As filed with the Securities and Exchange Commission on ~~May 30, 2017~~April 19, 2018

(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

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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 may read and copy any materials filed with the SEC in 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. 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” 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”, “achieve” and “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 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.

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 and ~~2016~~2017 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 “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 and recognizing non-controlling interest. We present our operating information on a consolidated basis.

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 reconciliations are no longer presented in our filings before the SEC. 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~~2,951.15 per US$1.00, which corresponds to theTasa Representativa Promedio del Mercado(TRM), or Average Representative Market Exchange Rate, for ~~2016.~~2017. Such conversion should not be construed as a representation that the Colombian Peso amounts correspond to, or have been or could be converted into, U.S. dollars at that rate or any other rate. On ~~May 26, 2017,~~April 16, 2018, the Representative Market Exchange Rate was COP$~~2,911.66~~2,705.34 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 a sharp contraction in crude oil price, particularly in the first quarter 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 fromAfter experiencing the lowest ~~prices during the oil crisis, high levels of uncertainty persist indicating a less than smooth recovery. Nonetheless, the change~~price level in ~~OPEC’s stance, announced at the end of September~~recent years in 2016, ~~and later ratified in early December 2016, towards coordinated production cuts provided a lift that allowed~~ the ICE Brent price underwent a gradual recovery during the second half of 2017. The agreement to ~~end~~cut production between OPEC and some Non-OPEC producers in 2017 was the ~~year above US$55 per barrel.~~key factor that boosted the crude market towards a path of rebalancing. In addition, price levels were also supported by lower supply in the Middle East and North Africa as a result of unrest and political tensions. On the other hand, the demand for crude oil was favored by improved economic performance in emerging countries, growing import requirements from independent refiners in China and the building of petroleum reserves in Asian countries.

According to estimates of the Energy Information Administration (“EIA”), in 2017 global oil demand grew 0.89 mboepd in excess of total supply. Non-OPEC supply climbed 0.7 mboepd, primarily due to higher US production. On the other hand, OPEC, in compliance with the cut agreement, reduced its crude flow ex NGLs by 0.24 mboepd, mainly in Saudi Arabia (-0.33 mboepd) and Venezuela (-0.26 mboepd). Global demand surprised the market by increasing 1.63 mboepd, mainly due to greater demand in Non-OECD countries.

Source: ~~PIRA Energy Group,~~S&P Global Platts, Pira World Oil Market Forecast (February ~~28, 2017)~~27, 2018)

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~~2017 Colombia’s GDP grew 2%1.8% in real terms, as compared to ~~2015.~~2016. The industries with the ~~greatest growth rates~~best performance were financial institutions, insurance, real estate and business services, ~~construction~~ and ~~manufacturing.~~agriculture. On the other hand, mining, construction and transportation 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 due to the increase in~~3%, boosted by higher sales of ~~gasoline. Gasoline domestic sales were more competitive than its substitutes due to its price decrease~~gasoline and ~~fewer than expected conversions to natural gas for vehicles (NGV) in Colombia.~~diesel.

~~In 2016, there were no major changes~~Natural gas demand in Colombia fell 7% in 2017 due to lower natural gas ~~regulation. With respect~~demand from power plants compared to 2016 when the “El Niño phenomenon” occurred. Although sales were affected by this factor, Ecopetrol’s short term strategy was focused on promoting demand to mitigate the impact on sales. According to the Energy and Mines Planning Unit (UPME for its acronym in Spanish), under the medium scenario of supply and demand for October 2017, the Colombian natural gas ~~supply, in November 2016,~~market might experience a ~~new regasification plant located in Cartagena became available, meaning that Colombia is now connected to the international LNG market and LNG prices will be a reference for national gas prices.~~deficit after 2024.

The low oil price environment present at the end of 2015 and the beginning of 2016 led to a revision of our business plan 2015-2020, originally launched in May 2015, with a price scenario of US$80 per barrel. Our new 2017-2020 business plan is focused on value generation, profitability and financial sustainability ~~under a price scenario of US$50 per barrel,~~ and allows for ~~considerable~~ upsides in case of potential price increases. ~~For example, if prices were~~The plan, released in the third quarter of 2016, has been adjusted to ~~increase to an average~~a lower price environment of US$7050 per barrel ~~production by 2020 could reach 830 thousand barrels equivalent per day, or 16% over the current production.~~on average.

The three pillars of the plan are: (i) cash flow focus and cost efficiency, (ii) strict capital discipline and (iii) profitable reserves and production growth.

Cash flow focus and cost efficiency: In 2015, we launched the 2015-2020 Transformation Program (the “Transformation Program”) with a goal of increasing our efficiency and decreasing ~~cost.~~costs. The Transformation Program has allowed us to decrease structural costs by US$~~1.5~~2.4 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~~project planning processes and the adoption of ~~strict~~ controls to ensure that projects are delivered efficiently, ~~and~~ within the expected time frame and ~~budget.~~ budget, and generate adequate return on investments. For this purpose, Ecopetrol S.A. created the Vicepresidency of Projects and Engineering to provide best-in-class project delivery, through “Ecopetrol Project Development” (“EDP”). EDP is the framework for maturing opportunities and employs best practice guidelines for projects. It is consistently applied with maximum synergy and standardization between Upstream, Midstream and Downstream projects.

The plan calls for investments of approximately US$13 billion between 2017 and 2020. By 2020, approximately ~~90%~~80-90% of this investment will be allocated to the development of ~~exploration and production~~upstream projects, while investments in transportation and refining will seek to improve operational integrity and reliability.

~~As part of capital discipline, Ecopetrol is currently engaged in 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~~.

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~~740-760 thousand barrels of oil equivalent per day by 2020, an approximately 6% growth from ~~2016.~~2017. Approximately ~~94%~~98% of this production will come from the current producing assets.

In exploration, 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 U.S. Gulf of ~~Mexico in the United States.~~ Mexico.

During the period ~~2017~~2016 – 2020, Ecopetrol expects to add 600 million barrels of proven reserves from current fields and exploration. Further, the business plan’s financial flexibility will allow Ecopetrol to evaluate inorganic growth opportunities to accelerate reserves addition.

~~Consistent~~As part of our long-term strategic planning process, we are in the process of developing strategic guidelines for the following years (“Strategy 2020+”). This analysis takes into account financial and sustainability parameters, operational excellence, portfolio diversification and synergies through the entire value chain. Strategy 2020+ will harmonize the requirements of the Upstream, Downstream and Midstream businesses, plus corporate areas, thus consolidating the long-term strategy of Ecopetrol.

In line with the business plan, ~~update,~~ in November ~~2016,~~2017, the ~~board of directors of Ecopetrol (“~~Board of ~~Directors”)~~Directors approved a US$~~3.5~~3.5-$4.0 billion investment plan for ~~2017.~~2018. The Ecopetrol Group ~~will continue~~plans to produce ~~an average of about 715~~715-725 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.2018. The table below sets forth the details of the investment plan per business segment.

In the exploration segment, US$~~650~~400-US$450 million will be allocated mainly to the evaluation and appraisal of discoveries and ongoing exploration efforts of Ecopetrol S.A. (approximately ~~US$460 million)~~49%), Hocol S.A. (“Hocol”) (approximately ~~US$114 million)~~17%), Ecopetrol America Inc. (approximately ~~US$11 million)~~9%), ECP Hidrocarburos Mexico (approximately 4%), Ecopetrol Costa Afuera (approximately ~~US$44 million)~~17%) and Ecopetrol Brazil (approximately ~~US$21 million)~~4%).

In the production segment, US$~~1,977~~2,580-US$2,950 million will be allocated mainly to the execution of development and incremental production projects ~~in the~~of Ecopetrol S.A. (approximately 94%) primarily at Akacias-CPO09, Castilla, Cupiagua-Cusiana, La Cira-Infantas, Piedemonte, Rubiales, Yarigui-Cantagallo, ~~La Cira - Infantas, Tibú, Piedemonte, Chichimene, Quifa,~~ Provincia and ~~Cusiana-Cupiagua fields (approximately US$1,147 million).~~Llanito-Lisama fields. We have also allocated funds for our affiliates and subsidiaries as follows: ~~US$64 million~~approximately 2% for the operation and maintenance of fields of Ecopetrol America Inc. in the U.S. Gulf of Mexico, ~~US$88 million~~approximately 3% to Hocol, ~~US$63 million~~approximately 1% to Equion and ~~US$8 million to~~ Savia.

In the transportation and logistics segment, US$~~138~~270-US$300 million will be allocated to investments focused on ~~the completion of projects such as San Fernando-Monterrey~~risk mitigation and ~~transportation of heavy crude oils as well as crude oil dilution projects.~~maintenance. The segment is seeking a higher efficiency in operations and maintenance practices.

In the refining, petrochemicals and biofuels segment, US$~~105~~220-US$250 million will be allocated ~~to Reficar, US$150 million~~ to programs to improve operations at Reficar and the Barrancabermeja ~~Refinery~~refinery through initiatives aimed to increase revenues, enhancing integrity management, improve efficiency and reduce operational ~~costs and US$82 million to Bioenergy.~~costs. The segment is seeking a higher efficiency in operations and maintenance practices. ~~It is important~~In accordance with the capital discipline criteria we established to ~~highlight that~~ensure growth and financial sustainability, the Barrancabermeja ~~Refinery~~refinery modernization plan will continue to be ~~delayed until~~suspended. Meanwhile, Ecopetrol continues to analyze and implement alternatives for improving the competitiveness of this refinery including, among others, the use of other sources of crude 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~~as well as removing operational and ~~investment.~~logistical restrictions.

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 production started in 1918, and the pipeline that connected that field with the Barrancabermeja Refinery and the port of Cartagena. In 1961, we assumed the direct operation of the Barrancabermeja Refinery and continued its transformation into an industrial complex. In 1974, we acquired the Cartagena Refinery, 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 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, 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 and are currently awaiting responses from both. In the meantime, we continue to be subject of the reporting requirements of such Commissions.

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

Our subsidiaries Refinería de Cartagena (Reficar), Cenit and 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 31, ~~2017,~~2018, we have ~~eight~~9 directly owned and 2029 indirectly owned subsidiaries.

During ~~2016,~~2017, 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.~~2018.

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 of 2016.

We currently own 100% of the total outstanding shares of Propilco. 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 Propilco.

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 559 based on ~~the Petroleum Intelligence Weekly Top 50~~Forbes Global 2000 Ranking - ~~2016.~~2017. 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 and production activities directly in Ecopetrol S.A., through some of our subsidiaries, and through joint ventures with third parties. As of December 31, ~~2016,~~2017, 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 Exploration Strategy 2017-2020, Ecopetrol is aiming to incorporate at least 1 billion barrels of contingent resources in high reward projects, concentrated in (i) Offshore Colombia, (ii) re-evaluating opportunities onshore Colombia, and (iii) international areas such as the Gulf of Mexico, Brazil and other areas within the Americas.

Graph 3- Sedimentary Basins where Ecopetrol executes exploration activities

During 2017, the exploration strategy was directed at leveraging our goal on three working fronts: onshore Colombia, offshore Caribbean, and strengthening and diversifying our exploration overseas.

During 2017, Ecopetrol and its subsidiaries conducted drilling operations in 16 exploration wells (A3/A2) and in 2 appraisal wells (A1) in Colombia. Of these 16 wells, 3 were successful, 6 were plugged and abandoned, and 7 were under evaluation as of December 31, 2017. This activity was concentrated mainly in the ~~sedimentary basins in Colombia, in which active oil~~following basins: onshore Sinu, Upper Magdalena Valley, Middle Magdalena Valley, Guajira and ~~gas operations are found.~~offshore Sinu.

~~The following map shows the basins where Ecopetrol has been conducting its main exploration activities.~~

~~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 Ecopetrol and its subsidiary Hocol S.A. in the Lower Magdalena Basin and Llanos Basin. Additionally Hocol finalized drilling operations in the Payero well (Piedemonte basin), which started in December 2015 and was operated by Equion. In terms of onshore Colombia, we focused our exploration efforts in searching for hydrocarbons in mature basins, near field exploration and close to existing production infrastructure. Additionally, we succeeded in increasing our participation in blocks Fuerte Sur (Sinu offshore ~~Colombia, drilling operations started at the Purple-Angel 1 well (following the discovery announced at the Kronos-1 well~~basin) and CPO-17 (Llanos basin), from 50% to 100% 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 of a gas presence at Purple-Angel 1.~~cases.

The following table sets forth for the periods ~~indicated,~~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.

Ecopetrol drilled ~~two~~three successful wells in ~~2016:~~Colombia in 2017: (i) ~~Chimú-1 St-1~~Purple Angel-1 well, where Ecopetrol holds a ~~100%~~50% working interest and Anadarko the remaining 50% at ~~Caño Sur Block, which was~~Purple Angel block, (ii) Gorgon-1 well, where Ecopetrol holds a ~~dry well,~~50% working interest and ~~(ii) Boranda well, in which~~Anadarko the remaining 50% at Purple Angel block, and (iii) Coyote-1, where Ecopetrol holds a 50% working interest, and Parex ~~holds~~Resources Inc. as operator the remaining 50% ~~working interest, as block operator. As of March 30, 2017 we announced that the presence of crude was discovered~~ at ~~this well.~~Playon block.

~~Our subsidiary Hocol S.A. drilled three~~Six wells were plugged and abandoned. Three of the wells were located in ~~2016:~~the Colombian Caribbean: (i) ~~Payero E1~~Molusco-1 well, ~~located at Niscota Block and operated by Equión. Total~~where Ecopetrol holds a 50% working interest through its affiliate Ecopetrol Costa Afuera S.A.S (“ECAS”) and ONGC with the remaining 50% at RC-9 block, which was a dry well, (ii) Siluro-1B well, operated by Repsol at RC-11 block, which was a dry well and (iii) Brama-1 well, operated by Petrobras at Tayrona block, which was a dry well. The other three wells were located onshore in Colombia and were determined to be dry: (i) Trogon-1 well, where Ecopetrol holds a ~~30%~~55% working interest as operator and ~~Hocol S.A.~~Repsol the remaining 45% at CPO-9 block, (ii) Landero-1 well, where Ecopetrol holds ~~a 20%~~an 100% working interest ~~this~~at Middle Magdalena Valley and (iii) Lunera-1 well, ~~was declared temporarily suspended; (ii) Bullerengue Sur-1 well,~~where Hocol holds an 100% working interest as operator at VSM-9 block.

In addition, two appraisal wells were drilled. The first, Capachos 2 ST located at ~~SSJN1 Block. Hocol S.A.~~Capachos block operated by Parex Resources Inc., which holds a 50% working interest ~~and Lewis Energy holds~~in partnership with Ecopetrol holding the remaining 50%~~, this one is a productive well, and (iii) Pegaso well, located at CPO 16 Block where Hocol S.A. holds a 100% working interest, this~~. This well was under evaluation as of December 31, ~~2016.~~2017, but has been declared successful since. The appraisal well Bullerengue Sur-3 located at SSJN1 Block operated by Lewis Energy, which holds a 50% working interest in partnership, with Ecopetrol holding the remaining 50% was plugged and abandoned.

In Colombia our subsidiary Hocol S.A. acquired a total of 518 km of 2D in blocks SN 8 and SN 18.

Our international exploration strategy is focused on participating in bidding rounds to secure blocks available for exploration and entering into joint ventures with international and regional oil companies. We believe exploring outside Colombia allows us to diversify our risks and improve the possibilities of increasing our crude oil and natural gas reserves.

~~With respect to~~In partnership with Petronas and Pemex, respectively, we were awarded block 6 and 8 in Mexico during the bidding round 2.1 and our ~~seismic data outside~~Mexican subsidiary, ECP Hidrocarburos Mexico S.A. de C.V., has entered into petroleum contracts in connection therewith. Additionally, in a 50% partnership with Repsol E&P USA Inc., as operator, we were awarded blocks Garden Banks 77, 78, 121 and 122 in the Gulf of ~~Colombia, during 2016,~~Mexico (US) through our American subsidiary, Ecopetrol ~~Brasil bought 854 Km~~² ~~of seismic data on the Potiguar basin, POT-M-567, in which Ecopetrol Brasil holds a 100% working interest.~~America Inc.

With respect to our exploratory drilling outside of Colombia, ~~during 2016, we have undertaken deep water exploratory drilling~~as set forth in the ~~U.S.~~table below, in 2017 our subsidiary Ecopetrol America Inc. drilled two wells: (i) Warrior-2 and (ii) Warrior-2 ST-1, both located in the Green Canyon area in the Gulf ~~Coast~~of Mexico (US). These wells contained hydrocarbons, both wells were deemed non-commercial due to thin compartmentalized reservoirs, and were plugged and abandoned. The associated contingent resources of this discovery are currently under evaluation. Ecopetrol America Inc. has a 30% interest in ~~association~~this area, with our ~~business partners.~~ partner Anadarko holding the remaining 70% interest and acting as operator.

The following table sets forth information on our exploratory drilling infor the ~~years 2016, 2015 and 2014.~~periods indicated.

Our subsidiary, Ecopetrol Brazil, completed the acquisition of a marine 3D seismic program of 446 km2 in block FZA-M-330, in the ~~table above, in 2016, our subsidiary~~Foz de Amazonas basin (Brazil). Ecopetrol ~~America Inc. drilled in the United States Gulf of Mexico the Warrior exploratory well, in which Ecopetrol America Inc.~~Brazil holds a ~~20% working~~70% equity interest ~~and our partners Anadarko (operator) holds a 65% working interest and MCX Gulf of Mexico LLC holds~~in this block with JX Nippon holding the remaining ~~15% working~~30% interest. ~~The well was declared productive. T~~his oil discovery is the result of our new exploratory strategy, which includes partnerships with leading companies to diversify risk, undertake further exploration activities and increase contingent resources. The Warrior well is the fifth oil discovery of the Ecopetrol Group in this prosperous oil region and contributes with increasing our contingent resources.

Ecopetrol America ~~Inc. also drilled a successful appraisal well~~Inc purchased the 3D seismic program EDGE of 28.000 km2 in ~~Leon discovery (León 2 BP4), operated by Repsol, which holds a 60% working interest. Ecopetrol America Inc. holds the remaining 40% working interest.~~Green Canyon. The ~~result of this well adds contingent resources~~seimic program contributed, to ~~those initially discovered with the León 1 exploratory well in 2014.~~mitigate subsalt uncertainty and to mature leads for lease sales.

~~During 2016, Ecopetrol S.A. did not participate in bidding rounds in the Gulf of Mexico.~~3.4.2 Production Activities

With regards to ECP Oil and Gas Germany GmbH´s operations in Angola, we reached an agreement with our partners on the terms upon which we will withdraw from Block 38/11 and Block 39/11. This agreement was sent for approval of the National Concessionaire, Sonangol EP, followed by the issuance of a decree from the Ministry of Petroleum. We expect the withdrawal process to be concluded by mid-year of 2017.

Our consolidated average production was ~~717.9~~715.1 thousand boepd in ~~2016,~~2017, a decrease of approximately 433 thousand boepd as compared to ~~2015.~~2016. This decrease is mainly the result of the natural production decline of our fields, ~~and a reduction~~partially offset by an increase in ~~the~~ upstream investments during ~~2016, as a consequence of the drop in oil prices.~~2017.

