losses or reversals (other than goodwill impairment losses)in the profit or loss. Highly sensitive significant estimates affecting each business segments, among others include: (i) in the exploration and production segment, variations of recoverable hydrocarbon estimates, changes in projected realization prices and discount rate; (ii) in the refining segment, changes in finished products and crude oil prices, discount rate, refining margins, changes in environmental regulations, cost structure and the level of capital expenditures; and (iii) in the transport and logistics segment, changes in regulated tariffs and transported volumes.

Based on the impairment tests conducted by the Ecopetrol Business Group, the following are the impairment (losses) or reversals for the years ended on December 31, 2018, 2017 and 2016 are presented:

(Impairment loss) reversal of impairment by segment	2018			2017			2016
Exploration and Production		785,940			183,718			(196,448	)
Refining and Petrochemicals		(984,704	)		1,067,965			(773,361	)
Transport and Logistics		(169,870	)		59,455			41,062
		(368,634	)		1,311,138			(928,747	)

Recognized in:
Property, plant and equipment (Note 13)		(1,083,285	)		977,919			(561,738	)
Natural resources (Note 14)		414,102			376,934			(239,151	)
Investment in joint ventures and associates (Note 12)		300,828			(15,059	)		(127,858	)
Other non–current assets		(279	)		(28,656	)		–
		(368,634	)		1,311,138			(928,747	)

16.1

Exploration and production

The impairment (loss) reversal of assets of the Exploration and Production segment for the years ended December 31 of 2018, 2017 and 2016 is as follows:

	2018		2017			2016
Oilfields		483,803		188,873			(68,590	)
Investment in joint ventures (Note 12)		302,136		(5,155	)		(127,858	)
Other		1		–			–
		785,940		183,718			(196,448	)

16.1.1

Oilfields

In 2018, based on new market variables, incorporation of new reserves, Ecopetrol’s crude oil basket price discounts as compared to the ICE Brent crude price, available technical and operational information, there was a partial reversal of an impairment recognized in previous years for the oil fields that operate in Colombia Casabe, Provincia, Underriver, Tisquirama and Orito and in fields operated abroad Gunflint and K2, and an impairment mainly in Tibú and Dina Norte fields.

In 2017, based on new market variables, incorporation of new reserves, Ecopetrol’s crude oil basket price discounts as compared to the ICE Brent crude price, available technical and operational information, there was a partial reversal of an impairment recognized in previous years for the oil fields that operate in Colombia CPO09, Casabe and Oripaya and in fields operated abroad Gunflint Dalmatian and K2, and an impairment in the Tibú, Underriver, Provincia and Orito fields, mainly.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~17.~~

~~Impairment on property, plant and equipment and natural and environmental resources~~

~~In accordance with that mentioned in section 4.12 of the accounting policies every year the Company assesses if there are any indications of impairment in its assets or cash generating units.~~

The Company is exposed to certain future risks derived from variations in: a) oil prices, b) refining margins and profitability, c) cost profile, d) investment and maintenance, e) amount of recoverable reserves, f) market and country risk reflected on the discount rate, g) changes in domestic and international regulations, etc. Any change in the foregoing variables to calculate the recoverable amount can have a material effect on the recognition or recovery of impairment charges. For example, the exploration and production segment is highly sensitive to variation of hydrocarbon prices, while the refining segment is highly sensitive to the discount rate given the leveraging of said segment as well as the refining margins.

~~Based on impairment tests conducted by the Company, the following impairment losses (reversals) were recorded for the years ended on December 31, 2016, 2015 and 2014:~~

2016 2015 2014
Impairment (recovery)
Exploration and production 68,590 3,649,451 853,179
Refining and petrochemicals 773,361 3,278,993 1,336,158
Transportation and logistics (41,062 ) 81,387 496
800,889 7,009,831 2,189,833
Recognized in:
Property, plant and equipment (Note 15) 561,738 4,144,754 1,491,809
Natural resources (Note 16) 239,151 2,865,077 694,720
Intangibles (Note 18) - - 3,304
800,889 7,009,831 2,189,833

~~17.1~~

~~Exploration and production segment~~

~~The expense (recovery) for impairment of assets of the exploration and production segment for the years ended December 31, 2016, 2015 and 2014 comprises:~~

~~2016~~

Cash-generating unit
Carrying amount Recoverable
amount Impairment loss
(reversal)
Fields in Colombia
Expense 5,258,265 4,902,943 1,117,020
Recovery 17,502,391 36,704,807 (1,090,434 )
Fields abroad
Expense 688,895 647,272 42,004
68,590

~~2015~~

Cash-generating unit Carrying amount Recoverable
Amount Impairment loss
(reversal)
Fields in Colombia 10,323,500 7,645,665 2,430,923
Fields abroad 1,242,979 24,451 1,218,528
3,649,451

~~2014~~

Cash-generating unit Carrying amount Recoverable
Amount Impairment loss
(reversal)
Fields in Colombia 4,186,400 5,581,870 841,937
Fields abroad 477,484 466,242 11,242
853,179

~~F-58~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

In 2016, as a result of ~~revising~~ the ~~expected~~revision of prospective oil prices in the long term, ~~oil prices~~ it was identified that some impairments recognized in previous years for oil fields ~~should~~could be ~~reversed.~~recovered due to an improved future price scenarios. The main fields ~~for~~on which there was a recovery of impairment ~~reversal~~ were ~~mainly~~ Chichimene, Caño Sur, Apiay and Llanito. ~~On the other hand,~~Similarly, the new technical information and operational aspects that gave rise to changes in investment levels ~~resulted~~caused an impairment in the ~~recognition of an impairment charge in~~ Casabe, Tibú, Gunflint and Niscota ~~fields.~~fields, mainly.

The following is the breakdown of oilfields impairment losses or reversals for the years ended December 31, 2018, 2017 and 2016:

2018

Cash generating units	Carrying amount		Recoverable amount		(Impairment loss) reversal
Oil fields in Colombia
Reversal		19,156,326		50,462,080		689,665
Loss		764,808		405,421		(359,387	)
Fields operated abroad
Reversal		1,810,618		2,719,086		157,709
Loss		184,375		180,191		(4,184	)
						483,803

2017

Cash generating units	Carrying amount		Recoverable amount		(Impairment loss) reversal
Oil fields in Colombia
Loss		2,172,747		1,588,207		(584,540	)
Reversal		13,229,212		23,906,828		298,210
Fields operated abroad
Reversal		748,510		1,324,010		475,203
						188,873

2016

Cash generating units	Carrying amount		Recoverable amount		(Impairment loss) reversal
Oil fields in Colombia
Loss		5,258,265		4,902,943		(1,117,020	)
Reversal		17,502,391		36,704,807		1,090,434
Fields operated abroad
Loss		688,895		647,272		(42,004	)
						(68,590	)

The grouping of assets to determine the CGUs is consistent as compared to the prior periods.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The assumptions used ~~in the model~~ to determine the recoverable ~~amounts include:~~amount include the following:

-–

The fair value less ~~the cost~~costs of disposal of ~~assets in~~ the ~~exploration~~Exploration and ~~production~~Production segment assets was determined based on cash flows after ~~taxes that are~~tax derived from the business plans approved by ~~Company management; these~~Group’s management, which are developed based on ~~the base of long~~ long–term macroeconomic ~~variables~~policies and fundamental assumptions of supply and ~~demand assumptions.~~demand. The fair value ~~category~~hierarchy is ~~level~~ 3.

-–

The discount rate in real terms determined as the weighted average cost of capital of market participants (WACC) was established for each company in the segment, with rates ranging between 7.9% and 8.9% (2015 – 8.4%).

Oil price - Brent: The forecasts include US$56.8/barrel for 2017, US$67.9/barrel average for the next six years and US$80/barrel in the long-term in annual prices. Prices are based on information provided by specialized market analysts and management analysts. The variation in estimations of future prices are generated by the forecast of fundamentals made by market analysts which include current scenarios of oil quota agreements of OPEC (Organization of Petroleum Exporting Countries) and impact of changes on specifications issued by the Marpol (abbreviation of marine pollution) agreement on crude and fuels with high sulfur content.

For 2015, the estimated prices were US$40/barrel for the short term reaching US$60 in the medium and long term. Prices were based on information provided by specialized market analysts and management analysts.

~~Certified balance~~Balance of oil and gas reserves, in addition to ~~prove reserves included in Note 37,~~proven reserves; probable and possible reserves were also considered, adjusted by different risk factors.

–

The real discount rate determined as the average weighted cost of capital (WACC) and it corresponds to 7.46% (2017–8.17% and 2016 – 7.9% and 8.9%).

~~The aggregation~~

–

Oil price – Brent: the forecasts include US$81.4/barrel for the first year, US$67.6/barrel for the medium term and US$71.4/barrel for the long term. In 2017, the assumptions taken US$52.9/barrel for 2018, US$72.5/barrel average for the next six years and US$81.9/barrel as of 2030. In 2016, the assumptions made used a price of US$56.8/barrel in 2017, US$67.9/barrel average for the medium term and US$80/barrel in the long term. International oil price projections were carried out by an independent agency specializing in oil and gas, taking into account the current scenarios of oil quota agreements of the OPEC (Organization of Petroleum Exporting Countries) and the impact of the changes in specifications issued by the international agreement to prevent pollution by ships (Marpol) as of the year 2020 on crude and fuels with high sulfur content.

16.1.2

Investments in joint ventures

Investments in joint ventures in the Exploration and Production segment are recorded using the equity method of ~~assets to identify~~accounting. Ecopetrol evaluates if there is objective evidence that indicate that the ~~CGU's is consistent as compared to~~fair value of such investments has deteriorated in the ~~prior period.~~period, especially those for which goodwill has been recorded.

~~In 2015, the impairment expense was caused mostly by the adverse economic context of the hydrocarbon industry, which translated into~~As a ~~decrease in the oil price forecast and increase in the market and country risks reflected~~result, Ecopetrol recognized an (impairment loss) or reversal on the ~~discount rate and the reduction on~~carrying value as of December 31, as follows:

	2018		2017			2016
Equion Energy Limited		108,791		(42,744	)		(81,155	)
Offshore International Group		193,345		37,589			(46,703	)
		302,136		(5,155	)		(127,858	)

The significant assumptions used to determine the recoverable amount of ~~reserves. The most representative cash generating units impacted~~these investments are consistent with those described in the previous section, except for the ~~foregoing factors were~~use of a discount rate in real terms in 2018 for Offshore International Group of 8.92% (2017 – 8.61% and 2016 – 8.0%).

In 2018, the ~~oil fields operated at domestic level: Casabe, Chichimene, Tibú, CP09, Apiay, Llanito and La Hocha and the fields~~market showed an improvement in the ~~Gulf~~crude oil and gas production forecast. Operational performance and technical evolution have contributed to strengthening future cash flows that, in turn, contributed to the reversal of ~~Mexico K2~~the impairment charged recognized in previous years for Offshore International Group and ~~Dalmatian.~~Equion Energy.

In 2017, because of new market variables, new reserves, price differentials against reference indicators and available technical and operational information, there was a recovery of an impairment recognized in previous years for Offshore International Group and Equion Energy.

For 2016, in spite of better forecasts of oil prices in the long term, there was an additional impairment in the investment in the Offshore International Group for the reversion to local authorities of some low-prospective success exploration blocks, high geological risk, and low economic viability with respect to a new price scenario.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~17.2~~16.2

Refining and ~~petrochemicals segment~~Petrochemical

~~Assets~~The Cash Generating Units with an (expense for) recovery of impairment in the ~~refining~~Refining and ~~petrochemicals segment~~Petrochemical Segment for the years ended December 31, 2018, 2017 and 2016 ~~2015 and 2014 comprises~~:include:

2018

Cash–generating units
Carrying
amount
Recoverable
amount

(Impairment loss)
reversal

Refinería de Cartagena 23,411,058 22,640,761 (770,297 )
Bioenergy 774,343 560,882 (213,461 )
Other 946 – (946 )
(984,704 )
2017

Cash–generating units
Carrying
amount
Recoverable
amount

(Impairment loss)
reversal

Refinería de Cartagena 20,578,412 22,012,710 1,434,298
Refinería de Barrancabermeja (projects) 1,172,773 898,786 (273,987 )
Bioenergy 757,741 665,395 (92,346 )
1,067,965

2016

Cash–generating units	Carrying amount		Recoverable amount		Impairment loss
Refinería de Cartagena		21,672,367		21,206,515		(465,852	)
Bioenergy		925,955		618,446		(307,509	)
						(773,361	)

The grouping of assets to determine the CGUs is consistent with prior periods.

Cash-generating unit Carrying amount Recoverable
amount Expense for
impairment
Refinería de Cartagena 21,672,367 21,206,515 465,852
Bioenergy 925,955 618,446 307,509
22,598,322 21,824,961 773,361

~~F-59~~16.2.1

Refinería de Cartagena

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~2015~~

Cash-generating unit Carrying amount Recoverable
amount Expense for
impairment
Refinería de Cartagena 26,561,335 23,335,096 3,226,240
Bioenergy 642,139 589,386 52,753
27,203,474 23,924,482 3,278,993

~~2014~~

Cash-generating unit Carrying amount Recoverable
amount Expense for
impairment
Refinería de Cartagena 18,794,568 17,469,140 1,325,428
Otros menores 100,311 89,581 10,730
18,894,879 17,558,721 1,336,158

~~Refinería de Cartagena~~

The recoverable amount ~~for~~of the Refinería de Cartagena was calculated based on ~~the~~its fair value less ~~cost~~costs of disposal, ~~with level~~which is higher than its value in continued use. The fair value less costs of ~~hierarchy 3, which corresponds to~~disposal of the ~~future~~Refinería de Cartagena was determined based on cash flows ~~discounted~~ after ~~taxes.~~taxes that are derived from business plans approved by the Ecopetrol Business Group’s management, which are developed based on market prices provided by a third-party expert, which considers long–term macroeconomic variables and fundamental supply and demand assumptions for crude oil and refined products. The fair value hierarchy is 3.

The significant assumptions ~~used in the model~~ to determine the recoverable ~~amounts~~amount included: ~~a) an average~~(i) a gross refining margin ~~of US$18.9/barrel (2015 - US$17.5),~~ determined by ~~specialists of market participants; b) adjustments associated with effects of the stabilization period; c)~~crude oil feedstock and products price outlook provided by an independent third-party expert; (ii) an actual discount rate of ~~6.3% (2015 - 7.2% and 2014~~6.48% (2017 – ~~7.1%~~6.00%) determined under ~~the~~ WACC methodology; ~~and d) extension of~~(iii) current conditions ~~and~~or benefits, or similar, as ~~industry~~an industrial user of goods and services inof the free trade zone and during the ~~term~~validity of the ~~license.~~license; (iv) level of costs and long–term operating expenses in line with international refinery standards of similar configuration and conversion capacity; (v) refinery throughput and production; and (vi) level of continued investment.

It is important to mention that the refining business is highly sensitive to the volatility of the margins and the macroeconomic variables implicit in the determination of the discount rate, therefore, any change in these assumptions could potentially result in significant variations in the determination of impairment losses or reversal amounts.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The impairment recorded for 2018 is explained by: i) an adjustment in market expectations in relation to the impact that the implementation of the MARPOL regulation will have on margins of refined products, ii) the differential of light and heavy crudes that serve as raw material; and iii) fundamental macroeconomic changes that increased the discount rate used for the valuation of Reficar's assets, mainly associated with the increase in the risk-free rate and higher market risk premiums. Improvements in operational and commercial inputs associated to the refinery optimization as well as the tax effects of the “Financing Law” (tax reform) partially offset the effects of the macroeconomic variables.

In 2017, we recorded a partial reversal of the impairment recorded in previous periods primarily as a result of: (a) an improved outlook in refining margins due to the ratification of the implementation of the International Convention for the Prevention of Pollution from Ships (Marpol) starting in 2020; (b) a lower discount rate resulting from the application of WACC methodology; and (c) operational and financial optimizations identified as part of the stabilization of the refinery.

In 2016, ~~there is~~we recorded an impairment ~~loss generated~~caused mostly by adjustment of operational variables based on what was observed ~~data~~ during the stabilization period, partially offset by a lower discount rate and better refining margins.

The impairment expense in 2015 was caused mostly by the adverse economic context of the hydrocarbon industry, which translated into reduction of the refining market expectations in coming years, an increase country and market risk that was reflected on the discount rate.

~~Bioenergy~~

16.2.2

Bioenergy

The recoverable amount ~~for~~of Bioenergy was calculated based on the fair value ~~in use,~~less the costs of disposal level, which is greater than the ~~fair~~ value ~~less cost of disposal~~in use and corresponds to the future cash flows discounted ~~before taxes.~~after taxes on profit. The fair value hierarchy is 3.

The significant assumptions used ~~in the model~~ to determine the recoverable amount included: a)(a) forecast of ethanol prices based on projections made by ~~home office~~Group specialists; (b) expected agricultural and b)operational yields; and (c) a ~~6.7%~~6.97% discount rate in ~~actual~~real terms ~~(2015~~(2017 – ~~6.8% in actual terms)~~6.23%) determined under the WACC methodology.

In 2018, impairment is presented due to: i) a lower prospect of short-term ethanol prices, associated with imports from abroad in an environment of global over-supply of ethanol, ii) updating of agricultural variables in the short term, iii) an increase in the discount rate used for the valuation in line with fundamentals of the market. These impacts were partially offset by the updating of operating variables associated with the stabilization and tax effects of the "Financing Law".

In 2017 and 2016, ~~and 2015, the Company~~we recorded an impairment loss mainly due to ~~mainly by~~ the updating the dates of start of operations of the ~~start date~~project, the stabilization process of ~~operations~~the industrial plant and the changes in ~~product price projections.~~the operational variables and ethanol prices.

~~17.3~~16.2.3

~~Transportation and logistics segment~~Refinería de Barrancabermeja

~~In 2016,~~During 2018, the Refinería de Barrancabermeja Modernization Project, which is currently suspended, was evaluated and there ~~was~~were no indications that implied the recognition of additional impairment.

During 2017, an impairment ~~recovery for~~loss of COP$273,987 was recognized on the ~~transport and logistics segment for COP$41,062 (2015 - COP$81,387 and 2014 - COP$496 of impairment expense)~~Refinería de Barrancabermeja, mainly ~~by the incorporation of flows associated~~related to the ~~San Fernando - Apiay system project that affects~~write off of certain management and financial capitalized balances associated with the ~~recoverable amount~~suspension of the ~~Llanos transport line, offset with greater~~modernization project of the Refinery. This suspension is in response to capital discipline criteria implemented to ensure the growth and financial sustainability of Ecopetrol S.A. and the Ecopetrol Business Group in the adverse context that the hydrocarbons sector experienced in previous years. This project is being assessed within the Ecopetrol Business Group’s strategic plan therefore any impairment ~~on the southern transport line.~~ loss recognized in previous years may be subject to recovery.

16.3

Transport and Logistics

The recoverable amount of these assets was determined based on its fair value ~~less~~with costs of disposal, ~~costs with level of hierarchy 3,~~ which corresponds to discounted cash flows based on the hydrocarbon production curves and ~~rates~~refined products transport curves. The fair value hierarchy is 3.

The assumptions used in the model to determine the recoverable value included: i) the tariffs regulated by the Ministry of Mines and Energy and the Energy and Gas ~~Regulating~~Regulation Commission - ~~CREG. The~~CREG, ii) the actual discount rate used in the valuation was ~~4.98% (2015~~5.60% (2017 - ~~5.9%~~5.00%) and ~~2014 -7.2%).~~iii) transport volume projections based on the end of year results for 2018 and the long-term volumetric transport program from 2019 onwards.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

In 2018, the main impairment recorded was COP$167,917, corresponding to the systems of the Southern Cash Generating Unit (CGU), composed of the Tumaco Port and the TransAndino Pipeline (OTA) and its afferent pipelines, the Mansoyá - Orito Pipeline (OMO), San Miguel - Orito (OSO), and Churuyaco- Orito (OCHO). This value was generated mainly by a decrease in the volume projections for the southern systems, and an increase in the need for maintenance capex to reduce the operational risk of the transport systems.

~~F-60~~

~~Ecopetrol S.A.~~

In 2017, there was a recovery of an impairment for the Transportation and Logistics segment for COP$59,455, mainly in Oleoducto del Sur, which includes, among others, the Trans Andino Pipeline. The recovery was due to the inclusion of the Port of Tumaco in that generating unit.

The recovery of COP$41,062 in 2016 was caused mainly by the incorporation of crude oil throughput associated with the San Fernando – Apiay system, which affects the recoverable amount of Los Llanos transport line, but was offset by the impairment of the Oleoducto del Sur.

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~18.~~17.

~~Intangibles~~

~~The following shows a breakdown of the changes in Intangibles and their amortization for the years ended December 31, 2016 and 2015:~~

Licenses and
software Other
intangibles (1) Total
Cost
Balance at December 31, 2015 733,115 244,063 977,178
Additions 63,560 5,693 69,253
Disposals (29,099 ) �� - (29,099 )
Foreign currency translation (9,359 ) (149 ) (9,508 )
Reclassifications 26,103 (110,625 ) (84,522 )
Balance at December 31, 2016 784,320 138,982 923,302

Accumulated amortization
Balance at December 31, 2015 (533,784 ) (55,343 ) (589,127 )
Amortization expense (81,913 ) (28,142 ) (110,055 )
Disposals 29,097 - 29,097
Foreign currency translation 8,527 1 8,528
Reclassifications (5,607 ) 15,994 10,387
Balance at December 31, 2016 (583,680 ) (67,490 ) (651,170 )

Net balance at December 31, 2016 200,640 71,492 272,132
Useful life <5 years <7 years

Licenses and
software Other
intangibles (1) Total
Cost
Balance at December 31, 2014 575,535 127,519 703,054
Additions 107,815 4,440 112,255
Disposals (615 ) - (615 )
Foreign currency translation 53,242 - 53,242
Reclassifications (2,862 ) 112,104 109,242
Balance at December 31, 2015 733,115 244,063 977,178

Accumulated amortization
Balance at December 31, 2014 (425,357 ) (32,545 ) (457,902 )
Amortization expense (66,043 ) (24,196 ) (90,239 )
Disposals 309 23 332
Foreign currency translation (41,318 ) - (41,318 )
Reclassifications (1,375 ) 1,375 -
Balance at December 31, 2015 (533,784 ) (55,343 ) (589,127 )

Net balance at December 31, 2015 199,331 188,720 388,051
Useful life <5 years <7 years

~~(1)~~

~~It includes mainly easements and right of use of the pipeline Caño Limón - Coveñas.~~

~~F-61~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~19.~~

Goodwill

The balance atas of December 31, ~~2016~~2018 and ~~2015~~2017 of ~~Goodwill from~~goodwill in acquisitions of ~~controlled companies is comprised as follows:~~subsidiaries was:

2016 2015
Transportation and logistics
Oleoducto Central S.A. 683,496 683,496
Exploration and production
Hocol Petroleum Limited 537,598 537,598
Refining and petrochemicals
Andean Chemical Limited 127,812 127,812
Propilco S.A. 108,137 108,137
1,457,043 1,457,043
Less: Impairment loss of Hocol Petroleum Ltd (297,121 ) (297,121 )
Total 1,159,922 1,159,922

	2018			2017
Transport and Logistics
Oleoducto Central S.A.		683,496			683,496
Exploration and Production
Hocol Petroleum Ltd.		537,598			537,598
Refining and Petrochemicals
Andean Chemical Ltd		127,812			127,812
Propilco S.A.		108,137			108,137
		1,457,043			1,457,043
Less impairment Hocol Petroleum Ltd.		(297,121	)		(297,121	)
		1,159,922			1,159,922

AtAs of December 31, ~~2016,~~2018 and 2017, the ~~Company~~Ecopetrol Business Group assessed the recoverability of the carrying value of goodwill generated in the acquisition of ~~controlled companies.~~subsidiaries. The recoverable amount was determined based on the ~~fair~~realization value less ~~cost~~costs of disposal using the present value of future cash flows for each of the companies ~~acquired. Future cash flows was based on~~acquired with goodwill. The source of information used the financial projections of each company derived from the business plans approved by management, which were developed based on ~~long term macro-economic~~long-term macroeconomic factors such as price curves and margins and fundamental assumptions of supply and demand. As a result of the analysis, the ~~Company~~Ecopetrol Business Group did not ~~identify any goodwill impairment.~~

In 2015, given the adverse economic environment faced by the hydrocarbon sector the Company was exposed to certain future risks such as a further decline in oil prices, lower refining margins, lower profit margins, changes in cost profiles, changes in levels of capital expenditures and maintenance, a reduction in recoverable reserves amount, and an increase in market and country risk that is reflected in a higher discount rate. Any significant change in the estimates and judgments used to calculate these variables can have a material effect on the recognition of goodwill impairment charges. Different variables have different impact on segments. For example, the Exploration and Production segment is highly sensitive to the price of hydrocarbons, while the Refining segment is highly sensitive to the discount rate given the leverage in that segment. As a result, at December 31, 2015 the company recognized a goodwill impairment of COP$266,900 in Hocol Petroleum Limited, due mainly from the current adverse economic context faced by the hydrocarbon sector. Regarding goodwill allocated to the Transportation and Logistics Segment and the Refining and Petrochemicals Segment Ecopetrol did not identify the need to recognize any goodwill impairment.

Ecopetrol S.A.

~~F-62~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~20.~~18.

Loans and borrowings

Exhibit 2 details the main conditions of the most significant loans of the Business Group.

~~20.1~~18.1

Composition of loans and borrowings

The ~~balance~~balances of the loans and financing, which are recorded at amortized cost, as of December 31, ~~2016~~2018 and ~~2015 is comprised as follows:~~2017:

Weighted average
effective interest rate at
December 31,
2016 / 2015 2016 2015
Local currency
Bonds 8.6% / 9.8% 2,008,203 1,960,695
Syndicated loan 9.5% / 7.7% 3,828,329 4,226,454
Commercial loans and other 9.1% / 7.9% 905,266 945,331
Total local currency 6,741,798 7,132,480

Foreign currency
Bonds 6.0% / 6.1% 29,310,165 29,121,535
Commercial loan-Refinería de Cartagena 4.1% / 4.1% 7,988,678 9,107,938
Other commercial loans 2.9% / 2.1% 7,945,693 7,101,195
Other (1) 235,693 760,190
Total foreign currency 45,480,229 46,090,858
Total loans and borrowings 52,222,027 53,223,338
Less short-term 4,126,203 4,573,620
Total long-term 48,095,824 48,649,718

	Weighted average effective interest rate as of December 31		2018		2017
	2018	2017
Local currency
Bonds	8.0%	8.9%		1,568,034		1,692,471
Syndicated loan	7.9%	8.7%		1,439,590		3,307,950
Other (1)	7.6%	7.7%		1,041,151		978,795
				4,048,775		5,979,216
Foreign currency
Bonds	5.7%	6.1%		25,599,996		29,166,594
Commercial loans – Refinería de Cartagena (2)	4.4%	4.3%		7,352,002		7,401,781
Commercial loans	-	4.3%		-		528,815
Loans from related parties (Note 29)	2.5%	1.5%		855,135		259,760
Other (1)	3.1%	-		206,737		211,669
				34,013,870		37,568,619
				38,062,645		43,547,835
Current				4,019,927		5,144,504
Non–current				34,042,718		38,403,331
				38,062,645		43,547,835

(1)

Includes financial leasing and debt in connection with build, operation, maintenance and transfer (BOMT) contracts.

~~20.2~~(2)

~~New borrowings~~Corresponds to the commercial credits that Refinería de Cartagena S.A. and which were assumed by Ecopetrol through voluntary assumption of the debt, transaction made on December 13, 2017.

18.2

Main movements

~~The main financing operations during 2016 and 2015 were as follows:~~Local currency

~~Bonds –~~

On August 6, 2018, Ecopetrol made the advance payment of the total syndicated loan held in 2013 with local banks, whose amortization was expected until the year 2025. The total amount to be paid is COP$1,430,333 million, for the concept of capital plus interests.

On August 27, 2018, the local 5 year series bond issued in 2013 became due. The total nominal amount paid was COP$120,950.

Foreign currency

On ~~June 8, 2016,~~April 13, 2018, Ecopetrol ~~reopened its bonds maturing~~S.A. paid in ~~September 2023 for US$ 500~~advance the entire international bond issued in 2013 with a maturity of 5 years; the value paid was USD$354 million, ~~with~~including interest.

On July 6 and 25, 2018, Ecopetrol S.A. made the advance payment of ~~principal at maturity and interest payable semi-annually at a coupon rate of 5.875%. The new total outstanding amount~~all the loans entered into in 2013 with international banks, guaranteed by the Export-Import Bank of the ~~bond is US$1.8 billion.~~United States, and whose amortization was foreseen until the year 2023. The total nominal amount paid was USD$156 million for capital, plus the interest caused.

~~At June 2015,~~On September 20, 2018, Ecopetrol S.A. ~~issued US$1,500~~subscribed a committed line of credit for USD$665 million, with Scotiabank (USD$430 million) and Mizuho Bank (USD$235 million). Under this type of ~~bonds in~~credit, banks commit to disburse resources when Ecopetrol S.A. require it, under the ~~international market~~terms and conditions previously agreed between the parties. The committed line of credit has two (2) years of availability for disbursements, with ~~payment of principal~~the following conditions: (i) amortized capital at maturity ~~(June 26, 2026)~~within a period of 5 years from the date of subscription of the contract and ~~interest payable semi-anually at~~(ii) a ~~coupon~~ rate of ~~5.375%.~~Libor interest (6M) + 125 basis points and a commission of 30 basis points per year on capital not paid during the period of availability. This facility would only increase the Ecopetrol Business Group's level of indebtedness at the time disbursements are made.

Ecopetrol S.A.

~~Commercial loans~~Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

§-

On ~~January 29, 2016,~~December 27, 2018, Ecopetrol ~~entered into a commercial loan for US$175~~S.A. paid in advance the entire 10-year international bond issued in 2009, the value paid was USD$1,587 million, with The Bank of Tokyo-Mitsubushi UFJ, Ltd. This loan has a 5 years term, is amortizable with a 2.5 years of grace period on principal and interest is payable semi-annually at a rate of 6-M Libor + 145 basis points.

~~F-63~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

On May 16, 2016, Ecopetrol entered into a commercial loan for US$300 million with Export Development Canada, the Canadian government’s export promotion agency.This loan has a 5-year term with principal payable at maturity and interest payable semi-annually at a rate of 6-M Libor+ 140 basis points rate.including interest.

On February 23, 2016, Ecopetrol entered into a commercial loan for COP$990,000 with Bancolombia S.A. which was canceled in early October 2016. This loan had an 8-year term, amortizable with a 2 years grace period on capital with interest payable semi-annually at a DTF rate of TA + 560 basis points.

In February 2015, Ecopetrol S.A. entered into a commercial loan for US$1,925 million. The operation was conducted with the participation of 8 international banks. The loan maturity date is February 2020 payable at maturity with semiannual interest payments at Libor + 140 basis points.

~~For the acquisition of the above credits, no guarantees have been granted due to the support of the Colombian Government through the Ministry of Finance and Public Credit.~~

~~Other~~

During 2016, the Company fully paid the short-term remittances financed in dollars with domestic banks for the payment of imports that were in effect as of December 31, 2015 in the amount of US$203 million with a financing rate of Libor + 65 basis points.

~~F-64~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~The following table details the main characteristics of the most significant loans of the Ecopetrol Business Group at December 31, 2016:~~

Initial amount at
original currency
Balance at December 31, Principal Interest
Type Company Starting date Currency (millions) 2016 2015 Maturity Interest rate payment payment
Dec-10 COP $ 138,700 138,700 138,700 dec-17 Floating Bullet* Semi-annually
Dec-10 COP $ 479,900 479,900 479,900 dec-20 Floating Bullet Semi-annually
Dec-10 COP $ 284,300 284,300 284,300 dec-40 Floating Bullet Semi-annually
Bonds in Ecopetrol S.A Aug-13 COP $ 120,950 120,950 120,950 aug-18 Floating Bullet Semi-annually
local-currency Aug-13 COP $ 168,600 168,600 168,600 aug-23 Floating Bullet Semi-annually
Aug-13 COP $ 347,500 347,500 347,500 aug-28 Floating Bullet Semi-annually
Aug-13 COP $ 262,950 262,950 262,950 aug-43 Floating Bullet Semi-annually
Syndicated loan Ecopetrol S.A. May-13 COP $ 1,839,000 1,736,833 1,839,000 may-25 Floating Semi-annually Semi-annually
in local-currency Oleoducto Bicentenario Jul-12 COP $ 2,100,000 1,549,625 1,717,625 jul-24 Floating Quarterly Quarterly
ODL Finance S.A. Aug-13 COP $ 800,000 480,000 608,000 aug-20 Floating Quarterly Quarterly
Jul-09 US$ 1,500 1,500 ** 1,500 jul-19 Fixed Bullet Semi-annually
Sep-13 US$ 350 350 ** 350 sep-18 Fixed Bullet Semi-annually
Sep-13 US$ 1,300 1,800 ** 1,300 sep-23 Fixed Bullet Semi-annually
Sep-13 US$ 850 850 850 sep-43 Fixed Bullet Semi-annually
Bonds in foreign Ecopetrol S.A. May-14 US$ 2,000 2,000 ** 2,000 may-45 Fixed Bullet Semi-annually
currency Sep-14 US$ 1,200 1,200 ** 1,200 may-25 Fixed Bullet Semi-annually
Jun-15 US$ 1,500 1,500 ** 1,500 jun-26 Fixed Bullet Semi-annually
Jun-16 US$ 500 500 ** - aug-23 Fixed Bullet Semi-annually
Oleoducto Central S.A. May-14 US$ 500 500 ** 500 may-21 Fixed Bullet Semi-annually
Refinería de Dec-11 US$ 2,747 2,177 2,394 dec-27 Fixed Semi-annually Semi-annually
Cartagena S.A. Dec-11 US$ 310 246 270 dec-27 Floating Semi-annually Semi-annually
Dec-11 US$ 440 374 402 dec-25 Floating Semi-annually Semi-annually
Mar-13 US$ 245 171 ** 196 jul-23 Floating Semi-annually Semi-annually
Commercial loans Mar-13 US$ 151 66 ** 105 jul-19 Floating Semi-annually Semi-annually
in foreign currency Ecopetrol S.A. Feb-15 US$ 1,925 1,925 ** 1,925 feb-20 Floating Bullet Semi-annually
Feb-16 US$ 175 175 - feb-21 Floating Semi-annually Semi-annually
May-16 US$ 300 300 - may-21 Floating Bullet Semi-annually

* Bullet: Nominal value is fully paid on the maturity date.