The following table summarizes the results of our oil and gas production activities for the periods indicated:

For the year ended December 31, ~~2016,~~2017, Ecopetrol S.A. was the largest participant in the Colombian hydrocarbons industry, accounting for approximately ~~62%~~64% of crude oil production (according to calculations made by Ecopetrol based on information from the Ministry of Mines and Energy) and approximately ~~61%~~68% of natural gas production (according to calculations made by Ecopetrol based on information from the Ministry of Mines and Energy). Also during ~~2016,~~2017, Ecopetrol S.A. carried out development drilling mainly in the ~~Oriente~~Orinoquia and ~~Orinoquia~~Middle Magdalena regions, drilling ~~133~~475 development wells; 83199 of those through direct operations and 50276 through joint ventures.

In terms of operational structure, Ecopetrol S.A. manages its production operations through a regional organization. Since July 1, 2014, three regional Vice-Presidencies were created: Central, Orinoquia and Southern. After the company took over the operations of the Rubiales field in July of 2016, a new Vice-Presidency, the Eastern Region, was incorporated to this scheme. Our operating assets are distributed in the following regions:

A fifth Vice-Presidency, the Vice-Presidency of Associated Operations, is responsible for all of the production activities in which a partner is involved, regardless of the location of such activities in Colombia. This Vice- Presidency is comprised of ~~137~~121 fields with active production in ~~2016.~~2017.

The map below indicates the locations of Ecopetrol ~~S.A´s~~S.A’s operations with production information for each of our administrative regions following in the subsequent paragraphs.

The average daily production of crude oil in Colombia by Ecopetrol S.A. (excluding its subsidiaries), was ~~552.1~~545 mbod in ~~2016, 34.1~~2017, 7.1 mbod lower than in ~~2015,~~2016, which represents a year-to-year decrease of 6%1.3%.

However, it is important to highlight that since July of 2016 we took over the operations of the Rubiales and Cusiana fields. A plan was set up ~~with~~ more than two years in advance, which allowed us to successfully transition between operators, without any technical, operational or communities’ issues in any of the two fields. In July 2017, Ecopetrol completed the ~~case~~first year of operating in the Rubiales ~~field, it is important to highlight that~~field. During 2017, we ~~restarted investments~~invested in the asset with ~~new development~~the drilling ~~during~~of 127 wells and the ~~last quarter~~implementation of ~~the year 2016, which helped us~~efficiency measures, thereby continuing to mitigate ~~the~~historical production ~~decline observed during 2015.~~declines.

The following chart summarizes Ecopetrol S.A.’s average daily crude oil production in Colombia by Region, prior to deducting royalties, for the periods indicated.

Table 7 – Ecopetrol S.A.’s Average Daily Crude Oil Production in Colombia by Region Vice-Presidency

Ecopetrol S.A.’s crude oil production during ~~2016~~2017 consisted of approximately ~~37%~~36% light and medium crudes and 64% heavy crudes. In 2016, approximately 37% of the crude oil production corresponded to light and medium crudes and 63% to heavy crudes. In 2015, approximately 40% of the crude oil production corresponded to light and medium crudes and 60% to heavy crudes. ~~During 2014, production distribution was approximately 42% of light and medium crudes and 58% of heavy crudes.~~

In ~~2016,~~2017, the average daily production of natural gas by Ecopetrol S.A. reached ~~116.0~~111 mboed, including natural gas liquids (“NGLs”), corresponding to a 4%4.3% decrease in comparison to ~~2015~~2016 production.

We have three main natural gas production fields, Guajira, Cusiana and Cupiagua. In the Guajira field, we have partnered with Chevron who operates the field. The development of Cusiana field had a change in participation, because Tauramena joint venture expired on July 3, 2016. The Tauramena block is part of the Cusiana unified exploitation plan. As a consequence of the termination of the Tauramena joint venture, ~~Ecopetrol´s~~Ecopetrol’s participation increased from 63.4% to 97.8%, and Ecopetrol assumed the operation of the Cusiana unified exploitation plan. Ecopetrol S.A. is the operator of the Cupiagua ~~field.~~field and other wells previously under the Recetor contract that were transferred from Equion to Ecopetrol as a result of the full return of the Recetor Field to Ecopetrol on May 30, 2017.

Of our total natural gas production during the year ended December 31, ~~2016,~~2017, approximately ~~29%~~24% was supplied from the Guajira field, ~~25%~~29% from the Cusiana field, ~~25%~~23% from the Cupiagua field and the remaining ~~21%~~24% from other fields.

The following table sets forth Ecopetrol S.A.’s average daily natural gas production in Colombia, including NGLs, prior to deducting royalties, for the years ended on December 31, 2017, 2016, ~~2015~~ and ~~2014.~~2015.

During ~~2016~~2017 Ecopetrol prioritized opportunities within its recovery factor increase program, keeping 18the following active pilots in ~~operation~~operation: waterflooding (WF) in Chichimene, Castilla, Apiay and Suria; Chemical Enhanced Oil Recovery (CEOR) in Chichimene, Yarigui and Casabe and Vapor Injection Continue (ICV) in Teca; and developing ~~a new~~ additional ~~one. From the current pilots, 12 have already presented an increase~~ones: WF in ~~production within the area impacted by the pilot.~~Nutria and Tisquirama and CEOR in Cira and Geles.

~~Among the main results of the pilots~~The Chichimene and Castilla fields have continued reporting increases in ~~2016, it is important to highlight~~their recovery factors between 8% and 12% in their pilot areas. Additionally, in 2017, we evaluated the positive results of the water flooding pilots in the heavy crude fields of Castilla and Chichimene. These fields reported a growth in the recovery factor of 5.2% in the pilot area of Chichimene field and 2.5% in the pilot area of Castilla field. Also in 2016, we continued the evaluation of steam injection pilots in the ~~Jazmin and~~ Teca ~~projects, with participation from partners,~~project, located in the Middle Magdalena Valley, where we also obtained positive ~~responses in terms of production.~~production responses.

InAt the Chichimene field, nitrogen injection pilots were successfully completed. We are currently analyzing the production curve, and air injection ~~pilot at Chichimene field, a detailed revision~~is expected to begin in the second half of 2018.

Among the main results of the ~~scope and of the works required was carried out due to the drop~~pilots in ~~global oil prices. During~~ 2017, ~~additional works will be completed and~~ it is ~~expected~~important to highlight that 73 mmboe of proven reserves and 174 mmboe of contingent resources were incorporated. In addition, four new recovery projects were conceptualized (WF in Chichimene, Castilla and Llanito-Gala-Galan, being among the ~~start of the injection will take place in the last quarter of 2017.~~most important ones).

~~Since~~35 recovery pilots have started since the beginning of the recovery factor increase program ~~we have started 34 recovery~~in 2008. Out of these pilots, ~~of which 24~~28 have shown positive results, of which 11 are now in ~~terms of pressure increase~~expansion stage, 11 are operating and ~~19 in incremental crude production.~~six were closed.

The following table sets forth the number of gross and net development wells drilled in Colombia, both solely by Ecopetrol S.A. and with its joint ventures that reached total depth for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014.~~2015.

The following table sets forth Ecopetrol S.A.’s developed and undeveloped gross and net acreage of crude oil and natural gas production in Colombia for the year ended December 31, ~~2016.~~2017.

Table 11 – Ecopetrol S.A.’s Developed and Undeveloped Gross
and Net Acreage of Crude Oil and Natural Gas Production in Colombia

The following table sets forth Ecopetrol S.A.’s total gross and net productive wells by region as of December 31, ~~2016.~~2017.

~~Table~~Table 12 – Ecopetrol S.A.’s Gross and Net Productive Wells by Region

The following table sets forth our average daily crude oil production from Hocol and Equion, prior to deducting royalties, for the periods indicated.

Table 13 – Ecopetrol S.A.’s Subsidiaries in Colombia Average Daily Crude Oil Production

The ~~15.4% decrease~~20.6% increase in Hocol’s production in ~~2016~~2017 as compared to ~~2015~~2016 was mainly due to the ~~temporary closure~~transfer of Ecopetrol’s stake in the ~~fields Guarrojo, Ortega, Toldado, Toy, Quimbaya and Puli as a result of community blockages and governmental resolutions (Constitutional Court) which were lifted afterwards.~~Espinal field to Hocol on January 1, 2017.

The ~~7% increase~~14.5% decrease in Equion’s production in ~~2016~~2017 as compared to ~~2015~~2016 was mainly due to the ~~start~~transfer of ~~production of a new well and the increase of three wells previously drilled as a result of specific interventions.~~Tauramena contract share in Cusiana to Ecopetrol.

The following table sets forth our subsidiaries’ average daily natural gas production, prior to deducting royalties, for the periods indicated.

Table 14 – Ecopetrol S.A.’s Subsidiaries in Colombia Average Daily Natural Gas Production

The following table sets forth the number of gross and net development wells drilled exclusively by our subsidiaries and in their joint ventures in Colombia for the periods indicated.

Table 15 – Ecopetrol S.A.’s Subsidiaries in Colombia Gross and Net Development Wells

The following table sets forth our subsidiaries’ developed and undeveloped gross and net acreage of crude oil and natural gas production in Colombia for the year ended December 31, ~~2016.~~2017.

Table 16 – Ecopetrol S.A.’s Subsidiaries in Colombia Developed and Undeveloped Gross and Net Acreage of Crude Oil and Natural Gas Production

The following table sets forth our subsidiaries’ total gross and net productive wells in Colombia for the year ended December 31, 2016. We consider crude oil wells to be those in which the main operation is oil production, although many of these wells produce gas associated with oil production that, in some cases, have a commercial purpose. Natural gas wells are those in which operations are directed only towards production of commercial gas. Information in the table below reflects productive wells that directly contribute to hydrocarbons production and therefore excludes wells used for injection, disposal, water abstraction, or other similar activities.2017.

Table 17 – Ecopetrol S.A.’s Subsidiaries in Colombia Gross and Net Productive Wells⁽¹⁾

The following table sets forth our average daily crude oil production outside Colombia, prior to deducting royalties, for the periods indicated.

Table 18 – Ecopetrol S.A.’s Subsidiaries Outside Colombia Average Daily Crude Oil Production

The following table sets forth our average daily natural gas production outside Colombia, prior to deducting royalties, for the periods indicated.

Table 19 – Ecopetrol S.A.’s Subsidiaries Outside Colombia Average Daily Natural Gas Production

The following table sets forth the number of gross and net development wells outside Colombia, drilled exclusively by us and in joint ventures for the periods indicated. Information in the table below reflects productive wells that directly contribute to hydrocarbons production and therefore excludes wells used for injection, disposal, water abstraction, or other similar activities.

Table 20 – Ecopetrol S.A.’s Subsidiaries Outside Colombia Gross and Net Development Wells⁽¹⁾

The following table sets forth our developed and undeveloped gross and net acreage of crude oil and natural gas production outside Colombia for the year ended December 31, ~~2016.~~2017.

Table 21 – Ecopetrol S.A.’s Subsidiaries Outside Colombia Developed and Undeveloped Gross and Net Acreage of Crude Oil and Natural Gas Production

The following table sets forth our total gross and net productive wells outside Colombia for the year ended December 31, ~~2016.~~2017.

Table 22 – Ecopetrol S.A.’s Subsidiaries Outside Colombia Gross and Net Productive Wells

In ~~2016,~~2017, Ecopetrol sold ~~962.5~~917.2 mboepd, out of which ~~449.7~~434.5 mbopd represented sales of crude oil ~~(46.7%~~(48%), ~~77.8~~75.7 mboepd natural gas ~~(8.1%~~(8%) and ~~435.0~~407 mboepd of fuels and petrochemicals ~~(45.2%~~(44%).

~~Export~~Crude oil export sales ~~of crude oil~~ in ~~2016~~2017 decreased by ~~101~~19 mbopd as compared to ~~2015 primarily~~2016 mainly due to ~~the crude Castilla blend and the Vasconia Norte blend being used as part~~higher consumption of the ~~slate for Reficar and therefore not available for exporting activities.~~local refineries. Ecopetrol’s crude oil export sales are traded both in the spot and contract markets, primarily to refiners in the United States, Asia ~~Europe, Central America~~ and ~~the Caribbean.~~Europe.

The Castilla blend is the ~~principal~~main type of crude oil for ~~foreign~~export sales, with ~~330.8~~315.1 mbopd sold during ~~2016~~2017 (a ~~74%~~76% share of our crude oil basket) followed by the Vasconia Norte with ~~32.3~~29.1 mbopd ~~(an~~(a 7% share in our crude oil basket), Vasconia with 15.2 mbopd (a 4% share of our crude oil basket), and the ~~Magdalena~~South blend with 2413.0 mbopd (a 5%3% share of our crude oil basket).

A market diversification strategy has allowed Ecopetrol to shift towards markets where it captures a better value for its crudes. The United States, Europe, Central America and Caribbean were destinations that showed an increase in our crude oil export volume, from 67% of total export sales in 2015 to 81% of total export sales in 2016. In contrast, other destinations, such as Asia, experienced a decrease in volume mainly due to: (i) larger supply coming into this market from the Middle East and (ii) more opportunities for Ecopetrol S.A. to sell in the United States because of the interest of refiners in imported crude.

Ecopetrol placed its exports in markets that represent the best value for its crudes. The United States remained the main destination representing almost a half of our crude exports. In particular, lower supply of other heavy and intermediate grades generated new opportunities for Colombian crudes in the US. In addition, the percentage of exports to Asia increased from 15% in 2016 to 25% in 2017 due to the expansion of refining capacity and higher imports in that market. Ecopetrol’s crude basket reached a nine year high, discounted only by US$ 6.9/bl below the ICE Brent price.

Ecopetrol has signed several crude oil purchase contracts with third parties and business partners. Ecopetrol also purchases crude oil ~~received by~~from the ANH as ~~royalties from other producers in Colombia.~~royalties. This oil is processed in Ecopetrol’s refineries or exported. The purchase price ~~corresponds~~is referenced to export parity based on international market prices plus a commercial fee.

The ~~term of some of our purchase contracts is~~contract terms are typically linked to the term of the exploration and production contracts signed with our ~~business~~ partners. Other contract clauses ~~of the contracts~~ such as price and ~~place~~point of delivery vary and may be subject to renegotiation during the term of the contract. Certain purchase contracts are not linked to joint venture agreements and may be extended and renegotiated by the parties.

The table below sets forth the volumes of crude oil purchased from our business partners and third parties and volumes of crude oil purchased from the ANH ~~corresponding to~~from royalties for the years ended on December 31, 2017, 2016 ~~2015~~ and ~~2014.~~2015.

In ~~2016,~~2017, Ecopetrol decreased ~~by 12.3% (7.9 mboepd)~~ the imports of ~~diluents~~diluent by 8% (5 mbpd) compared to 2016. Diluent is used to ~~allow~~transport our heavy crudes ~~to be pumped~~ through ~~pipelines, as compared to 2015,~~the pipeline system and the reduction is due to ~~an increase~~optimizations in dilution processes within the ~~viscosity specifications in the transport of heavy crude oil.~~transformation plan last year.

Ecopetrol sells natural gas to distribution companies through firm, interruptible and conditional contracts. These distributors supply natural gas to the residential market, ~~for~~as compressed natural gas for vehicles market and to ~~industries~~large industrials in Colombia. We also market and sell natural gas directly to the industrial sector and to gas-fired ~~and combined cycle~~ power plants.

~~Despite higher demand by thermal power plants due to “El Niño” climate phenomenon,~~ Ecopetrol’s natural gas sales and self-consumption decreased ~~15.9% (14.7~~by 2.8% (2.2 mboepd) as compared to ~~2015~~2016 due to ~~the decline of production at the Guajira field, restrictions on transporting~~lower demand from natural gas by pipeline to dispatch natural gas from fields found in the inner part of Colombia and the decrease in consumption of the industrial and vehicular sectors. Our market share in 2016 was 64% as compared to 63% in 2015.fired power plants.

The table below sets forth the commitments we have in Colombia under firm contracts with local natural gas distribution companies, local industries, gas fired power generators, and internal agreements with our refineries and fields.

Neither ~~Ecopetrol America,~~ Equion nor Savia Peru are included in the table above since they do not consolidate within Ecopetrol Group. ~~In respect~~Data was updated based on current contracts and the official report made to the Ministry of ~~Ecopetrol America Inc., it does not have any~~Mines and Energy in 2017.During 2017 the Energy and Gas Regulatory Commission published a new resolution modifying the existing trading rules in the Colombian natural gas ~~delivery or supply commitments.~~market. One of the major changes provided Ecopetrol the opportunity to negotiate and subscribe one-year term agreements starting on December 2018. See the sectionBusiness Overview—Applicable Laws and Regulations—Regulation of the Natural Gas Market.

Domestic sales of refined products increased by ~~3.6~~8.6 mboepd, an increase of ~~1.2%~~2.9% compared ~~with 2015.~~to 2016. This increase is primarily the result of: (i) a ~~10%~~2.7%, or ~~10.2~~3.8 mboepd, increase in middle distillates sales mainly due to the reactivation of oil service and the mining sector, (ii) a 2.2%, or 2.4 mboepd, increase in gasoline ~~sales mainly due to~~as a ~~13%~~result of a decrease in ~~gasoline prices as compared to 2015 and less~~the production of ethanol for gasoline blending, ~~(ii)~~(iii) a 5%32.8%, or ~~1.3 mboepd increase, in fuel sales mainly due to a 5% increase in the number of passengers transported as compared to 2015 and a 2% increase in air freight as compared to 2015, (iii) a 28%, or 1.3~~2.1 mboepd, increase in fuel oil sales mainly as a result of new contracts, ~~and higher domestic fuel sales at Reficar, and~~ (iv) a ~~1.9%~~3.1%, or ~~0.3~~0.5 mboepd, increase in LPG sales ~~mainly due to an increase in~~primarily as a result of the stabilization of production at ~~Reficar. These increases were partially offset~~Reficar and imports of LPG carried out by Ecopetrol to meet the national demand deficit, and (v) a 6%1.6%, or ~~7.5~~a 0.3 mboepd, decrease in ~~diesel~~petrochemicals sales, ~~mainly due to the freight land transportation strike in June and July 2016 and lower than expected economic growth.~~

Exports of products increased by 93.7% as compared to 2015, due to 74 mboepd increase by Reficar mainly due to: (i) the finalization of the entire expansion and modernization project, followed by the startup process completed in July 2016, thereby advancing to the stabilization phase, and (ii) an increase in Propilco’s exports of close to 0.6 mboepd in 2016 (9.9 mboepd vs. 9.3 mboepd of 2015). This increase was partially offset by a decrease in fuel oil exports by 6 mboepd, or 10%, due to lower fuel oil production in the Barrancabermeja Refinery.

~~In addition, local sales of petrochemicals (included in domestic sales of products) decreased as compared to the previous year (19.2 mboepd in 2016 compared with 21.7 mboepd in 2015),~~ due to a decrease in asphalt and aromatic solvents sales by Ecopetrol ~~S.A.~~S.A, as a consequence of non-execution of 4G road construction projects and contraction of the domestic demand and availability problems for aliphatic solvent.

Exports of products decreased by 25.7% compared to 2016 (18.7 mbd from Reficar and 17.7 mbd from Ecopetrol) primarily due to a decrease in ~~Propilco’s sales.~~our exports of fuel oil and high sulfur diesel. The 40% or 27 mbd, decrease in our fuel oil exports was primarily due to start up activities at our Coker Unit. The 39% or 11 mbd, decrease in our diesel exports was primarily due to our production of ultralow sulfur diesel for our local market.

The reserves audit process was conducted in accordance with SEC definitions and rules set forth in Rule 4-10(a) of Regulation S-X and the disclosure guidelines contained in the SEC’s Modernization of Oil and Gas Reporting final rule dated December 31, 2008 and effective as of January 1, 2010.

The estimated reserve amounts presented in this report, as of December 31, ~~2016,~~2017, are based on the average prices during the 12-month period prior to the ending date of the period covered in this report, determined as the unweighted arithmetic averages of the prices in effect on the first day of the month for each month within such period, unless prices were defined by contractual arrangements, as required by the SEC regulations.

Our crude oil and natural gas net proved reserves include reserves from our subsidiaries located in the United States (Gulf of Mexico) and Peru, and Equion and Hocol’s assets in Colombia.

The following table sets forth our estimated net proved developed reserves of crude oil and gas by region for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014.~~2015.

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

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. However, the ANH’s Resolution 877 of 2013, Resolution 351 of 2014 and Resolution 640 of 2014 require natural gas royalties to be paid in cash, which means that the determination of the property rights to the quantities of natural gas we produce is based on the total volume produced without deductions on account of royalties. The main producing gas fields are Cusiana, Cupiagua, Pauto, Chuchupa, Gibraltar, Ballena and ~~Ballena.~~

The Ministry of Mines and Energy is responsible for reviewing and approving the design of and tracks for crude oil pipelines in Colombia. The Ministry of Mines and Energy establishes transportation rates based on information provided by the service suppliers, with the tariffs based on the principle of cost recovery plus a reasonable rate of return.

In prior filings, Ecopetrol has used the tariffs set by the Ministry of Mines and Energy as transportation cost to be deducted from the crude benchmark price for the purpose of evaluating the economic production, economic life and reserves of Colombian assets.Mamey.

Ecopetrol S.A. owns 100% of Cenit, a subsidiary that operates in Colombia and is dedicated to the storage and transportation of hydrocarbons through pipelines. Cenit provides transportation services for the entire Ecopetrol Group and we fully consolidate Cenit into our consolidated results of operations. Therefore, the difference between the tariffs set by the Ministry of Mines and Energy and the real transportation costs (fixed and variable operating expenses) does not affect our consolidated income statement. Thus, in presenting our reserves information in ~~this~~2016 and 2017 annual report, we have used our real transportation costs, rather than the regular tariffs set by the Ministry of Mines and Energy.

The following table summarizes our proved oil, NGL and natural gas reserves, which includes ~~234~~304 billion standard cubic feet of fuel gas within our natural gas results and ~~671~~562 billion cubic feet of royalties, as of December 31, ~~2016.~~2017.

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

The reserves replacement ratio is defined as the sum of additions and revisions of proved reserves divided by produced volumes in any given period. The following table presents the changes in reserves in each category relating to the reserve replacement ratio for the years 2017, 2016 ~~2015~~ and ~~2014.~~2015.

The reserves replacement ratio for ~~2016~~2017 was ~~(0.07)~~1.26 compared to ~~0.06~~(0.07) in ~~2015.~~2016. The average replacement ratio for the last three years was ~~0.48.~~0.42.

In ~~2016,~~2017, revisions ~~reduced~~increased reserves by 54174 million boe, mainly as a result of:

In ~~2016,~~2017, improved recovery increased reserves by 1173 million boe. The additions were associated with new proved areas under waterflooding in the Chichimene and Castilla fields (47 million boe increase).

The continued development of ~~water flood~~waterflooding projects ~~through~~at existing wells ~~although additional drilling may be required to fully optimize~~in the ~~development configuration. The main additions were in~~Tibu, La ~~Cira-Infantas, Chichimene,~~Cira, Infantas, Casabe and ~~Yarigui~~Guando SW fields, ~~which collectively accounted~~accounting for ~~an 8~~a 24 million boe increase. The remaining 3%, or 2 million boe, increase was due primarily to water injection pilots in the Apiay and Palogrande fields.

Extensions and discoveries during ~~2016~~2017 amounted to 2744 million boe ~~which is comprised of 25 million boe of~~primarily due to 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 Rubiales, Castilla, ~~Chichimene, Gibraltar,~~ Pauto, Cajua and ~~Rubiales~~Arrayan fields, which accounted for 2039 million boe of the total of 2544 million boe from extensions of proved acreage. The remaining 5 million boe corresponds to smaller changes in several other fields.

Ecopetrol S.A.’s purchases of minerals in 2017 included the acquisition of an additional participation of 11.6% in the K2 Field by Ecopetrol America Inc which represented 4 million boe.

As of December 31, ~~2016,~~2017, our total proved undeveloped oil and gas reserves amounted to ~~269~~287 million boe, ~~27%~~24% of which ~~are~~is related to the drilling activities in ~~Area~~the Castilla field, 11% is related to gas sale projects in the Pauto and ~~25%~~Cupiagua fields and 42% of which is related to the development activities in the Rubiales, ~~field.~~Caño Sur, Chichimene, Yarigui, Tibu, Nutria, Palagua and Quifa fields. The ~~Cupiagua, Palagua, Pauto, Quifa,~~Moriche, Ocelote, Akacias, Dina, Casabe, Llanito, La Cira and ~~Yarigui~~Cajua fields collectively accounted for ~~27%~~11% of total proved undeveloped oil and gas reserves with the remaining ~~21%~~12% from several other fields.

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~~2016 (269.3 million boe), we converted approximately 6853 million boe, or ~~18%~~20%, to ~~proved~~proven developed reserves during ~~2016,~~2017 (286.6 million boe), primarily associated with the development of crude oil and gas projects in the Castilla, Rubiales, Pauto, ~~Mamey, Bonga~~Quifa, La Cira Infantas and ~~Gunflint~~K2 fields. These projects accounted for approximately ~~84%~~89% of the total conversion while the remaining ~~16%~~11% is associated with development execution in other fields such as the ~~Quifa~~Chichimene and ~~Rubiales~~Ocelote fields, among others. The amount of investments made during ~~2016~~2017 to convert proved undeveloped reserves to proved developed reserves was US$~~709~~494 million.

The following table reflects the main changes in undeveloped proved reserves during ~~2016.~~2017.

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 reserves audit group is comprised of reserves coordinators who are geologist and petroleum engineers, each with more than 10 years of experience in reservoir characterization, field development, estimation and reporting of reserves and who ~~have supervision and supporting responsibilities over~~support the professionals 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 in geology and has more than 20 years of experience in projects associated with reservoir characterization and development, estimation, and reporting of reserves. The employees involved in the reserves process meet the Society of Petroleum Engineers qualifications for reserves estimators. Internally estimated reserves are submitted to an external audit process, which was conducted by the external engineers (Ryder Scott and DeGolyer and MacNaughton). According to our corporate policy, we report the reserves values obtained from the external engineers, even if they are lower than our internal estimated reserves.

The reserves estimation process ends when the Corporate Reserves ~~Director~~Manager consolidates the results and together, with the Technical Vice-President, presents ~~them~~the outcome to the Reserves Committee, which ~~is composed~~comprises the CEO, Vice-President of ~~the~~Development and Production, Chief Financial Officer and the ~~Vice-President of Development and Production.~~Upstream Chief Financial Officer. 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 DeGolyer and MacNaughton and Ryder Scott have audited Ecopetrol’s proved reserves as of December 31, ~~2016.~~2017. These external engineers audited 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~~2017, 2016 and ~~2014.~~2015.

Ecopetrol uses deterministic methods that 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~~2015 through ~~2016,~~2017, 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:~~2017:

~~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 and La Cira) 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”, 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 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. 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; 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~~Other than facilities associated with drilled wells, 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; 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 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”). 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 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 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 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 main systems and those of affiliates decreased in ~~2016~~2017 by ~~11%~~5% compared to the previous year. This decrease was mainly the result of ~~lower production volumes~~attacks on the Caño Limon – Coveñas pipeline causing that pipeline to be out of operation for 193 days. Additionally, we experienced a decrease in ~~Colombia and impacted most~~the volume of ~~our~~ crude oil ~~pipelines.~~transported out of the Oleoducto Trasandino (“OTA”) pipeline. Of the total volume of crude transported by oil pipeline, approximately ~~68%~~60% belonged to Ecopetrol’s corporate group.

The volume of refined products transported by Cenit increased by 4%1.9% in ~~2016~~2017 mainly due to ~~a higher volume~~growth of ~~products transported through~~local fuel demand. This increase was partially offset by operating conditions such as, among others, an increase in inventories of certain customers, and the ~~Galan – Sebastopol system to fulfill the demand~~presence of illicit valves in the ~~central region.~~Oriente pipelines. Of the total volume of refined products transported in multi-purpose pipelines during the year, ~~20%~~23% belonged to Ecopetrol’s corporate group.

During ~~2016,~~2017, we increased the capacity of our primary and secondary oil pipelines and loading facilities due to the ~~reversion~~expansion of Ocensa's capacity, which in turn was due to the commencement of project P135 that contemplated the repowering of the ~~Ayacucho-Galan 14” system. Meanwhile, our main expansion projects are under way with our main focus being to perform~~entire system including the ~~adjustments to our infrastructure to allow the transportation~~entry of ~~heavier crude oil.~~three new pumping stations in segments two and three. Our main crude oil pipeline systems’ operating capacity increased from ~~1,336,000 bpd in 2015 to~~ 1,369,000 bpd in ~~2016.~~2016 to 1,500,000 bpd in 2017.

Our main refined products pipeline transportation capacity ~~decreased~~increased from ~~529 thousand bpd in 2015 to~~ 515 thousand bpd in ~~2016.~~2016 to 518.6 thousand bpd in 2017. This ~~decrease~~increase 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 insteadnew validation of the ~~two refined products (naphtha and diesel) transported in 2015.~~capacities of some of our pipelines with drag reducing agents.

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~~refinery 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 (Barranca refinery) and ~~Buenaventura-Yumbo systems.~~Cartagena station (Cartagena refinery).

As of December 31, ~~2016,~~2017, 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,~~2017, our network of crude oil and multipurpose pipelines was approximately ~~8,860~~8,939 kilometers in length. The transportation network consists of approximately ~~5,146~~5,228 kilometers of main crude terminals and oil pipeline networks connecting various fields to the Barrancabermeja ~~Refinery~~refinery and Reficar, as well as to export facilities. We also own ~~3,714~~3,712 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~~5,228 kilometers of crude oil pipelines, owned by us, ~~2,985~~3,016 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.~~2017.

As of December 31, ~~2016~~2017 we owned 6872 stations, 3438 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,~~2017, we had a nominal storage capacity associated with the transportation network of 1617.6 million barrels of crude oil and 44.4 million barrels of refined products. We do not own any tankers.

The Transportation and Logistic segment implemented a new maintenance operating model with the aim of clarifying roles as well as 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 300cSt 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~~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.

~~As a result of~~During 2017, the ~~evaluations we made~~systems and ~~due~~subsystems were tested and started to operate according to the reduction in production forecasts, the scope of the project was modified and the transportation capacity was reduced from 390,000 bpd to 300,000 bpd from 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.

~~The OCENSA P135 project’s main objective is to increase~~defined operational requirements. Currently, the pipeline transportation capacity by 135,000 bpd. The project involves improving the pumping system and increasing the storage capacity. The main project activities were completed at the end of December 2016 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.~~operating above 650 cSt.

~~Cenit is participating~~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 ~~Pacífico SAS, led by Enbridge, which intends to transport heavy crude oil to~~Pacifico suspended the ~~Colombian Pacific coast. In 2015, the scope of work was focused~~project. Based 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~~our current view, this decision has had no impact on the oil industry ~~and uncertainty about future volume of oil production~~ in Colombia and can be reconsidered in the ~~project continuity is under review and it was put on hold.~~event the transportation system may be necessary.

Ocensa executed an ambitious plan that addressed the crude oil basket quality in Colombia, where oil production is mainly comprised of heavy crude oil. In ~~2016 crude was transported at viscosities greater than 405~~response, Ocensa offered a solution to its clients by developing the AD600 project that leveraged transportation from 300 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. Since March 2017 the Ocensa pipeline regularly operates with this new viscosity specification with normal operational conditions that satisfy our clients’ needs.

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

The main modifications are on: the ODL pipeline (Oleoducto de los Llanos; Rubiales – Cusiana), on 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.

We currently have concessions granted by the Nation 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 reached 0.18 million bpd.

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 9 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 million barrels.

We have entered into transportation agreements with 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 in pipelines or in tanker trucks because of capacity limitation is transported by barges. During ~~2016, 22.9~~2017, 24.8 million barrels of crude oil and refined products were transported by tanker trucks and ~~7.9~~8.98 million barrels of crude oil and refined products were transported by barges, particularly using the Rio Magdalena, connecting Barrancabermeja with Barranquilla and Cartagena.

Cenit and its subsidiaries’ main line of business is the crude oil pipeline transport ~~(73%~~(74% of revenues), followed by the refined products pipeline transport (17% of revenues) and ports and related services ~~(8%~~(7% 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., Metapetroleum Corp., Petrominerales, Occidental de Colombia, Mansarovar and Gran Tierra, who collectively represented ~~92%~~93% of this business segment’s revenues in ~~2016.~~2017. Transportation services for crude oil provided to Ecopetrol S.A. represented ~~60%~~54% 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%~~42% of refined products pipeline transport revenues in ~~2016,~~2017, principally due to the transport of ~~naphtha.~~naphtha, diesel and gasoline. Cenit also has 1513 other fuel wholesalers’ customers for whom it transports other refined products. The most significant of these customers are Organizacion Terpel, ExxonMobil, Chevron Petroleum Company, Biocombustibles S.A.S. and Petrobras Colombia.

Deregulated businesses such as ports and crude loading facilities represent a smaller portion of Cenit’s revenue ~~(8%~~(7% in ~~2016)~~2017). Clients for these businesses include some of the same parties for which Cenit provides crude oil and refined products transportation services.

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~~that is operated by Reficar S.A., 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 daily average installed and actual refinery capacity for each of the last three years:

The Barrancabermeja ~~Refinery~~refinery supplies ~~73.8%~~55% of the fuels consumed in Colombia according to internal calculations made by the Barrancabermeja ~~Refinery~~refinery and Colombia´s fuels consumption reported by the Ministry of Finance.

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

In ~~2016,~~2017, total production from the Barrancabermeja ~~Refinery~~refinery decreased ~~3.0%~~by 0.8% from ~~220,713 bpd in 2015 to~~ 214,178 bpd in 2016 to 212,515 bpd in 2017 primarily due to lower throughput caused by less feedstockof light and intermediate crudes, which in turn was consequence of insurgent actions on the ~~processing of a heavier crude slate which lowered throughput, and the scheduled maintenance of two of its crude units in March and October 2016.~~Caño Limon-Coveñas pipeline.

We own and operate four petrochemical plants and one paraffin and lube plant located within the Barrancabermeja ~~Refinery.~~refinery. In ~~2016,~~2017, we produced ~~55,642~~53,417 tons of low-density polyethylene, ~~an increase~~a decrease of ~~26%~~4% compared to the production of ~~44,161~~55,642 tons in ~~2015.~~2016. This ~~increase~~decrease was due primarily to a reduction in the ~~recovery~~operational availability of the ~~Turbo expander unit, which resumed operations in August 2015 and supplied a greater amount of feedstock (ethylene) to polyethylene plants.~~turboexpander unit. We produced ~~1,994 mboepd~~857 kboepd of aromatics (benzene, toluene, xylene, orthoxylene, heavy aromatics and cyclohexane), a ~~12%~~57% decrease as compared with the production of ~~2,259 mboepd~~1,994 kboepd of aromatics in ~~2015.~~2016. The ~~decline~~decrease was mainly the result of lower ~~demand.~~load and availability of light crude oils (particularly from the Caño Limon pipeline) as explained above.

The gross refining margin decreased from US$~~16.8 per barrel in 2015 to US$~~14 per barrel in 2016 to US$13.5 per barrel in 2017, primarily due to price differentials of refined products as compared to crude oil, in line with international market ~~trends.~~trends, and the increase in the local crude price by US$6 per barrel in 2017 as compared to 2016.

The average conversion ratio for Barrancabermeja ~~Refinery~~refinery was 82.7% in 2017 and 74.6% in ~~2016 and 73.5% in 2015.~~2016. This increase in the conversion ratio was primarily due to an increase in the ~~upgrading~~yield of medium distillates and a ~~gasoil hydro-treating unit~~decrease in the production of fuel oil by redirecting efforts to ~~a mild hydrocracker unit allowing higher middle distillate yields.~~higher-value currents.

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

During the second half of ~~2016,~~2017, the refinery ~~initiated~~finalized its stabilization period.

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

During ~~2016,~~2017, Reficar imported products to cover the North Coast sales demand.

~~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, Reficar reached the goal of completing individual unit performance tests (for 100% of units), and the Global Performance Test on December 5, 2017. During the Global Performance Test, Reficar maintained an average throughput of 144 thousand barrels per day for 60 days.

In terms of gross refining margin, the refinery ~~advanced~~progressed from an average of approximately to US$ 35.3 per barrel ~~between January and July~~in 2016 to ~~around~~ US$ 99.5 per barrel ~~between August and December~~in 2017. Throughput also improved during 2017, increasing from an average of 117 kbpd in 2016 ~~(stabilization and performance testing period), with expectations that~~to 136 kbpd in ~~2017 the margin will be in line with the market trend for highly complex refineries.~~2017.

~~Reficar´s 2016~~Reficar’s 2017 financials already reflect the operation of the new units, thus total sales have increased ~~85%~~44% as compared to ~~2015,~~2016, from US$ ~~1,155 million in 2015 to US$~~ 2,142 million in ~~2016.~~2016 to US$3,085 million in 2017. A total of ~~42.9~~49.5 million barrels of crude were processed in ~~2016~~2017 compared to ~~3.8~~42.9 million barrels processed in ~~2015.~~2016. Exports to international markets represented ~~54%~~36% of total sales (US$ ~~1,158~~1,111 million). ~~The~~During 2017, the refinery’s production has substituted 101.6 million barrels of gasoline and 8.8 million barrels of 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~~Reficar and Barrancabermeja contributed ~~3.8%~~0.9 percentage points to the National Industrial GDP ~~and 0.4% to the National GDP during 2016.~~growth for 2017.

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, 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$3,496.6 million. These credit agreements included a mechanism by which Reficar can exit the facility by transferring the debt to the Ecopetrol parent level by either (i) the occurrence of a mandatory debt assumption event or (ii) a voluntary debt assumption. As part of Ecopetrol Group’s strategy to optimize its capital structure, on December ~~31, 2016,~~13, 2017, with the ~~principal amount owed to~~approval of the senior lenders ~~under these finance agreements~~and the Colombian Ministry of Finance and Public Credit, Ecopetrol S.A. voluntarily assumed Reficar’s senior debt. The principal amount repaid by Reficar during 2016 was US$~~2,796.3~~269 million and during 2017 was US$130 million. Interest payments during ~~2015~~2016 and ~~2016~~2017 were US$9287 million and US$8742 million, respectively. As of the date of the voluntary assumption, Reficar owed the senior lenders a principal amount of US$2,666 million (in nominal terms).

As ~~part of the project finance structure, Ecopetrol S.A. entered into~~ a Construction Support Agreement (the “Construction Support Agreement”) and 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 itsresult, debt service ~~in situations in which there are liquidity shortfalls.~~paid by Reficar during 2017 was lower as compared to 2016 because Ecopetrol assumed the debt service payment due on December 20, 2017, as described above.