** Loans designated as hedging instrument (see Note 31).

~~F-65~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~20.3~~18.3

Maturity of loans and borrowings

The following isare the ~~maturity profile~~maturities of loans and borrowing as of December 31, ~~2016:~~2018:

Up to 1
year 1 - 5 years 5-10 years > 10 years Total
Local currency
Bonds 312,207 955,204 357,015 383,777 2,008,203
Commercial loans 793,743 2,375,023 659,563 - 3,828,329
Others 58,952 333,372 339,009 173,933 905,266
Total local currency 1,164,902 3,663,599 1,355,587 557,710 6,741,798

Foreign currency
Bonds 1,648,707 10,956,507 12,133,576 4,571,375 29,310,165
Commercial loan Refinería de Cartagena 875,734 3,549,216 3,472,379 91,349 7,988,678
Other commercial loans 371,804 7,450,587 123,302 - 7,945,693
Other 65,056 114,226 56,411 - 235,693
Total foreign currency 2,961,301 22,070,536 15,785,668 4,662,724 45,480,229
Total 4,126,203 25,734,135 17,141,255 5,220,434 52,222,027

	Up to 1 year (1)		1 - 5 years		5-10 years		> 10 years		Total
Local currency
Bonds		116,693		842,514		362,446		246,381		1,568,034
Syndicated loan		406,582		1,033,008		-		-		1,439,590
Commercial loans and other		120,069		491,781		270,920		158,381		1,041,151
		643,344		2,367,303		633,366		404,762		4,048,775
Foreign currency
Bonds		1,374,390		10,605,708		8,664,732		4,955,166		25,599,996
Commercial loans – Refinería de Cartagena		1,116,370		4,061,541		2,174,091		-		7,352,002
Other		885,823		136,574		39,475		-		1,061,872
		3,376,583		14,803,823		10,878,298		4,955,166		34,013,870
		4,019,927		17,171,126		11,511,664		5,359,928		38,062,645

~~20.4~~(1)

Includes short–term credit and the current portion of long–term debt, as applicable.

The following are the maturities of loans and borrowing as of December 31, 2017:

	Up to 1 year (1)		1–5 years		5–10 years		> 10 years		Total
Local currency
Bonds		253,172		742,512		322,956		373,831		1,692,471
Syndicated loan		739,348		2,009,420		559,182		–		3,307,950
Other		98,729		415,599		308,121		156,346		978,795
		1,091,249		3,167,531		1,190,259		530,177		5,979,216
Foreign currency
Bonds		2,651,174		9,948,238		12,018,813		4,548,369		29,166,594
Commercial loans – Refinería de Cartagena		958,918		3,635,848		2,807,015		–		7,401,781
Commercial loans		153,873		315,849		59,093		–		528,815
Other		289,290		119,014		63,125		–		471,429
		4,053,255		14,018,949		14,948,046		4,548,369		37,568,619
		5,144,504		17,186,480		16,138,305		5,078,546		43,547,835

(1)

Includes short–term credit and the current portion of long–term debt, as applicable.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

18.4

Breakdown by type of interest rate and currency

2016 2015
Local - currency
Fixed interest rate 299,472 19,410
Floating interest rate 6,442,326 7,113,070
6,741,798 7,132,480
Foreign currency
Fixed interest rate 35,719,486 36,994,095
Floating interest rate 9,760,743 9,096,763
45,480,229 46,090,858
Total loans and borrowings 52,222,027 53,223,338

The following is the breakdown of loans and borrowing by type of interest rate as of December 31, 2018 and 2017:

	2018		2017
Local currency
Fixed rate		252,224		143,156
Floating rate		3,796,551		5,836,060
		4,048,775		5,979,216
Foreign currency
Fixed rate		31,432,667		35,062,742
Floating rate		2,581,203		2,505,877
		34,013,870		37,568,619
		38,062,645		43,547,835

~~Local~~The interest on the bonds in national currency ~~loans and borrowings at floating rates are mainly~~is indexed to the CPI (Consumer Price Index) and bank loans and variable rate leasing in Colombian pesos are indexed to the DTF (Fixed Term ~~Deposit). The~~Deposits) and IBR (Banking Reference Indicator), plus a differential. Interest on loans in foreign currency ~~loans and borrowings at floating rates are indexed mainly to Libor~~is calculated based on the LIBOR rate plus a ~~spread.~~spread and the interests of the other types of debt are at a fixed rate.

~~20.5~~18.5

Loans designated as hedging ~~instruments~~instrument

As of December 31, ~~2016 the Company~~2018, Ecopetrol S.A. designated US$~~10,512~~6,500 million (2017 – US$8,532 million) of foreign currency debt as a hedging ~~instrument;~~instrument, of which US$~~5,312 million correspond to the cash flow hedge for future crude exports and US$~~5,200 million is used to hedge ~~investments~~the net investment in ~~subsidiaries~~foreign operations with the US dollar as their functional ~~currency.~~currency, and US$1,300 million is used to hedge the cash flows of future crude oil exports. See Note ~~31 -~~ 28 –Risk management ~~for further information.~~.

~~F-66~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~20.6~~18.6

Guarantees and covenants

~~For financing~~Financing obtained directly by Ecopetrol S.A. in ~~the~~ capital markets ~~which correspond to issuance of local and foreign bonds that, are not guaranteed due to the support~~has no guarantees granted or financial covenant restrictions.

Until December 13, 2017, product of the ~~Colombian Government through the Ministry~~voluntary assumption of ~~Finance and Public Credit.~~

international credit held by Refinería de Cartagena ~~(Reficar)~~ ~~carried out an international commercial loan for US$3,497 million~~S.A. on the part of Ecopetrol SA, in its capacity as sponsor, restrictions applied in relation to finance the expansion project of Cartagena Refinery in 2011. This operation imposes restrictions on Reficar’s debt ratio, except for certain conditions expressly set out in contracts about working capital needs. Regarding the financial ~~covenants Reficar is required~~commitments to maintain a minimum service coverage ~~ratio of minimum debt service~~rate of 1.35: 1 debt at certain ~~times~~points in the life of the ~~loan’s life. This subsidiary is in compliance with all covenants and debt commitments~~loan by Refinería de Cartagena SA, as ~~of December 31, 2016.~~

~~Under~~well as the ~~same transaction Reficar entered into~~obligation to have a commercial trust and ~~Security~~a depositary and ~~Depositary Agreement~~security contract to receive the resources of the new refinery to ~~meet~~fulfill specific purposes such as operating expenses, interest and others.

~~In the case~~The following is a summary of ~~financing obtained by Oleoducto Bicentenario S.A.S. for the construction~~certain restrictions contained in certain other loan instruments of ~~the project and startup of the pipeline the creation of a main fund was established to manage the funds for the payment of the syndicated loan.~~Ecopetrol’s subsidiaries:

~~20.7~~–

The loan entered into by Oleoducto de los Llanos is guaranteed with the economic rights of the ship–or–pay transportation agreements with Frontera Energy Corp and also includes certain restrictions regarding capital contributions and asset disposal.

–

The syndicated loan entered into by Oleoducto Bicentenario requires that this subsidiary maintain an established relationship of leverage and solvency and cash flow / service to the debt.

–

The loan entered into by Bioenergy with Bancolombia is guaranteed with the La Esperanza 1 and 2 farms and there are certain restrictions on the variation of direct or indirect ownership by Ecopetrol S.A. in this subsidiary.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

18.7

Fair value of loans

The fair value of ~~the~~ loans and borrowings is COP$~~52,109,438~~38,305,674 and COP$~~49,668,119~~45,781,317 as of December 31, ~~2016~~2018 and ~~2015,~~2017, respectively.

Loans are recorded in the financial statements at their amortized cost, which is the financial amount of initial recognition less principal repayments, plus or minus the cumulative amortization using the effective interest method of any difference between that initial amount and the maturity amount.

For fair value measurement, ~~bonds and~~ local currency ~~securities~~bonds were valued using ~~Infovalmer's~~Infovalmer reference prices, while ~~for dollar-denominated~~ bonds ~~the Bloomberg methodology was used as the source.~~in U.S. dollars were valued using Bloomberg. With regard to the other financial obligations for which there is no market benchmark, a discount to present value technique was used. These rates incorporate market risk through some ~~benchmark~~benchmarks (Libor, ~~DTF)~~FTD) and the ~~Company's~~Ecopetrol Business Group’s credit risk (spread).

~~F-67~~18.8

Movement of net financial debt

The following is the movement of net financial debt as of December 31, 2018, 2017 and 2016:

	Cash and equivalents			Other financial assets			Loans and borrowings			Net financial debt
Balance as of December 31, 2016		8,410,467			6,686,895			(52,222,027	)		(37,124,665	)
Cash flow		(174,272	)		(564,755	)		11,259,492			10,520,465
Exchange difference:
Recognized in profit or loss		(290,310	)		208,394			147,993			66,077
Recognized in other comprehensive income		–			–			70,958			70,958
Financial cost registered to projects		–			–			(203,964	)		(203,964	)
Financial income (expense) recognized in profit or loss		–			104,706			(2,385,994	)		(2,281,288	)
Foreign currency translation		–			39,628			(76,171	)		(36,543	)
Other movements that do not generate cash flow		–			58,857			(138,122	)		(79,265	)
Balance as of December 31, 2017		7,945,885			6,533,725			(43,547,835	)		(29,068,225	)
Cash flow		(2,040,387	)		843,612			11,363,077			10,166,302
Exchange difference:
Recognized in profit or loss		406,246			920,609			(816,840	)		510,015
Recognized in other comprehensive income		–			-			(2,165,569	)		(2,165,569	)
Financial cost registered to projects		–			-			(217,891	)		(217,891	)
Financial income (expense) recognized in profit or loss		–			92,906			(2,399,414	)		(2,306,508	)
Foreign currency translation		–			(245,958	)		(203,446	)		(449,404	)
Other movements that do not generate cash flow		–			2,921			(74,727	)		(71,806	)
Balance as of December 31, 2018		6,311,744			8,147,815			(38,062,645	)		(23,603,086	)

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~21.~~19.

Trade and other payables

The balance ~~at December 31, 2016 and 2015~~ of trade and other payables, as of December 31, 2018 and 2017, is comprised as ~~follows:~~follows:

	2016		2015		2018		2017
Suppliers		4,687,353		4,979,932		6,878,510		5,088,957
Partners’ advances		864,971		675,527		874,010		880,420
Withholding tax		379,194		346,578		246,867		376,169
Related parties (Note 29)						116,418		129,520
Insurance and reinsurance						211,883		121,555
Agreements in transport contracts ~~(2)~~(1)						210,196		91,324
Deposits received from third parties		209,570		571,577		49,158		25,523
Related parties (Note 32)		114,420		87,463
Agreements in transport contracts ~~(2)~~(1)		111,899		33,735
Insurance and reinsurance		110,530		118,338
Dividends payable ~~(1)~~		11,193		693,878		84,657		3,723
Various creditors		389,126		250,255		304,613		280,485
		6,878,256		7,757,283		8,976,312		6,997,676
Current						8,945,790		6,968,207
Non–current						30,522		29,469
						8,976,312		6,997,676
Current		6,854,363		7,757,277
Non-current		23,893		6
		6,878,256		7,757,283

(1)

~~During the first quarter of 2016 the last installment of dividends on 2014 net profits was paid to the Ministry of Finance and Public Credit by COP$690,177~~

~~(2)~~

Corresponds to the value of ~~the~~ debt ~~for~~from agreements in ~~the~~transport contracts of ~~transport by~~oil pipelines and poliducts, ~~calculated in the volume~~impacted by volumetric adjustments, compensation byfor quality and other ~~agreements of~~inventory management ~~of inventories.~~agreements.

The carrying amount of trade accounts and other accounts payable approximates their fair value due to ~~its short-term~~their short–term nature.

~~22.~~20.

Provisions for ~~employee~~employees’ benefits

The following are the balances of provisions for employee benefits as of December 31, ~~2016~~2018 and ~~2015:~~2017:

2016 2015
Post-employment benefits
Healthcare 4,475,540 3,593,428
Pension 531,596 (262,182 )
Education 333,379 535,356
Bonds (191,338 ) (483,876 )
Other 67,945 41,263
Termination benefits - Voluntary retirement plan 161,796 -
5,378,918 3,423,989
Welfare benefits and salaries payable 423,360 353,285
Other post-employment benefits 73,300 74,841
Total 5,875,578 3,852,115
Current 1,974,496 1,392,266
Non-current 3,901,082 2,459,849
5,875,578 3,852,115

	2018		2017
Post–employment benefits
Healthcare		5,507,784		5,367,005
Pension		1,452,322		1,327,859
Education		479,945		502,260
Bonds		331,064		348,442
Other plans		82,576		77,636
Termination benefits – Voluntary retirement plan		137,859		155,286
		7,991,550		7,778,488
Social benefits and salaries		521,802		485,939
Other employee benefits		93,199		67,867
		8,606,551		8,332,294
Current		1,816,882		1,829,819
Non–current		6,789,669		6,502,475
		8,606,551		8,332,294

~~F-68~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~22.1~~20.1

~~Post-employment~~Post–employment benefits liability (asset)

The following table shows the movement in liabilities and assets, net of post-employment benefits and termination benefits, atas of December 31, ~~2016~~2018 and ~~2015:~~2017:

	Pension and pension bonds (1)						Healthcare, Education and others						Total						Pension and bonds (1)						Other						Total
	2016			2015			2016			2015			2016			2015			2018			2017			2018			2017			2018			2017
Employee benefits liabilities
Liabilities for employee benefits
Opening balance		10,435,546			11,559,018			4,170,047			5,515,809			14,605,593			17,074,827			14,147,464			12,463,433			6,105,432			5,041,133			20,252,896			17,504,566
Current service cost		-			-			53,771			53,095			53,771			53,095			–			–			77,373			52,164			77,373			52,164
Past service cost		-			-			164,271			-			164,271			-			–			–			50,489			–			50,489			–
Interest expense		876,076			839,716			337,844			395,977			1,213,920			1,235,693			888,583			872,524			377,923			350,060			1,266,506			1,222,584
Actuarial losses (gains)		1,915,767			(1,252,017	)		616,834			(1,490,315	)		2,532,601			(2,742,332	)
Paid benefits		(763,956	)		(711,171	)		(301,634	)		(304,519	)		(1,065,590	)		(1,015,690	)
Actuarial (gains) losses																				(56,655	)		1,621,184			(27,651	)		1,012,205			(84,306	)		2,633,389
Benefits paid																				(847,449	)		(809,677	)		(371,448	)		(350,130	)		(1,218,897	)		(1,159,807	)
Closing balance		12,463,433			10,435,546			5,041,133			4,170,047			17,504,566			14,605,593			14,131,943			14,147,464			6,212,118			6,105,432			20,344,061			20,252,896

Plan assets
Opening balance		11,181,604			11,657,629			-			-			11,181,604			11,657,629			12,471,163			12,123,175			3,245			2,473			12,474,408			12,125,648
Return on assets		950,704			849,556			-			-			950,704			849,556			780,494			848,677			170			385			780,664			849,062
Change in the effect of the asset ceiling		379,884			(329,825	)		-			-			379,884			(329,825	)
Paid benefits		(771,528	)		(711,432	)		2,406			-			(769,122	)		(711,432	)
Actuarial gains (losses)		382,511			(284,324	)		67			-			382,578			(284,324	)
Contributions to funds																				–			–			21,971			22,465			21,971			22,465
Benefits paid																				(847,449	)		(809,677	)		(21,526	)		(22,078	)		(868,975	)		(831,755	)
Actuarial (losses) gains																				(55,651	)		308,988			94			–			(55,557	)		308,988
Closing balance		12,123,175			11,181,604			2,473			-			12,125,648			11,181,604			12,348,557			12,471,163			3,954			3,245			12,352,511			12,474,408
Net post-employment benefits liability (asset)		340,258			(746,058	)		5,038,660			4,170,047			5,378,918			3,423,989
Net post–employment benefits liability																				1,783,386			1,676,301			6,208,164			6,102,187			7,991,550			7,778,488

(1)

There is no ~~service~~ cost for the pension and pension plans ~~because~~service, due to the fact that the beneficiaries were ~~all~~ retired byas of July 31, 2010.

~~F-69~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

The following table shows the movement in ~~results~~profit and loss and in other comprehensive income as of December 31, ~~2016~~2018, 2017 and ~~2015:~~2016:

	2016			2015			2018			2017			2016
Recognized in profit or loss
Interest expense, net								485,842			373,522			259,266
Current service cost		53,771			53,095			77,373			52,164			53,771
Past service cost		164,271			-			50,489			–			164,271
Interest expense, net		263,216			386,137
Remedies								503			13,889			–
		481,258			439,232			614,207			439,575			477,308
Recognized in other comprehensive income
Education and severance								45,509			(203,779	)		175,259
Pension and pension bonds								1,003			(1,312,195	)		(1,533,256	)
Termination benefits – Voluntary retirement plan								93			(3	)		67
Healthcare		(792,093	)		1,359,631			(17,356	)		(794,535	)		(792,093	)
Pension and pension bonds		(1,533,256	)		967,693
Education and severance		175,259			130,684
Termination benefits		67			-
Change in the effect of the asset ceiling		379,884			(329,824	)
Change in the effect of asset ceiling								–			–			379,884
		(1,770,139	)		2,128,184			29,249			(2,310,512	)	��	(1,770,139	)
Deferred tax		616,697			(723,582	)		(33,539	)		762,469			616,697
Other comprehensive income, net of taxes		(1,153,442	)		1,404,602
								(4,290	)		(1,548,043	)		(1,153,442	)

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~22.2~~20.2

Plan assets

Plan assets are ~~represented in the~~ resources ~~provided to Pension Trusts,~~held by pension trusts for payment of ~~the~~ pension ~~liabilities relating to the obligations~~obligations. Payments for ~~monthly pension payments and bonds; that pertaining to~~ health and education post–employment benefits is ~~under the responsibility of Ecopetrol.~~Ecopetrol’s responsibility. The destination of trust resources and its yields cannot be changed or returned to the ~~Company~~Ecopetrol Business Group until all pension obligations have been fulfilled.

The following is the composition ~~by investment type is comprised as follows at December 31, 2016 and 2015:~~

2016 2015
Bonds issued by the Colombian Government 4,410,326 4,099,067
Bonds of private entities 2,880,958 3,405,440
Other bonds of public entities 693,061 790,601
Bonds of foreign entities 622,817 300,181
Variable yield 305,052 278,716
Other local currency 2,910,083 2,257,655
Other foreign currency 300,878 429,828
Fair value of plan assets 12,123,175 11,561,488
Less asset ceiling - (379,884 )
12,123,175 11,181,604

~~The yield on~~of the plan assets of pension and pension bonds by type of investment as of December 31, ~~2016 was 11.60% (4.96% - 2015). The credit quality~~2018 and 2017:

	2018		2017
Bonds issued by the national government		4,307,972		4,349,400
Bonds of private entities		2,910,071		2,967,030
Other local currency		2,219,634		2,340,825
Other public bonds		1,014,663		1,149,200
Variable yield		653,828		605,380
Bonds of foreign entities		554,685		558,920
Other foreign currency		691,658		503,653
		12,352,511		12,474,408

47.4% of ~~issuers and counterparties in transactions involving~~ plan assets ~~is described~~are classified as level 1 in ~~Note 31.3 – Credit risk.~~

~~The following is~~ the fair value hierarchy ofwhere prices for the ~~plan~~ assets are directly observable on actively traded markets, and 52.6% are classified as ~~of December 31, 2016~~level 2 (46.0% and ~~2015:~~54.0% for 2017, respectively).

2016 2015
Level 1 5,604,643 3,876,386
Level 2 6,518,532 7,685,102
12,123,175 11,561,488

The fair value of ~~the~~level 2 plan assets is calculated using prices quoted in the ~~relevant~~ assets’ market. The ~~Company~~Ecopetrol Business Group obtains these prices through reliable financial data ~~suppliers~~providers recognized in Colombia or abroad depending on the investment.

~~F-70~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

For the securities issued in local currency, the fair value of ~~the~~ plan assets is calculated using information published by Infovalmer, a price supplier ~~of prices~~ authorized by the ~~Superintendency~~Financial Superintendence of ~~Finance.~~Colombia. According to its methodology, prices ~~may be~~are calculated based on market information aton the valuation date or estimated ~~based on historic~~from historical inputs ~~in accordance with~~according to the criteria established for the calculation of each of the prices.

The ~~fair value~~average price is calculated based on the most representative market of the transactions carried out through electronic platforms approved and supervised by the regulator.

~~The~~On the other hand, the estimated price is calculated for investments that do not reflect ~~sufficient~~enough information to estimate an average market price, replicating the quoted prices for similar assets or prices obtained through ~~stock broker quotes.~~quotes from brokers. This estimated price is also given by Infovalmer as a result of the application of robust methodologies approved by the financial regulator and widely used by the financial sector.

The following table reflects the credit quality of the issuers and counterparties in assets held by the autonomous pension funds:

	2018		2017

AAA		4,683,190		4,870,932
Nation		4,364,188		4,471,274
AA+		860,905		690,391
BBB-		426,743		192,636
BAA3		310,788		45,699
F1+		249,361		230,321
BBB		193,579		246,795
BRC1+		89,211		118,008
BBB+		86,040		159,103
A		62,754		39,048
AA-		60,382		18,770
AA		28,367		58,234
BAA1		21,395		5,296
A3		17,075		29,098
BAA2		-		371,972
Other qualifications		55,768		50,784
No rating available		842,765		876,047
		12,352,511		12,474,408

See credit risk policy in Note 28.2.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~22.3~~20.3

Actuarial assumptions

The following are the actuarial assumptions used in determining the present value of defined employee benefit obligations atused for the actuarial calculations as of December 31, ~~2016~~2018 and ~~2015:~~2017:

2016	Pension			Bonds			Healthcare			Education			Other benefits (1)
2018																Pension			Bonds			Health			Education			Other benefits⁽¹⁾
Discount rate		7.25	%		7.00	%		7.25	%		6.50	%		6.67	%		6.75	%		6.50	%		7.00	%		6.75	%		5.87	%
Salary growth rate		N/A			N/A			N/A			N/A			4.25	%		N/A			N/A			N/A			N/A			5.10% / 4.70	%
Expected inflation rate		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%
Pension growth rate		3.00	%		N/A			N/A			N/A			N/A			3.00	%		N/A			N/A			N/A			N/A
Cost trend
Short-term rate		N/A			N/A			3.00	%		4.00	%		N/A
Long-term rate		N/A			N/A			4.00	%		4.00	%		N/A
Short–term rate																	N/A			N/A			7.00	%		4.00	%		N/A
Long–term rate																	N/A			N/A			4.00	%		4.00	%		N/A

2015	Pension			Bonds			Healthcare			Education			Other benefits (1)
2017																Pension			Bonds			Health			Education			Other benefits⁽¹⁾
Discount rate		8.50	%		8.50	%		8.50	%		7.75	%		8.00	%		6.50	%		6.25	%		6.50	%		5.50	%		5.51	%
Salary growth rate		4.25	%		N/A			N/A			N/A			4.25	%		N/A			N/A			N/A			N/A			4.75% / 4.25	%
Expected inflation rate		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%		3.00	%
Pension growth rate		3.00	%		N/A			N/A			N/A			N/A			3.00	%		N/A			N/A			N/A			N/A
Cost trend
Short-term rate		N/A			N/A			3.50	%		4.00	%		N/A
Long-term rate		N/A			N/A			4.00	%		4.00	%		N/A
Short–term rate																	N/A			N/A			6.00	%		4.00	%		N/A
Long–term rate																	N/A			N/A			4.00	%		4.00	%		N/A

N/A: Not applicable for this benefit.

(1)

Weighted average ~~rates.~~discount rate.

The cost trend is the projected increase for the initial year, which includes the expected inflation rate.

The mortality table used for ~~all~~the calculations was ~~´Valid Annuitants”~~that of ‘Valid Annuitant’ for men and women based on the experience gained for the period ~~2005-2008~~2005–2008 of the Colombian Social Security ~~Institute – ISS.~~Institute.

~~F-71~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~22.4~~20.4

Maturity of benefit obligation

The cash ~~flow~~flows required for ~~post-employment benefits liability is comprised as follows:~~payment of post–employment obligations are the following:

Period	Pension and pension bonds		Other benefits		Total		Pension and bonds		Other benefits		Total
2017		794,566		330,539		1,125,105
2018		820,364		328,351		1,148,715
2019		842,858		330,878		1,173,736		914,959		366,866		1,281,825
2020		864,392		333,292		1,197,684		939,158		373,953		1,313,111
2021		886,464		336,423		1,222,887		962,651		381,734		1,344,385
2022-2025		4,877,784		1,672,066		6,549,850
2022								973,491		387,940		1,361,431
2023								996,864		397,555		1,394,419
2024 - 2028								5,434,882		2,104,259		7,539,141

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~22.5~~20.5

Sensitivity analysis

The following sensitivity analysis ~~below has been determined based on reasonably~~shows the effect of such possible changes ofon the ~~respective assumptions occurring at the end of the reporting period,~~obligation for defined benefits, while keeping ~~all~~the other assumptions constant, as ~~constant, at~~of December 31, ~~2016:~~2018:

Pension
Pension
bonds
Healthcare Education Other
benefits
Discount rate
-50 basis points 12,278,122 894,404 4,785,817 345,279 235,987
+50 basis points 10,996,917 815,680 4,197,636 329,870 224,749
Inflation rate
-50 basis points 10,946,122 814,065 - - 161,456
+50 basis points 12,330,307 895,826 - - 167,152
Salary growth rate
-50 basis points - - - - 62,511
+50 basis points - - - - 69,633
Cost trend
-50 basis points - - 4,198,775 330,360 -
+50 basis points - - 4,782,280 344,700 -

~~The Company conducted a sensitivity analysis related to the interest rate variation on plan assets. See section 30 – Risk management.~~

Pension

Bonds

Health

Education

Other benefits

Discount rate

–50 basis points

13,896,668

1,030,073

5,907,754

500,234

229,859

+50 basis points

12,449,997

956,984

5,152,929

461,725

219,178

Inflation rate

–50 basis points

12,395,671

955,640

N/A

139,854

+50 basis points

13,951,861

1,031,197

N/A

143,807

Salary growth rate

–50 basis points

N/A

78,849

+50 basis points

N/A

86,509

Cost trend

–50 basis points

N/A

5,155,141

461,296

N/A

+50 basis points

N/A

5,902,319

500,566

N/A

~~22.6~~20.6

Voluntary retirement plan

In August 2016, the ~~Company~~Ecopetrol Business Group offered a voluntary retirement plan to 200 employees who met certain criteria. As of December 31, 2018, 2017 and 2016, 137 employees were part of the plan, with a corresponding cost of COP$~~161,796.~~137,859 (2017 – COP$155,286 and 2016 – COP$161,796). This plan includes benefits such as monthly income, education and health benefits until the date on which the employee is granted their retirement pension.

~~F-72~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~23.~~21.

Accrued liabilities and provisions

~~The following shows a~~Below is the breakdown of the changes in the different categories of ~~accrued liabilities~~provisions and ~~provisions for the years ended~~contingencies as of December 31, ~~2016~~2018 and ~~2015:~~2017:

Asset
retirement
obligation Litigations Comuneros
provision Environmental
contingencies
and others Total
Balance at December 31, 2015 4,452,369 99,798 702,486 822,694 6,077,347
Increase in abandonment costs 404,797 - - - 404,797
Additions (recoveries) 18,285 44,120 (702,486 ) (74,312 ) (714,393 )
Uses (68,460 ) (4,585 ) - (31,218 ) (104,263 )
Financial cost 317,448 - - (173 ) 317,275
Foreign currency translation (14,703 ) (355 ) - (2,759 ) (17,817 )
Transfers (1) (45,076 ) 70,954 - (70,954 ) (45,076 )
Balance at December 31, 2016 5,064,660 209,932 - 643,278 5,917,870
Current 330,057 146,767 - 345,130 821,954
Non-current 4,734,603 63,165 - 298,148 5,095,916
Total 5,064,660 209,932 - 643,278 5,917,870

	Asset retirement obligation			Litigation			Environmental contingencies and others			Total

Balance as of December 31, 2017		5,527,324			182,966			827,159			6,537,449
Increase in abandonment costs		1,062,280			-			-			1,062,280
Additions		71,015			61,851			174,780			307,646
Uses		(182,130	)		(114,647	)		(100,215	)		(396,992	)
Financial costs		186,518			-			-			186,518
Foreign currency translation		54,610			(2,368	)		10,983			63,225
Transfers		(342	)		143			(5,915	)		(6,114	)
Balance as of December 31, 2018		6,719,275			127,945			906,792			7,754,012
Current		549,678			88,623			176,108			814,409
Non-current		6,169,597			39,322			730,684			6,939,603
		6,719,275			127,945			906,792			7,754,012

Asset
retirement
obligation Litigations Comuneros
provision Environmental
contingencies
and others Total

Balance at December 31, 2014 4,281,107 299,551 551,497 705,916 5,838,071
Additions (recoveries) (60,813 ) (188,962 ) 150,989 188,701 89,915
Uses (84,333 ) (10,791 ) - (74,876 ) (170,000 )
Financial cost 238,876 - - 2,417 241,293
Foreign currency translation 89,793 - - 5,905 95,698
Transfers (1) (12,261 ) - - (5,369 ) (17,630 )
Balance at December 31, 2015 4,452,369 99,798 702,486 822,694 6,077,347
Current 195,858 85,364 - 372,275 653,497
Non-current 4,256,511 14,434 702,486 450,419 5,423,850
Total 4,452,369 99,798 702,486 822,694 6,077,347

	Asset retirement obligation			Litigation			Environmental contingencies and others			Total
Balance as of December 31, 2016		5,064,660			209,932			643,278			5,917,870
Increase in abandonment costs		39,634			–			–			39,634
Additions (reversals)		110,587			(19,185	)		106,532			197,934
Uses		(66,469	)		(7,742	)		(19,613	)		(93,824	)
Financial costs		379,891			–			(367	)		379,524
Foreign currency translation		(979	)		(39	)		718			(300	)
Transfers (1)		–			–			96,611			96,611
Balance as of December 31, 2017		5,527,324			182,966			827,159			6,537,449
Current		199,824			159,881			199,123			558,828
Non–current		5,327,500			23,085			628,036			5,978,621
		5,527,324			182,966			827,159			6,537,449

(1)

Mainly includes transfers to liabilities associated with assets held for sale.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

	Asset retirement obligation			Litigation			Comuneros provision			Environmental contingencies and others			Total
Balance as of December 31, 2015		4,452,369			99,798			702,486			822,694			6,077,347
Increase in abandonment costs		404,797			-			-			-			404,797
Additions (reversals)		18,285			44,120			(702,486	)		(74,312	)		(714,393	)
Uses		(68,460	)		(4,585	)		-			(31,218	)		(104,263	)
Financial costs		317,448			-			-			(173	)		317,275
Foreign currency translation		(14,703	)		(355	)		-			(2,759	)		(17,817	)
Transfers (1)		(45,076	)		70,954			-			(70,954	)		(45,076	)
Balance as of December 31, 2016		5,064,660			209,932			-			643,278			5,917,870
Current		330,057			146,767			-			345,130			821,954
Non-current		4,734,603			63,165			-			298,148			5,095,916
		5,064,660			209,932			-			643,278			5,917,870

(1)

Mainly includes transfers to liabilities associated with assets held for sale.

~~23.1~~21.1

Asset retirement obligation

~~Asset~~The estimated liability for asset retirement obligation costs corresponds to the ~~Company's~~ future obligation that the Ecopetrol Business Group to restore environmental conditions into a ~~manner~~level similar to ~~those~~that existing ~~prior to~~before the start of projects or activities, as described in ~~section 3.5.~~Note 3.5 – Abandonment and dismantling costs of fields and other facilities. As ~~long-term~~these relate to long–term obligations, this liability is estimated by projecting the expected future payments and discounting at present value with a rate ~~referenced~~indexed to the ~~Company's~~Ecopetrol Business Group’s financial obligations, taking into account the ~~temporality~~temporariness and risks of this obligation. The ~~weighted average~~ discount ~~rate at~~rates used in the estimate of the obligation as of December 31, ~~2016 was 7.80% (2015 - 7.28%)~~2018 were: Exploration and Production 3.54%, Transportation and Logistics 3.69% and Refining and Petrochemicals 3.84%. For 2017, the equivalent real discount rates were: Production 3.34%, Transportation 3.43% and Refining 3.77%.

~~F-73~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~23.2~~21.2

~~Litigations~~Litigation

The following is a summary of the main legal proceedings recognized in the consolidated statement of financial position, ~~whose~~where the expectation of loss ~~expectations are highly~~is probable and could imply an outflow of resources atas of December 31, ~~2016~~2018 and ~~2015:~~2017:

Claims 2016 2015

Provision for payment of premium to update the Legal Stability Contract with the Ministry of Finance and Public Credit, generated by the increased investment in the expansion project. 59,528 54,181

Settlement before the Procuraduría General de la Nación with the firms Acciona Infraestructura S.A. y Mantenimiento y Montajes S.A., on August 18, 2016. 44,986 -

Litigation with Schrader Camargo, supplier for Reficar 17,003 17,003

Damage to third parties caused by hydrocarbon easement in a property near toRefinería de Cartagena. 11,019 11,019

Lawsuit by the Sincco consortium for damage related to contractual conditions for the modernization project at the product filling station at the Barrancabermeja industrial complex. 5,347 5,347

Damage to third parties caused by a spill of oil owned by Ecopetrol during a car accident in the Raizal rural district in Cundinamarca. 3,500 3,500

Labor proceeding in 2007 for recalculation of salaries and benefits based on the collective agreement for 232 contractors of Ecopetrol. In the last quarter of 2015 the claimant filed a request for settlement for a new amount of COP$9,338. In 2016 the ruling issued was favorable to Ecopetrol. 10 9,338

Proceedings	2018		2017

Controversy for breach of contract with the firms Consulting Group and Industrial Consulting S.A.S., with Refinería de Cartagena.		15,541		-
Damages to third parties due to hydrocarbon easement in a property close to Refinería de Cartagena.		11,019		11,019
Lawsuit filed by a group of people who claim to be victims of the incident in Machuca, Municipality of Segovia - Antioquia against Oleoducto Central S.A. - Ocensa		9,410		9,410
Provision for the payment of the 2016 legal stability contract premium with the Ministry of Finance and Public Credit, in Refinería de Cartagena – Payment made in 2018		-		64,104
Litigation with Schrader Camargo, supplier of Refinería de Cartagena. In 2018, a payment agreement was reached.		-		17,003

~~23.3~~

~~Comuneros - Santiago de las Atalayas provisions~~

On November 8, 2016, the Ministry of Mines and Energy concluded that the amounts being held were not royalties and therefore not due to the Comuneros. The amounts belonged to Ecopetrol and therefore Ecopetrol recovered the provision it had been recognizing in its financial statements relating to this dispute.