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$~~170~~172 million. There was no need to request additional contributions under the Debt Service Guarantee to cover the debt service payment due on December ~~2016.~~2017. Total debt service payments during ~~2016~~2017 totaled US$~~356~~172 million.

The current credit agreements include a mechanism to exit the project finance by transferring the debt at the level of Ecopetrol S.A., either by (i) the occurrence of a Mandatory Debt Assumption Event or (ii) a Voluntary Debt Assumption; as defined in said agreements.

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 46.58% to 75.96%:

During ~~2016,~~2017, Propilco production totaled ~~445~~441 thousand tons of petrochemical products, a ~~2.5% increase~~0.9% decrease compared to the ~~434~~445 thousand tons produced in ~~2015,~~2016, due to ~~higher sales volumes explained by greater competitiveness in the local market.~~feedstock price volatility. The total contribution margin in ~~2016~~2017 (including the contribution of polypropylene, polyethylene and masterbatches) was ~~9% higher~~32% lower than in ~~2015, an increase~~2016, a decrease from ~~US$293 per ton in 2015 to~~ US$318 per ton in ~~2016.~~2016 to US$215 per ton in 2017. 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, Propilco’s main feedstock.

We have investments in two biofuels companies: (i) Bioenergy ~~S.A.~~S.A.S., in which we own ~~98.6%~~99.08 % of the shares, ~~currently advancing on~~who finished the construction of an ethanol plant with theoretical capacity of 480,000 liters / day, and (ii) Ecodiesel Colombia S.A., in which we own 50% of the shares, currently in operations 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, natural gas and petrochemical products, among others.

~~The Colombian Petroleum Institute, the~~Our innovation and technology center ~~of Ecopetrol, was created~~is the Colombian Petroleum Institute, established in ~~June~~ 1985 and located in Bucaramanga, Santander. In 2017, research and development expenses were US$25.7 million, compared to US$16.9 million in 2016. 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,~~2017, we obtained US$~~5.6~~12.3 million in 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~~207 patent applications in the last ten years, 12 of them in ~~2016.~~2017. Our most recent patent applications include innovative technologies such as (i) a ~~catalyst~~process to ~~efficiently upgrade~~improve the flow capacity and enhance the dilution capacity of diluents in heavy and extra-heavy oil ~~residues in a slurry-type hydrocracking reactor;~~production and transport processes, (ii) ~~a system~~equipment for the ~~early prediction~~evaluation of ~~production events that are likely to trigger artificial lift system failures that may be avoidable;~~electrochemical impedance at high temperatures, (iii) ~~an intelligent tool to locate restrictions in pipelines;~~a clay-based catalyst for hydrocracking processes, (iv) catalysts for hydrotreating naptha and ~~(iv) two methods to obtain nanotechnology-based fluids, to prevent~~(v) a process and equipment for the ~~flocculation~~pretreatment and saccharification of ~~asphaltenes around the wellbore, and to break down emulsions, respectively.~~ biomass.

In ~~2016,~~2017, Ecopetrol declared ~~three~~four industrial secrets that strengthen its competitive advantages in exploration, refining and transport of heavy crudes in Colombian basins.

~~In 2016,~~ The Colombian and international authorities granted us 10five new ~~patents.~~patents, including one in Brazil that protects our proprietary process to obtain bioparaffins through hydrotreatment of oils. We currently hold 7984 patents in Colombia, the United States, Mexico, Russia, Peru, Venezuela, Ecuador, Brazil, Nigeria, Indonesia, and Malaysia.

In ~~2016,~~2017, Ecopetrol S.A. licensed ~~twelve (12)~~10 of its technologies to private companies for manufacturing, marketing commercialization, and after-sales support. To date, we have licensed 2842 technologies to Colombian and multi-national companies. ~~These~~One of the licensed ~~technological products have been tested~~technologies is a system of chemical additives to reduce the consumption of diluent in heavy crude oil gathering and ~~successfully used~~dehydration. Another licensed technology reduces haze in biodiesel. Some of our ~~organization to solve problems related to refining, production and transportation of hydrocarbons, and some~~technologies have potential uses in other ~~industries.~~industries, and may in the future represent an important source of income.

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 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 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 adapted 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.

Law 99 of 1993 and other environmental regulations, such as particularly Decree 1076 of 2015 (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 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 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 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 kbpd to 25% for fields producing in excess of 600 ~~thousand bpd. Changes~~kbpd. 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.

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. 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 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 is currently open for observations from the general public and the oil and gas industry. 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) to ensure access to the transport systems for liquid fuels and the LPG pipeline systems without discrimination; b) to promote the timely expansion of the transport system in line with the needs of the market; c) to promote competition and prevent restrictive practices; d) to separate the operations of refining and transport; and e) to ensure the efficient and continuous operation of transport systems. ~~Currently, CREG continues with the task of drafting this regulation.~~

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, 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 itthe Superintendence of Public Domestic Utilities 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.

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, any refining company operating in Colombia must provide 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~~2007. It is a fund assigned and administered by the ~~aim~~Ministry of Finance and Public Credit. Its function is to ~~mitigate,~~attenuate, in the domestic market, the impact of fluctuations in fuel prices ~~(gasoline and motor fuel oil)~~ in international markets. ~~As per~~

According to article 2.3.4.1.3 of Decree 1068 of 2015, the ~~funding~~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, and (c) funds allocated to the FEPC in the national general budget.

The operation of the FEPC ~~comes~~is governed by Decree 1068 of 2015 on Chapter 1, and Title 6 (compilation decree regarding treasury public sector). First, refiners and/or importers of regular gasoline and diesel must report to the Ministry of Mines and Energy, the volume of regular gasoline and diesel sold in the previous month, such report to be made within the first 25 days of each month. The report must also contain information corresponding to each fuel disaggregated daily; the discrimination of the volumes sold, and the origin national or imported of the gasoline and diesel sold. If the regular gasoline or the diesel is of national origin, the refiner/importer must inform the refinery from which they come. Secondly, the ~~following sources: (i) financial returns~~Ministry of Mines and Energy calculates and liquidates by resolution, the Net Position of each refiner/importer and each fuel to be stabilized by the FEPC.

Decree 1068 of 2015 provides that the FEPC will pay in Colombian pesos the value corresponding to the calculation and settlement of the Net Position of each refiner and/or importer within the term defined by the Ministry of Mines and Energy and based on availability of FEPC resources.

Law 1819 of 2016 created a tax, related contribution to finance the FEPC. This contribution is caused when the sum of the Differentials of Participation (difference between the Producer Income and the International Parity Price, when the first is greater than the second on the ~~funds~~date of issuance of the ~~FEPC; (ii) extraordinary contributions from~~sales invoice, multiplied by the ~~National Treasury;~~volume of fuel sold) is greater than the sum of the Differentials of Compensation (the difference presented between the Producer Income and ~~(iii) resources from~~ the ~~General Budget~~International Parity Price, when the second is greater than the first on the date of ~~Colombia.~~issuance of the sales invoice, multiplied by the volume of fuel sold).

The event that generates the contribution is the sale in Colombia of gasoline or ACPM (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, however, if the 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 the contribution is the refiner and/or importer and the active subject is the Nation. The tax base corresponds to the positive difference between the sum of the Differentials of Participation and the sum of the Differentials of Compensation.

The FEPC is currently regulated by Decree 1068 of 2015, which compiles Decree 1880 of 2014, and sets forth the calculation method of the Differential as the product of the volume reported by the refiner and/or importer to the Ministry of Mines and Energy ~~times~~calculates the difference between the international parity price and the reference price. It also provides that refiners and/or importers shall submit monthly reports to the Ministry of Mines and Energy on the volume, origin 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 the Net Position every six months by issuing a resolution provided, however, that such Net Position results from the sum of the differentials for the relevant six-month period. Decree 1068 of 2015 also provides that the FEPC shall pay in Colombian Pesos the value corresponding to the six-month Net Position of each refiner and/or importer within the term that the Ministry of Mines and Energy establishes and based on availability of resources of the FEPC. For more information regarding the FEPC and Ecopetrol, see the section 5.1.2.

By Resolution 31356 of 2016, the Ministry of Mines and Energy liquidated the net positions for Ecopetrol corresponding to December 23 to 31, 2014 and the first and second quarters of 2015, establishing that Ecopetrol must pay to FEPC COP$114,172,749,145.09 as a contribution ~~differential; Ecopetrol appealed but the Ministry 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 and the first half of 2016 establishing that FEPC must pay to Ecopetrol COP$338,252,758,969.68.

As of the date 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.

The Ministry of Mines and Energy will exercise 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).

Based on the aforementioned law and Decree 1068 of 2015, the Ministry of Mines and Energy settled, through Resolution 31762 of 2017, the value of the remaining resources resulting from the collection of the Differential Contribution of Participation, corresponding to the third quarter of 2013 and the second half of 2014 (from July 1 to December 22, 2014), valued at COP $6,849,420,921 and COP $202,004,538,015 respectively. In this Resolution, it ordered Ecopetrol to transfer the sum of COP $208,853,958,936 to DGCPTN, which has already been transferred by Ecopetrol.

In 2017 the Ministry of Mines and Energy issued Resolution 31885 that contains the liquidated net positions corresponding to the period between July 1 and December 28, 2016, and as a result, the FEPC must pay Ecopetrol COP $558,564,915,500.00, which it already paid to Ecopetrol.

As of the date of this report, the Ministry of Mines and Energy has not calculated the Net Positions corresponding to the year 2017.

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) sorts of market that will be served with biogas and biomethane; b) quality and safety conditions; and c) 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.

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 modifications. 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 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 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 and CREG Resolution 089 of 2013 permits~~CFPD) and; 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.

The results of the HSE strategies in ~~2016,~~2017, compared with the prior year, were:

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 drills.

In offshore operations, our 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~~2.96 incidents per million hours worked in ~~2010~~2012 to ~~1.09~~0.64 in ~~2016.~~2017. In ~~2016, 28% of occupational accidents affecting our employees and contractors resulted in a~~2017, 60 recordable cases occurred, where 37% led to restricted work, 18% required medical treatment, ~~restricted work or time away from work that lasted for three days or less.~~and 45% led to disability. Additionally, we had a ~~38%~~40% reduction in occupational incidents compared to ~~2015~~2016 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 Tier 1 process safety indicator by ~~33%~~17% compared to ~~2015 (2016: 0.06~~2016 (2017: 0.05 and ~~2015: 0.09)~~2016: 0.06). 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,~~2017, 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,~~2017, Ecopetrol S.A. recorded 814 environmental incidents compared with 8 in 2016 and 11 in ~~2015 and 29 in 2014.~~2015. The volume of oil spills was 50.7 barrels in 2017, a decrease from 202 barrels in 2016 ~~a decrease from~~and 207 barrels in ~~2015 and 885 barrels in 2014.~~2015. The ~~decrease~~increase in the numbers of environmental incidents and decrease in oil spills was the result of improvement in the identification of critical equipment operating in high or very high risk conditions, and the implementation of asset integrity plans designed to mitigate those risk conditions.

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 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 has ordered an investigation to determine the cause of the incident. As of the date of this annual report, the National Environmental Licenses Agency (ANLA) has opened an investigation into the incident and the Prosecutor’s Office and other control entities may also open investigations. As of the date of this annual report, Ecopetrol has received third party claims in the form of seven constitutional actions for the protection of fundamental rights. Ecopetrol is not aware of any other third party claims in connection with this incident, and it cannot offer any assurance as to whether or not there will be third party actions in the future.

While Cenit had previously followed Ecopetrol’s HSE guidelines, ~~in 2015,~~ Cenit established its own HSE practice and set and defined its own HSE Key Performance Indicators (KPIs) and targets in respect of its non-operative facilities and offices. This resulted in significant cost reductions with no change in risk levels in 2015, 2016 and ~~2016.~~2017. Local and field operations, however, are still conducted under Ecopetrol’s HSE model and guidelines.

Cenit ~~intends to implement~~established its own HSE Management System based on Decree 1072 of 2015 in 2017 and this will be implemented during ~~the first half of 2017.~~2018. Cenit is also leading the definition of HSE KPIs with 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 2017 KPIs and agreed upon the goals for 2018 for the transportation business to obtain the results for each subsidiary and for the entire group.

In ~~2016,~~2017, around ~~10.4 million~~7,495,531 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 our established guidelines.

The following table covers Reficar´s Total Recordable Cases (TRIF) for 2015, 2016 and ~~2016,~~2017, which includes 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.~~2010-2017.

⁽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. For 2017, these risks were associated with normal operations.

~~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:

Ecopetrol´s Secretary General, through its Corporate Responsibility unit, carries out an annual survey that evaluates stakeholder perception taking into account general and specific criteria relevant to corporate responsibility. For 2017, Ecopetrol decided to include a new section within the survey to measure stakeholder perception in human rights. This section includes criteria such as: (i) freedom of association, (ii) equality and non-discrimination, (iii) communicating how actual and potential human rights impacts are addressed, (iv) supply chain and human rights, (v) grievance mechanism or accountability mechanism, and (vi) human rights education and training. The information gathered through this process will be used by Ecopetrol to design an updated annual Human Rights Plan.

During ~~2016,~~2017, the environmental management strategy of Ecopetrol included the following components:

~~Since 2009,~~In 2017, 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.

Ecopetrol’s refining companies have been undertaking significant efforts to make efficient and rational use of energy resources in its production processes and reduce energy consumption and costs and carbon dioxide emissions. We focus on efficiency, reliability and optimization, and energy diversification. During ~~2016,~~2017, the ~~refinery segment’s~~Barrancabermeja Refinery’s average monthly energy consumption was ~~61.42~~61,782 MWhm (megawatts per hour per month) equivalents, ~~from which 99.9%~~provided through self-generation. Reficar’s average monthly energy consumption was 67,451 MWhm (megawatts per hour per month) equivalents, 99.94% was provided through self-generation and the remaining ~~0.01%~~0.06% with non-regulated energy purchased from the National Transmission System.

Further, during ~~2016,~~2017, Ecopetrol S.A.’s production sector had an average a monthly energy consumption of ~~272,839 MWhm (megawatts~~381 GWhm (gigawatts per hour per month) for its direct operation, from which ~~76%~~70.8% was provided through self-generation and the remaining ~~24%~~29.2% with non-regulated energy purchased from the National Transmission System.

Set forth below is a description of material related party transactions. For additional information about transactions with related parties, see Note ~~32 – Related Parties~~31 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:

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, 2017, 2016 ~~2015~~ and ~~2014,~~2015, 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: 40.3 million barrels, 42.9 million barrels ~~45.6 million barrels~~ and ~~45.4~~45.6 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.

(**) USD250M but USD400M Maximum Loss limit and in the aggregate in respect of earthquakes.

(****) 0.25, except for Drilling/Workover wells for which the deductible is 0.5.

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.

Until last year, this Group included coverages for midstream (assets and operations). However, since second semester 2017 Ecopetrol’s midstream subsidiaries (Cenit, Ocensa, ODL, Bicentenario and ODC) started an independent program looking for the optimization of coverages for the Oil Transportation.

*Each company has its own limit of 200M and an aggregated excess shared limit of 500m

With respect to offshore operations in the U.S. Gulf Coast, Ecopetrol America Inc. is party to Operating Agreements, or 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,~~2017, the Ecopetrol Corporate Group had ~~10,920~~11,682 employees, an increase of ~~1.48%~~7.0% from ~~2015.~~2016. 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, 2017, 2016 ~~2015~~ and ~~2014.~~2015.

To improve the quality of life of our employees, 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,~~2017, Ecopetrol S.A. extended ~~999~~1,201 housing loans for a total of COP$~~173~~219.44 billion and ~~1,742~~1,794 general-purpose loans for a total of COP$1314.86 billion. Ecopetrol S.A. also provided on-site and external training and development, which total to COP$~~5.7~~21.1 billion, and it extended a total of COP$~~165~~182.6 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 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”; 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~~4,609 employees as of January 1, ~~2017.~~2018. The agreement also governs our labor relations with the ~~2,818~~2,593 non-unionized employees who, according to current labor legislation, have been beneficiaries of the collective bargaining agreement.

We currently have ~~five~~seven 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, ASTIP, SINATRINHI 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 and ~~expires~~has a term of four years, expiring on June 30, 2018. In 2016, the agreement was reviewed on application matters, except for monetary expenses (including wages and benefits). This review ended with a mutual arrangement document, signed on December 10, 2016.

There will be no changes to these terms until June 2018 or till the end of the eventual negotiation process. This agreement currently covers all workers benefiting from the Collective Labor Convention, regardless of whether they are part of any labor union.

Our consolidated financial statements for the years ended December 31, ~~2014,~~ 2015, 2016 and ~~2016~~2017 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 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 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 them.~~cleaning.

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~~Cartagena 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%~~50.4% of our total revenues, on average, for the past three years.

Our foreign sales represented ~~52%~~49.6% 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.

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~~449,959 million in ~~2016.~~2017.

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 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.

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:~~as follows:

~~For the oil and gas industry the tax reform includes~~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.

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 from Ecopetrol Group companies whose functional currency is the Colombian Peso, the U.S. dollar-Colombian Peso is derived from local sales and exports of crude oil, natural gas and refined products ~~are~~ sold at prices referenced to 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, 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 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 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 2017, the Colombian ~~Peso~~peso appreciated on average 3.35% against the U.S. ~~dollar may have a significant impact on revenues, cost, assets~~dollar. In 2016 and ~~liabilities held in foreign currency.~~

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

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~~2017 our U.S. ~~dollar-denominated~~dollar denominated total debt was US$~~15.2 billion,~~12,590 million, which we recognize in our financial statements at its amortized cost, which corresponds to the present value of cash flows, discounted at the effective interest rate. Out of this total, US$~~12 billion~~11,985 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~~Other comprehensive income.

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) a cash flow hedge for exports of crude oil and ii) a hedge of athe net investment in a foreign ~~operation.~~operations. As a result of the implementation of both hedges ~~88%~~71.2% ($~~10.5 billion)~~8,532 million) of Ecopetrol S.A.’s debt in U.S. dollars, as of December 31, 2017, 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~~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 against the ~~U.S~~U.S. dollar could generate a loss iffor companies whose functional currency is the Colombian 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 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,~~2017, Ecopetrol Group companies with the Colombian peso as their functional currency have a net U.S. dollar position close to zero after the implementation of the natural hedging previously mentioned above, neutralizing the effect of exchange rate fluctuations in their results for the year. The companies with the U.S. dollar as their functional currency have a net ~~active~~ U.S. dollar position ~~after~~of US$1,699 million and are not exposed to a material exchange rate risk resulting from fluctuations in the ~~instruments of natural hedging previously mentioned.~~Colombian peso against the U.S. dollar, as discussed above.

~~Inflation in Colombia has not exceeded an~~The average annual rate of 8%inflation in Colombia for the past ten ~~years.~~years is 4.3%. It decreased in ~~2016~~2017 as compared to ~~2015.~~2016. As measured by the general consumer price index, average annual inflation in Colombia for the years ended December 31, 2017, 2016 and 2015 ~~and 2014; inflation~~ was 4.09%, 5.75%, ~~6.77%~~ and ~~3.66%~~6.77%, respectively. The decrease in inflation in ~~2016~~2017 is mainly explained by the ~~normalization of prices as a consequence~~recovery of the ~~ending~~agricultural sector given the end of the “El Niño” weather phenomenon and the ~~slight appreciation~~nonoccurrence of agricultural and freight transport stoppages that occurred in 2016. The decrease in inflation is also related to the ~~Colombian Peso against~~weakness of consumer demand and the ~~U.S. dollar in~~monetary policy applied by the ~~second half of 2016.~~central bank. 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 was US$~~45.1~~54.7 per barrel in 2017 as compared to US$45.10 per barrel in 2016 ~~as compared to~~and US$~~53.6~~53.60 per barrel in ~~2015~~2015. (See section Strategy 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$8.2 per barrel in 2016 compared to 2015. This decrease is mainly explained by a continuing imbalance between supply and demand in the global crude market due to higher OPEC production as well as a resilient North American production. Nevertheless, theMarket Overview). In addition, Ecopetrol’s average crude oil basket price relative to ICE Brent reported a discount of US$~~9.4~~6.90 in 2017, a lower discount than the US$9.40 and US$9.70 observed in 2016 ~~stronger than the US$9.7~~ and ~~US$12 observed in~~ 2015, ~~and 2014,~~ respectively, due to an active commercial ~~strategy.~~strategy, including seeking more valuable markets for our crude oil, and strengthening the demand for our heavy crude oil in the international market. Therefore, our average price crude oil basket was US$47.80 per barrel in 2017 as compared to US$35.70 per barrel in 2016 and US$43.90 per barrel in 2015, which represents an increase of US$12.10 per barrel in 2017 compared to 2016.

In theOperating Results section below, we present the impact of the price ~~decline~~increase in 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 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~~-Marpol- on crude and fuels with high sulfur content, Ecopetrol recognized an impairment of non-current assets of COP$928,747 million before taxes.

In 2017, Ecopetrol had a COP$1,311,138 million net reversal of prior year impairments primarily as a result an improved hydrocarbon prices outlook, incorporation of new reserves. Ecopetrol’s crude an improved oil basket price discount as compared to the ICE Brent crude oil price, favorable refining margins outlook and technical operational capacity, among other factors.

For additional information about ~~this~~ impairment charges, and reversals, see ~~Notes 14, 17~~sectionOperating Results—Consolidated Results of Operations—Impairment of non-current assets and 28Note 18 to our consolidated financial statements.

Our consolidated financial statements for the years ended December 31, ~~2014,~~ 2015, 2016 and ~~2016~~2017 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, 2017, 2016 ~~2015~~ and ~~2014.~~2015.

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

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 2017 as compared to 2016 was the result of (i) the 3.7%, or 6 mbe, decrease in our crude sales volume caused mainly by lower crude exports due to a greater allocation of 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 lower exports of diesel, primarily due to: (a) our commercial 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 the Barrancabermeja refinery as a result of reliance on more efficient alternative sources, and (iii) the 3%, or 0.86 mbe, decrease in natural gas sales volume due to continued lower thermal demand as a result of no effect of the “El Niño” weather phenomenon that ended in the middle of 2016.

In 2016, total revenues decreased by 7.4% as compared to 2015, primarily as a result of: (i) a COP$6,456,917 million decrease in revenues mainly due to the 18.6%, or US$8.2 per barrel reduction of our average crude oil basket price, (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 of the Colombian Peso against the U.S. dollar, from an average exchange rate of COP$2,746.47/US$1.00 in 2015 to an average exchange rate of COP$3,053.42/US$1.00 in 2016, resulting in an increase in sales revenue from exports, which represented an increase of COP$4,168,061 million.

The decrease of our sales volume in 2016 as compared to 2015 was the result of ~~(a)~~(i) the 18.1%, or 36.4 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 of crude due to its use for feedstock at Reficar, and ~~(b)~~(ii) the 15.6%, or 5.3 mbe, decrease in natural gas sales volume due to lower thermal demand as a result of the end 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 growth in the number of motor vehicles in Colombia.

~~In 2015, total revenues decreased by 20.7% as compared to 2014, primarily as a result of: (i) a COP$27,847,772 million, decrease in revenues mainly due to the 49.7%, or US$43.4 per barrel reduction~~4.5.1.2 Cost of our average crude oil basket price. This decrease was partially offset by (i) the 37.28% devaluation of the Colombian Peso against the U.S. dollar, from an average exchange rate of COP$2,000.68/US$1 in 2014 to an average exchange rate of COP$2,746.47/US$1 in 2015, resulting in an increase in sales revenue from exports as well as in services provided by our transportation and logistics segment, which combined represented an upturn of COP$13,312,094 million and (ii) COP$882,873 million increase in revenues which was attributable to increase our sales volume.Sales

The increase 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.

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

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 COP$231,222 million increase in inventories and an increase in unit costs associated with the increase of the Brent price of crude oils and products.

Cost of sales in 2016 was COP$34,251,423 million, representing a COP$2,743,093 million ~~(7.4%)~~or 7.4% decrease as compared to 2015, primarily as a result of the following factors:

The factors mentioned above were partially offset by a a)(i) 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)(ii) a COP$70,515 million decrease in other minor items.

~~Cost~~4.5.1.3 Operating Expenses before impairment of ~~sales~~non-current assets effects

Operating expenses and selling, general and administrative expenses before taking into account the impairment of non-current assets, amounted to COP$4,185,186 million in ~~2015 was COP$36,994,516 million, representing~~2017, a COP$~~5,980,612~~215,657 million ~~(13.9%)~~or 4.9% decrease as compared to ~~2014, primarily~~2016, mainly as a result of the following ~~factors:~~

~~The~~ factors ~~mentioned above were partially offset by a COP$341,228 million increase in the amortization, depletion~~(see Notes 27 and ~~depreciation of property, plant and equipment, primarily as a result of higher investments in the Castilla, Chichimene, and Rubiales fields.~~28 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$4,400,843 million in 2016, a COP$ 955,872 million (17.8%) decrease as compared to 2015, mainly as a result of the following factors (see Notes 27 and 2928 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 2818 to our consolidated financial statements for more detail). ~~Impairment~~

In 2017, we had a COP$1,311,138 million net reversal of impairment of non-current assets, ~~amounted~~as compared to impairment losses of COP$928,747 million in 2016 and COP$7,864,875 million in ~~2015 and COP$2,304,567 in 2014.~~2015. These impairments are ana non-cash accounting effect ~~that does~~and consequently they do not involve any disbursement or income. 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.

~~We recognized a smaller~~The partial reversal of the impairment recorded in ~~2016~~previous years 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~~technical operational capacity, among other factors.

The impairment losses recognized in 2016 ~~included the effect of operational adjustments to the variables observed during Reficar’s stabilization period~~ and ~~new ethanol prices affecting Bioenergy.~~

~~The impairments recognized in~~ 2015 ~~and 2014~~ 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).

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 ~~results from our hedging operations.~~net investment hedge accounting, which has allowed us to neutralize, overall, the effect of the exchange rate fluctuation 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, (ii) the efficient allocation of debt within the companies that make up the Ecopetrol Group, thereby achieving an approximately zero net position in U.S. dollars as of December 31, 2017, and (iii) a COP$379,030 million decrease in interest expenses as a result of: (i) the use of cash surpluses to pre-pay foreign currency-denominated loans totaling US$1,925 million in June 2017 and US$475 million in December 2017 and (ii) a decrease in 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.

Finance results, net, amounted to a loss of COP$1,175,367 million in 2016 as compared to a loss of COP$7,663,104 million in 2015. This decrease in loss was mainly due to:

The adoption of cash flow hedge accounting in October 2015 and the hedging of our net investment in June 2016 has allowed us to neutralize, overall, the effect of the exchange rate fluctuation over 88% of the U.S. dollar debt of Ecopetrol S.A., since exchange rate changes are recognized under other comprehensive income within equity.

This decrease in our financial loss was partially offset by a COP$996,406 million increase in interest expenses as a result of (i) the recognition of Reficar’s interest expenses which, up to 2015, had been capitalized (ii) the aggregate 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 instruments and (ii) a COP$40,748 million decrease in other minor financial expenditures.

For more details on our financial income and expenses see Note ~~30 – Finance results, net~~29 to our consolidated financial ~~statements.~~statements for more details.

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

The decrease in the effective tax rate from 2016 to 2017 was mainly due to: (i) the better financial performance of the exploration and production segment, (ii) the reduction of losses at Reficar and Ecopetrol America Inc, which also resulted in lower tax rates and (iii) the reduction of the wealth tax rate from 1% in 2016 ~~2015 and 2014, respectively.~~to 0.4% in 2017.

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

The decrease in the effective tax rate from 2014 to 2015 was mainly due to: (i) foreign exchange losses and a related adjustment for foreign currency translation, (ii) an adjustment to the tax rate of entities whose tax rate differed from that of Ecopetrol S.A. and (iii) the implementation of a nondeductible wealth tax in 2015.

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

As a result of the foregoing, in 2017, net income attributable to owners of Ecopetrol was COP$7,178,539 million whereas, in 2016, net income attributable to owners of Ecopetrol was COP$2,447,881 million ~~whereas,~~and, 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, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

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.

Ecopetrol updated its 2020 Business Plan on September 29, 2016. This 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~~2018 the Company will continue to pursue its transformation to ensure operational and financial sustainability. ~~Ecopetrol has named Phase 3.0 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 of the 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 primarily in the domestic market, with a surplus to be exported.

Adding profitable reserves and maintaining the pace of production are the Company’s ~~focus.~~priorities. The exploration campaign will be focused in regions ~~of high prospectivity.~~with strong prospects. Investment in exploration will ~~rise from~~be approximately US$ ~~282~~400-US$450 million, allocated mainly to ~~US$ 650 million, thus increasing offshore wells from one to six~~the evaluation and ~~onshore wells from five to 11 from 2016 to 2017. Enhanced recovery will continue to leverage additional reserves in mature fields.~~appraisal of discoveries and ongoing exploration efforts of Ecopetrol S.A., Hocol, Ecopetrol America Inc., Ecopetrol Mexico, Ecopetrol Costa Afuera and Ecopetrol Brazil.

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

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,~~2017, 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,~~2017, 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, 2017, 2016 ~~2015~~ and ~~2014,~~2015, 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 and US$54.93 per barrel in ~~hydrocarbon prices between 2014 and 2015, the Company recognized a reduction in oil and gas proven reserves of 11% in 2015 as compared to 2014, to 1,849 mmboe in 2015 from 2,084 mmboe in 2014.~~2017. In 2016, the Company recognized a reduction in oil and gas proven reserves of 14% in 2016 as compared to 2015, to 1,598 mmboe in 2016 from 1,849 mmboe in ~~2015~~2015. In 2017, the Company recognized an increase in oil and gas proven reserves of 4% as compared to 2016, to 1,659 mmboe in 2017 from 1,598 mmboe in 2016. 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 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 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 minus 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 a gain for impairment in the consolidated statement of profit or loss.

In 2017, Ecopetrol had a COP$1,311,138 million net reversal of impairments recorded in ~~2016 amounted to COP$928,747 million before taxes~~previous years primarily as a result of improved hydrocarbon prices outlook, incorporation of new reserves, Ecopetrol’s crude oil basket price discount as compared to 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~~ICE Brent crude oil ~~quota agreements~~price, improved refining margins outlook 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.~~technical operational capacity, among other factors. For additional information about this impairment charges,,see ~~Notes 14, 17 and 28~~Note 18 to our consolidated financial statements.

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.~~2017. Based on these calculations, assuming an average price per barrel of ICE Brent crude oil of US$55 per barrel in ~~2017,~~2018, US$60 per barrel in ~~2018,~~2019, US$65 ~~per barrel~~ in ~~2019,~~2020, US$70 in ~~2020~~2021 and US$75 per barrel for later years, Ecopetrol could recognize an increase in oil and gas proved reserves of approximately ~~9.6%~~3.3%. 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 revision in our estimated quantities of proved reserves would indicate lower future production volumes, which could result in higher expenses for depreciation, depletion and amortization for properties to which we apply the units of production method for calculating these expenses. These higher expenses, and any lower revenues as a result of actual production volumes and realized prices, could adversely impact 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 successful development of additional reserves.

Our long-term growth objectives depend largely on our ability to discover and/or acquire new reserves, and in turn developing them successfully and improving the recovery factor in our mature oil fields. 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; 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.

If we are unable to 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,~~2017, in Ecopetrol, approximately ~~91.7%~~92.4% of the revenues came from sales of crude oil, natural gas and refined products and ~~91%~~87% of the total volume sold of these products is 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; long-term changes in the demand for crude oil (as further explained below), natural gas and refined products; the economic policies in the United States, China and the European Union; regulatory changes; changes in global supply, such as the current market conditions shifting from oversupply ofto a balanced crude ~~oil;~~oil market; inventory levels; changes in the cost of capital; adverse or favorable economic conditions; global financial crises; development of substitute sources of energy, development of new 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; local and global demand and supply for crude oil, refined products and natural gas; trading activity in oil and natural gas, which thereby affects their respective margins; derivative financial instruments related to oil and gas; development or availability of alternative fuels; weather conditions; natural events or disasters; and terrorism and global conflict. In ~~2016 the impact of an oversupplied market was put to test, as OPEC changed its traditional controlling role and let the market find its own balance. The price of~~2017, demand grew faster than supply, reducing crude oil ~~may also fluctuate due~~inventories to ~~changes~~almost a five year average, leveraged in ~~demand. For example, Brexit’s impact on crude oil demand for 2017 is~~stronger than expected ~~to be moderate,~~economic growth in OECD countries and the ~~Petroleum Industry Research (PIRA Energy Group) estimates a short-term impact~~extension of ~~US$2 per barrel on crude oil due to a reduction between 100-200 KBD in demand for gasoline, middle distillates~~OPEC and ~~other products.~~Russia’s production cut agreement.

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,~~2017, our crude oil basket price was US$~~35.7~~47.8 per barrel versus US$~~43.9 per barrel~~35.7 in ~~2015;~~2016; the refined product basket price was US$~~50.1~~62.7 per barrel versus US$~~63.4~~50.1 per barrel in ~~2015;~~2016; and the natural gas price was US$22.7 per barrel equivalent in 2017 versus US$23.5 per barrel equivalent in ~~2016 versus US$22.0 per barrel equivalent in 2015.~~2016. 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 2017, we had a COP$1,311,138 net reversal of the impairment of non-current assets, ~~in 2016 amounted~~as compared to the impairment of non-current assets of COP$928,747 million ~~before taxes as a result~~in 2016 and COP$7,864,875 in 2015. These impairments are an accounting effect that does not involve any disbursement 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 exceeds 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 18 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~~2017 our U.S. dollar-denominated total debt was US$~~15.2~~12.6 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$1212.0 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 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,~~$8,532 million of Ecopetrol S.A.’s debt in U.S. dollars as of December 31, 2017, 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%~~37.28% against the U.S. dollar in ~~2014, 37.28% in~~ 2015, ~~and~~ 11.18% in ~~2016.~~2016 and appreciated 3.35% in 2017. Additionally, as of December 31, 2017, the Colombian Peso appreciated 0.56%, as of December 31, 2016, the Colombian Peso appreciated 4.72%, ~~but depreciated~~and as of December 31, 2015 ~~and 2014,~~it depreciated 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 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~~30.2 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 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 for a summary of our current deep-water drilling activities.

As a result of the oil spill in the Macondo field operated by British Petroleum 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 problems experienced by 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.~~revenues.

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 and Europe, the lack of consensus among OPEC members, 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 the outlook of the Republic of Colombia to negative. While on~~ March 14, 2017, Fitch Ratings maintained our long term international credit rating at BBB but upgraded our outlook from negative to stable following the upgrade from the Republic of Colombia from negative to stable also in March 2017. On June 27, 2017, weS&P increased our stand-alone credit rating from BB to BB+ and maintained our long-term international credit rating at BBB and our outlook as negative, in line with those of the Republic of Colombia. On December 11, 2017, in line with a downgrade of the Republic of Colombia, S&P lowered our long-term international credit rating from BBB to BBB- and changed our outlook from negative to stable. S&P maintained, however, our stand-alone credit rating at BB+. On September 21, 2017, Moody’s maintained our long term international credit rating at Baa3 and revised our outlook from negative to stable. On February 22, 2018, despite the downgrade of Republic of Colombia, Moody’s maintained our long term international credit rating and outlook. 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,~~2017, approximately ~~31%~~19%, or US$~~5.4~~2.8 billion (COP$~~16.2~~8.3 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 our strategic plan, 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 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; limit our ability to pursue new opportunities; affect the recoverability of our 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 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 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 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 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) 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,~~2017, 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. 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 prove successful.

Our operations ~~have and may continue to~~could be affected by reactions of labor unions, social organizations and contractors to Colombia’s political and social environment, organizational changes and ~~other management decisions.~~the collective bargaining agreement negotiation process.

Due to ~~the volatility of the markets~~Colombia’s political and ~~the existing low oil price~~social environment ~~we have~~ and ~~will continue to undertake measures to enhance operating cost efficiency. Such measures involve~~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, 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 collective bargaining agreement has been in effect since 2014 and has a term of ~~five~~four years, expiring June 30, 2018. There will be no changes to these terms until ~~2018; therefore, we~~June 2018 or until the end of the negotiation process. If the unions do not ~~expect~~present any ~~adverse reactions from~~request of negotiation, the terms will be maintained for another six months. During this period of time, the collective bargaining agreement negotiation will take place and unions may try to impact our ~~labor unions relating to this matter. However,~~normal operations. Further, we cannot assure you 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. 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 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 and ~~(vi)~~ crude oil prices. 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 in spite of the~~despite its recent ~~completion of their projects~~completion.

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~~which began operations in April 2017 was financed with COP$~~123~~132 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.~~component. Although Ecopetrol is not the sponsor and has not provided financing guarantees to Bioenergy, some additional financial support might be needed to assure the stabilization phase of the ~~project.~~plant. Additionally, Bioenergy may also face situations such as social unrest, strikes or other operational difficulties that could negatively impact its operation and financial results.

Any situation that could affect the operations of ~~these subsidiaries~~this subsidiary may have a negative impact on ~~their~~its profitability as well as ~~their~~on its ability to pay ~~their~~its debt, 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 business partners or their third-party service providers, as many of our operations are executed under joint venture agreements.

Many of our operations are performed through joint ventures with our business partners. Consequently, we depend on the performance of our business partners. The poor performance of any of them, especially in those projects in which we do not act as operator, could negatively impact oil and natural gas production, 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 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,~~2017, our internal cyber security systems identified several cyber security attacks such as brute force login attacks designed to identify valid ~~credential~~credentials in IT infrastructure and ~~seventeen~~one ransomware ~~attacks-only one of them~~attack with data loss (low level confidentiality) at Ecopetrol ~~S.A.-Our~~S.A. Our platforms also identified and controlled certain malware events and SQL injection attacks.

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~~2017 was ~~6,948~~6,392 GWh/year, of which ~~65%~~72% was supplied through self-generation, and the remaining ~~35%~~28% through power grid. Our demand is ~~10.5%~~9% of the total energy demand in Colombia.

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. The national electricity market is volatile due to changes in hydrology and availability of fuels (natural gas, diesel etc.)~~; and the grid expansion projects which are executed by power distribution contractors have experienced delays due~~, bringing uncertainty to ~~licenses and limited execution capability. To mitigate these risk the~~prices. Ecopetrol ~~Group decided to centralize~~centralizes the management of power sources and uses, ~~in order to optimize the energy availability,~~ quality and cost ~~for~~in the short, medium and long ~~term. While~~term with the ~~intention is to enhance system reliability by timely execution~~objective of ~~electrical projects and to launch~~optimizing energy ~~efficiency programs in all of our segments,~~consumption, but we cannot offer any assurance that wethe program will prove successful.