In accordance with the foregoing, the resources held by Ecopetrol are their property without any claim or discussion to date regarding ownership title thereof. On November 8, 2016, the amount of the controversy added up to COP$688,664 originated mostly from the valuation and financial yields of the fund where the resources were deposited. The reversal of this provision was recognized in the net financial results of the period ending December 31, 2016.

~~23.4~~21.3

Environmental contingencies and others

These ~~are mainly~~correspond to contingencies for environmental incidents and obligations related to environmental compensation ~~obligations~~and mandatory investment of 1% for the use ~~and impact~~of, exploitation of or effect on natural resources ~~within the framework~~imposed by national, regional and local environmental authorities. Mandatory investment of ~~environmental authorizations and~~ 1% ~~mandatory investment for~~is based on the use of water taken directly from natural sources ~~pursuant to that provided for~~ in accordance with the provisions of Law 99 of 1993, ~~article~~Article 43, ~~and~~ Decree 1900 of 2006, Decree 2099 of 2017 and 075 and 1120 of 2018 in relation ~~with~~to the projects that Ecopetrol ~~projects~~develops in Colombia.

Ecopetrol S.A.

Notes to the ~~region. On December 22, 2016,~~consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The Colombian Government through the Ministry of ~~the~~ Environment and Sustainable Development, issued ~~Decree~~in December 2016 and in January 2017 the Decrees 2099 ~~whereby it amended~~and 075, which modify the Single Regulatory ~~Single~~ Decree of the environment and sustainable development sector, Decree 1076 of 2015, related to ~~their~~the mandatory investment for the use of water taken directly from natural ~~sources;~~sources.

The main changes established by these decrees were related to the ~~Company~~areas and lines of investment and the basis for settlement of the obligations. Similarly, June 30, 2018 was declared the maximum date to modify investment plans that were underway.

On June 30, 2017, Ecopetrol filed with the National Environmental Licensing Authority (ANLA) certain investment plans to meet the 1% mandatory investment based on the new decrees, relative to investment lines, maintaining the settlement base of Decree 1900.

As of December 31, 2018, the provision for the 1% mandatory investment for the use of water was estimated based on the parameters established in Decree 1076 of 2015. The Ecopetrol Business Group is ~~currently~~in the process of analyzing the impact ~~derived from its implementation.~~of the applicability of the changes set out in the aforementioned decrees.

~~F-74~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~23.5~~21.4

Contingencies

Oleoducto Central S.A. - Ocensa

In 2017, Oleoducto Central Ocensa. S.A. (Ocensa) recognized a provision to address a probable loss from the potential outcome of the arbitration process filed by Frontera Energy Colombia Corp., Colombia Branch (Frontera); this arbitration process concluded on July 12, 2018 as a result of the Arbitral Court’s approval of the reconciliation agreement achieved by the parties, pursuant to which the standard transport rate was revised along with the monetary conditions of the transport agreements entered into July 29, 2014 for expanded capacity resulting from the P135 Project, in turn extending its effects from July 1, 2017 (effective date of the transport agreements). On July 12, 2018, the parties entered into the corresponding addenda to the current transport agreements, reflecting the changes contained in the approved reconciliation agreement.

Similarly, for Project P135 carriers that accepted the binding offer extended by Ocensa with regard to the principles of Resolution No. 72146 of 2014, a transaction agreement has been entered into along with the respective additional provisions amending the transport agreements, under identical or equivalent conditions as those contained in the reconciliation agreement and addenda with Frontera. Concerning the arbitral proceeding convened by Vitol Colombia C.I. S.A.S., the parties have requested, by mutual consent, that the Arbitral Court terminate the proceeding as a result of the settlement agreement reached on July 23, 2018. This request was accepted by the Court at the hearing of August 8, 2018, thus concluding the arbitral process.

The reconciliation and settlement agreements entered into established the obligation of the carriers to cease their current administrative or legal actions and refrain from filing new claims in the future.

As a result, Ocensa reconciled and adjusted the accounts receivable and payable that were held between the parties and the credit notes were issued to reflect the balances in favor of the senders. This recognition in the financial statements generated a movement of the provision and its corresponding effect on other operating income of COP COP$56,122, in addition to the decrease in income from ordinary activities as of June 30th because of the issued credit notes.

Oleoducto Bicentenario de Colombia S.A.S.

During July 2018 the carriers Frontera Energy Colombia Corp. (“Frontera”), Canacol Energy Colombia S.A.S. (“Canacol”) and Vetra Exploración y Producción Colombia S.A.S. (“Vetra” and, together with Frontera and Canacol, the “Carriers”) sent letters to Oleoducto Bicentenario de Colombia S.A.S. (“Bicentenario”) alleging they were early termination rights under the Ship-or-Pay Transport Agreements entered by each of them and Bicentenario in 2012 (the “Transport Agreements”). Bicentenario has rejected the terms of the letters, noting that there is no option for early termination and reiterating to the Carriers that the Transport Agreements are current and therefore the Carriers must fullfill their obligations under the Transport Agreements in a timely fashion.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

On October 19, 2018, Bicentenario notified Frontera of the existence of a “Dispute” pursuant to Clause 20 of the respective Transport Agreement and moved to the party dispute settlement stage as provided for in such clause. Such discussions ended without an agreement on December 19, 2018. On January 28, 2019, Bicentenario filed an Arbitration Claim against Frontera in accordance with the arbitration clause of the Transportation Agreement to claim any compensation, indemnification or other restitution deriving from the alleged early termination of said agreements.

Cenit Transporte y Logística de Hidrocarburos S.A.S.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

21.5

Legal proceedings not ~~recognized~~provided for

The following is a summary of the main contingent liabilities that have not been recognized in the statement of financial position ~~since~~as, according to the evaluations ~~performed~~made by ~~Company’s~~ internal and external advisors ~~their occurrence~~of the Ecopetrol Business Group, the expectation of loss is not probable atas of December 31, ~~2016~~2018 and ~~2015:~~2017:

Claims 2016 2015

Income tax for taxable year 2010 of Hocol - Rejections related to:
a) Special production on productive fixed assets related to unsuccessful exploratory wells.
b) Deduction of disbursements related to geology, geophysics and seismic, which must be capitalized and amortized. 197,824 197,824

Income tax for taxable year 2011 of Hocol - Rejections related to:
a) Special production on real productive fixed assets related to unsuccessful exploratory wells.
b) Deduction of disbursements related to geology, geophysics and seismic, which must be capitalized and amortized. 147,091 147,091

On March 14, 2016, a lawsuit was filed for default in settling the contract between Konidol and Ecopetrol, which gave rise to excess costs in the maintenance contract. 62,131 -

Indemnity to third parties for damage caused by hydrocarbon spills during a tanker truck accident on the Villeta - Guaduas road. 43,333 43,333

Recalculation of legal and extralegal social benefits on cash paid for the benefit of saving incentives. 16,562 16,562

Claim to Ecopetrol for legal actions filed against Cepsa as the operator of the Association contract for excess costs in current contracts. 10,608 -

Default by Ecopetrol in fulfilling contractual terms of the civil works project with the contractor Edgar Gómez Lucena y Asociados Ltda. 10,000 10,000

Transfers of the electric energy sector for electric power self–generation, pursuant to Law 142 of 1994. In 2016 there was a second instance ruling that was favorable to Ecopetrol.
- 219,944

~~F-75~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Proceedings	2018		2017

Administrative and patrimonial responsibility for terrorist attack perpetuated in 2015 against the TransAndino Pipeline.		500,000		-
Action of group that claim damages derived from the pollution caused by the attack on the TransAndino pipeline in 2015.		358,201		-
Environmental damages for terrorist attack perpetuated in 2015 against the Transandino pipeline.		209,220		209,220
Breaking of the economic and financial balance with contractor for the construction of transport system.		110,266		110,266
Breach of contract and recognition of salary readjustments and other claims related to an engineering service provider.		85,198		-
On March 14, 2016, a claim was filed for breach in the settlement of the contract between Konidol and Ecopetrol, which generated cost overruns in the maintenance contract.		62,131		62,131
Salary readjustments to the values established by Ecopetrol for personnel related to a contract signed with a third party for the assembly and construction of surface facilities for production and exploration projects.		60,313		60,313
Contractual imbalance with a technical maintenance provider.		51,429		-
Contractual imbalance with a third party that provides assembly and construction services for surface facilities for exploration and production projects.		35,741		-
Contractual imbalance with a third party in connection with road connection works.		31,679		31,679
Breach of certain obligations agreed in contract with supplier for the construction and assembly of tanks.		31,213		-
Contractual controversial with a third party in relation to seismic program acquisition and processing service.		30,000		30,000

~~23.6~~21.6

~~Detail~~Details of contingent assets

~~Included below, there~~The following is a ~~detail~~breakdown of the ~~major~~Ecopetrol Business Group’s principal contingent assets, ~~contingencies of which occurrence~~where the associated contingent gain is ~~possible at December 31, 2016 and 2015:~~likely, but not certain:

Claims 2016 2015

Default in fulfilling the pipe purchase order subscribe to with Daewoo International Corp. 21,232 21,232

Public lighting tax in the municipality of Barrancabermeja for the years 2003 to 2005. 17,490 -

Nullity of administrative act issued by the DIAN, which ordered a special contribution for public works contracts. 13,214 13,214

Nullity of resolution 113 of 1971 of the Presidency of Colombia, whereby the subsurface property titles were transferred to private parties known with the names of Santiago de las Atalayas and Pueblo Viejo de Cusiana. In 2016, the lawsuit ended in favor of Ecopetrol, making it clear that the sequestered cash is the property of Ecopetrol. - 175,000

Nullity of administrative act that ordered a special contribution for public works contracts. In 2016, there was a first instance ruling that is partially favorable to the claims of Ecopetrol. 2 14,956

Proceedings	2018		2017

Claim by Ecopetrol for differences in the settlement of additional income due to high prices.		286,331		-
Disagreement regarding the interpretation and application of the staggered production clause.		98,031		-
Non-compliance with the association contract in relation to reimbursement of administrative costs and other claims.		43,007		40,711
In 2015, the administrator of the Agreements signed with a Corporation filed a criminal complaint for the alleged falsification of a document. Ecopetrol is a victim in the process.		32,000		32,000
Failure to comply with the pipe purchase order, the physical characteristics of the coating do not correspond to those contracted.		21,232		21,232
Contractual controversy by others for the maintenance of some production fields.		13,449		-

Refinería de Cartagena S.A.

OnIn March 8, 2016, Reficar ~~presented~~filed a ~~request~~Request for Arbitration before the International Chamber of Commerce ~~(ICC)~~(the “ICC”), against Chicago Bridge & Iron Company ~~NV,~~N.V., CB&I (UK) Limited, and CBI Colombiana S.A. ~~(collectively, "CB&I"~~(jointly, “CB&I”) concerning a dispute related to the ~~contract for the construction, procurement~~Engineering, Procurement, and ~~engineering~~Construction Agreements entered into by and between Reficar and CB&I for the expansion of~~Refinería de~~ the Cartagena Refinery in Cartagena, Colombia. Reficar is the ~~claimant~~Claimant in the ICC arbitration ~~process of the ICC~~ and ~~requests at least~~seeks no less than US$2 billion ~~from CB&I.~~ in damages plus lost profits.

On May 25, 2016, CB&I filed ~~a counterclaim of~~its Answer to the Request for Arbitration and Counterclaim for approximately US$~~213~~106 million and COP$324,052 million. On June 27, 2016, Reficar ~~answered this request~~filed its reply to CB&I’s counterclaim denying ~~any responsibility.~~ and disputing the declarations and relief requested by CB&I. On April 28, 2017, CB&I submitted its Statement of Counterclaim increasing its claims to approximately US$116 million and COP$387,558 million. On March 16, 2018, CB&I submitted its Exhaustive Statement of Counterclaim further increasing its claims to approximately US$129 million and COP$432,303 million (including in each case interest).

The ~~International Chamber~~date for the filing of ~~Commerce process~~the Third Written Submission is ~~currently in its preliminary stage~~to be set by the Arbitral Tribunal and athe oral hearing is scheduled ~~for October 2018.~~to begin in April 2020. After the hearing, the Tribunal will analyze the parties’ arguments to render its final decision on Reficar’s and CB&I’s claims. Until then, the outcome of this arbitration is unknown.

Ecopetrol S.A.

~~F-76~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~24.~~21.7

Investigations of control entities

Reficar

The Office of the Comptroller General’s investigations and proceedings

1.1

Because of the modifications of the schedule and budget related to Reficar’s expansion and modernization project (the “Project”), the Office of the Comptroller General initiated a special audit investigation of the Project in 2016 and delivered a final report to Reficar on December 5, 2016. The report made 36 findings most of which were related to increased costs compared to budget for services, labor and materials. As required, on January 18, 2017, Reficar submitted an action plan exposing and addressing the 36 findings in the following areas: (i) contract management, (ii) supervision of engineering standards contracted with third parties, and (iii) documentation of the control, reporting and monitoring mechanisms of subcontracts.

1.2

As a result of the findings described above, on March 10, 2017, the Office of the Comptroller General opened actions for financial responsibility (proceso de responsabilidad fiscal) against 36 individuals and the six companies involved in the Project, including former members of Ecopetrol’s Board of Directors, former members of Reficar’s Board of Directors, former employees of Ecopetrol, and former employees of Reficar, as well as Chicago Bridge & Iron Company N.V., CBI - Chicago Bridge & Iron company (CB&I) Americas Ltd., Chicago Bridge & Iron Company CB&I UK Limited, CBI Colombiana S.A., Foster Wheeler USA Corporation and Process Consultants Inc.

These actions were initiated based on the Office of the Comptroller General’s theory that lower than expected profitability at Reficar could have been caused by (i) modifications to the schedule and, (ii) the increase of the budget for the Project.

On June 5, 2018, the Office of the Comptroller General split the initial proceeding in two. The first one is related to the increase of the Project’s budget and the second one is related to the modifications in the Project’s schedule.

Regarding the first proceeding, on June 5, 2018, the Office of the Comptroller General issued charges for financial responsibility (proceso de responsabilidad fiscal) against (i) 15 individuals, which include former members of Reficar’s Board of Directors, a current employee of Ecopetrol, and former employees of Reficar, as well as against (ii) Chicago Bridge & Iron Company N.V., CBI - Chicago Bridge & Iron company (CB&I) Americas Ltd., Chicago Bridge & Iron Company CB&I UK Limited, CBI Colombiana S.A., Foster Wheeler USA Corporation and Process Consultants Inc, and the following insurance companies, Compañía Aseguradora de Fianzas S.A, CHUBB de Colombia, Compañía de Seguros S.A., Mapfre Seguros, as third parties with joint liability.

As for the other 21 individuals initially investigated in 2017, the Office of the Comptroller General closed the investigations. Therefore, as of the date of these financial statements, no current or former member of Ecopetrol’s Board of Directors was charged in the first proceeding relating to the increase in the Project’s budget.

As of the date of these financial statements, no charges have been issued in the second proceeding relating to the modifications in the Project’s schedule.

While the content and status of the proceedings remains confidential, we can report that Reficar and several of its employees have cooperated with and provided the information required by the department of the Office of the Comptroller General in charge of leading the proceedings.

As of the date of these financial statements, Reficar has no liability under these proceedings.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

1.3

In January 2017, the Office of the Comptroller General initiated a special audit in Reficar and delivered a final report to Reficar on July 12, 2017. In this report the Office of the Comptroller General concluded that, in their opinion, Reficar’s 2016 Financial Statements do not reasonably represent, in all important aspects, the entity’s financial position as of December 31, 2016.

On February 2, 2018, the Legal Accounts Commission of the National House of Representatives of the Republic of Colombia informed Reficar that the House of Representatives decided, through Resolution No. 2713, that it would not close the General Budget and Treasury Account and the National Balance Sheet for the 2016 fiscal year, since the 2016 Financial Statements of several state entities, among them Reficar, had received a negative opinion from the Office of the Comptroller General. Pursuant to Resolution No. 2713, Colombian control entities were ordered to initiate the corresponding disciplinary, fiscal and/or criminal investigations.

1.4

In December 2017, the Office of the Comptroller General initiated a special audit in Reficar and submitted a final report to Reficar on May 18, 2018. In this report the Office of the Comptroller General concluded that, in their opinion, Reficar’s 2017 Financial Statements do not reasonably represent, in all important aspects, the entity’s financial position as of December 31, 2017.

On February 6, 2019, the Legal Accounts Commission of the National House of Representatives of the Republic of Colombia informed Reficar that the House of Representatives decided, through Resolution No. 3135, that it would not close the General Budget and Treasury Account and the National Balance Sheet for the 2017 fiscal year, since the 2017 Financial Statements of several state entities, among them Reficar, had received a negative opinion from the Office of the Comptroller General. Pursuant to Resolution No. 3135, Colombian control entities were ordered to initiate the corresponding disciplinary, fiscal and/or criminal investigations.

In respect of the special audits mentioned in sections 1.3 and 1.4 above, as of the date of these financial statements, Reficar has no knowledge of any procedural action carried out by any of the Colombian control entities regarding the disciplinary, fiscal and/or criminal investigations ordered neither by the Resolution No. 2713 nor by the Resolution No. 3135.

1.5

In January 2019, the Office of the Comptroller General initiated a financial audit in Reficar. The final report is expected to be submitted on May 2019.

Reficar’s external auditors issued an unqualified opinion on Reficar’s financial position as of December 31, 2016, 2017 and 2018. As of the date of these financial statements, such auditors have not informed Reficar that there has been any change to their opinion.

As of the date of these financial statements, to the best of Ecopetrol’s knowledge, the financial statements continue to fairly represent the financial and operational condition of the Company in all material aspects and its internal controls remain effective.

The Attorney General’s Office investigations:

Reficar has been officially informed that the Attorney General’s Office currently has five ongoing investigation related to the Project.

Regarding one of these five investigations, on September 12, 2017, the Attorney General’s Office issued a list of charges against certain former members of Reficar’s Board of Directors, as well as certain former officers of Reficar. The charges were related to the failure to fulfill some of their duties as administrators and/or for acting “ultra vires” in the exercise of their functions against: (i) Javier Genaro Gutiérrez (Ecopetrol CEO, 2007-2015); (ii) Felipe Laverde (Reficar General Counsel, 2009-March 2017); (iii) Pedro Rosales (Ecopetrol Downstream Executive Vice President, 2008-2015); (iv) Diana Constanza Calixto (Ecopetrol Head of the Corporate Finance Unit, 2009-2014) and (v) Reyes Reinoso Yañez (Reficar CEO, 2012-2016). The Attorney General’s Office closed the case against the rest of the members of Reficar’s Board of Directors and the rest of the former officers of Reficar.

The specific content and status of the remaining four ongoing investigations remains confidential.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The Prosecutor’s Office investigations:

The Prosecutor’s Office has been conducting the following legal proceedings:

3.1

Between July 25 and August 2, 2017, the Prosecutor’s Office indicted the following individuals with charges, the majority of which are related to offenses against the public administration and illegal interest in the execution of agreements: (i) Orlando José Cabrales Martínez (Reficar CEO, 2009-2012); (ii) Reyes Reinoso Yañez (Reficar CEO, 2012-2016); (iii) Felipe Laverde Concha (Reficar General Counsel, 2009-March 2017); (iv) Pedro Alfonso Rosales Navarro (Ecopetrol Downstream Executive Vice President, 2008-2015); (v) Masoud Deidehban (CBI Executive Project Director); (vi) Phillip Asherman (CBI CEO) and (vii) Carlos Lloreda (Reficar’s statutory auditor from 2013-2015.) The arraignment hearing began on May 30, 2018, and as of the date of these financial statements has not yet concluded.

The Prosecutor’s Office has already made public the factual basis for such charges, which is based on the theory that: (i) executing a cost reimbursable engineering, procurement and construction contract (EPC) and not a lump sum agreement favored CBI interests, and (ii) executing special invoicing procedures (MOA –Memorandum of Agreement and PIP –Project Invoicing Procedure) with CBI allowed the payments of unreasonable amounts not duly verified by Foster Wheeler USA Corporation. The defense attorneys have not yet had an opportunity to present their case against such facts in a court of law.

On May 9, 2017, Ecopetrol’s Audit and Risk Committee retained a U.S.-based outside law firm to commence a third-party investigation into the matters set forth in the Prosecutor’s Office announcement. The results were presented in December 2017 to Ecopetrol’s Audit and Risk Committee. This investigation concluded that to date there has been no evidence of possible unlawful acts that affect Ecopetrol’s internal control over the financial reporting of the Company, on the allegations made by the Prosecutor’s Office.

3.2

On October 22 and 23, 2018, the Prosecutor’s Office indicted the following individuals with charges related to improper management and obtaining false public documents: Javier Genaro Gutiérrez Pemberthy (Ecopetrol CEO, 2007-2015), Reyes Reinoso Yánez (Reficar CEO, 2012-2016), Pedro Alfonso Rosales Navarro (Ecopetrol Downstream Executive Vice President, 2008-2015), and Diana Constanza Calixto Hernández (Ecopetrol Head of the Corporate Finance Unit, 2009-2014). As of the date of these financial statements, the arrangement hearing has not yet taken place.

3.3

On March 18, 2019, the Prosecutor’s Office issued a public statement in which it announced that on April 25, 2019 it was going to indict the following individuals, in an indictment hearing that has not yet taken place, with charges related to entering into agreements without compliance with legal requirements: Orlando José Cabrales Martínez (Reficar CEO, 2009-2012) and Felipe Castilla (Reficar CEO, 2009).

22.

Equity

The main components of equity are ~~comprised as follows:~~detailed below:

~~24.1~~22.1

Subscribed and ~~paid-in~~paid–in capital

Ecopetrol’s authorized capital amounts to $36,540,000, and is comprised of 60,000,000,000 ordinary shares, of which 41,116,694,690 ~~of such shares have been subscribed represented by~~are outstanding, and 11.51% ~~(4,731,905,873~~(4,731,906,273 shares) ~~of natural and non-government entities~~are held privately and 88.49% ~~(36,384,788,817~~(36,384,788,417 shares) are held by ~~Government entities.~~the Colombian Government. The value of the reserve shares amounts to $11,499,933 comprised byof 18,883,305,310 shares. AtAs of December 31, ~~2016~~2018 and ~~2015,~~2017, subscribed and ~~paid-in~~paid–in capital amounts to $25,040,067. There are no potentially dilutive ~~instruments.~~

On March 26, 2015, the General Stockholders’ Meeting approved the capitalization of occasional reserves of Ecopetrol S.A. for COP$14,760,893 through the mechanism of increasing the face value. This capitalization of reserves did not modify materially the number of ordinary shares registered.shares.

~~24.2~~22.2

Additional ~~paid-in~~paid–in capital

ItAdditional paid–in capital mainly corresponds to: (i) ~~surplus with respect to its nominal value derived~~share premium from the ~~sale of shares upon~~Ecopetrol Business Group’s capitalization in 2007, for ~~$4,457,997,~~COP$4,457,997, (ii) ~~$31,377~~COP$31,377 share premium from the ~~value generated by the process~~placement of ~~placing the~~ shares on the secondary market, arising from the calling of guarantees from debtors in arrears, according to the provisions of Article 397 of the Code of Commerce, (iii) ~~to the surplus over nominal value arising~~share premium from the sale of shares awarded in the second ~~round,~~capitalization, which took place in September 2011, ~~in the amount~~ of ~~$2,118,468,~~COP$2,118,468, and (iv) ~~Additional paid-in~~additional paid–in capital ~~receivable~~receivables for ~~$(143)~~COP$(143).

~~24.3 Equity reserves~~Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

22.3

Equity reserves

The ~~balance~~following is the composition of the Ecopetrol Business Group’s reserves as of December 31, 2018 and 2017:

	2018		2017
Legal reserve		2,088,192		1,426,151
Fiscal and statutory reserves		509,081		512,632
Occasional reserves⁽¹⁾		2,541,622		239,086
		5,138,895		2,177,869

The movement of equity reserves is ~~comprised as follows at~~the following for the years ended December 31, ~~2016~~2018 and ~~2015:~~2017:

2016 2015
Legal reserve 1,269,680 5,139,587
Fiscal and statutory reserves 289,164 405,660
Occasional reserves - 1,323
Total 1,558,844 5,546,570

	2018			2017
Opening balance		2,177,869			1,558,844
Release of reserves		(751,718	)		(289,164	)
Allocation to reserves		3,712,744			908,189
Closing balance		5,138,895			2,177,869

⁽¹⁾

Occasional reserves

~~The following shows the balance and a breakdown~~As of ~~the changes in equity reserves at~~ December 31, ~~2016 and 2015:~~

2016 2015
Opening balance 5,546,570 17,963,370
Appropriation of reserves, net (117,819 ) 2,344,095
Legal reserve used to offset previous year loss (Note 24.4) (3,869,907 ) -
Capitalization of occasional reserves - (14,760,895 )
Closing balance 1,558,844 5,546,570

~~Legal reserve~~

~~The Colombian Code of Commerce establishes the appropriation obligation of 10%~~2018, occasional reserves correspond to allocation of net income ~~to the legal reserves until the legal reserves are equal to 50% of the subscribed capital. The legal reserve can be used to offset losses or for distribution in the event of a Company’s liquidation.~~

~~F-77~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~Occasional reserves~~

~~This corresponds to the appropriation of earnings ordered~~as approved by the shareholders at the Stockholders’ ~~meeting~~Meeting to carry out new explorations and ~~future investments, as well as unrealized profits between group companies. On March 26, 2015, the Stockholders’ Meeting approved, after~~strategic growth. As of December 31, 2017, the appropriation of ~~the~~ occasional reserves ~~of the 2014 period, the capitalization of occasional reserves for $14,760,895 through the mechanism of face value increase.~~

~~Tax and mandatory reserves~~

The Colombian tax regime contemplates the appropriation of the period’s profits equivalent to 70% when the value of the depreciation deduction for tax purposes exceeds the accounting depreciation. This reserve may be releasedcorrespond to the ~~extent that the depreciations subsequently accounted exceed those annually claimed for tax purposes or the assets that generated the higher value deducted are sold.~~

~~In addition, Decree 2336~~establishment of ~~1995 set out the obligation to establish~~ a reserve for valuation of investments. The profits generated at the closing of the accounting period as a consequence of the application of special valuation systems at market prices and that have not been made on behalf of the Company, will be taken to a reserve.new explorations.

~~24.4~~22.4

Retained earnings and ~~payment of~~ dividends

The ~~following shows the balance and a breakdown of the changes~~Ecopetrol Business Group distributes dividends based on its separate annual financial statements, prepared under International Financial Reporting Standards accepted in ~~retained earnings at December 31, 2016 and 2015:~~Colombia (NCIF, by its acronym in Spanish).

2016 2015
Opening balance (6,814,432 ) 8,192,040
Profit (loss) attributable to owners of Ecopetrol’s shareholders 2,447,881 (7,193,859 )
Appropriation of reserves 117,819 (2,344,095 )
Legal reserve used to offset previous year loss (1) 3,869,907
Dividends declared (1) - (5,468,521 )
Other movements (23,637 ) 3
Closing balance (402,462 ) (6,814,432 )

~~(1)~~

~~The Company distributes dividends based on its separate financial statements prepared under Colombian IFRS.~~

The Ordinary General Shareholders’ Meeting, ~~of Shareholders~~ held on March ~~31, 2016,~~29, 2019, approved the ~~proposal for~~ profit distribution ~~which established that there would be no~~for 2018 and set the distribution of dividends at COP$9,251,256.

The Ordinary General Shareholders’ Meeting, held on March 23, 2018, approved the profit distribution for 2017 and set the ~~year 2015, given the net loss occurred in that year; in addition, the shareholders voted to use the legal reserve to offset this loss, as permitted by the Article 456~~distribution of ~~the Colombian Code of Commerce. The amount of losses offset with the legal reserve once releases and tax and mandatory appropriations amounted to $ 3,869,907.~~dividends at COP$3,659,386. Dividends paid in ~~2016~~2018 attributable to ~~non-controlling~~the shareholders of ~~subsidiaries~~Ecopetrol S.A. amounted to COP$~~1,022,121.~~

On3,659,373 (2017 - COP$945,661) and those of the results of 2014 the General Stockholders Meeting approved the distribution of an ordinary dividend per share of COP$133. In June, 2015 the Company paid the minority stockholders COP$629,344 and COP$4,149,000 to majority stockholders. Dividends declared to the majority shareholder in 2015 payable at December 31, 2015 amountednon-controlling interest to COP$~~690,177 and were fully paid during the first quarter of 2016. Dividends paid in 2015 attributable to non-controlling shareholders of subsidiaries amounted to~~768,328 (2017 – COP$~~715,053.~~558,986).

~~F-78~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~24.5~~22.5

Other comprehensive income attributable to owners of ~~the Company~~parent

The following is ~~a breakdown~~the composition of the other comprehensive income attributable to the shareholders of the parent, Ecopetrol S.A., net of ~~tax at December 31, 2016 and 2015:~~tax:

	2016			2015			2018			2017			2016
Foreign currency translation								10,412,499			7,883,231			8,138,382
Cash flow hedge with derivative instruments								(30,962	)		6,942			(19,042	)
Cash flow hedges for future exports (Note 28.1.2)								(374,079	)		159,295			244,131
Actuarial gain on defined benefit plans		994,953			2,148,395			(557,381	)		(553,091	)		994,953
Gain (loss) on equity instruments measured at fair value (1)		7,828			(49,881	)
Cash flow hedges for future exports		244,131			(217,291	)
Hedge of a net investment in a foreign operation		(155,359	)		-
Cash flow hedge with derivative instruments		(19,042	)		(43,590	)
Hedge of a net investment in a foreign operation (Note 28.1.3)								(1,069,316	)		(97,362	)		(155,359	)
Gain on equity instruments measured at fair value								–			–			7,828
Others		11,817			58,643			–			–			11,817
Foreign currency translation		8,138,382			8,949,728
		9,222,710			10,846,004			8,380,761			7,399,015			9,222,710

~~(1)~~22.6

During 2016 the Company reclassified to the statement of profit or losses COP $68,497 (2015 - COP $19,405) arising from the realization of the valuations at market value of the accumulated amount in equity of assets available for sale - Empresa de Energía de Bogotá and Interconexión Eléctrica S.A. (Note 11).Earnings per share

	2018		2017		2016
Profit attributable to Ecopetrol’s shareholders		11,381,386		7,178,539		2,447,881
Weighted average number of outstanding shares		41,116,694,690		41,116,694,690		41,116,694,690
Net basic earnings per share (Colombian pesos)	COP$	276.8	COP$	174.6	COP$	59.5

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~24.6~~

~~Earnings (loss) per share (basic and diluted)~~

2016 2015
Profit (loss) attributable to Ecopetrol’s shareholders 2,447,881 (7,193,859 )
Weighted average number of outstanding shares 41,116,694,690 41,116,694,690
Net basic earnings (loss) per share (basic and diluted -Colombian pesos) 59.5 (175.0 )

~~There is no potential dilution of shares.~~

~~F-79~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~25.~~23.

Sales revenue from contracts with customers

The following is athe breakdown of sales revenue for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

	2016		2015		2014		2018		2017		2016
National sales
Mid-distillates		8,553,503		10,215,224		11,983,455
Gasoline		6,092,739		6,128,208		6,394,422
Services		4,043,284		4,435,274		3,778,073
Mid–distillates								11,586,192		9,590,326		8,553,503
Gasoline and turbo fuels								7,952,852		6,990,187		6,092,739
Transport services								3,531,404		3,589,553		3,817,991
Natural gas		1,988,336		1,845,345		1,346,625		1,885,846		1,815,754		1,988,336
Plastic and rubber		724,708		724,392		667,563		822,367		833,982		724,708
L.P.G. and propane		405,869		335,494		426,450
Crude		553,666		491,279		1,213,718
LPG and propane								574,639		509,619		405,869
Crude oil								550,479		909,871		553,666
Fuel oil								509,482		354,058		148,248
Asphalts		340,400		461,188		459,072		335,426		275,803		340,400
Aromatics								282,545		217,418		186,228
Polyethylene								270,887		167,348		203,959
Services								239,410		283,799		225,293
Other income gas contracts								156,031		188,195		271,337
Other products		994,645		988,346		1,001,321		489,507		280,226		184,873
		23,697,150		25,624,750		27,270,699		29,187,067		26,006,139		23,697,150
Recognition of price differential (1)		1,048,022		441,871		485,409		3,835,533		2,229,953		1,048,022
		24,745,172		26,066,621		27,756,108		33,022,600		28,236,092		24,745,172
Foreign sales
Crude		17,278,579		21,181,265		30,835,510
Crude oil								26,898,737		21,479,063		17,278,579
Diesel								3,050,839		1,213,740		1,604,498
Fuel oil		2,158,539		2,166,469		3,921,703		2,053,594		1,982,408		2,158,539
Trading of crude		-		1,309,196		1,486,060
Diesel		1,594,945		81,982		179,738
Gasoline and turbo fuels								1,782,194		1,223,994		1,046,758
Plastic and rubber		1,171,342		1,096,730		975,282		1,268,582		1,169,101		1,171,342
Gasoline and turbo fuel		1,046,758		93,125		127,090
Cash flow hedge for future exports – Reclassification to profit or loss (Note 31.2.1)		33,074		7,646		-
Natural gas								27,899		32,303		58,809
LPG and propane								20,212		15,631		8,568
Cash flow hedge for future exports – Reclassification to profit or loss (Note 28.1.2)								128,404		160,772		33,074
Other products		457,152		344,237		690,397		350,811		441,124		380,222
		23,740,389		26,280,650		38,215,780		35,581,272		27,718,136		23,740,389
Total sales revenue		48,485,561		52,347,271		65,971,888
								68,603,872		55,954,228		48,485,561

(1)

Corresponds to the application of Decree ~~1880~~1068 of ~~September 2014 and Resolution 180522 of 2010,~~2015, which ~~defined~~establishes the procedure to recognize the subsidy for ~~price differentials~~refiners and importers of current motor gasoline and ACPM, and the methodology for calculating the net position (value generated ~~by the difference~~ between the parity price and the regulated price, which can be positive or negative). See ~~section~~Note 4.16 – Sales revenue recognition ~~for more details.~~from contracts with customers.

Sales by geographic areas

~~Operating~~The following are the sales revenue by geographic ~~areas is comprised as follows~~area for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

2016 % 2015 % 2014 %
Colombia 24,745,172 51.0 % 26,066,621 49.8 % 27,756,108 42.1 %
United States of America 11,956,967 24.7 % 11,921,720 22.8 % 14,977,109 22.7 %
Asia 2,717,414 5.6 % 6,123,593 11.7 % 13,416,506 20.3 %
Europe 2,945,951 6.1 % 3,981,926 7.6 % 5,915,190 9.0 %
Central America and Caribbean 3,551,894 7.3 % 3,366,978 6.4 % 3,049,688 4.6 %
South America and others 2,568,163 5.3 % 886,433 1.7 % 857,287 1.3 %
Total 48,485,561 100 % 52,347,271 100 % 65,971,888 100 %

~~F-80~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

	2018		%			2017		%			2016		%
Colombia		33,022,600		48.1	%		28,236,092		50.5	%		24,745,172		51.0	%
United States		14,765,674		21.5	%		12,532,932		22.4	%		11,956,967		24.7	%
Asia		12,271,225		17.9	%		6,136,796		11.0	%		2,717,414		5.6	%
Central America and the Caribbean		4,449,033		6.5	%		6,070,565		10.8	%		3,551,894		7.3	%
South America and others		2,968,038		4.3	%		1,947,226		3.5	%		2,568,163		5.3	%
Europe		1,127,302		1.6	%		1,030,617		1.8	%		2,945,951		6.1	%
		68,603,872		100	%		55,954,228		100	%		48,485,561		100	%

Concentration of customers

During ~~2016~~2018, Organización Terpel ~~accounted~~S.A. represented 14.0% of sales revenue for ~~14.4% of total sales in~~ the period ~~(2015 -~~(2017 – 14.3% and 2016 – 14.4% ~~and 2014 - 13.7%~~)~~. No~~; no other customer ~~has~~represented more than 10% of total ~~consolidated~~ sales. There ~~was~~is no ~~exposure that affects~~risk of the Ecopetrol Business Group's financial ~~position~~situation being affected by a potential loss of ~~Ecopetrol if the Company lost~~ the client. The commercial relationship with this customer is for the sale of ~~refine~~refined products and transportation ~~service. Sales~~services.

Ecopetrol S.A.

Notes to ~~this customer are recognized by~~ the ~~Refining and Petrochemical and transportation and logistics Segments. Organizacion Terpel, is leader thanks to its network~~consolidated financial statements

(Figures expressed in millions of ~~petrol stations and industrial sales strategy and in the aviation segment.~~Colombian pesos, unless otherwise stated)

~~26.~~24.

Cost of sales ~~(before impairment of non-current assets)~~

~~The following is the detail of cost of sales per function for the years ended December 31, 2016, 2015 and 2014:~~

	2016			2015			2014		2018			2017			2016
Variable costs
Imported products (1)		12,049,477			12,935,878			13,264,700		11,809,529			11,637,419			12,049,477
Depreciation, depletion and amortization		5,333,245			5,166,455			5,114,053
Hydrocarbon purchases - ANH (2)		3,178,199			3,741,010			6,630,309
Purchases of hydrocarbons – ANH (2)										5,667,567			4,338,576			3,178,199
Depreciation, amortization and depletion										5,064,518			5,765,186			5,333,245
Purchases of crude in association and concession		1,517,829			1,928,938			3,293,594		3,820,746			2,240,704			1,517,829
Hydrocarbons transportation services		783,307			1,380,733			1,548,115
Processing materials		608,535			366,454			349,953
Electric power		618,675			424,920			408,248
Gas royalties in cash		478,332			481,029			399,752
Process materials										968,884			889,122			608,535
Hydrocarbon transport services										696,964			665,714			783,307
Electric energy										662,297			561,424			618,675
Purchases of other products and gas		519,884			703,163			1,021,327		632,509			488,056			519,884
Taxes and contributions (3)										441,207			449,959			478,332
Services contracted in associations		305,326			563,032			612,013		260,207			195,689			305,326
Others ~~(3)~~(4)		(432,694	)		(322,547	)		98,904		(186,087	)		(663,916	)		(432,694	)
		24,960,115			27,369,065			32,740,968		29,838,341			26,567,933			24,960,115
Fixed costs
Depreciation and amortization		2,050,739			1,433,263			1,144,437		2,555,176			2,366,849			2,050,739
Maintenance		1,998,128			2,334,130			2,646,832		2,260,984			2,038,970			1,998,128
Labor cost		1,571,511			1,542,701			1,369,654
Labor costs										2,105,803			1,815,213			1,571,511
Services contracted										1,796,354			1,414,056			1,083,176
Services contracted in associations		1,260,470			1,415,422			1,674,322		1,040,221			1,008,336			1,260,470
Services contracted		1,083,176			1,301,094			1,578,918
Taxes and contributions		391,032			461,624			607,494
Materials and operating supplies										565,601			468,205			333,258
Taxes and contributions (3)										393,690			343,505			391,032
Hydrocarbon transport services										261,237			333,671			157,463
General costs		383,842			461,994			441,718		366,972			551,587			445,531
Materials and operating supplies		333,258			435,238			500,934
Hydrocarbons transportation services		157,463			147,733			74,976
Non-capitalized project costs		61,689			92,252			194,875
		9,291,308			9,625,451			10,234,160		11,346,038			10,340,392			9,291,308
		34,251,423			36,994,516			42,975,128		41,184,379			36,908,325			34,251,423

(1)

~~Purchases of~~Imported products correspond mainly to diesel fuel and diluent ~~agents~~ to facilitate the ~~transportation~~transport of heavy crude oil.

(2)

Corresponds ~~mainly~~ to purchases of crude ~~royalties that~~oil by Ecopetrol ~~makes~~ from the National Hydrocarbons Agency (~~Agencia Nacional de Hidrocarburos~~~~or ANH by its acronym in Spanish)~~(ANH) derived from national production, by both of the ~~Company~~Ecopetrol Business Group in direct operation and of third parties.

(3)

Includes gas royalties paid and carbon tax.

(4)

Corresponds to the ~~allocation~~capitalization of ~~inventories because~~the inventory, product of the costing and valuation process, since the concepts ofthat make up the cost of sales are ~~presented at 100%.~~recognized for the entire amount incurred.

~~F-81~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~27.~~25.

~~Administration, operation~~Administrative, operations and project expenses

The following is the detail of administration, operation and project expenses, according to their function, for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

	2016		2015		2014		2018		2017		2016
Administration expenses
Administrative expenses
General expenses								911,645		723,341		556,563
Labor expenses								662,258		624,424		657,051
Taxes (1)		663,889		730,841		102,028		39,117		362,963		663,889
Labor expenses		657,051		491,748		463,836
General expenses and other		556,563		393,971		410,288
Depreciation and amortization		45,765		84,425		54,883		40,838		53,796		45,765
		1,923,268		1,700,985		1,031,035		1,653,858		1,764,524		1,923,268
Operation and project expenses
Exploration expenses		728,590		1,584,249		2,576,294
Operations and project expenses
Exploration costs								1,387,379		1,341,940		728,590
Taxes (1)								433,506		324,223		286,331
Commissions, fees, freights and services		568,513		878,259		1,244,045		466,862		471,657		568,513
Corporate projects		301,854		456,159		269,495
Taxes		286,331		348,871		449,824
Labor expenses		278,383		309,021		266,362		316,386		310,947		278,383
Fee for regulatory entities								98,794		63,470		87,325
Depreciation and amortization		177,252		86,215		103,834		44,318		95,516		177,252
Maintenance		147,197		181,630		241,313		50,846		122,273		147,197
Fee for regulatory entities		87,325		77,909		108,263
Various		176,242		111,955		260,895
Others								105,041		196,039		478,096
		2,751,687		4,034,268		5,520,325		2,903,132		2,926,065		2,751,687

(1)

ItFor 2017 and 2016, mainly ~~includes~~corresponds to the recognition of the wealth tax. See Note 10 ~~taxes.~~– Taxes.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~28.~~

~~Impairment of non-current assets~~

~~The detail of non-current assets impairment charges for the years ended December 31, 2016, 2015 and 2014 is as follows:~~

2016 2015 2014
Property, plant and equipment and Intangibles (Note 17) 561,738 4,144,754 1,495,113
Natural and environmental resources (Note 17) 239,151 2,865,077 694,720
Investments in associates and joint ventures (Note 14.2) 127,858 588,144 114,734
Goodwill (Note 19) - 266,900 -
928,747 7,864,875 2,304,567

~~F-82~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~29.~~26.

Other operating (expenses) income, ~~and (expenses),~~ net

The following is the detail of other operating income ~~and (expenses)~~or expenses for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

2016 2015 2014
Deferred income BOMT's (1) 211,768 193,197 140,372
Recovery of provisions for litigation 112,999 205,879 203,688
Compensation received 17,790 29,848 24,648
Profit (loss) on sale of materials and property, plant and equipment (82,200 ) 6,744 (111,378 )
Current assets impairment expense (2) (98,739 ) (2,858 ) (24,784 )
Gas pipeline availability under BOMT’s contracts (1) (125,077 ) (124,957 ) (102,916 )
Other income (expenses), net 237,571 70,685 178,564
274,112 378,538 308,194

	2018			2017			2016
(Expense) reversal of provisions for litigations		(68,398	)		(72,408	)		112,999
Expense for gas pipeline availability BOMT contracts⁽¹⁾		-			(72,318	)		(125,077	)
Impairment loss of short–term assets		(105,692	)		(68,800	)		(98,739	)
(Loss) profit on sale of assets		(93,601	)		40,227			(82,200	)
(Loss) gain on acquisition of interests in joint operation (Note 30.3)		(12,065	)		451,095			–
Compensation received		–			–			17,790
Deferred income BOMT contracts⁽²⁾		–			–			211,768
Other income		244,301			227,607			237,571
		(35,455	)		505,403			274,112

(1)

Corresponds to the services rendered in connection with the BOMT:~~Build, Operate, Maintain~~ contracts for the construction, operation, maintenance and ~~Transfer contracts arising from the sale~~transfer of ~~Ecogas.~~

~~(2)~~

~~Includes mainly an allowance for doubtful accounts and provisions for inventories.~~gas pipelines with Transgas. This contract terminated in August 2017.

~~30.~~(2)

Corresponds to the amortization of the deferred income recognized by Ecopetrol in 2007 for the advance payment made by the Ministry of Finance and Public Credit of the obligations by Ecogas, in relation to the BOMT contracts for the construction, operation, maintenance and transfer of gas pipelines, signed between Ecopetrol and Transgas de Occidente, Centragas and Gases de Boyacá and Santander S.A. in 1997. The amortization of this deferred income ended in December 2016.

27.

Financial result, net

The following is the detail of financial results ~~net~~ for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

2016 2015 2014
Financial income
Resources from Santiago de las Atalayas (1) 688,664 - -
Yield and interest 386,001 293,507 286,527
Valuation of financial assets 136,715 164,614 57,807
Gain on sale of available-for-sale assets 47,129 72,339 -
Gain on valuation of derivatives 42,865 - 2,282
Dividends 10,369 91,464 53,202
1,311,743 621,924 399,818
Financial expenses
Interest (2) (2,765,024 ) (1,768,618 ) (754,276 )
Financial cost of other liabilities (3) (580,491 ) (627,827 ) (651,055 )
Other financial expenses (67,786 ) (45,614 ) (36,410 )
Expense from financial assets (48,997 ) (167,869 ) (57,640 )
Loss on valuation of derivatives (1,242 ) (108,486 ) (140,913 )
(3,463,540 ) (2,718,414 ) (1,640,294 )
Foreign exchange gain (loss), net (4) 976,430 (5,566,614 ) (2,270,193 )
Financial result, net (1,175,367 ) (7,663,104 ) (3,510,669 )

	2018			2017			2016
Finance income
Results from financial assets and others		745,571			739,148			136,715
Yields and interests		383,624			405,562			386,001
Gain on sale of equity instruments		–			13,236			47,129
Resources from Santiago de las Atalayas⁽¹⁾		–			–			688,664
Other financial income		368			1,410			53,234
		1,129,563			1,159,356			1,311,743
Finance expenses
Interest⁽²⁾		(2,399,414	)		(2,385,994	)		(2,765,024	)
Financial cost of other liabilities⁽³⁾		(668,782	)		(753,047	)		(580,491	)
Results from financial assets		(381,445	)		(481,308	)		(48,997	)
Other financial expenses		(62,520	)		(40,252	)		(69,028	)
		(3,512,161	)		(3,660,601	)		(3,463,540	)
Foreign exchange gain (loss), net		372,223			5,514			976,430
Financial result, net		(2,010,375	)		(2,495,731	)		(1,175,367	)

(1)

~~Corresponds~~On November 8, 2016, the Ministry of Mines and Energy concluded that the resources that were restricted in relation to this process were not royalties and, therefore, were not due to the ~~reversal of a provision relating~~Comuneros. In accordance with the foregoing, the resources held by Ecopetrol are its property, without any claim or discussion to ~~a litigation Santiago de las Atalayas which~~date regarding ownership title thereof. On November 8, 2016, the amount claimed reached COP$688,664, originated mostly from the valuation and financial ~~yields generated~~yield of the fund where the resources were deposited. The recovery of this provision was recognized in the ~~time of permanence~~net financial results of the ~~cash that was subject to the caution (see Note 23.3 for more information).~~period ending December 31, 2016.

(2)

~~Interest was capitalized during~~As of December 31, 2018, borrowing costs for the ~~period to~~financing of developing natural resources and property, plant and equipment ~~for~~of COP$~~341,209 (2015~~200,833 (2017 – COP$~~744,426~~191,651 and ~~2014~~2016 – COP$~~640,698)~~341,209) were capitalized.

(3)

Includes the financial ~~cost~~expense of the asset retirement obligation and ~~post-employment benefits liabilities.~~the liabilities for post–employment benefits.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~(4)~~

Foreign exchange gain was COP$17,359,601 in 2016 (2015 - COP$21,813,720 and 2014 – COP$27,380,334) and foreign exchange loss was COP$16,383,171 in 2016 (2015 – COP$7,360,782 and 2014 – COP$9,630,975).

~~F-83~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~31.~~28.

Risk management

~~31.1~~28.1

Exchange rate risk

The Ecopetrol Business Group operates mainly in Colombia and makes sales in the local and international markets, for that reason, it is exposed to exchange rate risk, which arises from various foreign currency exposures due to commercial transactions and assets and liabilities denominated in foreign currency. The impact of exchange rate fluctuations, especially the Colombian peso/U.S. dollar exchange rate, has been material in previous years. To mitigate this risk, the Ecopetrol Business Group’s risk management strategy involves the use of non–derivative financial instruments related to cash flow hedges for future exports and net investment of foreign operations to minimize exchange rate risk exposure.

The U.S. dollar/Colombian peso exchange rate has fluctuated over the last few years. As of December 31, 2018, the Colombian peso depreciated 8.9%. The closing rates were COP$3,249.75, COP$2,984.00 and COP$3,000.71 for 2018, 2017 and 2016, respectively.

When the Colombian peso appreciates in relation to the U.S. dollar, export sales revenue decreases when converted to Colombian pesos; by contrast, imported goods, operating costs and interest on foreign debt denominated in U.S. dollars become less expensive. Conversely, when the Colombian peso depreciates, export revenues, when translated to Colombian pesos, increase and imports and servicing of the external debt become more expensive.

The following table sets out the carrying amount for financial assets and liabilities with exchange exposure denominated as of December 31, 2018 and 2017:

(in US$Million)	2018			2017
Cash and cash equivalents		514			1,203
Other financial assets		2,138			1,072
Trade receivables and payables, net		(202	)		(7	)
Loans and borrowings		(9,689	)		(12,590	)
Other assets and liabilities, net		63			-
Net liability position		(7,176	)		(10,322	)

Of the total net liability position, US$(335) million correspond to net liabilitiesin dollars with exchange exposure of companies with Colombian peso as functional currency and a net amount of US$(341) million correspond to monetary assets and liabilities with exchange exposure of companies whose functional currency is different from Colombian peso; for both cases valuation is recognized in profit or loss. The balance of loans and borrowings includes non-derivative hedging instruments of Ecopetrol for US$(6,500), for which valuation is recognized in other comprehensive income, within the equity.

28.1.1

Sensitivity analysis for exchange rate risk

The Ecopetrol Business Group’s risk management strategy involves the use of non-derivative financial instruments related to cash flow hedges for future exports and hedges of a net investment in a foreign operation in order to minimize exposure to currency rate risk, which is detailed below.

The following is the effect of a change of 1% and 5% in the exchange rate of the Colombian peso as compared with the U.S. dollar, on the balance of financial assets and liabilities denominated in foreign currency as of December 31, 2018:

Scenario / Variation in the exchange rate		Effect on income before taxes (+/–)			Effect on other comprehensive income (+/–)
1	%		(10,887	)		222,315
5	%		(54,433	)		1,111,577

The sensitivity analysis only includes financial assets and liabilities in foreign currency at the closing date.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

28.1.2

Cash flow hedge for future exports

Ecopetrol is exposed to foreign exchange risk given that a significant percentage of its income from crude oil exports is denominated in U.S. dollars. In recent years, the Ecopetrol Business Group has acquired long–term debt for investment activities in the same currency in which it expects to receive the cash flow of its export sales revenues. This situation creates a natural hedge relationship due to the fact that the risks generated by the foreign exchange difference of export sales revenues when booked in Ecopetrol’s functional currency (Colombian pesos) are naturally hedged with the foreign exchange variances of the long–term debt, in line with the Ecopetrol Business Group’s risk management strategy.

With the objective of presenting in the financial statements, the effect of the existing natural hedge between exports and debt, understanding that the exchange rate risk materializes when the exports are made, on October 1, 2015, the Board of Directors designated the sum of US$5,440 million of Ecopetrol’s foreign currency debt as a hedge instrument of future revenue from crude oil exports, for the period 2015–2023, in accordance with IAS 39 – Financial instruments.

The following is the movement of foreign currency debt designated as a non–derivative hedging instrument for the years ended December 31, 2018 and 2017:

(US$Million)	2018			2017
Hedging instrument at the beginning of the period		3,332			5,312
Reassignment of hedging instruments		3,366			1,803
Realization of exports		(3,366	)		(1,803	)
Capital payments⁽¹⁾		(2,032	)		(1,980	)
Hedging instrument at the end of the period		1,300			3,332

(1)

On December 27, 2018, Ecopetrol S.A. paid in advance the entire 10-year international bond issued in 2009, whose nominal value was USD$1,500 million. Equally, on June 30, 2017, Ecopetrol prepaid the entire outstanding balance of the international syndicated loan whose nominal value was US$1,925 million and original maturity date was in February 2020.

The following is the movement of accumulated foreign currency gains and losses in respect of the cash flow hedge recognized in other comprehensive income for the years ended December 31, 2018, 2017 and 2016:

	2018			2017			2016
Opening balance		(159,295	)		(244,131	)		217,291
Exchange difference		704,871			15,933			(724,395	)
Reclassification to profit or loss		128,404			160,772			(33,074	)
Ineffectiveness		(35,617	)		(9,247	)		–
Deferred income tax		(264,284	)		(82,622	)		296,047
Closing balance		374,079			(159,295	)		(244,131	)

The expected reclassification of the cumulative exchange rate difference in other comprehensive income to the profit or loss statement, is as follows:

Year		Before taxes			Taxes		After taxes
	2019		(375,261	)		123,836		(251,425	)
	2020		(45,940	)		15,160		(30,780	)
	2021		(48,203	)		15,907		(32,296	)
	2022		(48,203	)		15,907		(32,296	)
	2023		(34,878	)		7,596		(27,282	)
			(552,485	)		178,406		(374,079	)

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

28.1.3

Hedge of a net investment in a foreign operation

The Board of Directors approved the application of net investment hedge accounting from June 8, 2016. The measure is intended to reduce the volatility of non–operating income due to exchange rate variations. The net investment hedge will be applied on a portion of the Ecopetrol Business Group’s investments in foreign operations, in this case on investments in subsidiaries which have the U.S. dollar as their functional currency, using a portion of the Ecopetrol Business Group’s U.S. dollar denominated debt as the hedging instrument.

Ecopetrol S.A. has designated its net investments in Ocensa, Ecopetrol America Inc., Hocol Petroleum Ltd. (HPL) and Reficar as hedged items and as a hedging instrument and US$5,200 million of the Ecopetrol Business Group’s U.S. dollar debt as a hedging instrument.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The following is the movement of accumulated foreign currency gains and losses in respect of the net investment hedge recognized in other comprehensive income for the years ended December 31, 2018, 2017 and 2016:

	2018			2017			2016
Opening balance		97,362			155,359			–
Exchange difference		1,381,900			(86,892	)		231,879
Ineffectiveness		378			329			–
Deferred income tax		(410,324	)		28,566			(76,520	)
Closing balance		1,069,316			97,362			155,359

28.1.4

Hedging with derivatives to minimize currency risk

The Ecopetrol Business Group carries out forward hedging operations using the non–delivery modality, for mitigating the volatility of the exchange rate in the cash flow required for operations of its subsidiary, Ocensa, whose functional currency is the US dollar. The forward hedging instruments are used to enable setting sales prices in U.S. dollars, mitigating the foreign exchange variation given Ocensa’s obligations relative to operational cost and tax payments are payable in Colombian pesos. The accounting policy applicable to this operation is described in the Note 4.1.5.1.

As of December 31, 2018, there are forward contracts with a net short position for US$332 million (2017 – US$325 million) with maturities between January and December 2019.

The impact on the statement of profit or loss for the settlement of these hedges amounted to COP$80,636 (2017 – COP$99,971) and the amount recognized in the other comprehensive income was a loss of COP$(52,174) (2017 COP$35,768 and 2016 COP$33,869).

28.1.5

Commodity price risk

~~Ecopetrol´s~~Ecopetrol’s business ~~depends substantially on~~is significantly impacted by international prices for crude oil and refined products. The prices for these products are volatile and drastic changes couldadversely affect the ~~Company~~Ecopetrol Business Group business prospects and results of ~~operations~~operations.

A large proportion of ~~Ecopetrol´s~~Ecopetrol’s sales revenues come from sales of crude oil, natural gas and refined products. These products are indexed to international reference prices such as the Brent ~~Index.~~index. Consequently, fluctuations in those international indexes have a direct effect on the financial condition and ~~Company´s~~Group’s results of operations.

Prices of crude oil, natural gas and refined products have historically fluctuated as a result of a variety of factors including, among others, competition within the oil and natural gas industry; changes in international prices of natural gas and refined products; long-term changes in the demand for crude oil, natural gas and refined products; regulatory changes; changes in the cost of capital; adverse economic conditions; transactions in derivative financial instruments related to oil and gas and development or availability of alternative fuels.

The Ecopetrol Business Group has a policy approved by the Board of Directors that allows it to use derivative financial instruments in the organized ~~market~~ over the counter (OTC) market to cover itself from the risk of price fluctuations of crude oil and refined products associated towith physical transactions. The ~~Company~~Ecopetrol Business Group has established appropriate processes to handle risk ~~that~~which include constant monitoring of physical and financial ~~market~~markets to identify risks in order to subsequently prepare and execute hedging strategies.

Ecopetrol does not regularly use derivative instruments to hedge exposures to sales or purchase price risks. The impact of the settlement of the price hedges made ~~during the years~~in 2016 ~~and 2015 has~~was not ~~been~~ material and ~~were executed~~was made as hedging instruments to mitigate risk at different price indices to the benchmark of the ~~Company's~~Ecopetrol Business Group's international trade strategy on exports of crude and imports of products.

~~As of December 31,~~In 2018 and 2017, hedging transactions were not carried out with derivative instruments. In 2016, ~~and 2015~~then outstanding price hedges were ~~fully~~ settled in full, with an impact on the result of the period of COP$~~3,181 and COP$4,141, respectively.~~3,181.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~31.2~~

~~Exchange rate risk~~

The group mainly operates in Colombia and makes sales in the local and international markets. For this reason, it is exposed to the exchange rate risk that arises from various foreign currency exposures due to~~commercial transactions and assets and liabilities held in foreign currency.The impact of fluctuations in exchange rates, especially the Pesos/US$rate, on operations has been material.~~

The US$/pesos exchange rate has fluctuated over the last few years. The peso depreciated by an average of 11.2% and 37.3% in 2016 and 2015, respectively; on the other hand, the closing exchange rates were COP$3,000.71, COP$3,149.47 and COP$2,392.46 as of December 31, 2016, 2015 and 2014, respectively.

When the Colombian peso appreciates in comparison with the U.S. dollar export sales revenue decrease when translated into COP. However, imported goods, the oil services and interest on external debt denominated in U.S. dollars, become less expensive. Conversely, when the Colombian peso depreciates in comparison with the U.S. dollar sales revenues from exports, when translated into COP, increase, and imports and external debt service become more expensive.

~~The following table sets out the carrying values for financial assets and liabilities denominated in foreign currencies at December 31, 2016 and 2015:~~

2016 2015
US$ Million
Cash and cash equivalents 1,916 970
Other financial assets 1,367 381
Trade receivables and payables, net (282 ) (546 )
Loans and borrowings (15,172 ) (14,634 )
Net liability position (12,171 ) (13,829 )

~~F-84~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Of the total net liability position US$2,878 million relates to financial assets and liabilities for companies that have the Colombian peso as their functional currency whose value has affected results for the financial year. Likewise, US$(15,049) million of the net position relates to monetary assets and liabilities for group companies that have the dollar as their functional currency and non-derivate hedging instruments from Ecopetrol whose value is recognized in other comprehensive income.

The Company’s risk management strategy involves the use of non-derivative financial instruments related to cash flow hedges for future exports and hedges of a net investment in a foreign operation, in order to minimize exposure to currency rate risk, which is detailed below.

~~31.2.1~~

~~Cash flow hedge for future exports~~

Ecopetrol is exposed to foreign exchange risk given that a high percentage of its crude export sales revenues are denominated in U.S. dollars. In recent years, the Company has acquired long-term debt for investment activities in the same currency that projects receiving the cash flow of its export sales revenues. This situation creates a natural hedge relationship due to the fact that the risks generated by the foreign exchange difference of export sales revenues to Ecopetrol´s functional currency (Colombian pesos) are naturally hedged with the foreign exchange valuation risks of the long-term debt in U.S. dollars, aligned with the company’s risk management strategy.

With the objective of presenting in the financial statements the effect of the mentioned natural hedge between exports and debt, understanding that the exchange rate risk materializes when the exports are made, on October 1, 2015, the Board of Directors designated US$5,440 million of Ecopetrol’s debt as hedge instrument of its future export sales for the period 2015- 2023, in accordance with IAS 39 – Financial instruments: recognition and measurement.

Hedge accounting records the impact of foreign exchange gains/losses on the hedging instrument on statement of profit or loss effectively at the time of realization of the hedged risk. For this to happen, every month when the foreign currency debt is translated to Colombian pesos at the closing exchange rate, the effects on foreign exchange differences are recognized as part of the other comprehensive income. Once the hedged operation occurs and sales revenue is recognized, the cumulative exchange differences held within in other comprehensive income is reclassified to profit or loss statement, impacting operating income and EBITDA.

~~The following shows the movement of this non-derivative hedging instrument at December 31, 2016 and 2015:~~

(US$ Million) 2016 2015
Hedging instrument at the beginning of the period 5,376 5,376
Reassignment of hedging instruments 870 277
Realized exports (870 ) (277 )
Capital payments (64 ) -
Hedging instrument at the end of the period 5,312 5,376

~~F-85~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~The following is the movement in the other comprehensive income as of December 31:~~

2016 2015
Opening balance 217,291 -
Exchange difference on hedging instruments (724,395 ) 352,482
Reclassification to profit or loss (33,074 ) (7,646 )
Deferred income tax 296,047 (127,545 )
Closing balance (244,131 ) 217,291

~~The expected reclassification of exchange differences accumulated in other comprehensive income to profit or loss,setting the exchange rate at COP$3000.71 is as follows:~~

Year Peso equivalents Income tax Net
2017 102,454 (41,838 ) 60,616
2018 117,447 (47,960 ) 69,487
2019 102,307 (41,778 ) 60,529
2020 33,981 (13,876 ) 20,105
2021 16,847 (6,880 ) 9,967
2022 16,847 (6,880 ) 9,967
2023 22,750 (9,290 ) 13,460
412,633 (168,502 ) 244,131

~~31.2.2~~

~~Hedge of a net investment in a foreign operation~~

The Board of Directors approved the application of hedge accounting of net investment from June 8, 2016. The measure seeks to reduce the volatility of non-operating income due to the exchange difference. The hedge of a net investment applies to a portion of the investments the Company has in foreign currency, in this case in subsidiaries with the US dollars as their functional currency, using as hedging instrument a portion of the Company’s debt denominated in US dollars.

Ecopetrol designated as hedged items net investments in Ocensa, Ecopetrol America Inc., Hocol Petroleum Ltd. (HPL) and Reficar; and as a hedging instrument a portion of its debt denominated in US dollars in a total amount equivalent to US $5,200 million.

~~From the implementation to the date of this report this hedge has been effective.~~

~~Gain on exchange difference of these debts net of taxes recognized in the other comprehensive income at December 31, 2016, was COP$155,359.~~

~~31.2.3~~

~~Hedges with derivatives to minimize currency risk~~

The Company carries out forwards hedging operations using the Non-Delivery modality whose purpose is mitigating the volatility of the exchange rate in the cash flow required for operations of its subsidiary Ocensa, whose functional currency is US dollars. The forward hedging instruments used enable setting the sale price in US dollars, seeking to counteract the effects from devaluation or revaluation at the time in which Ocensa monetizes the resources necessary to fulfill its monthly or specific obligations relative to operational cost and tax payments, which are payable in Colombian pesos.

As of December 31, 2016 there are forwards contracts with a net short position of US $323 million (2015 - US $387). The impact on the income statement resulting from the liquidation of these hedges amounting to COP$42,865 of profit (2015- COP$86,914 of loss) and the amount recognized on the other comprehensive income was COP$33,869 of profit (2015 – COP$60,083 of loss).

~~F-86~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~31.2.4~~

~~Sensitivity analysis for exchange rate risk~~

The following table shows the impact that a variation of 1% and 5% in the exchange rate of the Colombian peso vs the US dollar would have on the assets and liabilities held in such currency at December 31, 2016:

Scenario/
Variation in the
exchange rate
Effect on income before
taxes (+/-) Effect on other comprehensive
income (+/-)
1% 86,363 451,577
5% 431,813 2,257,884

~~The sensitivity analysis includes only monetary assets and monetary liabilities held in foreign currency at the closing date.~~

~~31.3~~28.2

Credit risk

Credit risk is the risk that the ~~Company~~Ecopetrol Business Group may suffer financial losses as a consequence of ~~the breach of contracts~~default of: (a) payments by its clients for ~~purchase and~~the sale of crude oil, gas, ~~refined and petrochemical~~ products ~~and transportation services, in addition to the~~or services; (b) financial institutions in which it keeps investments, or ~~the~~(c) by counterparties with which it has contracted ~~derivative~~ financial instruments.

~~Credit risk for customers~~

28.2.1

Credit risk for customers

In ~~performance of~~ the ~~sale~~selling process of crude oil, gas, refined ~~and petrochemical~~ products and ~~transportation~~petrochemicals, and transport services, the ~~Company~~Ecopetrol Business Group may be exposed to credit risk in the event that customers fail to ~~comply with~~fulfill their payment obligations. ~~Risk~~The Ecopetrol Business Group’s risk management strategy has designed mechanisms and procedures that ~~have permitted the Company~~aim to minimize ~~the probability of materialization~~such events, thus safeguarding the ~~Company’s~~Ecopetrol Business Group’s cash flow.

The ~~Company~~Ecopetrol Business Group performs a continuous analysis of the financial strength of its counterparties, ~~which implies their classification~~by classifying them according to their risk level and financial ~~supports~~guarantees in the event of a ~~cessation~~default of payments. ~~In addition, a constant monitoring is made of~~Similarly, the Ecopetrol Business Group continuously monitors national and international market conditions ~~in order to establish~~for early alerts of major changes that may have an impact on the timely payment of obligations from customers of the ~~Company.~~Ecopetrol Business Group.

~~For the bad debts, an~~Allowances for loan losses are set by individual analysis ~~is performed that allow to analyze the situation~~ of each ~~customer and thus define the applicable allowance to be established, such as age of receivables.~~customer’s situation. The ~~group carries out the~~Ecopetrol Business Group performs administrative and legal actions ~~necessary~~required to recover amounts past due ~~accounts receivable as well as the recognition of~~and charges interest offrom customers ~~who do not~~that fail to comply with payment policies.

~~The business group~~Ecopetrol does not have a significant ~~concentrations~~concentration of credit risk. ~~The following is the~~An aging analysis of ~~aging of customer~~the accounts receivable portfolio in arrears, but not impaired, atas of December 31, ~~2016~~2018 and ~~2015:~~2017 is as follows:

2016 2015
Less than 3-month overdue 179,008 71,791
Between 3- and 6- month overdue 14,275 4,862
More than 6-month overdue 103,574 116,849
Total 296,857 193,502

	2018		2017
Less than 3 months overdue		157,608		65,354
Between 3 and 6 months overdue		41,263		1,131
More than 6 months overdue		93,657		79,688
		292,528		146,173

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~F-87~~28.2.2

Credit quality of resources in financial assets

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~Credit quality of resources in financial assets~~

Following the promulgation of Decree 1525 of 2008, which provides general rules on investments for public entities, Ecopetrol’s management established guidelines for our investment portfolios. These guidelines determine that investments in Ecopetrol’s U.S. dollar portfolio are generally limited to investments of our excess cash in ~~fixed-income~~fixed–income securities issued by entities rated A or higher in the long term and A1/P1/F1 or higher in the short term (international scale) by Standard & Poor’s Ratings Services, Moody’s Investors Service or Fitch Ratings.

In addition, Ecopetrol S.A. may also invest in securities issued or guaranteed by the U.S. government or Colombian government, without regard to the ratings assigned to such securities. In Ecopetrol’s ~~peso~~Colombian Peso portfolio, it must invest our excess cash ~~excess~~ in ~~fixed-income~~fixed–income securities of issuers rated AAA in the long term, and F1+/BRC1+ in the short term (local scale) by Fitch Ratings Colombia or BRC Standard & Poor’s. In addition, Ecopetrol may also invest in securities issued or guaranteed by the Colombian government without rating restrictions.

In order to diversify risk in our ~~peso~~Colombian Peso portfolio, Ecopetrol does not invest more than 10% of the excess of cash in one specific issuer. In the case of our U.S. dollar portfolio, it does not invest more than 5% of the excess of cash in one specific issuer in the short term (up to 1one year), or 1% in the long term. The ~~Company~~Ecopetrol Business Group has complied with this ~~policy~~policy.