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

During ~~2016, we~~2017, Ecopetrol S.A. produced approximately ~~9.36~~9.3 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,~~2017, the attacks against our pipeline infrastructure ~~decreased~~increased by ~~35%~~28% in relation to ~~2015 (80~~2016 (49 attacks in ~~2015~~2016 compared with 5263 attacks in ~~2016), however they were strategically targeted and more severe.~~2017). 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~~One of the ~~Caño Limon – Coveñas system have taken place, impacting our operations in this pipeline and resulting in~~consequences of the 2017 attacks is a deferred ~~crude oil~~ production of ~~603 thousand~~1.6 million barrels. On several occasions, guerilla 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 the pipeline infrastructure managed by Ecopetrol ~~S.A.,~~S.A, the direct cost of ~~repair pipeline infrastructure~~repairs due to terrorist attacks in ~~2016~~2017 was approximately COP$~~41.7 billion~~20,313 million (US$~~13.9~~6.8 million, with a ~~3,000.71 Colombian Peso/U.S. dollar~~COP$2,984/1.00 US exchange rate as of December 31, ~~2016)~~2017). ~~Also, our~~During the first four months of 2018, there have been 33 attacks against the infrastructure of the Caño Limón Coveñas and Transandino pipelines. So far, however, these attacks have not resulted in deferred production ~~was impacted by approximately 3,215 bpd~~ due to ~~events related~~the transportation of the crude from the Caño Limón field through the Bicentenario pipeline from Banadia in Arauca to ~~attacks on~~Araguany in Casanare. We cannot offer any assurance that we will continue to ensure such transportation through alternate routes.

Likewise, the theft of refined products and crude oil, resulting from security issues, may impact our ~~infrastructure that limited 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, increased from approximately 28.5 boed in 2016 to approximately 34.9 boed in 2017. Theft of crude oil increased from approximately 1,796 bod in 2016 to approximately 1,883 bod in 2017.

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 with the National Liberation Army (the ELN), some illegal and terrorist activities of guerrilla groups or their members may 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 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 9, 2018, when the bilateral ceasefire ended. The Colombian Government decided to resume the dialogue in April 2018, due to the suspension of ELN terrorist actions during the electoral period in March 2018. It is expected that attacks against critical infrastructure will continue until a new bilateral ceasefire can be agreed upon.

Despite the progress made with the FARC and the ~~ongoing~~now stalled negotiations with the ELN, some guerrilla groups may continue their illegal and terrorist activities, resulting in a deterioration of Colombia’s national security and 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, in particular Venezuela, have been tense in the past. Although relations with Venezuela have stabilized and improved with Colombia’s current administration, economic~~countries.

Economic differences between Colombia and Venezuela, mainly due to Venezuela’s current public ~~disorder~~order situation and internal political tension, could affect our diplomatic relations, impact border towns and cities and therefore have a negative impact on Colombia’s economy and general security situation.

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 upcoming 2018 Colombian presidential election could also result in changes to policies that may have an adverse effect on the local market and consumer confidence that may impact our business and have a material adverse effect on us.

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 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. For a description of taxes affecting our results of operations and financial condition in ~~2016,~~2017, 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, 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 withholding tax rates applicable to dividends paid to non-resident shareholders are: (i) a 5% dividend tax on dividends distributed from profits taxed at the corporate level; 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. 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.

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 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 sanctions function.

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 of December 31, ~~2016,~~2017, Ecopetrol S.A. was a party to ~~2,774~~3,169 legal proceedings relating to civil, administrative, environmental, tax, and labor claims filed against us in courts and arbitration tribunals, of which ~~341~~396 met the accounting threshold for an accrual provision. Additionally, Ecopetrol S.A.’s subsidiaries were a party to ~~1,136~~1,190 legal proceedings relating to civil, administrative, environmental, tax, and labor claims filed against them of which 8618 met the accounting threshold for 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~~23 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 may encounter difficulties in protecting their interests.

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 Resolution 8 of 2000 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 authorized foreign exchange market intermediaries. 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 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 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,~~2017, the Colombian Stock Exchange (~~Bolsa de Valores de ColombiaI~~~~,or “BVC”~~(“BVC”) had a market capitalization of approximately COP$~~311,384~~363,843 billion (US$~~103,770 million~~121.93 billion using the closing rate for ~~2016)~~2017), a ~~12%~~17% increase when compared with the amount at the end of ~~2015,~~2016, a daily average trading volume of approximately COP$~~194,116~~138,631 million (US$~~64.69~~46.99 million, using the average exchange rate for ~~2016)~~2017), a ~~42% increase~~29% decrease when compared with the volume in ~~2015.~~2016. By comparison, the New York Stock Exchange (the “NYSE”) had a market capitalization of US$~~19.6~~22.1 trillion as of December 31, ~~2016,~~2017, and a daily trading volume of approximately US$~~68.9~~32.8 billion in ~~2016.~~2017.

As of December 31, ~~2016,~~2017, our shares represented the highest market capitalization of the BVC accounting for as of ~~7.6%~~8.9% 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~~at least 80% of our outstanding capital stock. The Nation currently holds ~~88.49%~~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, as controlling shareholder, may propose and approve decisions that are 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 an 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; 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 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.~~semiannually and by the Audit and Risk Committee monthly.

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 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. Under those guidelines, each subsidiary must 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, 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 area with the participation of industrial control systems specialists, has been understanding the new challenges of cybersecurity risk; developing activities to identify and protect critical digital ~~assets and its security threats.~~ assets.

During ~~2016,~~2017, 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~~an 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 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 some cyberattacks during 2017, 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 2017, our internal audit department conducted an audit on cybersecurity processes with an emphasis on the production area. As a result of such audit, an action plan was established to be implemented in 2018. The primary goal of the plan is to reinforce our cybersecurity strategy and refine certain technical components of our cybersecurity program.

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~~2017 our U.S. dollar-denominated total debt was US$~~15.2~~12.6 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$1212.0 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 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, 2017, the outstanding value of the natural accounting hedges was US$8.5 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~~30.2 for details of the hedge accounting adopted). With the adoption of hedge accounting, the effect of volatility of foreign exchange rate on the 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 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%~~5.2%, ~~8.2%~~8.7% and ~~3.5%~~3.9%, respectively, of the nominal debt balance as of December 31, ~~2016)~~2017). Thus, volatility in interest rates may affect the fair value of and cash flows related to our investments and floating rate debt. In ~~2016,~~2017, 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 of 2002 and Decree 1861 of 2012, where it is indicated that they have to follow the same regime as the regular obligatory pension funds in their moderate (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 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 creditworthiness, stock price behavior, spreads on credit default swaps and the probability of default.

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 to diversify risk in our Colombian Peso portfolio, Ecopetrol S.A. 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 one year), or 1% in the long term.

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,~~2017, Ecopetrol S.A. was a party to ~~2774~~3,169 legal proceedings relating to civil, administrative, environmental, tax and labor claims filed against us in the Colombian courts and arbitration tribunals, of which ~~341~~396 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~~ 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 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 ~~project and Ecopetrol has finalized~~construction of the ~~basic and detailed engineering.~~above mentioned infrastructure.

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 informal traders and fishermen as claimants.

On March 10, 2017, a mandatory conciliatory hearing was held in order to seek an agreement but it ~~was declared unsuccessful.~~failed.

In January 2018, a judicial order was issued to commence the evidence gathering process, a decision which was objected by the parties.

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, 1310 lawsuits related to this incident are active for an approximately worth of COP$~~16.2~~7.8 billion.

As of December ~~2016,~~2017, Ecopetrol S.A. was party to ~~209~~215 environmental administrative proceedings, of which ~~193~~197 were initiated before ~~2015,~~2017, and 1618 during ~~2016.~~2017. During ~~2016, six~~2017, 5 proceedings were concluded, in ~~four~~3 of them we were subject to monetary fines through Resolutions ~~Corporinoquía Resolution 200.41-16-0551 of~~issued in 2017; DTP 1330 October 5, DGL 796, September and DGL 411 May ~~3, 2016, Corporinoquía Resolution 200.41-16-0873 of July 18, 2016, Cam Resolution 2134 of July 25, 2016 and Corpoamazonía Resolution 1162 of September 9, 2016.~~10. However, these ~~four~~last two proceedings were 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~~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 ~~Comptroller~~ 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.

As a result of the findings described above the Office of the ~~General~~ Comptroller ~~recently~~General opened actions for financial responsibility (proceso de responsabilidad ~~fiscal)~~fiscal) against 36 individuals and the six companies involved in the Project, including current and former members of Ecopetrol’s Board of Directors; former members of Reficar’s Board of Directors; current and 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. ~~The~~

One current ~~members~~member of Ecopetrol’s ~~board and senior management subject to these proceedings are Juan Carlos Echeverry Garzón, Chief Executive Officer; and~~Board of Directors, Joaquín Moreno Uribe, ~~Horacio Ferreira and Mauricio Cárdenas Santamaría, all of them members~~is being investigated in these proceedings.

These actions were initiated based on the Office of the ~~Board of Directors. These actions pertain to an eventual reduction of the value of state assets due to a~~Comptroller General’s theory that lower than expected profitability at Reficar ~~as a result of the~~could have been caused by modifications ofto the schedule, and for the increase of the budget of the ~~project.~~

~~On January 2017, the Office of the General Comptroller initiated another special audit in Reficar.~~Project. As of the date of this annual report, Reficar has no liability under this proceeding.

While the content and status of the investigations 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 investigation.

In January 2017, the Office of the Comptroller General initiated another special audit is in ~~its preliminary stage.~~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 material 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, Treasury Account or 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 have been ordered to initiate disciplinary, fiscal and/or penal investigations.

Reficar’s external auditors issued an unqualified opinion on Reficar’s financial position as of December 31, 2016 and 2017. As of the date of this annual report, such auditors have not informed Reficar that there has been any change to their opinion.

~~The~~Reficar has been officially informed that the Attorney General’s Office currently has ~~two~~one ongoing ~~investigations~~investigation relating to the ~~Project: (i) the first,~~Project. The investigation 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)~~Reficar.

On September 12, 2017 the Attorney General’s Office issued a ~~more recent investigation regarding delays~~list of charges related to the failure to fulfill some of their duties as administrators and/or for acting “ultra vires” in the ~~completion~~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 ~~Project, focusing on~~Corporate Finance Unit, 2009-2014) and (vi) Reyes Reinoso Yañez (Reficar CEO, 2012-2016). The Attorney General’s Office closed the ~~role~~case against the rest of the members of Reficar’s Board of Directors and the rest of the current and former officers of ~~Ecopetrol, as well as current and former members of Ecopetrol’s Board of Directors.~~Reficar.

The Prosecutor’s Office is conducting ~~a confidential~~an investigation. In connection therewith, ~~on April 27,~~between July 25 and August 2, 2017 the Prosecutor’s Office ~~announced in a press release its intention~~indicted the following individuals with charges, the majority of which are related to ~~pursue charges for~~offenses against the ~~alleged crimes of document forgery,~~public administration and illegal interest in the execution of agreements, misappropriation of public funds 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 Rate as of May 26, 2017 of COP 2,911.66 per US$).agreements:

~~The Ecopetrol and Reficar executives and officials are:~~(i) Orlando José Cabrales Martínez (Reficar CEO, ~~2009-12)~~2009-2012); (ii) Reyes Reinoso Yañez (Reficar CEO, ~~2012-16), current employee of Ecopetrol;~~2012-2016); (iii) Felipe Laverde Concha (Reficar General Counsel, 2009-March 2017); (iv) Pedro Alfonso Rosales Navarro (Ecopetrol Downstream Executive Vice President, ~~2008-15)~~2008-2015); (v) Masoud Deidehban (CBI Executive Project Director); (vi) Phillip Asherman (CBI CEO) and ~~Nicolás Isaksson Palacios (Reficar Lead Legal Counsel, 2013-January 2017).~~(vii) Carlos Lloreda (Reficar’s statutory auditor from 2013-2015.)

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~~of the ~~Prosecutor’s Office may bring.~~ charges.

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.

In the press release, the Prosecutor’s Office also announced that in order to conclude the next phases of the investigation, related to, among others, the selection of the strategic partner, the exit of Glencore and the selection of the contractor, it would be interviewing executives of Ecopetrol, Reficar, Glencore and the supervisory joint venture conformed by Foster Wheeler USA Corporation and Process Consultants Inc.

In connection with the Prosecutor’s Office press release, on May 9, 2017, the Audit 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.

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.

Additionally, 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.

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 interests).

The ~~ICC proceeding~~hearing before the tribunal is currently ~~in its preliminary stage and is~~ scheduled for ~~a hearing in October 2018. The~~2019. At the conclusion of which the tribunal would 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 the agricultural component of the project. As required, Bioenergy has ~~responded~~commenced a remediation plan to address the ~~information requirements that have been requested to date.~~findings.

Our Shareholders’ General Assembly was held on March ~~31, 2017~~23, 2018 and the following matters were approved:

In ~~2016,~~2018, as a result of the solid financial position of the Company, the Board of Directors approved as a dividend policy ~~under which we are to distribute~~consisting of the 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 asses the ~~corporate group level.~~macroeconomic environment, the cash projection for achieving strategy goals and growth plans, while maintaining an appropriate financial flexibility. This policy cannot exceed the maximum amount to be distributed and should keep the Company’s debt metrics in line with an investment grade rating. 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 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~~2015 there was no dividend distribution and ~~2015,~~in 2016 the shareholders approved the distribution of ~~80.1% and 70%~~40% of ~~2013 and 2014~~our net income ~~respectively.~~before the impairment of non-current assets (net of taxes). 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 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 the Board of Directors made the decision to delist from the TSX. This 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. 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 were delisted from the TSX. After delisting from the TSX, 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, Canadian as well as Colombian reporting and corporate governance obligations. Ecopetrol has applied to the Alberta Securities Commission and Ontario Securities Commission to cease being a reporting issuer in Canada. As of the date of this annual report, these applications are under review by such entities and we are awaiting for final resolution on the matter, until a decision is reached, Ecopetrol continues to comply with its reporting responsibilities under its reporting issuer status in Canada.

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.

The following table sets forth reported high and low closing prices in U.S. dollars for our ADSs and the average daily trading volume of our ADSs on the NYSE for the periods indicated. The table also sets forth information on the trading price of our ADSs in U.S. dollars, as well as the average trading volume.

Under Colombian law, transfers of shares must be registered on the issuer’s stock ledger. Only those holders registered on the stock ledger are considered by law as shareholders. Ecopetrol’s shares are in electronic form, other than those shares held by the Nation, which are in physical form.

Transfers of shares evidenced in electronic form required to be negotiated through the Colombia Stock Exchange. In Colombia, only the relevant stockbrokers calledsociedades comisionistas de bolsa are authorized to make the transfers of shares through the Colombia Stock Exchange. The transfers of shares are registered in the Centralized Security Deposit (Depósito Centralizado de Valores) or DECEVAL, through the relevant stockbrokers. DECEVAL records the share transfer on its systems, in order to make the corresponding registration in the issuer stock ledger.

Under Colombian legislation, if a transfer of shares for a value equivalent to or higher than 66,000 UVR (the UVR was COP$ ~~242.4513~~252.3767 as of December 31, ~~2016)~~2017) must be made through the BVC if the shares are registered with the BVC. Otherwise, shareholders can freely negotiate a transfer of shares.

Nevertheless, pursuant to Decree 2555 of 2010 article 6.15.1.1.2 the following transfers are not required to be executed through the BVC:

For the purposes described above, multiple transfer transactions made within one hundred twenty (120) calendar days, between the same parties on shares of the same issuer and under similar conditions, are treated as a single transfer.

Fees and Charges That a Holder of Our ADSs May Have to Pay, Either Directly or Indirectly

JPMorgan Chase Bank, N.A., our Depositary, may charge each person to whom ADSs are issued, including, without limitation, issuances against deposits of shares, issuances in respect of share distributions, rights and other distributions, issuances pursuant to a stock dividend or stock split declared by us or issuances pursuant to a merger, exchange of securities or any other transaction or event affecting the ADSs or ~~deposited securities,~~Deposited Securities, and each person surrendering ADSs for withdrawal of ~~deposited securities~~Deposited Securities in any manner permitted by the Deposit Agreement or whose ~~ADRs~~ADSs are cancelled or reduced for any other reason, US$5.00 for each 100 ADS (or any portion thereof) issued, delivered, reduced, cancelled or surrendered, as the case may be. The Depositary may sell (by public or private sale) sufficient securities and property received in respect of a share distribution, rights and/or other distribution prior to such deposit to pay such charge.

The Depositary collects its fees for issuance and cancellation of ADSs directly from investors depositing common shares or surrendering ADSs for the purpose of withdrawal or from intermediaries acting for them. The Depositary collects fees for making distributions to investors by deducting those fees from the amounts distributed or by selling a portion of distributable property to pay the fees. The Depositary may collect its annual fee for Depositary services by deduction from cash distributions, or by directly billing investors, or by charging the book-entry system accounts of participants acting for them. The Depositary may generally refuse to provide services to any holder until the fees and expenses owing by such holder for those services or otherwise are paid.

The following additional charges may be incurred by ~~ADS~~ holders of ADRs, by any party depositing or withdrawing common shares or by any party surrendering ADSs and/or to whom ADSs are issued (including, without limitation, issuance pursuant to a stock dividend or stock split declared by us or an exchange of stock regarding the ADRs or the ~~deposited securities~~Deposited Securities or a distribution of ADSs), whichever is applicable:

We will pay all other charges and expenses of the Depositary and any agent of the Depositary (except the custodian) pursuant to agreements from time to time between us and the Depositary. The fees described above may be amended from time to time.

Our Depositary has agreed to reimburse us for certain expenses we incur that are related to establishment and maintenance of the ADR program, including investor relations expenses and exchange application and listing fees. In ~~2014, reimbursements were made in the amount of approximately US$3,093,346 for expenses related to investor relations activities. In~~ 2015, reimbursements were made in the amount of approximately US$2,069,202 for expenses related to investor relations activities. In 2016, reimbursements were made in the amount of approximately US$2,366,395 for expenses related to investor relations activities. In 2017, reimbursements were made in the amount of approximately US$2,220,290 for expenses related to investor relations activities.

The following is a general description of the Colombian tax considerations for investments in common shares in Colombia or for the purchase of ADSs, in a foreign securities market. This description is based on applicable law in effect as of the date of this annual report is issued, which may be subject to changes.

Prospective purchasers of common shares or ADSs should consult their own tax advisors for a detailed analysis of the tax consequences in Colombia, resulting from the acquisition, ownership and disposition of common shares or ADSs.

Colombian entities and individuals who are deemed to be residents within the Colombian national territory for Colombian tax purposes are subject to Colombian income tax on their worldwide income. Foreign entities and individuals ~~as well as their permanent establishments in Colombia,~~ who are not deemed to be residents in Colombia, as well as their permanent establishment in Colombia for tax purposes are subject to income tax in Colombia only with respect to their national-source income, which is generally defined as income obtained from (i) the rendering of services inside Colombian territory, (ii) the exploitation of tangible and intangible assets in Colombia, and (iii) the sale of tangible or intangible assets that are located inside Colombian territory at the time of the sale Double taxation treaties signed by Colombia, if applicable, may provide for special regulations regarding income tax.

Dividends paid by Colombian companies, as well as profits distributed by branches/permanent establishments are deemed Colombian income. However, whether they are taxed or not depends on an imputation system set forth in articles 48 and 49 of the Colombian Tax Code (hereinafter “CTC”). According to this system, dividends are taxable when paid out of non-taxed profits, in which case a 35% withholding applies when paid to non-resident shareholders. Conversely, they are non-taxable when paid out of taxed ~~profits.~~profits, provided that the shareholder qualifies as a Colombian company.

~~One~~Notwithstanding the above, one of the novelties introduced by ~~law~~Law 1819 of December 29 of 2016 (the “Tax Reform”) was the creation of a new dividends tax that applies on all dividend distributions to Colombian individuals or to any type of non-resident shareholder, absent any specific treaty or ~~exception.~~exception, regardless that dividends are paid from taxed or non-taxed profits. According to the Tax Reform, dividend payments made to foreign shareholders will be subject to a 5% withholding. This new tax will only apply to dividends paid from profits accrued as from fiscal year 2017.

Note that the dividend tax will apply simultaneously with the aforementioned imputation system. Accordingly, dividends paid from non-taxed profits will be subject to a 35% withholding for income tax, and an additional 5% dividend tax on the balance. This means that the overall burden in this scenario is 38.25% (e.g. $100 *35% = $35, plus $65 * 5% = $3.25).

Relief or reduced tax rates may apply under an applicable treaty to avoid double taxation, but the application of any such rules must be analyzed on a case-by-case basis.

For Colombian tax purposes, an individual is considered to be a Colombian resident when he/she meets any of the following criteria:

Law 1739 of 2014 clarifies that Colombian nationals who meet any of the following requirements, will not be deemed as tax residents:

For purposes of Colombian taxation, an entity is deemed to be a “national” or a “Colombian entity” and, therefore, subject to taxation in Colombia on its worldwide income, if it meets any of the following criteria:

Pursuant to the Colombian Tax Code, a foreign company or non-resident individual has a permanent establishment in Colombia when said company or individual performs activities in Colombia through: (1) a fixed place of business (i.e., branches, factories or offices), or (2) an individual who is not an independent agent empowered to execute agreements on behalf of the foreign company. As noted above, permanent establishments are considered Colombian taxpayers in connection with the Colombian-source income and Colombian-source taxable gains attributed to said permanent establishment. A foreign company or entity will not be deemed to have a permanent establishment by the sole fact that it acts through a broker or any other independent agent. In addition, passive-income generating activities, such as dividends, royalties and interests, typically do not qualify as entrepreneurial and are not deemed to create permanent establishments.

Tax Treatment of a Non-Colombian Entity and a Non-Resident Individual of Colombia Who Purchases an ADS in a Foreign Securities Market

As a general rule, dividends paid to foreign companies, foreign entities or non-resident individuals who are investing in ADSs which underlying assets are Colombian shares are treated as Colombian-source income and are thus subject to Colombian income tax.

To avoid double taxation, dividends paid by Colombian entities are not subject to income tax at the shareholder level when they are paid out of corporate profits that have been previously taxed at the corporate level. As of taxable year 2017, a withholding tax on dividends is triggered for dividends paid to non-resident shareholders. Withholding tax rates on dividends varies as follows: (i) a new 5% dividend tax for dividends distributed out of profits already taxed at the ~~company´s~~company’s level; (ii) 35% withholding tax rate for dividends distributed out of profits not taxed at the ~~company´s~~company’s level, plus ~~an additional~~the new 5% dividend tax rate after having applied and deducted the initial 35% withholding. As of fiscal year 2017, for Colombian individuals, the new dividends tax will ~~be taxed between~~apply 5% ~~and~~or 10% depending on the dividend amount. Profits that did not pay tax at the corporate level would be subject to a 35% withholding tax at the time of distribution. In this case, the base amount subject to the dividend tax would be the remaining amount after the 35% withholding tax. Dividends tax will be applicable to profits generated ~~as of 2017.~~from fiscal year 2017 onwards. Finally, dividends paid to local corporations are not subject to this new dividend tax.

Further to the above, the applicable withholding tax rate for an entity or a non-resident individual investing through a Foreign Funds Administration Account (FFAA) is 25%, since its investment qualifies as portfolio investments and the dividends that are distributed by the Colombian entity are not taxed at the corporate level (assuming that the dividends cannot be attributed to a permanent establishment in Colombia belonging to the shareholder). These foreign shareholders subject to this withholding tax are not required to file an income tax return in Colombia.

Capital gains obtained from the sale of ADSs by non-Colombian entities, Colombian individuals who are non-residents in Colombia and foreign non-resident individuals, are not subject to income tax in Colombia as such sale does not generate Colombian-source income to the extent that the ADSs are not deemed to be sourced in Colombia.

If the holder of the ADSs who is a non-resident entity, a Colombian individual who is not a resident in Colombia or a foreign non-resident individual, decides to surrender the ADSs and withdraw the underlying common shares, it is arguable that such transaction does not generate a capital gain subject to income tax in Colombia. However, different interpretations may be adopted by the Colombian Tax Authorities on this matter.

Tax Treatment in Colombia of a Non-Colombian Entity and a Non-Resident Individual of Colombia Who Purchases Ecopetrol’s Shares in Colombia’s Securities Market

As a general rule, dividends paid to foreign companies, foreign entities, or to non-resident individuals in Colombia, who are investing in Colombian shares directly or through a FFAA, are treated as national-source income; thus, they are subject to Colombian income tax.

To avoid double taxation, dividends are not subject to income tax at the shareholder level when they are paid out of corporate profits that have been previously taxed at the corporate level. However, as of taxable year 2017, a withholding tax on dividends is triggered for dividends paid to non-resident shareholders. Withholding tax rates on dividends varies as follows: (i) 5% dividend tax for dividends distributed out of profits already taxed at the company´s level; and (ii) 35% withholding tax ~~rate~~ for dividends distributed out of profits not taxed at the company´s level, plus an additional 5% dividend tax ~~rate~~ after having applied and deducted the initial 35% withholding. As of fiscal year 2017, for Colombian individuals, dividends will be taxed between 5% and 10% depending on the dividend amount. Profits that did not pay tax at the corporate level would be subject to a 35% withholding tax at the time of distribution. In this case, the base amount subject to the dividend tax would be the remaining amount after the 35% withholding tax. Dividends tax will be applicable to profits generated ~~as of 2017.~~from fiscal year 2017 onwards. Finally, dividends paid to local corporations are not subject to ~~this~~the new dividend tax.

For fiscal year 2017 if the shareholder is a non-resident entity or a non-resident individual investing directly, it will be taxed upon distribution, by means of the withholding tax mechanism, provided that its investment does not qualify as portfolio investments and dividends that are distributed are not taxed at the corporate level. In this case, dividends will be subject to a 35% withholding tax.

Non-resident entities or non-resident individuals will be taxed upon distribution by means of the withholding tax mechanism, provided that their investments qualify as portfolio investments (i.e., investing through a FFAA) and dividends that are distributed by the Colombian entity are not taxed at the corporate level. In this case, pursuant to Article 18-1 of the Colombian Tax Code, the applicable withholding tax rate is 25%, assuming that the dividends cannot be attributed to a permanent establishment in Colombia belonging to the shareholder. These foreign shareholders subject to this withholding tax are not required to file an income tax return in Colombia.

Pursuant to Article 36-1 of the Colombian Tax Code, capital gains derived from the sale of shares listed on the BVC and owned by the same beneficial owner, are deemed as non-taxable income in Colombia, provided that the shares sold during the same taxable year do not represent more than 10% of the outstanding shares of the listed company. Pursuant to Article 18 of Decree 2634 of 2012, sellers of shares are not required to file an income tax return for the transfer of securities that are listed in the National Registry of Securities and Issuers (Registro Nacional de Valores y Emisores) as long as the foreign investment is treated as a portfolio investment according to article 3 of Decree 2080 of 2000.

If the above-mentioned requirements are not met, the capital gain obtained in the sale of shares is subject to income tax or capital gains tax, under the following rules:

Tax Treatment of Non-Residents Who Purchase Ecopetrol’s Shares in the BVC Market and Exchange Them for ADSs

Payment of dividends by Colombian entities to foreign companies, foreign entities or to non-resident individuals who are investing in ADSs which underlying assets are Colombian shares or in Colombian shares directly are subject to the tax treatment described above.

If the holder of the Colombian shares is a non-resident entity, a Colombian individual who is not a resident in Colombia or a foreign non-resident individual, and such holder decides to exchange such common shares for ADSs, it is arguable that such transaction should not generate a capital gain subject to income tax in Colombia. However, different interpretations may be adopted by the Colombian tax authorities on this matter. For instance, assuming that the exchange of securities is treated as a sale of Ecopetrol’s shares, the seller would be subject to the tax treatment described above in connection with the taxation of capital gains for the sale of shares. Absent any specific rules or regulations addressing this specific situation, a case-by-case analysis would be necessary.

This summary describes the principal U.S. federal income tax consequences of the ownership and disposition of common shares or ADSs, but it does not purport to be a comprehensive description of all of the U.S. tax consequences that may be relevant to a decision to hold or dispose of common shares or ADSs. This summary applies only to purchasers of common shares or ADSs who will hold the common shares or ADSs as capital assets for U.S. federal income tax purposes and does not apply to special classes of holders such as dealers in securities or currencies, holders whose functional currency is not the U.S. dollar, holders of ten percent or more of our shares (taking into account shares held directly or through depositary ~~arrangements)~~arrangements by vote or by value), tax-exempt organizations, financial institutions, holders liable for the alternative minimum tax, securities traders who elect to account for their investment in common shares or ADSs on a mark-to-market basis, partnerships or other pass-through entities or arrangements and investors therein, insurance companies, U.S. expatriates, persons that purchase or sell common shares or ADSs as part of a wash sale for tax purposes, and persons holding common shares or ADSs in a hedging transaction or as part of a straddle, conversion or other integrated transaction for U.S. federal income tax purposes. The statements regarding U.S. tax law set forth in this summary isare based on the Internal Revenue Code of 1986, as amended, which we call the “Code,” its legislative history, existing and proposed U.S. Treasury regulations, published rulings and court decisions all as in force on the date of this annual report, and changes to such law subsequent to the date of this annual report may affect the tax consequences described herein (possibly with retroactive effect). This summary is also based in part on the representations of the Depositary and the assumption that each obligation in the Deposit Agreement and any related agreement will be performed in accordance with its terms.

Each holder is encouraged to consult such holder’s tax advisor concerning the overall tax consequences to it, including the consequences under laws other than U.S. federal income tax laws, of an investment in common shares or ADSs.

In this discussion, references to a “U.S. Holder” are to a beneficial owner of a common share or an ADS that is for U.S. federal income tax purposes (1) an individual citizen or resident of the United States, (2) a corporation, or any other entity taxable as a corporation, organized under the laws of the United States, any state thereof or the District of Columbia, (3) an estate whose income is subject to U.S. federal income tax regardless of its source, or (4) a trust if (i) a United States court can exercise primary supervision over the trust’s administration and one or more United States persons are authorized to control all substantial decisions of the trust or (ii) it has in effect a valid election under applicable U.S. Treasury regulations to be treated as a U.S. person.

For U.S. federal income tax purposes, holders of ADSs generally will ~~generally~~ be treated as owners of the common shares represented by such ADSs.

This discussion does not address any aspect of U.S. federal taxation other than U.S. federal income taxation (such as the estate and gift tax or the Medicare tax on net investment income). Holders of common shares or ADSs should consult their own tax advisor regarding the U.S. federal, state and local and other tax consequences of owning and disposing of common shares and ADSs in their particular circumstances.

A distribution to U.S. Holders made by us of cash or property with respect to common shares or ADSs generally will be treated as a dividend for U.S. federal income tax purposes to the extent paid out of our current or accumulated earnings and profits (as determined under U.S. federal income tax principles). Distributions in excess of our current or accumulated earnings and profits, as determined for U.S. federal income tax purposes, will be treated first as a tax-free return of capital reducing such U.S. Holder’s adjusted tax basis in the common shares or ADSs. Any distribution in excess of such adjusted tax basis will be treated as capital gain and will be either long-term or short-term capital gain depending upon whether the U.S. Holder held the common shares or ADSs for more than one year. Distributions of additional common shares or ADSs to U.S. Holders that are part of a pro rata distribution to all of our shareholders generally will not be subject to U.S. federal income tax. We do not maintain calculations of our earnings and profits under U.S. federal income tax principles, and, therefore, except as described in the previous sentence, U.S. Holders should expect that any distributions generally will be reported as dividends for U.S. federal income tax purposes. As used below, the term “dividend” means a distribution that constitutes a dividend for U.S. federal income tax purposes.

The amount of any distribution will include the amount of any Colombian tax withheld on the amount distributed, and the amount of a distribution paid in Colombian Pesos will be measured by reference to the exchange rate for converting Colombian Pesos into U.S. dollars in effect on the date the distribution is received by the Depositary (or by a U.S. Holder in the case of a holder of common shares) regardless of whether the payment is in fact converted into U.S. dollars. If the Depositary (or U.S. Holder in the case of a holder of common shares) does not convert such Colombian Pesos into U.S. dollars on the date it receives them, generally, any gain or loss resulting from currency exchange fluctuations during the period from the date the dividend payment is included in income to the date the payment is converted into U.S. dollars will be treated as ordinary income or loss and will not be eligible for the special tax rate applicable to qualified dividend income (as discussed below). The gain or loss generally will be income or loss from sources within the United States for foreign tax credit limitation purposes. Dividends paid by us will not be eligible for the dividends received deduction allowed to corporations under the Code.

If you are a non-corporate U.S. Holder, dividends that constitute qualified dividend income will be taxable to you at the preferential rates applicable to long-term capital gains provided that you meet certain holding requirements. Dividends paid on the ADSs will be treated as qualified dividend income if (1) the ADSs are readily tradable on an established securities market in the United States and (2) we were not, in the year prior to the year in which the dividend was paid, and are not, in the year in which the dividend is paid, a passive foreign investment company (PFIC). The ADSs are listed on the New York Stock Exchange, and will qualify as readily tradable on an established securities market in the United States so long as they are so listed. Based on our audited financial statements and relevant market and shareholder data, we believe that we were not treated as a PFIC for U.S. federal income tax purposes with respect to our ~~2016~~2017 taxable year. In addition, based on our audited financial statements and our current expectations regarding the value and nature of our assets, the sources and nature of our income, and relevant market and shareholder data, we do not anticipate becoming a PFIC for the ~~2017~~2018 taxable year. However, this conclusion is a factual determination that is made annually and thus may be subject to change. Based on existing guidance, it is not clear whether dividends received with respect to the common shares will be treated as qualified dividends. In addition, the U.S. Treasury has announced its intention to promulgate rules pursuant to which holders of ADSs or common shares and intermediaries through whom such securities are held will be permitted to rely on certifications from issuers to treat dividends as qualified for tax reporting purposes. Because such procedures have not yet been issued, it is not clear whether we will be able to comply with them. Holders of ADSs and common shares should consult their own tax advisers regarding the availability of the reduced dividend tax rate in the light of the considerations discussed above and their own particular circumstances.

A U.S. Holder will be entitled, subject to a number of complex limitations and conditions, to claim a U.S. foreign tax credit in respect of any Colombian income taxes withheld on dividends received on common shares or ADSs. U.S. Holders who do not elect to claim a credit for any foreign income taxes paid during the taxable year may instead claim a deduction in respect of such Colombian income taxes provided the U.S. Holder elects to deduct (rather than credit) all foreign income taxes for that year. Dividends received with respect to the common shares or ADSs will be treated as foreign source income, subject to various classifications and other limitations. For the purposes of the U.S. foreign tax credit limitations, the dividends paid with respect to our common shares or ADSs generally will ~~generally~~ constitute “passive category income” for most U.S. Holders. The rules relating to computing foreign tax credits or deducting foreign income taxes are extremely complex, and U.S. Holders are urged to consult their own independent tax advisers regarding the availability of foreign tax credits with respect to any Colombian income taxes withheld.

A U.S. Holder generally will recognize capital gain or loss upon the sale, exchange or other taxable disposition of common shares or ADSs in an amount equal to the difference between the U.S. dollar value of the amount realized on the sale, exchange or other taxable disposition of the common shares or ADSs and the U.S. Holder’s adjusted tax basis, determined in U.S. dollars, in the common shares or ADSs. Any gain or loss will be long-term capital gain or loss if the common shares or ADSs have been held for more than one year. Certain non-corporate U.S. Holders (including individuals) may be eligible for preferential rates of U.S. federal income tax in respect of long-term capital gains. The deductibility of capital losses is subject to limitations under the Code.

If you are a U.S. Holder of common shares or ADSs, the initial tax basis of your common shares or ADSs will be the U.S. dollar value of the Colombian Peso-denominated purchase price determined on the date of purchase. If the common shares or ADSs are treated as traded on an “established securities market,” a cash basis U.S. Holder, or, if it elects, an accrual basis U.S. Holder, will determine the dollar value of the cost of such common shares or ADSs by translating the amount paid at the spot rate of exchange on the settlement date of the purchase. Such an election by an accrual basis U.S. Holder must be applied consistently from year to year and cannot be revoked without the consent of the Internal Revenue Service (“IRS”). If you convert U.S. dollars to Colombian Pesos and immediately use that currency to purchase common shares or ADSs, such conversion generally will not result in taxable gain or loss to you.

With respect to the sale or exchange of common shares or ADSs, the amount realized generally will be the U.S. dollar value of the payment received determined on (1) the date of receipt of payment in the case of a cash basis U.S. Holder and (2) the date of disposition in the case of an accrual basis U.S. Holder. If the common shares or ADSs are treated as traded on an “established securities market,” a cash basis taxpayer, or, if it elects, an accrual basis taxpayer, will determine the U.S. dollar value of the amount realized by translating the amount received at the spot rate of exchange on the settlement date of the sale.

Deposits and withdrawals of common shares in exchange for ADSs, and ADSs for common shares generally will not result in the realization of gain or loss for U.S. federal income tax purposes.

In general, dividends on common shares or ADSs, and payments of the proceeds of a sale, exchange or other taxable disposition of common shares or ADSs, paid within the United States, by a U.S. payor through certain U.S.-related financial intermediaries to a U.S. Holder are subject to information reporting and may be subject to backup withholding at a current rate of ~~28%~~24% unless the holder (1) establishes that it is a corporation or other exempt recipient or (2) with respect to backup withholding, provides an accurate taxpayer identification number and certifies that it is a U.S. person and that no loss of exemption from backup withholding has occurred.

Backup withholding is not an additional tax. The amount of any backup withholding tax from a payment to a U.S. Holder will be allowed as a credit against the U.S. Holder’s U.S. federal income tax liability, provided that the required information is timely furnished to the IRS. A U.S. Holder generally may obtain a refund of any amounts withheld under the backup withholding rules that exceed its U.S. federal income tax liability by timely filing a refund claim with the IRS.

A holder or beneficial owner of common shares or ADSs that is not a U.S. Holder for U.S. federal income tax purposes (a “non-U.S. Holder”) generally will not be subject to U.S. federal income or withholding tax on dividends received on common shares or ADSs, unless the dividends are “effectively connected” with the non-U.S. Holder’s conduct of a trade or business within the United States. In such a case a non-U.S. Holder generally will be taxed in the same manner as a U.S. Holder. In the case of “effectively connected” dividends received by a corporate non-U.S. Holder, the corporate non-U.S. Holder may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate.