Ecopetrol’s investment portfolio in U.S. dollars is segmented into four tranches, each one matching our liquidity needs. The working capital tranche is calculated taking into account our cash flow needs for the next 60 days. The liquidity tranche is calculated as the contingent cash flow needs over the working capital, taking into account the development of ~~December 31,2016~~capital expenditures related to projects. The asset liability tranche is built to match our long-term debt. The investment tranche includes the remaining amount of the total portfolio after deducting the amounts pertaining to the above mentioned tranches and ~~2015.~~after subtracting the Colombian Peso portfolio.

Ecopetrol’s investment portfolio in Colombian Pesos is segmented in two tranches, each one matching our liquidity needs. The first tranche is calculated taking into account our cash flow needs for the next 30 days, and the second tranche is built for investment purposes.

The ~~tables below reflects the~~ credit ~~quality~~rating of issuers and counterparties in transactions involving financial instruments ~~at December 31, 2016~~is disclosed in Note 6 – Cash and ~~2015:~~cash equivalents, Note 9 – Other financial assets and Note 20 – Provisions for employees’ benefits.

Cash and cash
equivalents Other financial assets Plan assets
Credit quality 2016 2015 2016 2015 2016 2015
AAA 3,198,394 581,303 1,858,665 1,130,216 9,077,893 7,597,462
F1+ 2,188,471 3,696,327 1,636,039 217,493 416,439 43,351
A1 1,466,015 - 3,060,660 - - -
F1 545,872 1,247,398 - 48,919 - -
F2 409,717 421,084 - - - -
BRC 1+ 312,290 120,217 - - 309,282 221,257
Prime-2 78,989 - - - - -
A1+ 73,470 294,931 - - - -
F3 37,172 - - - - -
Prime-3 32,748 31,862 - - - -
B 144 - - - - -
AA+ - - 50,192 - 470,944 661,604
AA - - 5,289 - 79,750 68,481
AA- - - 3,730 - 34,197 55,077
A - - - - 4,175 4,682
BBB+ - - - - 193,835 196,815
BBB - - - 125,936 150,808 388,586
BBB- - - - - 23,237 1,569,850
BB+ - - - - - 28,999
BB - - - - - 22,572
CCC - - - - 489 1,035
A- - - - - 9,111 -
A+ - - - - 8,841 -
A3 - - - - 61,325 -
AA3 - - - - 14,385 -
BA2 - - - - 3,006 -
BA3 - - - - 12,802 -
BAA1 - - - - 5,274 -
BAA2 - - - - 141,940 -
BAA3 - - - - 131,993 -
BB- - - - - 11,001 -
BRC1 - - - - 7,710 -
BRC2+ - - - - 5,763 -
CC - - - - 734 -
SP1+ - - - - 7,013 -
VRR1+ - - - - 55,821 -
Unrated 67,185 157,328 72,320 62,815 885,407 701,717
Total 8,410,467 6,550,450 6,686, 895 1, 585,379 12,123,175 11,561,488

~~F-88~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~31.4~~28.3

Interest rate risk

Interest rate risk arises from Ecopetrol’s exposure to changes in interest rates because the ~~group~~Ecopetrol Business Group has investments in fixed ~~floating-rate~~and floating–rate instruments ~~in Ecopetrol’s investment portfolio~~ and ~~issuances of~~has issued floating rate debt linked to LIBOR, DTF and ~~IPC~~CPI interest rates. Thus, interest rate volatility may affect the fair value and cash flows ~~related to~~of the ~~Company's~~Ecopetrol Business Group’s investments and the financial expense of floating rate loans and financing.

As of December 31, 2018, 17% (2017, 19% and 2016, ~~and 2015~~ 31%) of the Ecopetrol Business Group’s indebtedness ~~has a~~is linked to floating ~~rate.~~interest rates. As a result, if ~~the~~ market interest ~~rate rises~~rates rise, financing ~~costs~~expenses will increase, which could have an adverse effect on the results of operations.

Ecopetrol controls the exposure to interest rate risk by establishing limits to ~~its effective~~exposure duration, Value at Risk -– VAR andtracking ~~error~~error..

Autonomous equities linked to Ecopetrol’s pension obligations are also exposed to changes in interest rates, as they include fixed and floating rate instruments that are marked to market. Colombian regulation for pension funds, as stipulated in the Decree 941 of 2002 and Decree 1861 of 2012, indicates that they have to follow the same regime as the regular obligatory pension funds in their moderate portfolio.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The following table provides information about the sensitivity of ~~Company´s~~the Ecopetrol Business Group’s results and other comprehensive income for the next 12 months to variations in interest rate of 100 basis points:

Financial liabilities Financial assets Plan assets
Variation in interest rate (Financial expenses) (Financial income) (Other comprehensive income)
+ 100 basis points 321,000 40,670 376,255
- 100 basis points (245,568 ) (40,670 ) (383,158 )

	Effect on profit or loss (+/–)						Effect on Other Comprehensive Income (+/–)
	Financial assets			Financial Liabilities			Plan assets
+100 basis points		(71,123	)		240,711			(513,699	)
–100 basis points		71,123			(94,062	)		527,058

~~Sensitivity~~A sensitivity analysis of discount rates on pension ~~plans~~plan assets and liabilities is ~~shown~~disclosed in ~~the~~ Note 2220 – Provisions for ~~employee~~employees’ benefits.

F-88

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~31.5~~28.4

Liquidity risk

The ability to access ~~the~~ capital necessary to finance the ~~Company´s~~Ecopetrol Business Group’s investment plans on acceptable terms can be limited due to deterioration in market conditions. A ~~new~~global financial crisis could worsen ~~the~~ risk perception in ~~the~~ emerging markets.

~~Risks related to Colombia’s~~Events impacting the political and regional environment of Colombia, could ~~also~~ make it ~~more~~ difficult for our subsidiaries to access ~~the international~~ capital markets. These conditions, ~~along~~together with potential significant ~~write-offs~~losses in the financial services sector and ~~the re-pricing of~~changes in credit risk ~~can~~assessments, may make it difficult to obtain ~~funding for capital needs~~financing on favorable terms. As a result, wethe Ecopetrol Business Group may be forced to ~~revise~~review the ~~timing~~opportunity and scope of ~~these projects~~its investment plans as necessary, ~~to adapt to existing market and economic conditions,~~ or access ~~the~~ financial markets onunder less favorable terms, ~~less favorable; therefore,~~thereby negatively affecting the ~~Company´s~~Ecopetrol Business Group’s results of operations and financial ~~condition.~~position.

Liquidity risk is managed in accordance with the ~~Company´s~~Ecopetrol Business Group’s policies aimed at ensuring that there are sufficient net funds to meet the ~~Company's~~Ecopetrol Business Group’s financial commitments within its maturity schedules with no additional costs. The main method for the measurement and monitoring of liquidity is cash flow forecasting.

During 2018, the Ecopetrol Business Group used US$2,446 million equivalents (2017 – US$2,400 million) as part of its liquidity surpluses to prepay part of its debts with original maturities between 2019 and 2025. The details of these movements are described in Note 18 – Loans and borrowings.

The following is a summary of the maturity of financial liabilities atas of December 31, ~~2016.~~2018. The amounts disclosed in the table are the contractual undiscounted cash flows. The payments in foreign currency were restated taking a constant exchange rate of ~~$ 3,000.71 Colombian pesos~~COP$3,249.75 per U.S. dollar. Consequently, these amounts may not reconcile with the amounts disclosed on the consolidated statement of financial position:

Up to 1 year 1-5 years 5-10 years > 10 years Total
Loans (principal and interests) 4,268,060 29,965,353 25,736,624 20,589,796 80,559,833
Trade and other accounts payable 6,854,363 23,893 - - 6,878,256
Total 11,122,423 29,989,246 25,736,624 20,589,796 87,438,089

~~F-89~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

	Up to 1 year		1–5 years		5–10 years		> 10 years		Total
Loans (payment of principal and interest)		3,570,843		16,093,120		20,942,328		19,300,708		59,906,999
Trade and other payables		8,945,790		30,522		–		–		8,976,312
Total		12,516,633		16,123,642		20,942,328		19,300,708		68,883,311

~~31.6~~28.5

Capital management

The main objective of ~~Ecopetrol’s Capital Management~~the capital management of the Ecopetrol Business Group is to ensure a financial structure that ~~will optimize~~optimizes the ~~Company’s~~ cost of capital, ~~maximize~~maximizes the ~~returns~~rate of return to its shareholders and allows access to financial markets at a competitive cost to cover financing needs that support an investment grade credit rating profile.

Net financial debt is ~~financing needs.~~calculated by taking short–term and long–term loans and borrowings less cash and cash equivalents and investments in securities as of December 31 of each year. The level of leverage is calculated as the ratio between net financial debt and the sum of equity and net financial debt. The following is the information of these indicators as of December 31, 2018 and 2017:

	2018			2017
Loans and borrowings (Note 18)		38,062,645			43,547,835
Cash and cash equivalents (Note 6)		(6,311,744	)		(7,945,885	)
Other financial assets (Note 9)		(8,147,815	)		(6,533,725	)
Net financial debt		23,603,086			29,068,225
Equity (Note 22)		57,107,780			48,215,699
Leverage		29.24	%		37.61	%

The ~~leverage index at~~movement of the ~~relevant periods~~net financial debt is ~~comprised as follow at December 31, 2016 and 2015:~~detailed in Note 18.8.

2016 2015
Loans and borrowings (Note 20) 52,222,027 53,223,338
Cash and cash equivalents (Note 6) (8,410,467 ) (6,550,450 )
Other financial assets not restricted (Note 9) (6,686,895 ) (885,547 )
Net financial debt 37,124,665 45,787,341
Equity (Note 24) 43,560,501 43,100,963
Leverage (1) 46.01 % 51.51 %

F-89

~~(1)~~

~~Net financial debt / (Net financial debt + Equity)~~

Ecopetrol S.A.

~~F-90~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~32.~~29.

Related parties

Balances with ~~associated companies~~associates and joint ventures as of December 31, ~~2016~~2018 and ~~2015~~2017 are as follows:

Accounts
receivable Other assets Accounts
payable Loans
Joint ventures
Equion Energía Limited 97,601 7,135 89,666 30,644
Ecodiesel Colombia S.A. 129 - 20,765 -
Offshore International Group (1) 170,121 - - -
Associates
Serviport S.A. - - 3,989 -
Balance at December 31, 2016 267,851 7,135 114,420 30,644

	Accounts receivable		Accounts receivable – Loans		Other assets		Accounts payable		Loans		Other liabilities
Joint Ventures
Equion Energy Limited⁽¹⁾		22,958		–		19,214		87,079		855,135		67
Ecodiesel Colombia S.A.		522		–		–		23,857		–		1
Offshore International Group Inc.⁽²⁾		–		117,824		–		–		–		–
Associates
Serviport S.A.		–		–		–		5,482		–		–
Balance as of December 31, 2018		23,480		117,824		19,214		116,418		855,135		68
Current		23,480		–		19,214		116,418		855,135		68
Non–current		–		117,824		–		–		–		–
		23,480		117,824		19,214		116,418		855,135		68
		(Note 7)		(Note 7)		(Note 11)		(Note 19)		(Note 18)

	Accounts receivable		Other assets		Accounts payable		Loans		Accounts receivable		Accounts receivable – Loans		Other assets		Accounts payable		Loans		Other liabilities
Joint ventures
Equion Energía Limited		64,583		28,668		62,861		45,913
Joint Ventures
Equion Energy Limited⁽¹⁾										4,010		–		7,716		101,472		259,760		7
Ecodiesel Colombia S.A.		-		-		22,243		-		362		–		–		22,228		–		–
Offshore International Group Inc.⁽²⁾										–		154,810		–		–		–		–
Associates
Invercolsa S.A.										18,641		–		–		–		–		–
Serviport S.A.		141		-		2,359		-		–		–		–		5,820		–		–
Balance at December 31, 2015		64,724		28,668		87,463		45,913
Balance as of December 31, 2017										23,013		154,810		7,716		129,520		259,760		7
Current										23,013		–		7,716		129,520		259,760		7
Non–current										–		154,810		–		–		–		–
										23,013		154,810		7,716		129,520		259,760		7
										(Note 7)		(Note 7)		(Note 11)		(Note 19)		(Note 18)

(1) The accounts receivable correspond to a loan granted to Offshore International Group Inc. for US $57 million in April 2016, at an interest rate of 4.99% payable semi-annually from 2017 and maturing in 2021.Loans with related parties:

(1)

Deposits held by Equion in Capital AG for a nominal value of USD$263 million (2017 – USD$77 millon), with a three-month Libor rate + 1.92% (2017 - 1.44%).

(2)

Loan granted by Ecopetrol S.A. to Savia Perú S.A. (subsidiary of Offshore International Group) for US$57 million in 2016, with an interest rate of 4.99% payable semiannually from 2017 and maturating in 2021. The balance in nominal value of this loan as of December 31, 2018 is USD$35 million (2017 – USD$49 million).

The amounts outstanding are not guaranteed and will be settled in cash. No expense has been recognized in the current period or in ~~prior~~previous periods with respect to uncollectible or doubtful accounts related to the amounts owed by related parties.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The main transactions with related ~~entities~~parties for ~~the~~ years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014~~2016 are detailed as follows:

2016 2015 2014
Sales and
services Purchases
and others Sales and
services Purchases
and others Sales and
services Purchases
and others
Joint ventures
Equion Energía Limited 491,698 418,618 515,968 190,158 908,357 79,264
Ecodiesel Colombia S.A. 5,744 265,584 7,245 267,647 3,840 220,834
Offshore International Group 6,285 - - - - -
Associates
Serviport S.A. - 24,572 - - - -
Total 503,727 708,774 523,213 457,805 912,197 300,098

~~The dividends received by these companies are listed in Note 14 - Investments in companies.~~

~~F-91~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

	2018				2017				2016
	Sales and services		Purchases and others		Sales and services		Purchases and others		Sales and services		Purchases and others
Joint Ventures
Equion Energy Limited		67,002		846,284		425,881		598,636		491,698		418,618
Ecodiesel Colombia S.A		6,860		267,498		6,583		259,269		5,744		265,584
Offshore International Group		2,386		–		15,188		–		6,285		–
Associates
Serviport S.A.		–		–		–		–		–		24,572
		76,248		1,113,782		447,652		857,905		503,727		708,774

~~32.1~~29.1

~~Key executives~~Directors and key management personnel

~~Based on a resolution adopted at~~In accordance with the ~~annual~~approval given by the shareholders’ meeting in 2012, compensation paid to directors isfor attending the ~~equivalent~~meetings of the Board of Directors and/or committees increased from four to six minimum legal monthly ~~wage~~ salaries ~~which totals~~in force, or approximately ~~COP $3,870,000 pesos~~to COP$4,687,000 for ~~2015~~2018, from COP$4,426,000 for 2017 and ~~COP $4,140,000 pesos~~COP$4,140,000 for 2016. ~~Fees for attendance at virtual meetings are set at~~For non–face–to–face sessions, 50% of the ~~face-to-face meeting fee.~~quota for face–to–face meetings is set. The members of the Board of Directors isdo not ~~subject~~have any kind of variable remuneration. The amount paid in 2018 for compensation to ~~any variable remuneration.The amount canceled in 2016 for fees to~~members of the Board ~~members~~of Directors amounted to COP$~~1,253 (2015 -~~2,152 (2017 – COP$~~1,238)~~1,877 and 2016 – COP$1,253).

The total compensation paid to Directors ~~executive officers and senior management during the year ended~~as of December 31, ~~2016~~2018, amounted to COP$~~13,901 (2015 -~~21,580 (2017 – COP$~~6,690)~~20,669 and 2016 – COP$13,901). ~~The~~ Directors are not eligible to receive pension and retirement benefits. The total amount ~~set aside~~reserved as of December 31, ~~2016~~2018, to provide pension and retirement benefits to our eligible executive officers amounted to COP$~~4,674 (2015 -~~5,491 (2017 – COP$~~10,341)~~5,401 and 2016 – COP$4,674).

As of December 31, ~~2016, the following~~2018, key management ~~executives~~officers owned less than 1% of the outstanding shares of Ecopetrol S.A. as follows:

Key management ~~executive~~personnel	% ~~Shareholding~~	Shares
~~Joaquí~~Felipe Bayón ~~Moreno Uribe~~	<1% of outstanding shares
~~Mauricio Cárdenas Santamaría~~Jaime Caballero	<1% of outstanding shares
~~Héctor Manosalva Rojas~~Jorge Calvache	<1% of outstanding shares
Rafael Espinosa Rozo	<1% of outstanding shares
~~Patricia Stella Zuluaga~~	~~<1% of outstanding shares~~
~~Juan Carlos Echeverry~~	~~<1% of outstanding shares~~

~~32.2~~29.2

~~Post-employment~~Post–employment benefit plans

The administration and management of resources for payment of ~~Ecopetrol's~~Ecopetrol’s pension obligations are managed by autonomous pension ~~autonomous equities (PAP,~~funds (PAPs, by its acronym in Spanish) which serve as guarantee and payment ~~source. These funds were established in compliance with~~sources. In 2008, Ecopetrol S.A. received the ~~provisions of decree 2153 of 1999 which authorized as of December 31, 2008 partial commutation of~~authorization to partially commute the value corresponding to monthly payments, ~~bonuses~~bonds and ~~contributions,~~quotas, transferring said obligations and ~~money supporting~~the monies that support them to autonomous patrimonies of a ~~pensional nature.~~pension nature, in accordance with the requirements of Decree 1833 of 2016.

~~As of December 31,~~Since November 2016, the entities ~~managing these~~that administer the resources ~~were:~~are: Fiduciaria Bancolombia, Fiduciaria de Occidente and Consorcio Ecopetrol ~~PAAC (comprised~~PACC (formed by Fiduciaria La Previsora, Fiduciaria Bancoldex, ~~Fiduciaria Agraria~~Fiduagraria and Fiduciaria Central).

These ~~entities~~fiduciaries will manage the pension resources for a ~~five-year term (2016 - 2021)~~period of five years (2016-2021) and as ~~consideration~~compensation they receive a remuneration with fixed and variable components, ~~which is calculated~~the latter are settled on the gross ~~yield~~yields of the portfolios and ~~are~~ charged to ~~manage resources.~~the resources administered.

F-91

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~32.3~~29.3

Government related parties

The Colombian Government ~~holds control of~~controls Ecopetrol with a stock ownership of 88.49%. The most significant transactions with governmental entities are comprised as follows:

a)(a)

Purchase of oil ~~form~~from the National Hydrocarbons Agency -– ANH

~~Because~~By nature of the business, ~~nature~~ the ~~Company~~Ecopetrol Business Group has a direct relationship with ANH, an entity which operates under the rules of the Ministry of Mines and Energy, ~~rules, of which~~whose objective is to manage the oil and gas reserves and resources owned by the Colombian Nation.

~~F-92~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Ecopetrol purchases the crude oil that the ANH receives from ~~all~~ producers in Colombia at the prices set in accordance with a jointly established formula, which reflects the export sale prices (crude oils and products), ~~adjustment to the~~adjusted for API gravity quality, sulfur content, transportation rates from the wellhead to the ports of Coveñas and Tumaco, refining process cost and a commercialization rate. This contract was extended to ~~June 30, 2018.~~January 31, 2020.

AtFrom December 2013 the ~~Company~~Ecopetrol Business Group commercialized, on behalf of the ANH, the natural gas received by the latter in kind from ~~the~~ producers. Since January 2014, ANH ~~receives the~~has received royalties in cash for the production of natural gas.

The purchase value of oil and gas from ~~AHN~~ANH is detailed in Note ~~26 -~~24 – Cost of sales.

Additionally Ecopetrol, like other oil companies, takes part in ~~"rounds"~~“rounds” for the allocation of exploration blocks in Colombia without implying special treatment for Ecopetrol on account of it being an entity whose majority shareholder is the ~~Ministry of Finance.~~Colombian Government.

b)(b)

Price differential

Regular gasoline and diesel sale prices are regulated by the National Government. In this case, there are differentials between the volume reported by the Colombian companies at the time of the sale and the difference between the international parity price and the ~~benchmark~~regulated price actually charged, where the parity price is ~~that corresponding to~~ the daily ~~motor~~price of gasoline and diesel ~~prices observed during~~oil of the ~~month.~~respective month in Colombian pesos, indexed to the United States of America Gulf market, calculated in accordance with Resolution 18 0522 of 2010 and the Producer Price reference defined by the Ministry of Mines and Energy. These differentials may be in favor or against the producers. The value of this differential is detailed in Note ~~25 -~~23 – Sales revenue from contracts with customers and Note 7 – Trade and other receivables, net.

c)(c)

National Tax and Customs Direction

Ecopetrol, just like any other company in Colombia, has tax obligations that it must comply with ~~in respect of this entity~~ and ~~Ecopetrol~~ does not have any other kind of association or commercial relationship with ~~it.~~the National Tax and Customs Direction. For more information see Note 10 – Taxes.

d)(d)

Comptroller General of the Republic

Ecopetrol, just like any other state entity in Colombia, is obliged to comply with the requirements set out by ~~this control entity~~the Comptroller General of the Republic and make an annual payment to this entity on account of a maintenance fee. Ecopetrol does not have any other kind of association or commercial relationship with this entity.

F-92

~~F-93~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~33.~~30.

Joint operations

The ~~Company~~Ecopetrol Business Group carries out exploration and production operations through Exploration and Production (E&P) Contracts, Technical Evaluation (TEA) Contracts and Agreements signed with the National Hydrocarbons Agency or ANH, as well as through Partnership Contracts and other types of contracts. The main joint operations in ~~2016~~2018 are as follows:

~~Contracts in which Ecopetrol is not the operator~~:

30.1

Contracts in which Ecopetrol is not the operator

Partners	Contract	Type	% Participation	Geographic area of operations
	~~Chipirón~~		~~30-47%~~
	~~Cosecha~~		~~30%~~
Occidental Andina LLC	Chipirón Harvest Cravo ~~norte~~Norte Rondón	Production	30–40% 30% 50% 50%	Colombia
	~~Rondón~~		~~50%~~
Chevron Petroleum ~~Company~~Group	Guajira	Production	57%	Colombia
Mansarovar Energy Colombia Ltd	Nare	Production	50%	Colombia
~~Meta Petroleum~~Frontera Energy Colombia Corp	Quifa	Production	~~30%~~40%	Colombia
Equion ~~Energía~~Energy Limited	Piedemonte	Production	50%	Colombia
	~~Casanare~~		~~64%~~
	~~Corocora~~		~~56%~~
Perenco Colombia Limited	Casanare Corocora Estero Garcero Orocúe	Production	64% 56% 89% 76% 63%	Colombia
	~~Garcero~~		~~76%~~
	~~Orocúe~~		~~63%~~
	~~Casanare~~		~~13%~~
	~~Estero~~		7%
~~Perenco Colombia Limited~~	~~Garcero~~	~~Production~~	~~15%~~	~~Colombia~~
	~~Orocue~~		~~23%~~
	~~Corocora~~		~~28%~~
~~Noble Energy~~	~~Gunflint~~	~~Production~~	~~32%~~
~~Murphy Oil~~	~~Dalmatian~~	~~Production~~	~~30%~~	~~EEUU~~
~~Anadarko~~	K2	~~Production~~	9%
ONGC Videsh Limited ~~Sucursal Colombia~~	~~Ronda Caribe RC-10~~RC–10 Caribbean Round	Exploration	50%	~~Offshore~~ North Caribbean	Offshore
Petrobras, Repsol & Statoil	Tayrona	Exploration	30%	~~Offshore~~ North Caribbean	Offshore
Repsol & Statoil	TEA GUA ~~OFF-1~~OFF–1	Exploration	50%	~~Offshore~~ North Caribbean	Offshore
Anadarko	Fuerte Norte	Exploration	50%	~~Offshore~~ North Caribbean
	~~Fuerte Sur~~		~~50%~~
~~Equion Energía Limited~~	~~Niscota~~	~~Exploration~~	~~20%~~	~~Colombia~~
	~~PAMA-M-187~~
	~~PAMA-M-188~~
~~Petrobras~~	~~PAMA-M-222~~	~~Exploration~~	~~30%~~	~~Brazil~~
	~~PAMA-M-223~~
	~~BM-S-63~~
~~Vanco~~	~~BM-S-71~~	~~Exploration~~	~~30%~~	~~Brazil~~
	~~BM-S-72~~				Offshore
Shell	Deep Rydberg/Aleatico	Exploration	29%		Gulf of Mexico
Repsol – Leon	Leon	Exploration	40%		Gulf of Mexico
~~Stone~~Noble Energy	~~Parmer~~Gunflint	~~Exploration~~Production	~~30%~~32%	~~EEUU~~	Gulf of Mexico
Murphy Oil	~~Sea Eagle~~Dalmatian	Production	30%	Gulf of Mexico
Anadarko	K2	Production	21%	Gulf of Mexico
Equion Energia Limited	Niscota	Production	20%	Colombia
CNOOC – British Petroleum	Pau Brasil	Exploration	20%	Brazil
Chevron	CE–M–715_R11	Exploration	50%		Brazil
~~Anadarko~~ PC Carigali Mexico Operations S.A. de C.V. (Petronas)	~~Warrior~~ CNH-R02-L01-A6.CS/2017	Exploration	~~20%~~ 50%	Mexico
Petroleos Mexicanos (PEMEX)	CNH-R02-L01-A8.CS/2017	Exploration and production	50%	Mexico

F-93

~~F-94~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~Termination~~Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of ~~Rubiales and Pirirí contracts~~Colombian pesos, unless otherwise stated)

Since July 1, 2016 Ecopetrol took over the direct operation of the Rubiales field, which up to that date had been operated by Pacific Rubiales Energy. Upon termination of the contract Ecopetrol received the assets from said operation and the obligations associated with the BOMT contracts for US$46 million.

30.2

Contracts in which Ecopetrol is the operator

~~Termination ofTauramena association agreement~~

On July 3, 2016, the Tauramena Association Agreement was terminated and for this reason, Ecopetrol began to operate directly the Cusiana field, Casanare. Since its commercialization in 1993 it was operated first by BP and then by Equion. Cusiana represents for Ecopetrol a 98% participation in the Unified Exploitation Plan (PEU) of the field, while Equión and Emerald will maintain both 2%.

~~Contracts in which Ecopetrol is the operator~~:

Partners	Contract	Type	% Participation	Geographic area of operations
	~~VMM29~~
ExxonMobil Exploration Colombia	VMM29 CR2 C62	Exploration	50%	Colombia
	~~C62~~
Talisman Colombia Oil	CPO9	Exploration	55%	Colombia
ONGC Videsh Limited ~~Sucursal~~ Colombia Branch	~~Ronda Caribe Nueve~~RC9	Exploration	50%	Colombia
CPVEN Sucursal Colombia	VMM32	Exploration	51%	Colombia
Shell ~~Exploración~~Exploration and ~~Producción~~Production	CR4	Exploration	50%	Colombia
SK Innovation Co Ltd.	San Jacinto	Exploration	70%	Colombia
Repsol Exploración Colombia S.A.	Catleya	Exploration	50%	Colombia
Emerald Energy PLC Suc. Colombia	Cardon	Exploration	50%	Colombia
~~Maurel & Prom~~Talismán Colombia	~~CPO 17~~	~~Exploration~~	~~50%~~	~~Colombia~~
~~JX Nippon~~	~~FAZ M-320 R11~~	~~Exploration~~	~~70%~~	~~Brazil~~
~~Lewis~~	~~Clarinero~~	~~Exploration y Production (E&P)~~	~~50%~~	~~Colombia~~
~~Gas~~ oil and gas Ltd.	CPO9 -– Akacias	Production	55%	Colombia
Occidental Andina LLC	La Cira Infantas Teca	Production	~~54%~~62.1% 82%	Colombia
	~~Teca~~		~~87%~~	Colombia
Ramshorn International Limited	Guariquies I	Production	50%	Colombia
Equion ~~Energía~~Energy Limited	Cusiana	Production	98%	Colombia
	~~Planta de gas~~
Perenco Oil And Gas			~~18%~~
~~Cepsa Colombia~~	San Jacinto y Rio Paez	Production	18%	Colombia
Cepsa Colombia	San Jacinto Rio Paez	Production	18%	Colombia
Total Colombia	Mundo Nuevo	Exploration	15%	Colombia
Talisman Oil & Gas	Mundo Nuevo	Exploration	15%	Colombia
Lewis	Clarinero	Exploration	50%	Colombia
Maurel & Prom Suramerica	CPO17	Exploration	50%	Colombia
Equion ~~Energía~~Energia Limited ~~Emerald Energy~~ ~~Pacific Rubiales~~	Alto Magdalena Pipeline	OAM	~~Production~~	45%	Colombia
Emerald Energy	Alto Magdalena Pipeline	OAM	45%	Colombia
Frontera Energy	Alto Magdalena Pipeline	OAM	45%	Colombia
ONGC Videsh Limited	Block RC–9 Contract– Caribbean Round No. 37–2007	Exploration	50%	Colombia
JX Nippon	FAZ–M–320_R11	Exploration	70%	Brazil
Ecopetrol	Potiguar	Exploration	100%	Brazil

F-94

~~F-95~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~34.~~30.3

Relevant operations during the period

During 2018 and 2017, the following significant events occurred in respect of our joint operations contracts:

(a)

Agreement to acquire 10% of the Saturno Block

In December 2018, the Ecopetrol Business Group entered into an agreement with Shell and Chevron for a 10% interest in the Saturno block, located in the central region of the Santos basin, which was allocated to Shell and Chevron on September 28, 2018 in the Fifth Pre-Salt Round held by the Brazilian National Oil, Natural Gas and Biofuels Agency (ANP).

This deal is subject to approval by the Brazilian Ministry of Mines and Energy and the ANP. Once the respective approvals are forthcoming, the partners’ shares of the block will be the following: Ecopetrol 10%, Shell (operating partner) 45% and Chevron 45%.

(b)

Acquisition of interests in joint operations

On December 11, 2017, Ecopetrol América Inc. acquired the 11.6% interest in the K2 oil field in the Gulf of Mexico MCX Exploration USA LLC (“MCX”), increasing its share from 9.2% to 20.8%.

The acquisition of MCX’s interest was recognized in accordance with policy 4.4 Joint Operations. To determine the fair value of the assets acquired and liabilities assumed, the income approach model was used, using the discounted cash flow and market data to determine the fair values of oil and gas properties. This model incorporated future commodity prices, estimated volumes of oil and gas reserves, future developments, operating costs, future abandonment and packing costs and a risk adjusted discount rate.

The fair value of the consideration transferred in the operation was US$47.6 million (COP$141,950), the fair value of the net assets acquired was US$198.4 million before deferred taxes (US$146 million net of deferred taxes) with recognition of a gain of US$150.8 million before deferred taxes (US$98 million after deferred taxes) in the period’s statement of profit or loss (equivalent to COP$451,095 before deferred taxes), mainly due to the transaction price being fixed before the closing date of the transaction and the fair value of the net identifiable assets acquired having increased during the interim period.

Transaction costs incurred in the operation amounted to US$0.2 million, recognized in profit or loss for 2017.

During 2018, the Final Settlement Statement was made for COP$12,065 (US COP$4.2 million) recognized as an adjustment to the fair value of interests in joint operations.

F-95

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

31.

~~Segment information~~Information by segments

~~The~~A description of the Ecopetrol Business Group’s business segments ~~can be seen~~is in ~~note~~Note 4.19 – Information by business segment.

~~34.1~~31.1

Statement of profit or loss

The following segment information is reported based on the information used by the Board of Directors as the top body to make strategic and operational decisions of these business segments. The performance of the segments are based primarily on an analysis of income, costs, expenses and results for the period generated by each segment which are regularly monitored.

The information disclosed in each segment is presented net of transactions between the Ecopetrol Business Group companies.

~~The following presents~~Below are the consolidated ~~statement~~statements of profit or loss by segment for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

	For the year ended on December 31, 2018
	Exploration and Production			Refining and Petrochemicals			Transport and Logistics			Eliminations			Total
Third–party sales		30,112,900			34,947,948			3,543,024			-			68,603,872
Inter–segment sales		20,259,864			2,063,425			7,811,143			(30,134,432	)		-
Total sales revenue		50,372,764			37,011,373			11,354,167			(30,134,432	)		68,603,872
Fixed costs		(8,871,709	)		(3,204,791	)		(2,805,516	)		3,535,979			(11,346,037	)
Variable costs		(23,367,475	)		(32,453,962	)		(596,571	)		26,579,666			(29,838,342	)
Cost of sales		(32,239,184	)		(35,658,753	)		(3,402,087	)		30,115,645			(41,184,379	)
Gross profit		18,133,580			1,352,620			7,952,080			(18,787	)		27,419,493

Administrative expenses		(889,293	)		(443,880	)		(320,498	)		(187	)		(1,653,858	)
Operation and project expenses		(1,993,054	)		(668,177	)		(263,104	)		21,203			(2,903,132	)
Impairment of non–current assets		785,940			(984,704	)		(169,870	)		-			(368,634	)
Other operating income and expenses, net		(137,836	)		(13,652	)		118,905			(2,872	)		(35,455	)
Operating income (expenses)		15,899,337			(757,793	)		7,317,513			(643	)		22,458,414
Financial result, net
Financial income		1,099,893			147,689			110,898			(228,917	)		1,129,563
Financial expenses		(2,038,312	)		(1,295,528	)		(407,589	)		229,268			(3,512,161	)
Foreign exchange gain (loss), net		868,479			(517,410	)		21,154			-			372,223
		(69,940	)		(1,665,249	)		(275,537	)		351			(2,010,375	)
Share of profits of associates and joint ventures		135,265			27,730			2,841			-			165,836
Income before tax		15,964,662			(2,395,312	)		7,044,817			(292	)		20,613,875
Income tax		(6,096,591	)		420,224			(2,582,118	)		-			(8,258,485	)
Net profit (loss) for the period		9,868,071			(1,975,088	)		4,462,699			(292	)		12,355,390
Profit (loss) attributable to:
Group owners of parent		9,930,519			(1,973,075	)		3,424,234			(292	)		11,381,386
Non–controlling interest		(62,448	)		(2,013	)		1,038,465			-			974,004
		9,868,071			(1,975,088	)		4,462,699			(292	)		12,355,390
Supplementary information
Depreciation, depletion and amortization		5,248,364			1,307,216			1,149,270			–			7,704,850

~~F-96~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

	For the year ended on December 31, 2017
	Exploration and Production			Refining and Petrochemicals			Transport and Logistics			Eliminations			Total
Third–party sales		25,004,320			27,343,359			3,606,549			–			55,954,228
Inter–segment sales		11,490,614			1,300,657			6,991,515			(19,782,786	)		–
Total sales revenue		36,494,934			28,644,016			10,598,064			(19,782,786	)		55,954,228
Fixed costs		8,055,925			2,886,745			2,637,604			(3,239,880	)		10,340,394
Variable costs		18,254,159			23,968,650			634,231			(16,289,109	)		26,567,931
Cost of sales		26,310,084			26,855,395			3,271,835			(19,528,989	)		36,908,325
Gross profit		10,184,850			1,788,621			7,326,229			(253,797	)		19,045,903
Administrative expenses		781,386			516,501			466,669			(32	)		1,764,524
Operation and project expenses		2,070,916			965,457			142,847			(253,155	)		2,926,065
Impairment of non–current assets		(183,718	)		(1,067,965	)		(59,455	)		–			(1,311,138	)
Other operating income and expenses, net		(545,218	)		11,694			28,121			–			(505,403	)
Operating income (expenses)		8,061,484			1,362,934			6,748,047			(610	)		16,171,855
Financial result, net
Financial income		1,062,393			164,006			106,659			(173,702	)		1,159,356
Financial expenses		(2,288,576	)		(1,110,874	)		(434,664	)		173,513			(3,660,601	)
Foreign exchange gain (loss), net		(101,030	)		163,992			(57,448	)		–			5,514
		(1,327,213	)		(782,876	)		(385,453	)		(189	)		(2,495,731	)
Share of profits of associates and joint ventures		120,786			15,245			(42,493	)		–			93,538
Income before tax		6,855,057			595,303			6,320,101			(799	)		13,769,662
Income tax		(3,034,556	)		(238,625	)		(2,527,087	)		–			(5,800,268	)
Net profit (loss) for the period		3,820,501			356,678			3,793,014			(799	)		7,969,394
Profit (loss) attributable to:
Group owners of parent		3,820,501			358,859			2,999,978			(799	)		7,178,539
Non–controlling interest		–			(2,181	)		793,036			–			790,855
		3,820,501			356,678			3,793,014			(799	)		7,969,394
Supplementary information
Depreciation, depletion and amortization		5,981,294			1,188,871			1,111,182			–			8,281,347

	For the year ended December 31, 2016
	Exploration and Production			Refining and Petrochemicals			Transportation and Logistics			Eliminations			Total
Third–party sales		20,527,332			24,194,024			3,764,205			–			48,485,561
Inter–segment sales		7,693,878			629,690			6,884,571			(15,208,139	)		–
Total sales revenue		28,221,210			24,823,714			10,648,776			(15,208,139	)		48,485,561
Fixed cost		6,940,074			2,458,745			2,861,269			(2,968,780	)		9,291,308
Variable cost		16,032,574			20,385,242			488,522			(11,946,223	)		24,960,115
Cost of sales		22,972,648			22,843,987			3,349,791			(14,915,003	)		34,251,423
Gross profit		5,248,562			1,979,727			7,298,985			(293,136	)		14,234,138
Administrative expenses		832,266			574,413			516,884			(295	)		1,923,268
Operation and projects expenses		1,656,960			1,206,718			180,353			(292,344	)		2,751,687
Impairment of non–current assets		196,448			773,361			(41,062	)		–			928,747
Other operating income and expenses, net		(349,419	)		20,947			53,559			801			(274,112	)
Operating income (expenses)		2,912,307			(595,712	)		6,589,251			(1,298	)		8,904,548
Financial result, net
Financial income		983,472			46,469			61,373			220,429			1,311,743
Financial expenses		(2,017,641	)		(952,006	)		(262,844	)		(231,049	)		(3,463,540	)
Foreign exchange gain (loss), net		923,573			94,715			(41,858	)		–			976,430
		(110,596	)		(810,822	)		(243,329	)		(10,620	)		(1,175,367	)
Share of profit of associates and joint ventures		39,397			22,785			(837	)		–			61,345
Income before tax		2,841,108			(1,383,749	)		6,345,085			(11,918	)		7,790,526
Income tax		(1,518,738	)		(446,595	)		(2,577,713	)		–			(4,543,046	)
Net profit (loss) for the period		1,322,370			(1,830,344	)		3,767,372			(11,918	)		3,247,480
Income attributable to:
Group owners of parent		1,322,370			(1,823,020	)		2,960,449			(11,918	)		2,447,881
Non–controlling interest		–			(7,324	)		806,923			–			799,599
		1,322,370			(1,830,344	)		3,767,372			(11,918	)		3,247,480
Supplementary information
Depreciation, depletion and amortization		5,482,827			1,145,780			978,393			–			7,607,000

F-97

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

For the year ended December 31, 2016
Exploration and
production Refining and
petrochemicals Transportation and
logistics Eliminations Total
Third-party sales 20,527,332 24,194,024 3,764,205 - 48,485,561
Inter-segment sales 7,693,878 629,690 6,884,571 (15,208,139 ) -
Total sales revenue 28,221,210 24,823,714 10,648,776 (15,208,139 ) 48,485,561
Fixed cost 6,940,074 2,458,745 2,861,269 (2,968,780 ) 9,291,308
Variable cost 16,032,574 20,385,242 488,522 (11,946,223 ) 24,960,115
Cost of sales 22,972,648 22,843,987 3,349,791 (14,915,003 ) 34,251,423
Gross profit 5,248,562 1,979,727 7,298,985 (293,136 ) 14,234,138
Administration expenses 832,266 574,413 516,884 (295 ) 1,923,268
Operation and projects expenses 1,656,960 1,206,718 180,353 (292,344 ) 2,751,687
Impairment of non-current assets 196,448 773,361 (41,062 ) - 928,747
Other operating income and expenses, net (349,419 ) 20,947 53,559 801 (274,112 )
Operating income 2,912,307 (595,712 ) 6,589,251 (1,298 ) 8,904,548
Financial result, net
Financial income 983,472 46,469 61,373 220,429 1,311,743
Financial expenses (2,017,641 ) (952,006 ) (262,844 ) (231,049 ) (3,463,540 )
Foreign exchange gain (loss), net 923,573 94,715 (41,858 ) - 976,430
(110,596 ) (810,822 ) (243,329 ) (10,620 ) (1,175,367 )
Share of profit of associates 39,397 22,785 (837 ) - 61,345
Income before tax 2,841,108 (1,383,749 ) 6,345,085 (11,918 ) 7,790,526
Income tax (1,518,738 ) (446,595 ) (2,577,713 ) - (4,543,046 )
Net income for the period 1,322,370 (1,830,344 ) 3,767,372 (11,918 ) 3,247,480
Income attributable to:
Company’s shareholders 1,322,370 (1,823,020 ) 2,960,449 (11,918 ) 2,447,881
Non-controlling interests - (7,324 ) 806,923 - 799,599
1,322,370 (1,830,344 ) 3,767,372 (11,918 ) 3,247,480
Supplementary information
Depreciation, depletion and amortization 5,482,827 1,145,780 978,394 - 7,607,001

~~F-97~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

For the year ended December 31, 2015
Exploration and
production Refining and
petrochemicals Transportation
and logistics Eliminations Total
Third-party sales 25,669,213 22,456,866 4,221,192 - 52,347,271
Inter-segment sales 6,063,398 788,810 6,623,358 (13,475,566 ) -
Total Revenue 31,732,611 23,245,676 10,844,550 (13,475,566 ) 52,347,271
Fixed costs 7,208,632 1,902,797 3,304,815 (2,790,793 ) 9,625,451
Variable costs 18,500,240 18,856,011 439,607 (10,426,793 ) 27,369,065
Cost of sales 25,708,872 20,758,808 3,744,422 (13,217,586 ) 36,994,516
Gross income 6,023,739 2,486,868 7,100,128 (257,980 ) 15,352,755
Administration expenses 731,626 451,250 518,109 - 1,700,985
Operation and projects expenses 2,969,723 1,155,301 157,596 (248,352 ) 4,034,268
Impairment of non-current assets 4,504,497 3,278,993 81,388 7,864,878
Other operating income and expenses, net (399,954 ) 122,595 (101,182 ) - (378,541 )
Operating income (1,782,153 ) (2,521,271 ) 6,444,217 (9,628 ) 2,131,165
Finance results, net
Financial income 536,121 135,622 86,568 (136,387 ) 621,924
Financial expenses (1,774,090 ) (451,906 ) (492,485 ) 67 (2,718,414 )
Foreign exchange gain (loss), net (4,798,741 ) (949,176 ) 181,303 - (5,566,614 )
(6,036,710 ) (1,265,460 ) (224,614 ) (136,320 ) (7,663,104 )
Share of profit of companies (70,407 ) 23,187 533 - (46,687 )
Income before tax (7,889,270 ) (3,763,544 ) 6,220,136 (145,948 ) (5,578,626 )
Income tax 2,037,650 (257,256 ) (2,490,747 ) - (710,353 )
Net income (loss) for the period (5,851,620 ) (4,020,800 ) 3,729,389 (145,948 ) (6,288,979 )
Income attributable to:
Owners of the Company (5,851,620 ) (4,016,050 ) 2,819,759 (145,948 ) (7,193,859 )
Non-controlling interests - (4,750 ) 909,630 - 904,880
(5,851,620 ) (4,020,800 ) 3,729,389 (145,948 ) (6,288,979 )
Supplementary information
Depreciation, depletion and amortization 5,318,587 570,033 881,738 - 6,770,358

~~F-98~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

For the year ended December 31, 2014
Exploration and
production Refining and
petrochemicals Transportation
and logistics Eliminations Total
Third-party sales 35,903,045 26,612,204 3,456,639 - 65,971,888
Inter-segment sales 9,252,146 560,096 4,887,295 (14,699,537 ) -
Total Revenue 45,155,191 27,172,300 8,343,934 (14,699,537 ) 65,971,888
Fixed costs 6,788,549 1,888,558 3,538,797 (1,981,744 ) 10,234,160
Variable costs 21,139,234 23,648,670 402,255 (12,449,191 ) 32,740,968
Cost of sales 27,927,783 25,537,228 3,941,052 (14,430,935 ) 42,975,128
Gross income 17,227,408 1,635,072 4,402,882 (268,602 ) 22,996,760
Administration expenses 335,432 354,221 341,523 (141 ) 1,031,035
Operation and projects expenses 4,288,108 1,039,695 380,940 (188,418 ) 5,520,325
Impairment of non-current assets 965,607 1,340,086 (1,121 ) - 2,304,572
Other operating income and expenses, net (285,821 ) 12,490 (36,643 ) 1,775 (308,199 )
Operating income 11,924,082 (1,111,420 ) 3,718,183 (81,818 ) 14,449,027
Finance results, net
Financial income 251,902 113,237 127,262 (92,583 ) 399,818
Financial expenses (837,510 ) (306,174 ) (496,615 ) 5 (1,640,294 )
Foreign exchange gain (loss), net (2,243,938 ) (309,449 ) 283,194 - (2,270,193 )
(2,829,546 ) (502,386 ) (86,159 ) (92,578 ) (3,510,669 )
Share of profit of companies 154,816 11,254 - - 166,070
Income before tax 9,249,352 (1,602,552 ) 3,632,024 (174,396 ) 11,104,428
Income tax (4,159,511 ) (29,251 ) (1,246,093 ) - (5,434,855 )
Net income for the period 5,089,841 (1,631,803 ) 2,385,931 (174,396 ) 5,669,573
Income attributable to:
Owners of the Company 5,089,841 (1,627,705 ) 1,758,777 (174,396 ) 5,046,517
Non-controlling interests - (4,098 ) 627,154 - 623,056
5,089,841 (1,631,803 ) 2,385,931 (174,396 ) 5,669,573
Supplementary information
Depreciation, depletion and amortization 5,172,743 548,539 695,925 - 6,417,207

~~F-99~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~34.2~~

~~Information by segments of sales by product and capital expenditures~~

~~34.2.1~~31.2

Sales by product

The sales by product offor each ~~of the segments~~segment are detailed below for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

	For the year ended December 31, 2016
	Exploration and production		Refining and petrochemicals		Transportation and logistics		Eliminations			Total		For the year ended on December 31, 2018
												Exploration and Production		Refining and Petrochemicals		Transport and Logistics		Eliminations			Total
Local sales
Med-distillates		-		8,553,503		-		-			8,553,503
Mid–distillates													725		11,662,476		-		(77,009	)		11,586,192
Gasoline and turbo fuel		-		6,465,939		-		(373,200	)		6,092,739		-		9,690,113		-		(1,737,261	)		7,952,852
Services		73,247		41,736		10,572,170		(6,643,869	)		4,043,284
Transport service													37,279		36,321		11,089,012		(7,631,208	)		3,531,404
Natural gas		2,383,323		11,763		-		(406,750	)		1,988,336		2,535,658		-		-		(649,812	)		1,885,846
Plastic and rubber		-		724,708		-		-			724,708		-		822,367		-		-			822,367
L.P.G. and propane		90,783		319,644		-		(4,558	)		405,869
Crude oil		5,284,554		-		-		(4,730,888	)		553,666
Asphalts		31,277		309,123		-		-			340,400
Crude													20,142,527		-		-		(19,592,048	)		550,479
LPG and propane													245,875		329,569		-		(805	)		574,639
Fuel oil													20,391		489,091		-		-			509,482
Asphats													26,406		309,020		-		-			335,426
Aromatics		-		186,228		-		-			186,228		-		282,545		-		-			282,545
Oil fuel		1,382		146,866		-		-			148,248
Polyethylene													-		270,887		-		-			270,887
Services													103,522		190,612		265,059		(319,783	)		239,410
Other income gas contracts													156,031		-		-		-			156,031
Other products		424,952		669,568		75,793		(510,144	)		660,169		11,484		604,530		-		(126,507	)		489,507
		8,289,518		17,429,078		10,647,963		(12,669,409	)		23,697,150		23,279,898		24,687,531		11,354,071		(30,134,433	)		29,187,067
Recognition of price differential		-		1,048,022		-		-			1,048,022		-		3,835,533		-		-			3,835,533
		8,289,518		18,477,100		10,647,963		(12,669,409	)		24,745,172		23,279,898		28,523,064		11,354,071		(30,134,433	)		33,022,600

Foreign sales
Crude		19,516,197		-		-		(2,237,618	)		17,278,579		26,898,737		-		-		-			26,898,737
Oil fuel		-		2,158,539		-		-			2,158,539
Med-distillates				1,594,945		-		-			1,594,945
Diesel													-		3,050,839		-		-			3,050,839
Fuel oil													-		2,053,594		-		-			2,053,594
Gasoline and turbo fuels													-		1,782,194		-		-			1,782,194
Plastic and rubber		-		1,171,342		-		-			1,171,342		-		1,268,582		-		-			1,268,582
Gasoline and turbo fuel				1,046,758		-		-			1,046,758
Natural gas		350,685		-		-		(291,875	)		58,810		27,899		-		-		-			27,899
L.P.G. and propane		6,342		2,225		-		-			8,567
Cash flow hedging – Reclassification to profit or loss		33,074		-		-		-			33,074
LPG and propane													20,212		-		-		-			20,212
Cash flow hedge for future exports – Reclassification to profit or loss													128,404		-		-		-			128,404
Other products		25,395		363,250		814		316			389,775		17,614		333,101		96		-			350,811
		19,931,693		6,337,059		814		(2,529,177	)		23,740,389		27,092,866		8,488,310		96		-			35,581,272
Total sales revenue		28,221,211		24,814,159		10,648,777		(15,198,586	)		48,485,561
													50,372,764		37,011,374		11,354,167		(30,134,433	)		68,603,872

~~F-100~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

												For the year ended on December 31, 2017
	Exploration and production		Refining and petrochemicals		Transportation and logistics		Eliminations			Total		Exploration and Production		Refining and Petrochemicals		Transport and Logistics		Eliminations			Total
Local sales
Med-distillates		25,782		10,206,599		-		(17,157	)		10,215,224
Gasoline		-		6,464,661		-		(336,453	)		6,128,208
Mid–distillates													1,334		9,588,992		-		-			9,590,326
Gasoline and turbo fuel													-		8,052,289		-		(1,062,102	)		6,990,187
Transport service													41,157		41,998		10,277,921		(6,771,523	)		3,589,553
Natural gas													2,540,233		4		-		(724,483	)		1,815,754
Plastic and rubber													-		833,982		-		-			833,982
Crude													11,668,529		-		-		(10,758,658	)		909,871
LPG and propane													199,796		309,823		-		-			509,619
Fuel oil													14,758		339,300		-		-			354,058
Asphats													34,834		240,969		-		-			275,803
Aromatics													-		217,418		-		-			217,418
Polyethylene													-		167,348		-		-			167,348
Services		118,812		198,369		10,822,078		(6,703,985	)		4,435,274		140,227		179,912		319,776		(356,116	)		283,799
Natural gas		2,198,284		-		-		(352,939	)		1,845,345
Crude oil		5,847,368		-		-		(5,356,089	)		491,279
Diesel and asphalts		49,583		411,605		-		-			461,188
Plastic and rubber		-		724,392		-		-			724,392
L.P.G. and propane		154,201		190,346		-		(9,053	)		335,494
Other income gas contracts													188,195		-		-		-			188,195
Other products		262,906		1,070,725		22,472		(367,757	)		988,346		11,107		379,023		-		(109,904	)		280,226
		8,656,936		19,266,697		10,844,550		(13,143,433	)		25,624,750		14,840,170		20,351,058		10,597,697		(19,782,786	)		26,006,139
Recognition of price differential		-		441,871		-		-			441,871		-		2,229,953		-		-			2,229,953
		8,656,936		19,708,568		10,844,550		(13,143,433	)		26,066,621		14,840,170		22,581,011		10,597,697		(19,782,786	)		28,236,092
Foreign sales
Crude		21,495,762		-		-		(314,497	)		21,181,265		21,426,666		52,397		-		-			21,479,063
Diesel													-		1,213,740		-		-			1,213,740
Fuel oil		-		2,166,469		-		-			2,166,469		-		1,982,408		-		-			1,982,408
Trading of crude		1,309,196									1,309,196
Gasoline and turbo fuels													-		1,223,994		-		-			1,223,994
Plastic and rubber													-		1,169,101		-		-			1,169,101
Natural gas		233,500		-		-		(50,550	)		182,950		32,303		-		-		-			32,303
Gasoline and turbo fuel		27,756		65,369		-		-			93,125
Diesel		-		81,982		-		-			81,982
Plastic and rubber		-		1,096,730		-		-			1,096,730
Cash flow hedging – Reclassification to profit or loss		7,646		-		-		-			7,646
Other products and services		1,815		126,558		-		32,914			161,287
LPG and propane													15,631		-		-		-			15,631
Cash flow hedge for future exports – Reclassification to profit or loss													160,772		-		-		-			160,772
Other products													19,392		421,365		367		-			441,124
		23,075,675		3,537,108		-		(332,133	)		26,280,650		21,654,764		6,063,005		367		-			27,718,136
Total revenue		31,732,611		23,245,676		10,844,550		(13,475,566	)		52,347,271
													36,494,934		28,644,016		10,598,064		(19,782,786	)		55,954,228

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Exploration
and production Refining and
petrochemicals Transportation and
logistics Eliminations Total
Local sales
Med-distillates 1,241 11,982,214 - - 11,983,455
Gasoline - 6,979,197 - (584,775 ) 6,394,422
Services 245,798 152,267 8,324,753 (4,944,745 ) 3,778,073
Natural gas 1,580,941 - - (234,316 ) 1,346,625
Crude oil 9,487,864 - - (8,274,146 ) 1,213,718
Diesel and asphalts 46,336 412,736 - - 459,072
Plastic and rubber - 667,563 - - 667,563
L.P.G. and propane 181,806 248,578 - (3,934 ) 426,450
Other products 102,696 812,510 19,181 66,934 1,001,321
11,646,682 21,255,065 8,343,934 (13,974,982 ) 27,270,699
Recognition of price differential 485,409 - - 485,409
11,646,682 21,740,474 8,343,934 (13,974,982 ) 27,756,108
Foreign sales
Crude 31,524,915 - - (689,405 ) 30,835,510
Fuel oil - 3,921,703 - - 3,921,703
Trading of crude 1,486,060 1,486,060
Natural gas 439,076 - - (15,615 ) 423,461
Gasoline and turbo fuel - 127,090 - - 127,090
Diesel - 179,738 - - 179,738
Plastic and rubber - 975,282 - - 975,282
Other products and services 58,458 228,013 - (19,535 ) 266,936
33,508,509 5,431,826 - (724,555 ) 38,215,780
Total revenue 45,155,191 27,172,300 8,343,934 (14,699,537 ) 65,971,888

~~F-101~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

	For the year ended on December 31, 2016
	Exploration and Production		Refining and Petrochemicals		Transport and Logistics		Eliminations			Total
Local sales
Mid–distillates		-		8,553,503		-		-			8,553,503
Gasoline and turbo fuel		-		6,465,939		-		(373,200	)		6,092,739
Transport service		73,247		41,736		10,283,338		(6,580,330	)		3,817,991
Natural gas		2,383,323		11,763		-		(406,750	)		1,988,336
Plastic and rubber		-		724,708		-		-			724,708
Crude		5,284,554		-		-		(4,730,888	)		553,666
LPG and propane		90,783		319,643		-		(4,557	)		405,869
Fuel oil		1,382		146,866		-		-			148,248
Asphats		31,277		309,123		-		-			340,400
Aromatics		-		186,228		-		-			186,228
Polyethylene		20		203,939		-		-			203,959
Services		133,429		152,028		301,088		(361,252	)		225,293
Other income gas contracts		271,337		-		-		-			271,337
Other products		20,165		313,603		63,537		(212,432	)		184,873
		8,289,517		17,429,079		10,647,963		(12,669,409	)		23,697,150
Recognition of price differential		-		1,048,022		-		-			1,048,022
		8,289,517		18,477,101		10,647,963		(12,669,409	)		24,745,172
Foreign sales
Crude		17,266,094		-		-		12,485			17,278,579
Diesel		-		1,604,498		-		-			1,604,498
Fuel oil		-		2,158,539		-		-			2,158,539
Gasoline and turbo fuels		-		1,046,758		-		-			1,046,758
Plastic and rubber		-		1,171,342		-		-			1,171,342
Natural gas		58,809		-		-		-			58,809
LPG and propane		6,343		2,225		-		-			8,568
Cash flow hedge for future exports – Reclassification to profit or loss		33,074		-		-		-			33,074
Other products		2,567,372		363,252		813		(2,551,215	)		380,222
		19,931,692		6,346,614		813		(2,538,730	)		23,740,389
		28,221,209		24,823,715		10,648,776		(15,208,139	)		48,485,561

~~34.2.2~~31.3

Capital expenditures by ~~segment~~segments

The following are the investments amounts ~~of investments~~ made by each segment for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

2018	Exploration and Production		Refining and Petrochemicals		Transport and Logistics		Total
Property, plant and equipment		2,071,604		702,247		529,078		3,302,929
Natural and environmental resources		5,051,828		-		-		5,051,828
Intangibles		56,755		20,203		28,711		105,669
		7,180,187		722,450		557,789		8,460,426

2016	Exploration and production		Refining and petrochemicals		Transportation and logistics		Total
2017									Exploration and Production		Refining and Petrochemicals		Transport and Logistics		Total
Property, plant and equipment		1,208,464		1,099,850		1,338,615		3,646,929		927,282		606,749		829,252		2,363,283
Natural and environmental resources		2,121,295		-		-		2,121,295		3,568,355		–		–		3,568,355
Intangibles		53,774		10,274		5,205		69,253		154,155		4,941		16,772		175,868
		3,383,533		1,110,124		1,343,820		5,837,477		4,649,792		611,690		846,024		6,107,506

2015 Exploration and
production Refining and
petrochemicals Transportation
and logistics Total
Property, plant and equipment 2,460,975 3,590,279 2,497,679 8,548,933
Natural and environmental resources ( Note 2.8) 6,856,761 - - 6,856,761
Intangibles 69,126 18,494 24,635 112,255
9,386,862 3,608,773 2,522,314 15,517,949

2014	Exploration and production		Refining and petrochemicals		Transportation and logistics		Total
2016									Exploration and Production		Refining and Petrochemicals		Transport and Logistics		Total
Property, plant and equipment		3,556,536		3,730,289		1,636,743		8,923,568		1,208,464		1,099,850		1,338,615		3,646,929
Natural and environmental resources (Note 2.8)		6,601,680		-		-		6,601,680
Natural and environmental resources										2,121,295		–		–		2,121,295
Intangibles		26,610		10,636		74,772		112,018		53,774		10,274		5,205		69,253
		10,184,826		3,740,925		1,711,515		15,637,266		3,383,533		1,110,124		1,343,820		5,837,477

~~F-102~~

F-100

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~35.~~

~~Contractual obligations~~

Ecopetrol business group enter into various commitments and contractual obligations that may require future cash payments. The details of the commitments and contractual obligations can be found in section 4.8 Financial Review - Financial Indebtedness and Other Contractual Obligations.

~~36.~~32.

Subsequent events

On February 15, 2017 the fourth auction was carried out corresponding to the Second Stage of the Alienation and Awarding Program of 28,465,035 shares of Empresa de Energía de Bogotá S.A. E.S.P, the auction was declared deserted.

No events subsequent to the date of approval of these Consolidated Financial Statements have been presented.

The Ordinary General Shareholders’ Meeting, held on March 31, 2017, approved the profit distribution project, which establishes that a common dividend per share of twenty-three pesos (COL $ 23) will be distributed. The shareholders’ dividend was paid in a single installment on April 28, 2017.

On April 28, 2017 Ecopetrol transferred the fields Santana and Nancy-Maxine-Burdine to Gran Tierra for a total amount of US$30.41 million. On May 26, 2017 the company IHSA paid US$21.74 million to acquire the fields Rio de Oro and Puerto Barco, Rio Zulia and Valdivia Almagro, which will be transferred on May 30 and 31, 2017. All of these fields were awarded through an auction offered in November 2016.

As part of the investigations carried out by various control entities on the Cartagena refinery modernization and expansion project, the Prosecutor’s Office (Fiscalia General de la Nación) is conducting a confidential investigation. In connection therewith, on April 27, 2017, through a press release informed its intention to pursue charges including document forgery, illegal interest in the execution of agreement, misappropriation of public funds and unjust enrichment.

The Prosecutor’s Office has not yet made public the factual basis for such charges, and accordingly we are not in a position to predict the outcome of the Prosecutor’s Office investigation or the disposition of any charges that the Prosecutor’s Office may bring. Given the early stage of the investigation, it is not possible to assess the probability of any other consequences that might impact the financial statements, such as additional provisions, fines, legal costs, disallowance of tax deductions that may impact the recognition of tax reserves or the carrying amount of deferred tax assets or any other impact that is not known at the present time.

~~F-103~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~37.~~33.

Supplemental information on oil and gas producing activities (unaudited)

The information in this note is referred to as “unaudited” as a means of clarifying that it is not covered by the audit opinion of the independent registered public accounting firm that has audited and reported on the “Consolidated Financial ~~Statements”.~~Statements.”

In accordance with the requirements of the United States Securities and Exchange Commission (SEC), Rule 4–10(a) of Regulation S–X, Release ~~33-8879,~~33–8879, Accounting Standards Codification 932 and the ~~ASU- 2010-03~~ASU– 2010–03 “Oil and Gas reserve Estimation and Disclosures” rule, this section provides supplemental information on oil and gas exploration and producing activities of the ~~Company.~~Ecopetrol Business Group. The information included in sections a)(a) to c)(c) provides historical cost information pertaining to costs incurred in exploration, property acquisitions and development, capitalized costs and results of operations. The information included in sections d)(d) and e)(e) presents information on Ecopetrol’s estimated net proved reserve quantities, standardized measure of estimated discounted future net cash flows related to proved reserves and changes in estimated discounted future net cash flows.

The following information corresponds to Ecopetrol’s oil and gas producing activities as of December 31 ~~2016, 2015~~2018, 2017 and ~~2014,~~2016, and includes information related to the ~~Company’s~~Ecopetrol Business Group’s consolidated subsidiaries, as well as its investments the joint ventures Equion Energía Limited and Offshore International Group. The oil and gas exploration and production activities of these two joint ventures are immaterial, as such the corresponding information has not been disclosed separately.

Under the SEC final rule optional disclosure of possible and probable reserves is allowed but, the ~~Company~~Ecopetrol Business Group opted not to do so. Ecopetrol estimated its reserves without considering ~~non-traditional~~non–traditional resources.

~~(a)~~33.1

Capitalized costs relating to oil and gas exploration and production activities

	December 31,
	2016			2015			2014			2018			2017			2016
Natural and environmental properties		47,097,475			45,789,713			40,356,524			53,752,436			48,129,595			47,097,475
Wells, equipment and facilities – property, plant and equipment		29,931,039			21,822,897			17,839,350			29,416,081			30,405,565			29,931,039
Construction in progress		6,855,832			9,145,198			8,110,401
Exploration and production projects											8,463,584			6,632,812			6,855,832
Accumulated depreciation, depletion and amortization		(49,714,944	)		(39,743,147	)		(32,003,657	)		(55,689,222	)		(51,791,897	)		(49,714,944	)
Net capitalized costs		34,169,402			37,014,661			34,302,618
Net capitalized cost											35,942,879			33,376,075			34,169,402

It includes information of the ~~exploration~~Exploration and ~~production~~Production segment ~~subsidiaries.~~subsidiaries and joint ventures.

In accordance with IAS 37, costs capitalized to natural and environmental properties include provisions for asset retirement obligations ~~amounting~~of COP$1,076,116, COP$598,125 and COP$766,909 ~~COP$580,575~~during 2018, 2017 and ~~COP$1,061,392 during~~ 2016, ~~2015 and 2014,~~ respectively.

~~(b)~~33.2

Costs incurred in oil and gas exploration and developed activities

Costs incurred are summarized below and include both amounts expensed and capitalized in the corresponding period.

Year ended December 31
2016 2015 2014
Acquisition of Proved properties - - 16,747
Acquisition of unproved properties (1) - 357,772 263,057
Exploration costs 852,097 1,012,264 2,036,526
Development costs 2,190,426 8,018,131 8,189,239
Total costs incurred 3,042,523 9,388,167 10,505,569

	2018		2017		2016
Acquisition of proved properties⁽¹⁾		–		591,875		–
Acquisition of unproved properties⁽²⁾		81,295		164,180		–
Exploration costs		1,197,946		1,095,588		852,097
Development costs		6,346,276		3,599,385		2,190,426
		7,625,517		5,451,028		3,042,523

(1)

~~It relates~~On December 11, 2017, Ecopetrol América Inc. acquired the 11.6% interest in the K2 oil field in the Gulf of Mexico from MCX; increasing its share from 9.2% to drilling for the Leon 2 exploratory project, operated by Repsol as well as acquisition of the Lease sales 235 and 246 (unproven lands). For 2014, it corresponds to drilling for the Ridberg/Aleatico and Leon 1 exploratory projects, operated by Shell and Repsol, respectively, as well as acquisition of the Lease Sale 231 (unproved lands)20.8%.

~~F-104~~(2)

On September 2018, Ecopetrol Oleo e Gas do Brasil acquired the 20% interest in the Pau Brasil oil field in the Basin of Santos. As of December 2017, the investments were mainly made by Ecopetrol América Inc. in offshore exploration projects of the Warrior and Rydberg wells.

F-101

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~(c)~~33.3

Results of operations for oil and gas exploration and production activities

The ~~Company’s~~Ecopetrol Business Group’s results of operations from oil and gas exploration and production activities for the years ended December 31, ~~2016, 2015~~2018, 2017 and ~~2014~~2016 are as follows:

2016 2015 2014
Net revenues
Sales 21,322,662 26,039,708 36,678,579
Transfers 7,734,195 5,692,902 8,476,612
Total 29,056,857 31,732,610 45,155,191

Production cost (1) 5,785,950 6,006,563 6,457,013
Depreciation, depletion and amortization (2) 6,123,914 9,887,331 6,129,538
Other production costs (3) 12,370,540 14,457,836 16,406,789
Exploration expenses (4) 730,393 1,586,940 2,590,778
Other expenses (5) 1,488,143 2,711,274 2,478,563
Total 26,498,940 34,649,944 34,062,681
Income before income tax 2,557,918 (2,917,333 ) 11,092,510
Income tax expenses (1,367,357 ) (371,376 ) (5,428,674 )
Results of operations for producing activities 1,190,561 (3,288,709 ) 5,663,836

	2018			2017			2016
Net revenues
Sales		39,633,866			29,823,565			21,322,662
Transfers		11,794,014			7,518,216			7,734,195
		51,427,880			37,341,781			29,056,857
Production costs⁽¹⁾		8,337,413			6,535,794			5,785,950
Depreciation, depletion and amortization⁽²⁾		5,591,774			6,349,382			5,927,466
Other production costs⁽³⁾		18,918,275			14,066,593			12,370,540
Exploration expenses⁽⁴⁾		1,387,463			1,342,952			730,393
Other expenses⁽⁵⁾		1,036,983			882,743			1,684,590
		35,271,908			29,177,464			26,498,939
Income before income tax expense		16,155,972			8,164,317			2,557,918
Income tax expense		(6,303,251	)		(3,678,955	)		(1,367,357	)
Results of operations for exploration and production activities		9,852,721			4,485,362			1,190,561

(1)

Production costs are lifting costs incurred to operate and maintain productive wells and related equipment and facilities including costs such as operating labor, materials, supplies, and fuel consumed in operations and the costs of operating natural gas liquids plants. In addition, ~~it includes accretion expense~~they include expenses related to the asset retirement obligations that were recognized during 2018, 2017 and 2016 ~~2015 and 2014 amounting approximately~~of COP$~~305,653,~~187,340, COP$~~206,570~~380,810 and COP$~~184,648,~~305,653, respectively.

(2)

In accordance with IAS 37 the expense related to asset retirement obligations that were recognized during ~~2016, 2015~~2018, 2017 and ~~2014~~2016 in depreciation, depletion and amortization, ~~amounted approximately to~~were COP$~~188,370,~~180,193, COP$~~294,849~~179,601 and COP$~~160,106,~~188,370, respectively.

(3)

Corresponds to transportation costs and naphtha that are not part of the ~~Company´s~~Ecopetrol Business Group’s lifting cost.

(4)

Exploration expenses include the costs of geological and geophysical activities, as well as the ~~non-productive~~non–productive exploratory wells.

(5)

Corresponds to administration and marketing expenses.

During 2018, 2017 and 2016, ~~2015 and 2014 ,~~ the ~~Company~~Ecopetrol Business Group transferred approximately ~~17.7%~~22.9%, ~~17.9%~~20.1% and ~~18.8%~~17.7%, respectively, of its crude oil and gas production; (percentages based on the value sales in Colombian pesos) to intercompany business units. ~~Based on volume those~~Those transfers were 51.8%, 48.4% and 46.1%, ~~37.4%~~respectively, of crude oil and ~~38.8%, respectively~~gas production volume (including Reficar).

The intercompany transfers were ~~performed~~realized at market prices.

~~F-105~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~(d)~~33.4

Reserve information

The Ecopetrol Business Group follows international standards for estimating, classifying and reporting reserves framed under SEC definitions. ~~The process is led by~~Corporate Reserve Management of Ecopetrol, Upstream Management and the ~~Reserves Department which submits~~Vice-Presidency of Development and Production, present the ~~report~~reserves balance to the Board of Directors for approval.

The reserves were ~~audited~~estimated at a level of 99% by 2 specialized ~~auditing companies:~~firms: DeGolyer and MacNaughton and Ryder Scott ~~Company.~~Company, Gaffney Cline & Associates and Sproule International Limited. According to these certifications the reserves report complies with the content and guidelines set forth in Rule ~~4-10~~4–10 of Regulation ~~S-X~~S–X issued by the United States SEC.

The following information relates to the net proven reserves owned by the Ecopetrol Business Group in ~~2016, 2015~~2018, 2017 and ~~2014,~~2016, and corresponds to the official reserves statements prepared by the ~~Company:~~Ecopetrol Business Group:

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

	2016									2015									2014									2018									2017									2016
	Oil			Gas			Total			Oil			Gas			Total			Oil			Gas			Total			Oil			Gas			Total			Oil			Gas			Total			Oil			Gas			Total
	(Mbls)			(Gpc)			(Mbe)			(Mbls)			(Gpc)			(Mbe)			(Mbls)			(Gpc)			(Mbe)			(Mbls)			(Gpc)			(Mbe)			(Mbls)			(Gpc)			(Mbe)			(Mbls)			(Gpc)			(Mbe)
Proved reserves:
Opening balance		1,239			3,479			1,849			1,465			3,529			2,084			1,434			3,068			1,972			1,088			3,254			1,659			1,033			3,218			1,598			1,239			3,479			1,849
Revisions of previous estimates (1)		(50	)		(23	)		(54	)		(64	)		225			(25	)		154			666			270			121			(4	)		121			124			294			175			(50	)		(23	)		(54	)
Improved recovery		11			1			11			16			3			17			33			-			34			128			4			129			72			4			73			11			1			11
Purchases																													-			-			-			3			2			4			–			–			–
Extensions and discoveries		22			25			27			24			-			24			41			59			51			54			18			57			44			–			43			22			25			27
Production		(189	)		(264	)		(235	)		(202	)		(278	)		(251	)		(197	)		(264	)		(243	)		(191	)		(270	)		(239	)		(188	)		(264	)		(234	)		(189	)		(264	)		(235	)
Closing balance		1,033			3,218			1,598			1,239			3,479			1,849			1,465			3,529			2,084			1,200			3,002			1,727			1,088			3,254			1,659			1,033			3,218			1,598

Proved developed reserves:
Opening balance		913			3,176			1,470			1,042			3,284			1,618			933			2,663			1,400			818			3,158			1,372			779			3,131			1,329			913			3,176			1,470
Closing balance		779			3,131			1,329			913			3,176			1,470			1,042			3,284			1,618			883			2,882			1,389			818			3,158			1,372			779			3,131			1,329

Proved undeveloped reserves:
Opening balance		326			303			379			423			245			466			501			405			572			270			96			287			254			87			269			326			303			379
Closing balance		254			87			269			326			303			379			423			245			466			317			119			338			270			96			287			254			87			269

(1)

~~It represents~~Represents changes in previous proved reserves, upward or downward, resulting from new information (except for an increase in proved area), usually obtained from development drilling and production history or result from changes in economic factors.

~~The~~For additional information about the changes in Proved Reserves and the process for estimating reserves, see section 3.4.3 – Business Overview ~~Business~~ – Exploration and Production – ~~Reserves~~ ~~contains additional information of the process of estimating reserves and main explanations about the changes in Proved~~ Reserves.

~~(e)~~33.5

Standardized measure of discounted future net cash flows relating to proved oil and gas quantities and changes therein

The standardized measure of discounted future net cash flows related to the above proved crude oil and natural gas reserves is calculated in accordance with the requirements of ASU ~~2010-03.~~2010–03. Estimated future cash inflows from production under SEC requirements are computed by applying unweighted arithmetic average of the ~~first-day-of-the-month~~first–day–of–the–month for oil and gas price to ~~year-end~~year–end quantities of estimated net proved ~~reserves.~~reserves, with cost factors based on those at the end of each year, currently enacted tax rates and a 10% annual discount factor. In our view, the information so calculated does not provide a reliable measure of future cash flows from proved reserves, nor does it permit a realistic comparison to be made of one entity with another because the assumptions used cannot reflect the varying circumstances within each entity. In addition, a substantial but unknown proportion of future real cash flows from oil and gas production activities is expected to derive from reserves which have already been discovered, but which cannot yet be regarded as proved.

	2016			2015			2014			2018			2017			2016
Future cash inflows		140,458,230			176,865,586			310,138,127			275,046,421			182,114,282			140,458,230
Future costs
Production		(60,705,779	)		(76,363,169	)		(107,629,865	)		(90,176,326	)		(70,159,534	)		(60,705,779	)
Development		(12,005,835	)		(16,498,118	)		(23,504,455	)		(21,945,453	)		(14,860,992	)		(12,005,835	)
Income tax expenses		(15,400,000	)		(30,052,830	)		(60,366,272	)
Income taxes											(41,102,015	)		(23,660,328	)		(15,400,000	)
Future net cash flow		52,346,616			53,951,469			118,637,535			121,822,627			73,433,428			52,346,616
10% annual discount for estimated timing of cash flows		(18,221,004	)		(19,117,422	)		(43,604,395	)
Standardized measure of discounted future net cash flows		34,125,612			34,834,047			75,033,140
10% discount factor											(35,518,187	)		(22,216,583	)		(18,221,004	)
Standardized measure of discounted net cash flows											86,304,440			51,216,845			34,125,612

Ecopetrol S.A.

~~F-106~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The following are the principal sources of change in the standardized measure of discounted net cash flows in ~~2016, 2015~~2018, 2017 and ~~2014:~~2016:

2016 2015 2014

Net change in sales and transfer prices and in production (lifting) cost related to future production 3,603,876 (50,472,025 ) 12,924,167
Changes in estimated future development costs (4,767,340 ) 592,529 (10,987,031 )
Sales and transfer of oil and gas produced during the period (23,270,907 ) (25,726,047 ) (38,698,178 )
Net change due to extensions and discoveries 154,352 (93,190 ) (902,356 )
Net change due to purchase and (sales) of minerals in place (83,450 ) - -
Net change due to revisions in quantity estimates (2,570,103 ) (985,217 ) 18,866,518
Previously estimated development costs incurred during the period 5,042,697 10,769,369 8,702,964
Accretion of discount 5,423,781 11,321,221 11,018,459
Timing and other 6,394,404 (4,381,037 ) 2,103,078
Net change in income taxes 9,364,255 18,775,304 (1,254,706 )
Aggregate change in the Standardized measure of discounted future net cash flows for the year (708,435 ) (40,199,093 ) 1,772,915

~~F-107~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

	2018			2017			2016
Net change in sales and transfer prices and in production cost (lifting) related to future production		79,632,263			26,918,170			3,603,876
Changes in estimated future development costs		(13,141,340	)		(1,978,913	)		(4,767,340	)
Sales and transfer of oil and gas produced, net of production costs		(43,090,467	)		(30,805,987	)		(23,270,907	)
Net change due to extensions, discoveries and improved recovery ⁽¹⁾		8,496,249			3,226,852			326,854
Net change due to purchase and sales of minerals in place		-			211,777			(83,450	)
Net change due to revisions in quantity estimates		10,163,131			9,090,882			(2,570,103	)
Previously estimated development costs incurred during the period		12,505,421			3,482,570			5,042,697
Accretion of discount		6,771,897			4,416,512			5,423,781
Timing and other ⁽¹⁾		(13,633,228	)		8,991,981			6,221,902
Net change in income taxes		(12,616,331	)		(6,462,611	)		9,364,255
Aggregate change in the standardized measure of discounted future net cash flows for the year		35,087,595			17,091,233			(708,435	)

⁽¹⁾For comparative purposes, figures as of December 2017 and 2016 were reclassified.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Exhibit 1 -– Consolidated subsidiaries, associates and joint ventures

Consolidated subsidiary companies ~~associates~~(1/2)

Company	Functional currency	Ownership interest Ecopetrol		Activity	Country/ Domicile	Geographic area of operations	Equity		Profit (loss) of the year			Total assets		Total liabilities
Refinería de Cartagena S.A.S.	U.S. dollar	100	%	Refining of hydrocarbons, commercialization and distribution of products	Colombia	Colombia		17,075,400		(1,479,448	)		26,251,879		9,176,479
Cenit Transporte y Logística S.A.S.	Colombian peso	100	%	Storage and transport by pipelines of hydrocarbons	Colombia	Colombia		14,566,611		3,566,742			16,343,576		1,776,965
Oleoducto Central S. A. - Ocensa	U.S. dollar	72.65	%	Transportation by crude oil pipelines	Colombia	Colombia		3,431,369		1,976,554			6,550,710		3,119,341
Ecopetrol Global Energy S.L.U	U.S. dollar	100	%	Investment vehicle	Spain	Spain		2,777,401		(757,450	)		2,777,806		405
Hocol Petroleum Limited - HPL	U.S. dollar	100	%	Investment vehicle	Bermuda	Bermuda		2,602,760		210,443			2,602,852		92
Ecopetrol América Inc.	U.S. dollar	100	%	Exploration and exploitation of hydrocarbons	United States	United States		2,571,983		(603,957	)		3,015,656		443,673
Hocol S.A.	U.S. dollar	100	%	Exploration, exploitation and production of hydrocarbons	Cayman Islands	Colombia		1,843,876		208,026			2,709,974		866,098
Propilco S.A.	U.S. dollar	100	%	Production and commercialization of polypropylene resin	Colombia	Colombia		1,515,393		165,670			2,024,401		509,008
Ecopetrol Capital AG	U.S. dollar	100	%	Collection of surpluses from, and providing funds to, companies of the Ecopetrol Business Group.	Switzerland	Switzerland		1,493,572		129,343			6,544,222		5,050,650
Andean Chemicals Ltd.	U.S. dollar	100	%	Investment vehicle	Bermuda	Bermuda		1,183,536		(376,664	)		1,184,667		1,131
Oleoducto Bicentenario de Colombia S.A.S.	Colombian peso	55.97	%	Transportation by crude oil pipelines	Colombia	Colombia		1,243,689		495,107			3,464,898		2,221,209
Oleoducto de los Llanos Orientales S. A. - ODL	Colombian peso	65	%	Transportation by crude oil pipelines	Panama	Colombia		1,083,479		416,347			1,887,076		803,597

F-105

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Consolidated subsidiaries (2/2)

Company	Functional currency	Ownership interest Ecopetrol		Activity	Country/ Domicile	Geographic area of operations	Equity		Profit (loss) of the year			Total assets		Total liabilities
Black Gold Re Ltd.	U.S. dollar	100	%	Reinsurer for companies of the Ecopetrol Business Group	Bermuda	Bermuda		691,710		28,303			905,207		213,497
Oleoducto de Colombia S.A. – ODC	Colombian peso	73	%	Transportation by crude oil pipelines	Colombia	Colombia		382,937		265,460			593,387		210,450
Bioenergy S.A.	Colombian peso	99.35	%	Production of biofuels	Colombia	Colombia		170,227		(308,331	)		249,155		78,928
COMAI - Compounding and Masterbatching Industry	Colombian peso	100	%	Manufacture of polypropylene compounds and masterbatches	Colombia	Colombia		149,876		122,537			202,175		52,299
Ecopetrol Oleo é Gas do Brasil Ltda.	Brazilian real	100	%	Exploration and exploitation of hydrocarbons	Brazil	Brazil		125,745		(70,052	)		140,372		14,627
Bioenergy Zona Franca S.AS.	Colombian peso	99.35	%	Production of biofuels	Colombia	Colombia		100,297		(202,061	)		530,651		430,354
Ecopetrol del Perú S.A.	U.S. dollar	100	%	Exploration and exploitation of hydrocarbons	Peru	Peru		51,888		(1,353	)		55,715		3,827
ECP Hidrocarburos de México S.A. de CV	U.S. dollar	100	%	Offshore exploration	Mexico	Mexico		25,836		(80,845	)		42,907		17,071
Ecopetrol Costa Afuera S.A.S.	Colombian peso	100	%	Offshore exploration	Colombia	Colombia		12,505		(4,427	)		31,520		19,015
Esenttia Resinas del Perú SAC	U.S. dollar	100	%	Commercialization polypropylene resins and masterbatches	Peru	Peru		4,694		404			26,517		21,823
Ecopetrol Energía S.A.S E.S.P.	Colombian peso	100	%	Energy supply service	Colombia	Colombia		3,414		414			45,953		42,539
Ecopetrol Germany Gmbh (***)	U.S. dollar	100	%	Exploration and exploitation of hydrocarbons	Germany	Angola		2,277		(254	)		2,632		355

*** Company in liquidation process.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Associated companies and joint ventures

~~Consolidated subsidiaries~~

Company	Functional currency	Ownership interest Ecopetrol		Activity	Country/ Domicile	Geographic area of operations	Equity		Profit (loss) of the year			Total assets		Total liabilities
Associates
Invercolsa S.A. (1)	Colombian peso	43	%	Holding with investments in transportation and distribution companies of natural gas and LPG in Colombia	Colombia	Colombia		510,116		240,949			560,536		50,420
Serviport S.A. (2)	Colombian peso	49	%	Services for the support of loading and unloading of oil ships, supply of equipment, technical inspections and load measurements	Colombia	Colombia		22,882		2,862			67,222		44,340
Sociedad Portuaria Olefinas y Derivados S.A. (1)	Colombian peso	50	%	Construction, use, maintenance and administration of port facilities, ports, private docks	Colombia	Colombia		3,173		308			6,145		2,972

Joint ventures
Equion Energía Limited	U.S. dollar	51	%	Exploration, exploitation and production of hydrocarbons	United Kingdom	Colombia		1,939,686		421,511			2,567,950		628,264
Offshore International Group	U.S. dollar	50	%	Exploration, exploitation and production of hydrocarbons	United States	Peru		771,492		(322,969	)		1,878,508		1,107,016
Ecodiesel Colombia S.A.	Colombian peso	50	%	Production, commercialization and distribution of biofuels and oleochemicals	Colombia	Colombia		82,608		12,846			119,991		37,383

(1)

Information available as of November 30, 2018.

(2)

Information available as of September 30, 2018.

F-107

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Company Functional
currency Ownership
interest
Ecopetrol Activity Shared interest Country/ Domicile Geographic area of
operations Net equity Income (loss) for
the period
Ecopetrol Global Energy S.L.U U.S. Dollar 100% Investment vehicle Ecopetrol America Inc., Ecopetrol Oleo & Gas do Brazil Ltda., Ecopetrol del Perú S. A.,ECP Oil and Gas Germany GmbH Gmbh, Refinería de Cartagena S. A., Bioenergy S. A. Spain Spain 2,727,352 (380,156 )
Ecopetrol Oleo é Gas do Brazil Ltda. Real 100% Hydrocarbon exploration and explotation Sociedad Portuaria de Oleofinas y Derivados, Propileno del Caribe S. A Brazil Brazil 27,617 (50,849 )
Ecopetrol del Perú S. A. U.S. Dollar 100% Hydrocarbon exploration and explotation - Peru Peru 51,523 (2,847 )
Ecopetrol América Inc. U.S. Dollar 100% Hydrocarbon exploration and explotation Ecopetrol Perú S.A., Ecopetrol Oleo é Gas do Brazil Ltda., Propileno del Caribe S. A, Sociedad Portuaria de Oleofinas y Derivados United States of America United States of America 2,645,772 (298,055 )
Black Gold Re Ltd. U.S. Dollar 100% Reinsurer of Ecopetrol and its subsidiaries - Bermuda Bermuda 581,901 36,808
ECP Oil and Gas Germany GmbH U.S. Dollar 100% Hydrocarbon exploration and explotation - Germany Angola 2,476 (27,530 )
Hocol Petroleum Limited U.S. Dollar 100% Investment vehicle. Hocol S. A. Bermuda Bermuda 2,267,217 (15,627 )
Hocol S.A U.S. Dollar 100% Hydrocarbon exploration and explotation ODC, Oleoducto Bicentenario Cayman Islands Colombia 1,563,126 659

Exhibit 2 – Conditions of the most significant loans

~~F-108~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Company Functional
currency Ownership
interest
Ecopetrol Activity Shared interest Country/ Domicile Geographic area
of operations Net equity Income (loss) for
the period
Andean Chemicals Ltd. U.S. Dollar 100% Investment vehicle Bioenergy S. A., Refinería de Cartagena, Propileno del Caribe S. A. y Comai S.A. Bermuda Bermuda 4,857,372 (1,564,731 )
Refinería de Cartagena S. A. U.S. Dollar 100% Hydrocarbons refining, marketing and distribution - Colombia Colombia 6,969,793 (2,205,876 )
Propileno del Caribe Propilco S. A. U.S. Dollar 100% Production and marketing of polypropylene resin Comai S. A., Refinería de Cartagena., Bioenergy S. A., Sociedad Portuaria Oleofinas y Derivados Colombia Colombia 1,195,760 191,060
COMAI - Compounding and Masterbatching Industry Colombian peso 100% Manufacturing of polypropylene compounds and master batches for a wide range of uses Refinería de Cartagena., Bioenergy S. A., Zona franca de Cartagena S.A , Sociedad Portuaria del Dique Colombia Colombia 131,227 103,888
Bioenergy S. A. Colombian peso 98.46% Biofuels production Bioenergy Zona Franca S. A., Amandine Holdings Corp. y Los Arces Group Corp. Colombia Colombia 313,824 (475,294 )
Bioenergy Zona Franca S. A. Colombian peso 98.46% Biofuels production - Colombia Colombia 251,185 (362,102 )
Amandine Holdings Corp. Colombian peso 98.46% In a winding-up process - Panama Panama 6,657 -
Los Arces Group Corp. Colombian peso 98.46% In a winding-up process - Panama Panama 5,100 -
Cenit S.A.S. Colombian peso 100% Storage and transportation through hydrocarbon pipelines Oleoducto Bicentenario, Ocensa, ODC, ODL, Sento S.A.S, Serviport Colombia Colombia 10,767,210 2,915,342

~~F-109~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Company Functional
currency Ownership
interest
Ecopetrol Activity Shared interest Country/ Domicile Geographic area of
operations Net equity Income (loss) for
the period
Oleoducto Central S. A. - Ocensa U.S. Dollar 72.65% Pipeline transportation of crude oil - Colombia Colombia 2,446,722 1,779,134
ODL S. A. Colombian peso 65% Pipeline transportation of crude oil - Panama Colombia 1,044,369 341,362
Oleoducto de Colombia S. A. – ODC Colombian peso 73% Pipeline transportation of crude oil - Colombia Colombia 288,734 237,787
Oleoducto Bicentenario de Colombia SAS Colombian peso 55.97% Pipeline transportation of crude oil - Colombia Colombia 945,026 440,371
Ecopetrol Capital AG U.S. Dollar 100% Financing, liquidation of funding for companies, groups or any business or related activity - Switzerland Switzerland 1,098,981 143,805
Ecopetrol Global Capital SLU Euro 100% Investment vehicle - Spain Spain 31 (53 )
Ecopetrol Costa Afuera S.A.S. Colombian peso 100% Offshore exploration - Colombia Colombia 7,954 (1,834 )
Sento S.A.S. Colombian peso 100% Investments in hydrocarbon transportation business ODC Colombia Colombia 21,453 10,918

~~F-110~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

Class of credit

Company

Initial date

Expiry date

Currency

Disbursement

Outstanding
balance
Dec 31, 2018

Outstanding
balance
Dec 31, 2017

Typo de
interest

Amortization of
the principal

Payment of
interest

dec-10

dec-20

COP

479,900

Floating

Bullet

Half-yearly

dec-10

dec-40

COP

284,300

Floating

Bullet

Half-yearly

Bonds, domestic

Ecopetrol S.A.

aug-13

aug-23

COP

168,600

Floating

Bullet

Half-yearly

currency

aug -13

aug-28

COP

347,500

Floating

Bullet

Half-yearly

aug -13

aug-43

COP

262,950

Floating

Bullet

Half-yearly

Local currency
syndicated

Oleoducto Bicentenario
ODL - Oleoducto de los

jul-12

jul-24

COP

2,100,000

1,191,050

1,373,750

Floating

Quarterly

loan

Llanos Orientales S.A.

aug -13

aug-20

COP

800,000

224,000

352,000

Floating

Quarterly

sep-13

sep-23

USD

1,300

Fixed

Bullet

Half-yearly

sep-13

sep-43

USD

850

Fixed

Bullet

Half-yearly

Bonds, foreign

Ecopetrol S.A.

may-14

may-45

USD

2,000

Fixed

Bullet

Half-yearly

currency

sep-14

may-25

USD

1,200

Fixed

Bullet

Half-yearly

jun-15

jun-26

USD

1,500

Fixed

Bullet

Half-yearly

jun-16

sep-23

USD

500

Fixed

Bullet

Half-yearly

Oleoducto Central S.A.

may-14

may-21

USD

500

Fixed

Bullet

Half-yearly

International

dec-17

dec-27

USD

2,001

1,742

1,941

Fixed

Half-yearly

commercial credits -

dec-17

dec-27

USD

Floating

Half-yearly

Refinería de

Ecopetrol S.A.

dec-17

dec-27

USD

Fixed

Half-yearly

Cartagena

dec-17

dec-27

USD

159

138

154

Floating

Half-yearly

dec-17

dec-25

USD

359

321

344

Floating

Half-yearly

~~Associates and joint ventures~~

Company Functional
currency Ownership
interest
Ecopetrol Activity Country/
Domicile Geographic area of
operations Net equity Income (loss) for the
period

Associates
Invercolsa S.A. (*) Colombian peso 43.35% Investment in companies of transport and distribution of natural gas and L.P.G. in Colombia Colombia Colombia 560,915 111,997
Serviport S.A. Colombian peso 49% Services for oil-vessel loading and unloading support; supply of equipment; technical inspections and loading Colombia Colombia 18,259 877
Sociedad Portuaria Olefinas y Derivados S.A. (*) Colombian peso 50% Construction, use, maintenance, adaptation and administration of ports and private or public docks facilities Colombia Colombia 2,669 469

Joint ventures
Equion Energía Limited U.S. Dollar 51% Hydrocarbon exploration, exploitation and production United Kingdom Colombia 1,530,858 279,515
Ecodiesel Colombia S.A. Colombian peso 50% Production, commercialization and distribution of biofuels and oleo chemicals Colombia Colombia 79,050 24,176
Offshore International Group U.S. Dollar 50% Hydrocarbon exploration, exploitation and production United States of America Peru 1,192,980 (248,037 )

~~(*) Information available~~** Financial debt designated as ~~of November 30, 2016.~~hedging instrument (see Note 28.1).

~~F-111~~

Signature Page

SIGNATURES

The registrant hereby certifies that it meets all of the requirements for filing on Form 20-F and that it has duly caused and authorized the undersigned to sign this annual report on its behalf.

	Ecopetrol S.A.

	By:	/s/ ~~María Fernanda Suárez~~Felipe Bayón Pardo
		Name: ~~María Fernanda Suárez~~	Felipe Bayón Pardo
		Title:	Chief ~~Financial~~Executive Officer

	By:	/s/ ~~Juan Carlos Echeverry~~Jaime Caballero Uribe
		Name: ~~Juan Carlos Echeverry~~	Jaime Caballero Uribe
		Title:	Chief ~~Executive~~Financial Officer

~~Dated: May 30, 2017~~

~~152~~

Dated: April 5, 2019

10.

Exhibits

Exhibit No.		Description
1.1		Amended and Restated Bylaws of Ecopetrol S.A., dated March 26, 2015, as recorded under Public Deed No. 1049 of May 19, 2015 (incorporated by reference to Exhibit 3.1 on Form 6-K of the Company, furnished to the U.S. Securities and Exchange Commission on November 27, 2015 (File No. 001-34175))29, 2019 (English Translation).
4.1		Transportation Agreement between Ecopetrol S.A. and Oleoducto Central S.A., dated March 31, 1995 (incorporated by reference to Exhibit 4.1 on Form 20-F filed with the U.S. Securities and Exchange Commission on September 12, 2008 (File No. 001-34175)) (English Translation).
4.2		Supplementary Agreement to Transportation Agreement between Ecopetrol S.A. and Oleoducto Central S.A., dated January 17, 2013 (incorporated by reference to Exhibit 4.2 on Form 20-F filed with the U.S. Securities and Exchange Commission on April 29, 2013 (File No. 001-34175)) (English Translation).
4.3		Natural Gas Transportation Agreement between Ecopetrol S.A. and Transportadora de Gas del Interior S.A. ESP, dated October 1, 2008 (incorporated by reference to Exhibit 4.3 on Form 20-F filed with the U.S. Securities and Exchange Commission on April 29, 2013 (File No. 001-34175)) (English Translation).
4.4		Supplementary Agreement No. 1, dated December 5, 2008, to the Natural Gas Transportation Agreement between Ecopetrol S.A. and Transportadora de Gas del Interior S.A. ESP, dated October 1, 2008 (incorporated by reference to Exhibit 4.4 on Form 20-F filed with the U.S. Securities and Exchange Commission on April 29, 2013 (File No. 001-34175)) (English Translation).
4.5		Supplementary Agreement No. 2, dated April 11, 2012, to the Natural Gas Transportation Agreement between Ecopetrol S.A. and Transportadora de Gas Internacional S.A. E.S.P., dated October 1, 2008 (incorporated by reference to Exhibit 4.5 on Form 20-F filed with the U.S. Securities and Exchange Commission on April 29, 2013 (File No. 001-34175)) (English Translation).
4.6		Crude Oil Transportation Services Agreement between Ecopetrol S.A. and Cenit Transporte y Logística de Hidrocarburos S.A.S., dated April 1, 2013 (incorporated by reference to Exhibit 4.6 on Form 20-F filed with the U.S. Securities and Exchange Commission on April 29, 2013 (File No. 001-34175)) (English Translation).
4.7		Refined Products Transportation Services Agreement between Ecopetrol S.A. and Cenit Transporte y Logística de Hidrocarburos S.A.S., dated April 1, 2013 (incorporated by reference to Exhibit 4.7 on Form 20-F filed with the U.S. Securities and Exchange Commission on April 29, 2013 (File No. 001-34175)) (English Translation).
4.8		Indenture, dated as of July 23, 2009, between the Company and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.2 to the Company’s Form F-4 filed with the U.S. Securities and Exchange Commission on July 31, 2009 (File No. 333-160965)).
4.9		Bicentenario Transport Contract between Oleoducto Bicentenario de Colombia S.A.S. and Ecopetrol S.A., dated June 20, 2012 incorporated by reference to Exhibit 4.9 on Form 20-F filed with the U.S. Securities and Exchange Commission on April 25, 2014 (File No. 001-34175)) (English Translation).
4.10		Amendment No. 1 to the Indenture, dated as of June 26, 2015, between the Company and The Bank of New York Mellon, as trustee (incorporated by reference to Exhibit 4.10 on Form 6-K of the Company furnished to the U.S. Securities and Exchange Commission on June 25, 2015 (File No. 001-34175)).
4.11		Supplementary Agreement No. 2, dated March 28, 2014, to the Bicentenario Transport Contract between Oleoducto Bicentenario de Colombia S.A.S. and Ecopetrol S.A., dated June 20, 2012 (incorporated by reference to Exhibit 4.11 on Form 20-F filed with the U.S. Securities and Exchange Commission on April 28, 2016 (File No. 001-34175)) (English Translation).
4.12		Supplementary Agreement No. 4, dated April 6, 2015, to the Bicentenario Transport Contract between Oleoducto Bicentenario de Colombia S.A.S. and Ecopetrol S.A., dated June 20, 2012 (incorporated by reference to Exhibit 4.12 on Form 20-F filed with the U.S. Securities and Exchange Commission on April 28,2016 (File No. 001-34175)) (English Translation).
4.13		Amendment No. 6, dated April 25, 2016, to the Crude Oil Transportation Services Agreement between Ecopetrol S.A. and Cenit Transporte y Logística de Hidrocarburos S.A.S., dated April 1, 2013 (English Translation).

~~153~~

~~Exhibit No.~~ 4.14		~~Description~~
~~4.14~~		Amendment No. 7, dated December 28, 2016, to the Crude Oil Transportation Services Agreement between Ecopetrol S.A. and Cenit Transporte y Logística de Hidrocarburos S.A.S., dated April 1, 2013 (English Translation).
8.1		List of subsidiaries of Ecopetrol S.A.
12.1		Section 302 Certification of the Chief Executive Officer.

12.2		Section 302 Certification of the Chief Financial Officer.
13.1		Section 906 Officer Certification.
~~99.1~~23.1		Consent of Ernst & Young Audit S.A.S.
23.2		Consent of Ryder Scott LP.
23.3		Consent of Sproule International Limited.
23.4		Consent of DeGolyer and MacNaughton.
23.5		Consent of Gaffney, Cline & Associates.
99.1		Third-Party Reserve Report of Ryder Scott Company, L.P.
99.2		Third-Party Reserve Report of Sproule International Limited.
99.3		Third-Party Reserve Report of DeGolyer and MacNaughton.
99.4		Third-Party Reserve Report of Gaffney, Cline & Associates.
101.INS		XBRL Instance Document
101.SCH		XBRL Taxonomy Extension Schema Document
101.CAL 101.DEF 101.LAB		XBRL Taxonomy Extension Calculation Linkbase Document XBRL Taxonomy Extension Definition Linkbase Document XBRL Taxonomy Extension Labels Linkbase Document
101.PRE		XBRL Taxonomy Extension Presentation Linkbase Document

11.

Cross-reference to Form 20-F

		Sections
Item 1.	Identity of Directors, Senior Management and Advisers	N/A
Item 2.	Offer Statistics and Expected Timetable	N/A
Item 3.	Key Information
	A. Selected Financial Data	1.3
	B. Capitalization and Indebtedness	N/A
	C. Reasons for the Offer and Use of Proceeds	N/A
	D. Risk Factors	5.1
Item 4.	Information on the Company	Note 1 to the consolidated financial statements
	A. History and Development of the Company	2.1; 3.1; Note 1 to the consolidated financial statements
	B. Business Overview	2; 3.3 – 3.9; 4.5.1
	C. Organizational Structure	3.2
	D. Property, Plants and Equipment	3.4 – 3.6; 4.6.2; Notes ~~15, 16~~13, 14 and 1815 to the consolidated financial statements
	E. Oil and Gas Disclosures	3.3 – 3.6; Notes ~~15 and 16~~13, 14 and Supplemental information on Oil and Gas producing activities (unaudited by EY) to the consolidated financial statements
Item 4A.	Unresolved Staff Comments	None
Item 5.	Operating and Financial Review and Prospects
	A. Operating Results	3.8; 4; 5.1; 5.2
	B. Liquidity and Capital Resources	2.1; 4.6; 4.8; Consolidated statements of cash flow and Notes 9, ~~20, 30~~18, 27 and ~~31.6~~28.5 to the consolidated financial statements
	C. Research and development, Patents and Licenses, etc.	3.7; Note 1815 to the consolidated financial statements
	D. Trend Information	4.10
	E. Off-Balance Sheet Arrangements	4.9
	F. Tabular Disclosure of Contractual Obligations	4.8
	G. Safe Harbor	1.2

Item 6.	Directors, Senior Management and Employees
	A. Directors and Senior Management		7.3; 7.5
	B. Compensation		7.6; Notes 4, 2220 and 3229 to the consolidated financial statements
	C. Board Practices		7.3
	D. Employees		3.12
	E. Share Ownership	~~7.7~~

~~154~~

	~~Sections~~ 7.7
Item 7.	Major Shareholders and Related Party Transactions
	A. Major Shareholders	6.3; 6.8; 7.7
	B. Related Party Transactions	3.10; Note 3229 to the consolidated financial statements
	C. Interests of Experts and Counsel	N/A
Item 8.	Financial Information
	A. Consolidated Statements and Other Financial Information	4; 5.3; 6.2; 8
	B. Significant Changes	7.8; Note 3635 to the consolidated financial statements
Item 9.	The Offer and Listing
	A. Offer and Listing Details	6.3
	B. Plan of Distribution	N/A
	C. Markets	6.3
	D. Selling Shareholders	N/A
	E. Dilution	N/A
	F. Expenses of the Issue	N/A
Item 10.	Additional Information
	A. Share Capital	N/A
	B. Memorandum and Articles of Association	7.1
	C. Material Contracts	3.4.4; 4.8; Exhibits 4.1 – ~~4.12~~4.14
	D. Exchange Controls	5.1.4; 6.6
	E. Taxation	4.2.1; 6.5; Note 10 to the consolidated financial statements
	F. Dividends and Paying Agents	N/A
	G. Statements by Experts	N/A
	H. Documents On Display	1.1
	I. Subsidiary Information	N/A
Item 11.	Quantitative and Qualitative Disclosures About Market Risk	4.10; 5.1.1; 5.2.1; 5.2.3; Note 3128 to the consolidated financial statements
Item 12.	Description of Securities Other than Equity Securities
	A. Debt Securities	N/A
	B. Warrants and Rights	N/A
	C. Other Securities	N/A
	D. American Depositary Shares	6.4
Item 13.	Defaults, Dividend Arrearages and Delinquencies	None
Item 14.	Material Modifications to the Rights of Security Holders and Use of Proceeds	None
Item 15.	Controls and Procedures	5.2; 7.8
Item 16A.	Audit Committee Financial Expert	7.3.2
Item 16B.	Code of Ethics	7.2; 7.4
Item 16C.	Principal Accountant Fees and Services	7.8
Item 16D.	Exemptions from the Listing Standards for Audit Committees	N/A
Item 16E.	Purchases of Equity Securities by the Issuer and Affiliated Purchases	N/A
Item 16F.	Changes in Registrant’s Certifying Accountant	7.8
Item 16G.	Corporate Governance	7.4
Item 16H.	Mine Safety Disclosure	N/A
Item 17.	Financial Statements	N/A
Item 18.	Financial Statements	8
Item 19.	Exhibits	10

~~155~~

Title of each class		Name of each exchange on which registered:
American Depository Shares (as evidenced by American Depository Receipts), each representing 20 common shares par value COP$609 per share		New York Stock Exchange
Ecopetrol common shares par value COP$609 per share		New York Stock Exchange (for listing purposes only)

Title of each class		~~New York Stock Exchange~~
~~4.250% Notes due 2018~~		~~New York Stock Exchange~~Name of each exchange on which registered
5.875% Notes due 2023		New York Stock Exchange

~~Title of each class~~		~~Name of each exchange on which registered:~~
4.125% Notes due 2025		New York Stock Exchange
5.375% Notes due 2026		New York Stock Exchange
7.375% Notes due 2043		New York Stock Exchange
5.875% Notes due 2045		New York Stock Exchange

Business Segment	*Millions of US$*⁽¹⁾		%*Percentage*⁽²⁾
Exploration		430-490		12	%
Production		2,385-2,725		68	%
Midstream		240-275		7	%
Downstream		365-420		11	%
Others		80-90		2	%
TOTAL		3,500-4,000		100	%

	For the year ended December 31,																		For the year ended December 31,
	2016						2015						2014						2018						2017						2016
	Oil		Gas⁽¹⁾		Total		Oil		Gas⁽¹⁾		Total		Oil		Gas⁽¹⁾		Total		Oil		Gas⁽¹⁾		Total		Oil		Gas⁽¹⁾		Total		Oil		Gas⁽¹⁾		Total
	(thousand boepd)																			(thousand boepd)
Total production in Colombia⁽²⁾		582.5		123.3		705.8		619.2		130.4		749.6		610.9		133.3		744.2		578.4		125		703.4		577.3		121.6		698.9		582.5		123.3		705.8
Total International production⁽³⁾		9.6		2.5		12.1		7.3		3.8		11.1		8.6		2.6		11.2		14.1		2.9		17.0		13.6		2.6		16.2		9.6		2.5		12.1
Total production of Ecopetrol Group		592.1		125.8		717.9		626.5		134.2		760.7		619.5		135.9		755.4		592.5		127.9		720.4		590.9		124.2		715.1		592.1		125.8		717.9

1.	Introduction					1

	1.1	About This Report				1

	1.2	Forward-looking Statements				1

	1.3	Selected Financial and Operating Data				2

2.	Strategy and Market Overview					4

	2.1	Our Corporate Strategy				5

3.	Business Overview					6

	3.1	Our History				6

	3.2	Our Corporate Structure				7

	3.3	Our Business				9

	3.4	Exploration and Production				9

		3.4.1	Exploration Activities			9

			3.4.1.1	Exploration Activities in Colombia		9

			3.4.1.2	Exploration Activities Outside of Colombia		12

		3.4.2	Production Activities			13

			3.4.2.1	Production Activities in Colombia		14

				3.4.2.1.1.	Ecopetrol S.A.’s Production Activities in Colombia	14

				3.4.2.1.2.	Ecopetrol S.A.’s Affiliates and Subsidiaries’ Production Activities in Colombia	19

			3.4.2.2	Production Activities Outside Colombia		22

			3.4.2.3	Marketing of Crude Oil, Natural Gas and Refined Products		23

		3.4.3	Reserves			25

		3.4.4	Joint Venture and Other Contractual Arrangements			30

	3.5	Transportation and Logistics				34

			3.5.1.1	Transportation Activities		34

			3.5.1.2	Pipelines		37

			3.5.1.3	Export and Import Facilities		39

		3.5.2	Other Transportation Facilities			39

	3.5.3	Marketing of Transportation Services		38

3.6	Refining and Petrochemicals			39

	3.6.1	Refining		39

		3.6.1.1	Barrancabermeja Refinery	39

		3.6.1.2	Cartagena Refinery	40

		3.6.1.3	Esenttia S.A.	42

		3.6.1.4	Biofuels	42

	3.6.2	Marketing and Supply of Refined Products		43

3.7	Research and Development; Intellectual Property			43

3.8	Applicable Laws and Regulations			44

	3.8.1	Regulation of Exploration and Production Activities		44

		3.8.1.1	Business Regulation	44

	3.8.2	Regulation of Transportation Activities		47

	3.8.3	Regulation of Refining and Petrochemical Activities		48

		3.8.3.1	Regulation of Liquefied Petroleum Gas (LPG) and Liquid Fuels	48

		3.8.3.2	Regulation Concerning Production and Prices	49

		3.8.3.3	Regulation of Biofuel and Related Activities	51

	3.8.4	Regulation of the Natural Gas Market		51

3.9	Sustainability Initiatives			52

	3.9.1	HSE		52

		3.9.1.1	Ecopetrol S.A.	52

		3.9.1.2	Cenit	58

		3.9.1.3	Cartagena Refinery	58

	3.9.2	Corporate Responsibility		59

	3.9.3	Environmental Sustainability		59

		3.9.3.1	Environmental Practices	59

	3.9.4	Energy Initiatives		60

3.10	Related Party and Intercompany Transactions			61

	3.11	Insurance			66

	3.12	Human Resources/Labor Relations			68

		3.12.1	Employees		68

		3.12.2	Collective Bargaining Arrangements		69

4.	Financial Review				71

	4.1	Factors Affecting Our Operating Results			71

	4.2	Effect of Taxes, Exchange Rate Variation, Inflation and the Price of Oil on our Results			72

		4.2.1	Taxes		72

		4.2.2	Exchange Rate Variation		75

		4.2.3	Effects of Inflation		76

		4.2.4	Effects of the Crude Oil Price		76

	4.3	Accounting Policies			76

	4.4	Critical Accounting Judgments and Estimates			76

	4.5	Operating Results			77

		4.5.1	Consolidated Results of Operations		77

			4.5.1.1	Total Revenues	77

			4.5.1.2	Cost of Sales	79

			4.5.1.3	Operating Expenses before impairment of non-current assets effects	80

			4.5.1.4	Impairment of non-current assets	81

			4.5.1.5	Finance Results, Net	82

			4.5.1.6	Income Tax	83

			4.5.1.7	Net Income (Loss) Attributable to Owners of Ecopetrol	84

			4.5.1.8	Segment Performance and Analysis	84

			4.5.1.9	Exploration and Production Segment Results	85

			4.5.1.10	Transportation and Logistics Segment Results	88

			4.5.1.11	Refining and Petrochemicals Segment Results	89

	4.6	Liquidity and Capital Resources			91

		4.6.1	Review of Cash Flows		91

		4.6.2	Capital Expenditures	92

		4.6.3	Dividends	92

	4.7	Summary of Differences between Internal Reporting (Colombian IFRS and IFRS)		92

	4.8	Financial Indebtedness and Other Contractual Obligations		94

	4.9	Off Balance Sheet Arrangements		96

	4.10	Trend Analysis and Sensitivity Analysis		96

5.	Risk Review			98

	5.1	Risk Factors		98

		5.1.1	Risks Related to Our Business	98

		5.1.2	Risks Related to Colombia’s Political and Regional Environment	108

		This section discusses potential risks related to our extensive operations in Colombia.		108

		5.1.3	Legal and Regulatory Risks	111

		5.1.4	Risks Related to Our ADSs	113

		5.1.5	Risks Related to the Controlling Shareholder	115

	5.2	Risk Management		116

		5.2.1	Managing Risk through Our Internal Control System	116

		5.2.2	Managing Information Security and Cybersecurity	117

		5.2.3	Managing Financial Risk	118

	5.3	Legal Proceedings and Related Matters		120

6.	Shareholder Information			126

	6.1	Shareholders’ General Assembly		126

	6.2	Dividend Policy		127

	6.3	Market and Market Prices		127

	6.4	Ecopetrol ADR Program Fees		128

	6.5	Taxation		130

		6.5.1	Colombian Tax Considerations	130

		6.5.2	U.S. Federal Income Tax Consequences	134

	6.6	Exchange Controls and Limitations		137

		3.9.4	Energy Projects		57

	3.10	Related Party and Intercompany Transactions			57

	3.11	Insurance			62

	3.12	Human Resources/Labor Relations			63

		3.12.1	Employees		63

		3.12.2	Collective Bargaining Arrangements		64

4.	Financial Review				65

	4.1	Factors Affecting Our Operating Results			66

	4.2	Effect of Taxes, Exchange Rate Variation, Inflation and the Price of Oil on our Results			67

		4.2.1	Taxes		67

		4.2.2	Exchange Rate Variation		68

		4.2.3	Effects of Inflation		69

		4.2.4	Effects of the Price of Oil		70

	4.3	Accounting Policies			70

	4.4	Critical Accounting Judgments and Estimates			70

	4.5	Operating Results			70

		4.5.1	Consolidated Results of Operations		70

			4.5.1.1	Total Revenues	72

			4.5.1.2	Cost of Sales	73

			4.5.1.3	Operating Expenses before impairment of non-current assets effects	75

			4.5.1.4	Impairment of non-current assets	75

			4.5.1.5	Finance Results, Net	76

			4.5.1.6	Income Tax	77

			4.5.1.7	Net Income (Loss) Attributable to Owners of Ecopetrol	77

			4.5.1.8	Segment Performance and Analysis	77

			4.5.1.9	Exploration and Production Segment Results	78

			4.5.1.10	Transportation and Logistics Segment Results	82

			4.5.1.11	Refining and Petrochemicals Segment Results	83

	6.7	Exchange Rates		138

	6.8	Major Shareholders		138

	6.9	Enforcement of Civil Liabilities		139

7.	Corporate Governance			140

	7.1	Bylaws		141

	7.2	Code of Ethics and Conduct		144

	7.3	Board of Directors		144

		7.3.1	Board Practices	147

		7.3.2	Board Committees	148

	7.4	Compliance with NYSE Listing Rules		149

	7.5	Management		151

	7.6	Compensation of Directors and Management		155

	7.7	Share Ownership of Directors and Executive Officers		155

	7.8	Controls and Procedures		155

8.	Financial Statements			157

9.	Signature Page			158

10.	Exhibits			159

11.	Cross-reference to Form 20-F			160

Operating Information	2016			2015			2014			2013			2012			2018			2017			2016			2015			2014
Oil and gas production (mboed)		717.9			760.7			755.4			788.2			754.0			720.4			715.1			717.9			760.7			755.4
Proved oil and gas reserves (Mmboe)⁽¹⁾		1,598			1,849			2,084			1,972			1,877			1,727			1,659			1,598			1,849			2,084
Exploratory Wells⁽²⁾		6			5			28			22			23			17			20			6			5			28
Refinery Through-put (bpd)⁽³⁾		332,751			234,861			240,484			283,362			296,340			375,666			347,483			332,751			234,861			240,484
1P Reserves replacement ratio		(7	%)		6	%		146	%		139	%		108	%		129	%		126	%		(7	)%		6	%		146	%

Business Segment	Millions of US$⁽¹⁾		% Percentage
Exploration		650		18.6	%
Production		2,200		62.9	%
Transportation and Logistics		265		7.6	%
Refining, Petrochemicals, and Biofuels		360		10.3	%
Others		25		0.6	%
TOTAL		3,500		100	%

~~(1)~~	~~A productive well is an exploratory well that has evidence of hydrocarbons.~~
~~(2)~~(1)	A dry well or hole is an exploratory well found to be incapable of producing either crude oil or natural gas in sufficient quantities to justify completion as a crude oil or natural gas well.

	2016 (mbod)		Year-on-Year ∆ (%)			2015 (mbod)		Year-on-Year ∆ (%)			2014 (mbod)		2018 (mbod)		Year-on- Year ∆(%)			2017 (mbod)		Year-on- Year ∆(%)			2016 (mbod)
Light		44.6		(0.0	)%		44.6		0.2	%		44.5		40.7		(4.0	)%		42.4		(4.9	)%		44.6
Medium		161.5		(13.7	)%		187.1		(5.8	)%		198.6		154.4		1.8	%		151.6		(6.1	)%		161.5
Heavy		346.0		(2.4	)%		354.5		5.3	%		336.6		353.6		0.7	%		351.0		1.4	%		346.0
Total		552.1		(5.8	)%		586.2		1.1	%		579.7		548.7					545.0					552.1

	As of December 31, 2016 (number of wells)								As of December 31, 2018 (number of wells)
	Crude Oil⁽¹⁾				Natural Gas⁽²⁾				Crude Oil⁽¹⁾				Natural Gas⁽²⁾
	Gross		Net		Gross		Net		Gross		Net⁽³⁾		Gross		Net⁽³⁾
COLOMBIA
Ecopetrol S.A.
Central region		2,286		1,807		9		9		2,244		1,767		9		9
Orinoquía region		952		946		17		17		1,086		1,077		22		18
Southern region		583		520		6		6		589		534		13		13
Eastern Region		780		780		0		0		693		693		-		-
Region of Associated Operations		2,829		1,425		27		10		2,602		1,260		16		7
Total (Ecopetrol S.A.)(4)		7,430		5,478		59		42		7,214		5,331		60		47

	Production acreage as of December 31, 2016								Production acreage as of December 31, 2018
	Developed				Undeveloped				Developed				Undeveloped
	Gross		Net		Gross		Net		Gross		Net		Gross		Net
	(in acres)								(in acres)
Hocol		18,787.4		8,547.0		346.8		329.6		17,845		15,930		675		666
Equion		20,867.4		5,269.0		84,826.9		19,853.0		16,300		4,104		54,666		12,162
Total (Subsidiaries in Colombia)		39,654.8		13,816.0		85,173.7		20,182.6		34,145		20,034		55,341		12,828

	For the year ended December 31, 2018
	Crude Oil				Natural Gas
	Gross		Net		Gross		Net
	(number of wells)
Hocol		281		241.9		20		18.5
Equion		15		8		15		8
Total (Subsidiaries in Colombia)		296		249.9		35		26.5

Net Proved Developed Reserves	Colombia		North America		South America excluding Colombia		Total		Colombia		North America		South America excluding Colombia		Total
Net Proved Developed oil reserves in million barrels oil equivalent
At December 31, 2014		967		2		10		979
At December 31, 2015		849		3		6		858
At December 31, 2016		710		6		7		723		710		6		7		723
At December 31, 2017										747		10		6		763
At December 31, 2018										814		13		5		832
Net Proved Developed NGL reserves in million barrels oil equivalent
At December 31, 2014		62		0		1		63
At December 31, 2015		54		0		1		55
At December 31, 2016		55		0		1		56		55		-		1		56
At December 31, 2017										54.6		-		0.8		55.4
At December 31, 2018										50.5		-		0.6		51.1
Net Proved Developed gas reserves in billion standard cubic feet
At December 31, 2014		3,260		14		9		3,284
At December 31, 2015		3,156		16		5		3,176
At December 31, 2016		3,114		9		8		3,131		3,114		9		8		3,131
At December 31, 2017										3,143		10		5		3,158
At December 31, 2018										2,865.5		10		7		2,882
Net Proved Developed oil, NGL and gas reserves in million barrels oil equivalent
At December 31, 2014		1,602		5		12		1,618
At December 31, 2015		1,457		5		7		1,470
At December 31, 2016		1,311		8		10		1,329		1,311		8		10		1,329
At December 31, 2017										1,353		11		8		1,372
At December 31, 2018										1,368		14		7		1,389

Reserves Category	Oil (million barrels)		NGL (million barrels)		Natural Gas (bcf)		Total Oil and Gas (Mmboe)		Oil (million barrels)		NGL (million barrels)		Natural Gas (bcf)		Total Oil and Gas (Mmboe)
PROVED DEVELOPED RESERVES
Total (Colombia)		710		55		3,114		1,311		814		50.5		2,866		1,368
International:
North America		6		0		9		8		13		-		10		14
South America		7		1		8		10		5		0.5		7		7
TOTAL PROVED DEVELOPED RESERVES		723		56		3,131		1,329		832		51		2,883		1,389
PROVED UNDEVELOPED RESERVES
Total (Colombia)		238		13		85		266		285		22		113		327
International:
North America		3		0		2		3		10		-		6		11
South America		0		0		0		0		-		-		-		-
TOTAL PROVED UNDEVELOPED RESERVES		241		13		87		269		295		22		119		338
TOTAL PROVED RESERVES		964		69		3,218		1,598		1,127		73		3,002		1,727

Proved Reserves as of December 31,	Oil		NGL		Gas		Total
	Mmbls		Mmbls		Bcf		Mmboe
2016 proved reserves
Developed		723		56		3,131		1,329
Undeveloped		241		13		87		269
2015 proved reserves
Developed		858		55		3,176		1,470
Undeveloped		308		18		303		379
2014 proved reserves
Developed		979		63		3,284		1,618
Undeveloped		405		18		245		466

Consolidated Companies ~~(million~~ (million barrels oil equivalent)
Revisions of previous estimates	~~(60.4~~28.4	)
Improved recovery	~~7.1~~67.1
Extensions and discoveries	~~11.8~~39.9
Proved Undeveloped converted to Proved Developed	(~~68.4~~83.7	)
Net change in unproved reserves	~~(109.9~~51.7	)

Consolidated companies	Colombia			North America			South America excluding Colombia			Total			Colombia			North America			South America excluding Colombia			Total
	Net proved oil, NGL and gas reserves in Mmboe												Net proved oil, NGL and gas reserves in Mmboe
At December 31, 2016														1,577			11			10			1,598
Revisions		264.7			1.7			4.0			270.4			170			4.6			(0.3	)		174.3
Purchase of Minerals		0.0			0.0			0.0			0.0
Improved Recovery		34.1			0.0			0.0			34.1			73			-			-			73
Extensions and discoveries		50.1			0.8			0.0			50.9			44			-			-			44
Sales		0.0			0.0			0.0			0.0
Purchases														-			4			-			4
Production		(239.6	)		(1.5	)		(2.0	)		(243	)		(229	)		(3.6	)		(1.5	)		(234.1	)
At December 31, 2014		2,043			18			23			2,084
Revisions		(14.8	)		(2.8	)		(7.1	)		(24.7	)
Purchase of Minerals		0.0			0.0			0.0			0.0
Improved Recovery		15.8			0.0			0.0			15.8
Extensions and discoveries		24.4			0.0			0.0			24.4
Sales		0.0			0.0			0.0			0.0
Production		(247.5	)		(1.4	)		(1.8	)		(250.7	)
At December 31, 2015		1,821			14			14			1,849
At December 31, 2017														1,635			16			8.2			1,659.2
Revisions		(51	)		(0.7	)		(2.5	)		(54	)		114			5.8			1			120.8
Improved Recovery		11			0			0			11			129			-			-			129
Extensions and discoveries		27			0			0			27			50			7			-			57
Production		(231	)		(2.3	)		(1.7	)		(235	)		(233	)		(3.8	)		(2	)		(238.8	)
At December 31, 2016		1,577			11			10			1,598
At December 31, 2018														1,695			25			7.2			1,727.2

Pipeline	Kilometers		Capacity (mbd)			Product Transported	Origin	Destination	Indirect Ownership Percentage			Kilometers		Capacity (mbd)			Product Transported	Origin	Destination	Indirect Ownership Percentage
Caño Limón-Coveñas		771		250		Crude Oil	Caño Limón	Coveñas		100.00	%		771		250		Crude Oil	Caño Limón	Coveñas		100.00	%
Oleoducto de Alto Magdalena (OAM)		391		110		Crude Oil	Tenay	Vasconia		87.29	%		391		110		Crude Oil	Tenay	Vasconia		95.8	%
Oleoducto de Colombia (ODC)		483		236		Crude Oil	Vasconia	Coveñas		73.00	%		483		236		Crude Oil	Vasconia	Coveñas		73.00	%
Oleoducto Central –Ocensa (*Segment 2)		836		616	*	Crude Oil	Cupiagua	Coveñas		72.65	%
Oleoducto Central –Ocensa⁽¹⁾													848		745		Crude Oil	Cupiagua	Coveñas		72.65	%
Oleoducto de los Llanos (ODL)		260		340		Crude Oil	East fields	Monterrey Cusiana		65.00	%		260		314	⁽²⁾	Crude Oil	East fields	Monterrey Cusiana		65.00	%
Oleoducto Bicentenario de Colombia		230		110	⁽¹⁾	Crude Oil	Araguaney	Banadia		55.97	%		230		110	⁽³⁾	Crude Oil	Araguaney	Banadia		55.97	%

	For the year ended December 31,⁽¹⁾						For the year ended December 31,
	2016		2015		2014		2018		2017		2016
	(bpd)						(bpd)
LPG, Propylene and Butane		6,080		0		0		4,227		6,791		6,080
Motor Fuels		35,012		1,558		1,997
Gasoline Fuels and Naphta								51,703		43,728		35,012
Diesel		40,950		2,282		2,254		76,833		60,467		40,950
Jet Fuel and Kerosene		5,768		1,202		812		8,057		6,700		5,768
Fuel Oil		24,602		2,826		3,352		4,671		10,150		24,602
Sulfur		241		0		0		581		446		241
Total		112,653		7,868		8,415		146,072		128,282		112,653
Difference between Inventory of Intermediate Products		911		2,476		1,896		39		3,916		911
Total Production⁽²⁾⁽¹⁾		113,564		10,344		10,311		146,111		132,198		113,564

Petcoke (Metric tons)		601,163		0		0		984,558		704,073		601,163

METRIC	2016		2015⁽¹⁾		2018		2017		2016
Man-hours		10,351,896		32,944,698		6.779.729		7.495.531		10.351.896
Recordable accidents		29		57		12		9		29
Total recordable cases (TRIF)*		2.80		1.73		1,77		1,2		2,80
Environmental Incidents (EI)		0		0		0		0		0
Process Safety Incidents (ISP)*		0.19		0.03		0		0,13		0,19

Income Statement	For the Years ended December 31,									% Change
(Colombian Pesos in millions)	2016			2015			2014			2016/2015			2015/2014
Revenue		48,485,561			52,347,271			65,971,888			(7.4	)		(20.7	)
Cost of Sales		34,251,423			36,994,516			42,975,128			(7.4	)		(13.9	)
Gross Profit		14,234,138			15,352,755			22,996,760			(7.3	)		(33.2	)
Operating Expenses		4,400,843			5,356,715			6,243,166			(17.8	)		(14.2	)
Impairment of non-current assets		928,747			7,864,875			2,304,567			(88.2	)		241.3
Operating Income		8,904,548			2,131,165			14,449,027			317.8			(85.3	)
Finance results, net		(1,175,367	)		(7,663,104	)		(3,510,669	)		(84.7	)		118.3
Share of profit of companies		61,345			(46,687	)		166,070			(231.4	)		(128.1	)
Income before income tax		7,790,526			(5,578,626	)		11,104,428			(239.6	)		(150.2	)
Income tax		(4,543,046	)		(710,353	)		(5,434,855	)		539.5			(86.9	)
Net Income (loss)		3,247,480			(6,288,979	)		5,669,573			(151.6	)		(210.9	)
Net Income (loss) attributable to:
Company’s shareholders		2,447,881			(7,193,859	)		5,046,517			(134.0	)		(242.6	)
Non-controlling interest		799,599			904,880			623,056			(11.6	)		45.2
Net Income (loss)		3,247,480			(6,288,979	)		5,669,573			(151.6	)		(210.9	)

*Income Statement*	For the Years ended December 31,									% Change
(Colombian Pesos in millions)	2018			2017			2016			2018/2017			2017/2016
Revenue		68,603,872			55,954,228			48,485,561			22.6			15.4
Cost of sales		41,184,379			36,908,325			34,251,423			11.6			7.8
Gross Profit		27,419,493			19,045,903			14,234,138			44.0			33.8
Operating expenses		4,592,445			4,185,186			4,400,843			9.7			(4.9	)
Impairment of non-current assets		368,634			(1,311,138	)		928,747			(128.1	)		(241.2	)
Operating Income		22,458,414			16,171,855			8,904,548			38.9			81.6
Finance results, net		(2,010,375	)		(2,495,731	)		(1,175,367	)		(19.4	)		112.3
Share of profit of companies		165,836			93,538			61,345			77.3			52.5
Income before income tax		20,613,875			13,769,662			7,790,526			49.7			76.7
Income tax		(8,258,485	)		(5,800,268	)		(4,543,046	)		42.4			27.7
Net Income (loss)		12,355,390			7,969,394			3,247,480			55.0			145.4
Net income (loss) attributable to:
Company’s shareholders		11,381,386			7,178,539			2,447,881			58.5			193.3
Non-controlling interest		974,004			790,855			799,599			23.2			(1.1	)
Net Income (loss)		12,355,390			7,969,394			3,247,480			55.0			145.4

	Year ended December 31,									% Change						Year ended December 31,									% Change
	2016			2015			2014			2016/2015			2015/2014			2018			2017			2016			2018/2017			2017/2016
	(Colombian Pesos in millions)															(Colombian Pesos in millions)
Exploration and Production		28,221,210			31,732,611			45,155,191			(11.1	)		(29.7	)		50,372,764			36,494,934			28,221,210			38.0			29.3
Third parties		20,527,332			25,669,213			35,903,045			(20.0	)		(28.5	)		30,112,900			25,004,320			20,527,332			20.4			21.8
Local crude oil		553,666			491,279			1,213,718			12.7			(59.5	)		550,479			909,871			553,666			(39.5	)		64.3
Foreign crude oil		17,278,579			21,181,265			30,835,510			(18.4	)		(31.3	)		26,898,737			21,426,666			17,278,579			25.5			24.0
Trading of crude oil		-			1,309,196			1,486,060			(100.0	)		(11.9	)
Natural gas local		1,988,336			1,845,345			1,346,625			7.7			37.0			1,885,846			1,815,754			1,988,336			3.9			(8.7	)
Foreign natural gas		58,809			182,950			423,461			(67.9	)		(56.8	)		27,899			32,303			58,809			(13.6	)		(45.1	)
Other income		647,942			659,178			597,671			(1.7	)		10.3			749,939			819,726			647,942			(8.5	)		26.5
Inter-segment net operating revenues		7,693,878			6,063,398			9,252,146			26.9			(34.5	)		20,259,864			11,490,614			7,693,878			76.3			49.3
Refining and Petrochemicals		24,823,714			23,245,676			27,172,300			6.8			(14.5	)		37,011,373			28,644,016			24,823,714			29.2			15.4
Third parties		24,194,024			22,456,866			26,612,204			7.7			(15.6	)		34,947,948			27,343,359			24,194,024			27.8			13.0
Local refined products		17,771,166			18,806,063			20,952,495			(5.5	)		(10.2	)		26,354,549			21,187,091			17,771,166			24.4			19.2
Foreign refined products		6,330,648			3,535,666			5,431,828			79.1			(34.9	)		8,485,932			6,005,556			6,330,648			41.3			(5.1	)
Foreign crude oil																	-			52,397			-			(100.0	)		-
Other income		92,210			115,137			227,881			(19.9	)		(49.5	)		107,467			98,315			92,210			9.3			6.6
Inter-segment net operating revenues		629,690			788,810			560,096			(20.2	)		40.8			2,063,425			1,300,657			629,690			58.6			106.6
Transportation and Logistics		10,648,776			10,844,550			8,343,934			(1.8	)		30.0			11,354,167			10,598,064			10,648,776			7.1			(0.5	)
Third parties		3,764,205			4,221,192			3,456,639			(10.8	)		22.1			3,543,024			3,606,549			3,764,205			(1.8	)		(4.2	)
Inter-segment net operating revenues		6,884,571			6,623,358			4,887,295			3.9			35.5			7,811,143			6,991,515			6,884,571			11.7			1.6
Eliminations of consolidations		(15,208,139	)		(13,475,566	)		(14,699,537	)		12.9			(8.3	)		(30,134,432	)		(19,782,786	)		(15,208,139	)		52.3			30.1
Total revenues		48,485,561			52,347,271			65,971,888			(7.4	)		(20.7	)		68,603,872			55,954,228			48,485,561			22.6			15.4

COP$ in millions	Payments due by period										Payments due by period
Contractual obligations	Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years		Total		Less than 1 year		1 to 3 years		3 to 5 years		More than 5 years
Employee Benefit Plan		26,365,279.0		1,125,105.0		2,322,451.0		2,420,570.0		20,497,153.0		30,269,275		1,281,826		2,657,497		2,755,849		23,574,103
Contract Service Obligations		5,991,167.1		2,378,785.4		2,407,447.8		429,061.3		775,872.7		3,951,217		1,453,298		1,609,737		412,396		475,786
Operating Lease Obligations		652,681.2		190,875.0		157,100.1		118,815.1		185,891.0		407,664		96,976		116,620		86,154		107,914
Natural Gas Supply Agreements		2,107,163.5		229,202.5		495,130.2		395,420.0		987,410.9		363,735		109,927		99,440		0		154,368
Purchase Obligations		1,318,087.2		624,323.3		571,858.9		74,385.0		47,520.0		1,653,507		80,698		1,525,351		8,092		39,366
Energy Supply Agreements		795,408.8		97,418.0		155,820.8		121,267.0		420,902.9		848,790		153,205		172,200		70,347		453,038
Capital Expenditures		621,571.7		423,021.94		169,321.7		29,228.1		-		556,157		397,522		130,214		28,421		0
Build, Operate, Maintain and Transfer Contracts (BOMT)		576,758.8		65,155.9		114,724.0		113,351.5		283,527.4		665,759		64,748		123,481		129,283		348,247
Capital (Finance) Lease Obligations		381,838.6		254.1		23,649.2		40,011.2		317,924.1		454,631		55,087		80,812		63,353		255,379
Financial Sector Debt		20,162,033.8		1,333,129.9		3,181,732.0		9,712,744.3		5,934,427.7		10,071,534		1,576,597		2,906,067		2,886,955		2,701,915
Bonds		30,909,787.0		138,700.0		5,672,263.5		1,980,255.0		23,118,568.5		25,986,306		64,995		3,542,961		5,388,600		16,989,750
Total		89,881,776.78		6,605,971.01		15,271,499.17		15,435,108.32		52,569,198.28		72,228,575		5,334,879		12,964,380		11,829,450		45,099,866

	Oil and NGL (million barrels)		Natural Gas (bcf)		Total Oil and Gas (Mmboe)		Oil and NGL (million barrels)			Natural Gas (bcf)			Total Oil and Gas (Mmboe)
Reserves as of December 31, 2016		1,033		3,218		1,598
Reserves as of December 31, 2018								1,200			3,002			1,727
Sensitivity Scenario		1,182		3,252		1,752		1,155			2,958			1,674
Difference (million barrels)		149		34		154		(45	)		(44	)		(53	)
Difference (%)		14.4		1		9.6		(4	)%		(1	)%		(3	)%

	Income Statement 2016			Income Statement Case ICE Brent⁽¹⁾ + US$1			Difference Between Real 2016 and Case ICE Brent			Income Statement Case TRM⁽²⁾ - 1%			Difference Between Real 2016 and Case TRM			Income Statement 2018			Income Statement Case ICE Brent⁽¹⁾+ US$1			Difference Between Real 2018 and Case ICE Brent			Income Statement Case TRM⁽²⁾- 1%			Difference Between Real 2018 and Case TRM
	(COP$ in billions)															(COP$ in billions)
Revenue		48,485,56			49,398,37			912,81			48,931,98			446,42			68,603.87			69,602.13			998.26			69,324.68			720.81
Cost of sales		34,251,42			34,606,79			355,37			34,472,25			220,83			41,184.38			41,560.55			376.17			41,514.49			330.11
Gross Income		14,234,14			14,791,58			557,44			14,459,73			225,60			24,419.49			28,041.58			622.09			27,810.19			390.70
Operating expenses		4,400,84			4,400,84			-			4,400,84			-			4,592.45			4,592.45			-			4,592.45			-
Impairment of non-current assets		928,75			928,75			-			928,75			-			368.63			368.63			-			368.63			-
Operating income		8,904,55			9,461,99			557,44			9,130,14			225,60			22,458.41			23,080.50			622.09			22,849.11			390.70
Finance results, net		(1,175,37	)		(1,175,37	)		-			(1,175,37	)		-			(2,010.38	)		(2,010.38	)		-			(2,010.38	)		-
Share of profit of associates and joint ventures		61,35			61,35			-			61,35			-			165.84			165.84			-			165.84			-
Income before income tax		7,790,53			8,347,97			557,44			8,016,12			225,60			20,613.87			21,235.96			622.09			21,004.57			390.70
Income Tax		(4,543,05	)		(4,868,12	)		(325,07	)		(4,674,60	)		(131,56	)		(8,258.49	)		(8,507.71	)		(249.23	)		(8,415.01	)		(156.52	)
Net Income		3,247,48			3,479,85			232,37			3,341,52			94,04			12,355.38			12,728.25			372.86			12,589.56			234.18

VARIATION ON ICE BRENT REFERENCE PRICE		VARIATION ON AVERAGE EXCHANGE RATE REVENUE
~~REVENUE~~
Sales of crude oil		Sales of crude oil
Sales of refined products		Sales of refined products
Sales of natural gas		Sales of natural gas
		COST OF SALES
Local purchases from business partners		Local purchases from business partners
Local purchases of hydrocarbons from the ANH		Local purchases of hydrocarbons from the ANH
Local purchases of natural gas		Local purchases of natural gas
Imports of products		Imports of products

	Ø·	~~Minister~~General Secretary of the Ministry of Finance and Public Credit
	Ø	~~Ana Milena López Rocha~~

	Shares Traded on the BVC
	Colombian Pesos per share				U.S. dollars per share⁽¹⁾				Average number of shares traded
	High		Low		High		Low		Per day
2012		5,850		4,200		3.3236		2.1619		8,396,801
2013		5,710		3,695		3.2091		1.8992		7,018,859
2014		4,030		1,815		2.0556		0.7546		8,222,596
2015		2,305		1,090		0.8402		0.3973		10,109,301
2016		1,465		881		0.4802		0.2888		13,077,105
Most recent quarters
First quarter 2015		2,305		1,800		0.9335		0.7289		12,054,021
Second quarter 2015		2,085		1,625		0.8337		0.6497		10,056,874
Third quarter 2015		1,675		1,285		0.5706		0.4377		9,516,211
Fourth quarter 2015		1,515		1,090		0.4953		0.3563		8,805,595
First quarter 2016		1,425		881		0.4386		0.2712		17,971,092
Second quarter 2016		1,465		1,220		0.4892		0.4074		14,267,136
Third quarter 2016		1,410		1,170		0.4786		0.3971		10,403,945
Fourth quarter 2016		1,385		1,240		0.4593		0.4112		9,760,236
First quarter 2017		1,415		1,290		0.4842		0.4414		10,004,466
Most recent six months
November 2016		1,330		1,240		0.4276		0.3987		10,179,339
December 2016		1,385		1,305		0.4602		0.4336		8,629,345
January 2017		1,415		1,360		0.4811		0.4624		8,948,342
February 2017		1,395		1,310		0.4844		0.4549		11,907,449
March 2017		1,350		1,290		0.4588		0.4384		9,282,601
April 2017		1,400		1,340		0.4865		0.4656		13,581,125
May 2017 (through May 26, 2017)		1,480		1,335		0.5054		0.4559		18,112,368