A non-U.S. Holder of common shares or ADSs will not be subject to U.S. federal income or withholding tax on gain realized on the sale of common shares or ADSs, unless (i) the gain is “effectively connected” with the non-U.S. Holder’s conduct of a trade or business in the United States, or (ii) in the case of gain realized by an individual non-U.S. Holder, the non-U.S. Holder is present in the United States for 183 days or more in the taxable year of the sale and certain other conditions are met. In the case of “effectively connected” gains realized by a corporate non-U.S. Holder, the corporate non-U.S. Holder may, under certain circumstances, be subject to an additional “branch profits tax” at a 30% rate.

Although non-U.S. Holders generally are exempt from backup withholding and information reporting requirements, a non-U.S. Holder may be required to comply with certification and identification procedures in order to establish its exemption from information reporting and backup withholding.

Payments in foreign currency with respect to certain foreign exchange transactions including international investments between Colombian residents and non-Colombian residents must be conducted through the foreign exchange market. Therefore, any foreign currency income or expense under the ADRs must be completed through the appropriate channels of the foreign exchange market. Transactions conducted through the foreign exchange market are made at market rates freely negotiated with authorized foreign exchange intermediaries (local banks, financial corporations, administrators and others). As of September 25, 1999 the Colombian foreign exchange regime is structured under the system of free flotation of the exchange rate whereby market forces determine the level of exchange rate from time to time.

Foreign portfolio investments must be made through authorized foreign exchange investment management companies. Only brokerage firms, trust companies and investment management companies, subject to the inspection and supervision of the Superintendence of Finance, are allowed to make investments in the local Colombian market on behalf of foreign investors. Such brokerage firms, trust companies and investment management companies also act as the foreign investors’ local representatives for tax and foreign exchange purposes.

Colombian law provides that the Colombian Central Bank may intervene in the foreign exchange market at its own discretion at any time (i.e. it may limit the remittance of dividends whenever the international reserves fall below an amount equal to three months of imports). Additionally, from time to time, the Colombian government introduces amendments to the International Investment Statute. Hence, we cannot assure you that the Colombian Central Bank will not intervene in the future imposing restrictions to the free convertibility system currently applicable in Colombia. See ~~the~~ sectionRisk Review—Risk Factors—Risks Related to Colombia’s Political and Regional Environment.

Colombia’s International Investment Statute and the regulations issued by the Colombian Central Bank, which have been amended from time to time through related decrees and regulations, govern the manner in which non-Colombian resident entities and individuals can invest in Colombia and participate in the Colombian securities markets. Among other requirements, the International Investment Statute and Colombian Central Bank regulations mandate registration of foreign investment transactions with the Colombian Central Bank and specify procedures to authorize and administer such foreign investment transactions. Additionally, pertinent information related to foreign investment transactions must be updated on a regular basis (yearly or monthly, depending on the type of information).

Under the International Investment Statute and Colombian Central Bank regulations, the failure of a foreign investor to report or register with the Colombian Central Bank foreign exchange transactions relating to investments in Colombia on a timely basis may (i) prevent the investor from obtaining remittance rights, (ii) constitute an exchange control infraction, and (iii) result in financial sanctions.

Notwithstanding the regulations described above, foreign investors who acquire ADRs are not required to directly register this investment with Colombian authorities. Holders of ADRs will benefit from the registration to be obtained by the local custodian for our common shares underlying the ADRs in Colombia. Such registration allows the custodian to convert dividends and other distributions with respect to the common shares into foreign currency and remit the proceeds abroad. If investors in ADRs choose to surrender their ADRs and withdraw common shares, they must retain an administrator, who will act as a local representative for the investments, and register their investments in common shares as a portfolio investment through said local representative. The local representative is the brokerage firm, trust company or investment management company that acts on behalf of the holders of the ADRs in Colombia, and the request for registration is made by them.

Colombian residents who acquire ADRs and either receive profits from this investment, surrender their ADRs or liquidate their investment in ADRs must register these operations with the Colombian authorities and comply with applicable regulations through its Colombian brokerage firm.

In obtaining its own foreign investment registration, an investor who surrenders its ADRs and sells common shares may incur expenses and/or suffer delays in the application process. Investors would only be allowed to transfer dividends abroad or transfer funds received as distributions relating to our common shares after their foreign investment registration procedure with the Colombian Central Bank has been completed. In addition, the ~~depositary’s~~Depositary’s foreign investment registration may also be adversely affected by future legislative changes, but its rights to transfer dividends abroad or profits arising from distributions relating to our common shares must be maintained according to Colombian law and foreign investment treaties entered into by Colombia in force at the time of the registration of the investment, except when Colombia’s international reserves fall below an amount equivalent to three months’ worth of imports. Prospective purchasers of common shares or ADSs should consult their own foreign exchange advisors.

On ~~May 26, 2017,~~April 16, 2018, the Representative Market Exchange Rate was COP$~~2,911.66~~2,705.34 per US$1.00. The Federal Reserve Bank of New York does not report a noon-buying rate for Colombian Pesos. TheSuperintendencia Financiera, or Superintendence of Finance, calculates the Representative Market Exchange Rate based on the weighted averages of the buy and sell foreign exchange rates quoted daily by foreign exchange rate market intermediaries including financial institutions for the purchase and sale of U.S. dollars. The Superintendence of Finance also calculates the Representative Market Exchange Rate for each month for purposes of preparing financial statements and converting amounts in foreign currency to Colombian Pesos.

The following table sets forth the high, low, average and period-end exchange rate for Colombian Peso/U.S. dollar Representative Market Exchange Rate for each of the last five years and for the last six months.

~~Source: Superintendence of Finance for historical data.~~~~Banco de la República~~~~, or the Colombian Central Bank, for averages.~~

The following table sets forth the names of our major shareholders, and the number of shares and the percentage of outstanding shares owned by them at March 31, ~~2017:~~2018:

As of ~~March 31, 2017, 1.8%~~February 20, 2018, 2.1% of our common shares were held of record in the form of American Depository Shares. As of ~~March 31, 2017,~~February 20, 2018, we had 4139 registered holders and as of ~~February 23, 2017~~March 31, 2018 we had ~~11,970~~15,907 beneficiaries of common shares, or ADSs representing common shares, in the United States.

There are no conditions in our bylaws governing changes in our capital stock that are more stringent than those required under Colombian law, with the exception that the Nation must hold a minimum of 80% of our capital stock at all times.

We are a Colombian company. Most of our Directors and executive officers and some of the experts named in this annual report 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 affect service of process within the United States upon us or these persons who are residents in Colombia or to enforce against us or these persons who are residents in ~~Colombiajudgments~~Colombia judgments in U.S. courts obtained in such courts predicated upon the civil liability provisions of the U.S. federal securities laws. Colombian courts will enforce a U.S. judgment predicated on the U.S. securities laws through a procedural system known under Colombian Law as “exequatur.” The Colombian Supreme Court will enforce a foreign judgment, without reconsideration of the merits only if the judgment satisfies the requirements set forth in Articles 605 through 607 of Law 1564 of 2012 (Código General del Proceso) which entered into force on January 1, 2016, pursuant toAcuerdoNo. PSAA15-10392, of October 1, 2015, issued by the Colombian Superior Council of the Judiciary (Consejo Superior de la Judicatura),as follows:

The United States and Colombia do not have a bilateral treaty providing for automatic reciprocal recognition and enforcement of judgments in civil and commercial matters. The Colombian Supreme Court has in the past accepted that reciprocity exists when it has been proven that either a U.S. court has enforced a Colombian judgment or that a U.S. court would enforce a foreign judgment, including a judgment issued by a Colombian court. However, such enforceability decisions are considered by Colombian courts on a case-by-case basis.

Proceedings for enforcement of a money judgment by attachment or execution against any assets or property located in Colombia are within the exclusive jurisdiction of Colombian courts and such proceedings are conducted in Spanish. All parties affected by a foreign judgment in exequatur proceedings must be summoned to the exequatur proceedings in accordance with the rules that apply to the Colombian courts. In the course of such proceedings, both the plaintiff and the defendant are afforded the opportunity to request that evidence be collected in connection with the requirements listed above. In addition, before the judgment is rendered, each party may file final allegations in support of such party’s position regarding the above-mentioned requirements.

Assuming that a foreign judgment complies with the standards set forth in the preceding paragraphs and the absence of any condition referred to above that would render a foreign judgment not subject to recognition under Colombian law, such foreign judgment would be enforceable in Colombia in an enforcement proceeding under the laws of Colombia, provided that the Colombian Supreme Court has previously granted exequatur upon the foreign judgment.

Since 2004, Ecopetrol S.A. has voluntarily adopted transparency, governance and control practices to facilitate corporate governance in order to generate confidence among stakeholders and ensure the sustainability of its business.

Ecopetrol’s majority shareholder (the Nation, represented by the Ministry of Finance and Public Credit), is unilaterally committed to protect the interests of the minority shareholders in the following topics:

According to corporate governance practices recommended by the OECD, organization to which Colombia is in the process of access, the National Government begun to implement the practice of reducing the participation of Directors with a ministerial level in Ecopetrol’s Board of Directors. Thus, in ~~2017~~2018 in the ~~ordinary~~General Shareholders’ Assembly, the National Government nominated ~~only one (1)~~two (2) non-independent ~~Director with~~Directors none of which has a ministerial ~~level and in 2018 no director of ministerial rank will be nominated.~~rank.

The Bylaws of Ecopetrol S.A. are contained in Public Deed No. 5314 of December 14, 2007, issued by the Second Notary of Bogotá; amended by Public Deed No. 560 of May 23, 2011, issued by the Notary Forty- Six of Bogotá, Deed No. 666 of May 7, 2013, issued by the Notary Sixty-Five of Bogotá, and Deed No. 1049 of May 19, 2015, issued by the Notary Second of Bogotá. In addition, the bylaws were recently amended in the ordinary meeting of the General Shareholders Assembly held on March 23, 2018. The text of the amended bylaws is yet to be recorded in public deed and registered before the mercantile registry, which in Colombia is the Chamber of Commerce. An English translation of the amended bylaws is included as Exhibit 1.1 to this annual report.

This summary does not purport to be complete and is qualified by reference to our bylaws, which are filed as an exhibit to this annual report. For a description of the provisions of our bylaws relating to our Board of Directors and its committees, see the sectionsCorporate Governance—Board of Directors—Board Practices and—Corporate Governance—Board of Directors—Board Committees.

Shareholders’ meetings may be ordinary or extraordinary. Ordinary meetings will take place in our legal domicile located in Bogota, Colombia, within the first three months following the end of each fiscal year, on the day and at the time set forth in the notice for the ~~general shareholders’ meeting.~~General Shareholders Assembly. The call for the ~~general shareholders’ meeting~~General Shareholders Assembly is published on the Ecopetrol S.A. website and in a newspaper of wide circulation 30 calendar days prior to the date on which the meeting will take place and on the Sunday previous to the meeting, must be published at Ecopetrol S.A.’s website www.ecopetrol.com.co. ~~The call for the general shareholders’ meeting is also sent electronically to shareholders.~~

In the ~~ordinary general shareholders’ meeting,~~General Shareholders Assembly, our Board of Directors and the external auditor are appointed and our annual financial statements, profit distribution, audit and management reports, including our corporate governance report and sustainability report, and any other matter provided under applicable law or our corporate bylaws are approved.

Extraordinary meetings of shareholders may be called by our Board of Directors, by our president or chief executive officer, by our external auditor, or by shareholders holding at least 5% of the shares outstanding, or when unforeseen or urgent needs of the Company require it. Calls to extraordinary meetings should be made at least 15 calendar days prior to the date of the meeting, with the exception of the case where the Law requires a greater time between the summons and the meeting. Such a call is published on the Ecopetrol S.A. website and in a newspaper of wide circulation. The meeting notice must specify the agenda for the meeting.

The required quorum for both ordinary and extraordinary meetings is a plural number of shareholders representing 50% plus one of the subscribed shares entitled to vote and decisions are approved with a majority of the members present. This quorum is exempted in the case of “second-call meetings,” which may take place when a meeting fails to obtain the required quorum and is called within a period between 10 business days and 30 business days from the first date, in which case decisions may be adopted by a majority of the shares present regardless of the number represented.

Decisions made at ordinary and extraordinary shareholders’ meeting must be approved by a plural number of shareholders representing the majority of the shares present. Colombian law requires supermajorities in the following cases:

Shareholders may be represented by proxies provided that the proxy: (1) is in writing (faxes and electronic documents are valid), (2) specifies the name of the representative, (3) specifies the date or time of the meeting for which the proxy is given and (4) includes other information specified by the applicable law. Proxies granted abroad do not require legalization or an apostille.

During our ordinary annual shareholders’ meeting, our employees and Directors are only allowed to represent their own shares, unless they act as legal representatives.

We have only one class of stock without special rights or restrictions (ordinary shares). Our shareholders do not have any type of preemptive rights.

Under Commercial Colombian law, our shareholders have the following economic privileges and voting rights:

Our bylaws and corporate governance code provide additional rights to our minority shareholders. These rights include:

We have only one class of stock and it has no special rights or restrictions (ordinary shares). Our shareholders do not have any type of preemptive rights. The rights given to our shareholders by law are described in our bylaws and may only be modified through an amendment to the law.

The additional rights given to our minority shareholders in our bylaws and corporate governance code may only be modified through an amendment of those internal documents.

There are no limitations in our bylaws or Colombian law on the rights of Colombian residents or foreign investors to own the shares of our Company, or on the right to hold or exercise voting rights with respect to those shares, except in cases of legal representation and except that the Nation must hold a minimum of 80% of our capital stock at all times.

Restrictions on Change of Control Mergers, ~~Acquisitions~~Spin-offs or ~~Corporate Restructuring~~Transformations of the Company

Under Colombian law and our bylaws, the ~~general shareholders’ meeting~~General Shareholders Assembly has full authority to approve any ~~corporate restructuring, including any~~ mergers, ~~acquisitions~~spin-offs or ~~spin-offs.~~transformations. Corporate restructurings are ~~also~~ subject to the requirement that the Nation must hold a minimum of 80% of our common stock at all times. So long as Law 1118 of 2006 is in effect, there cannot be any restructuring that result in a change of control of our Company.

The Corporate Governance Code, Title III, Chapter 1, Section 5, states: Identification of Major Shareholders. The shareholding composition of the Company, indicating at least the twenty (20) people with the greatest number of shares, is disclosed on Ecopetrol’s website atwww.ecopetrol.com.co. Colombian securities regulations set forth the obligation to disclose any material event orhecho relevante. Any transfer of shares equal or greater than 5% of our capital stock, or any legal entity or individual acquiring a percentage of shares that would make him the beneficial owner of 5% or more of our capital stock, is a material event, and therefore, must be disclosed to the Superintendence of Finance. The regulation includes other criteria in order to identify when to report a material event other than the situations described in the previous sentence.

Pursuant to our bylaws, ~~our~~the external auditor ~~shall not~~will be appointed for ~~more than five consecutive one-year terms by us. However, an external auditor~~periods of two (2) years and may be reelected consecutively for two (2) periods, and it may once again be hired ~~again~~ after ~~two terms have passed since~~one (1) period away from the ~~conclusion of its last term of appointment.~~position. At the ~~ordinary general shareholders’ meeting~~General Shareholders Assembly on March ~~31, 2017,~~23, 2018, the shareholders appointed Ernst & Young as external auditor of Ecopetrol for the fiscal year ~~2017.~~2018.

We have ~~adopted a~~recently updated our code of ethics, which ~~complies~~considers, as ethical principles of the organization, the integrity, responsibility, respect and commitment to life. Our code of ethics also states that we must comply with the provisions contained in the applicable national and international laws in the countries where we have operations, including the U.S. and ~~Colombian law.~~ Colombia.

In our code, we define the guidelines for the following aspects: conflict of interest; ethical conflict; prohibition of bribery and violations of the FCPA; Integrity in accounting; prevention of money laundering and financing of terrorism; gifts, amenities and hospitalities; protection and use of resources; information management and security; social responsibility and respect for human rights; whistleblowing channel; and examples of ethical behaviors.

Our code of ethics applies to our Board of Directors, our Chief Executive Officer, our Chief Financial Officer, principal accounting officer, persons performing similar functions and in general to all of the other employees of the company and its affiliates.

All of our agreements with suppliers or third parties include a provision relating to compliance with applicable anti-bribery and anti-corruption regulations. These agreements also require our suppliers and third parties to accept our Code of Ethics and our compliance manuals.

Our code of ethics is available on our website ~~at http:~~at:https://www.ecopetrol.com.co/~~especiales/codigoEtica_/index.html.~~wps/portal/es/ecopetrol-web/responsabilidad-corporativa/etica-y-cumplimiento/codigo-etica-conducta

~~If we amend the provisions~~7.3 Board of ~~our code of ethics or if we grant any waiver of such provisions, we will disclose such amendment or waiver on our website at the same address.~~Directors

The information below sets forth the names and business experience of each of our current Directors elected at the ~~shareholders’ ordinary meeting~~General Shareholders Ordinary Meeting held on March ~~31, 2017~~23, 2018 for ~~terms of~~ one year term beginning on that date, as of the date hereof:

~~Minister~~Alfonso Camilo Barco Muñoz (51) Director General of State Owned Enterprises of the Ministry of Finance and Public Credit, ~~Mauricio Cárdenas Santamaría (54)~~ishas experience in corporate finance, project management and corporate governance. He has served as advisor of Special Projects in the ~~Minister~~Ministry of Finance and Public Credit, since September, 2012. He was the Minister of Mines and Energy of Colombia 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 in Washington D.C. Previously, Mr. Cárdenas served as ExecutiveGeneral Director of ~~Fundación para la Educación Superior y el Desarrollo (FEDESARROLLO), CEO~~Investment Banking of ~~Empresa de Energía~~BBVA Colombia and CFO of Interconexión Eléctrica S.A. Dr. Barco is a lawyer from Universidad del Rosario, with a specialization in financial law from Universidad de ~~Bogotá, Minister~~los Andes. He also has a certification in finance from the London School of ~~Economic Development, Minister of Transport,~~Economics and ~~Director of the National Planning Agency of Colombia. Mr. Cárdenas holds a B.A. and master degree~~ in ~~economics~~Business from the University ~~Andes and a Ph.D. in economics from the University~~Of Chicago School of ~~Berkeley, California. In 2001, Mr. Cárdenas was a visiting scholar at Harvard University’s Center for International Development. Mr. Cárdenas has also served as~~Business. To date, he is a member of the board of directors at Generadora y Comercializadora de Energía del Caribe S.A. E.S.P. (GECELCA) and Bancoldex, representing the Ministry of ~~various organizations, including the Latin American~~Finance and ~~Caribbean Economic Association (LACEA), University Andes and the Colombia Stock Exchange (BVC).~~Public Credit. Currently ~~he is a Director of Banco de la República. Mr. Cárdenas has served as a Director of Ecopetrol´s Board since March 27, 2008. Currently Mr. Cárdenas~~Dr. Barco is a non-independent ~~Director~~member of ~~Ecopetrol´s Board.~~Ecopetrol’s Board of Directors.

Mauricio ~~Cabera~~Cabrera Galvis ~~(65)~~(66) currently serves as Director of the firm Cabrera & Bedoya Investment Bankers. He has been President of the FES Foundation and Banco de Occidente. He has served as Director and Financial Consultant of INCORBANK S.A. and as Public Credit Director in the Ministry of Finance and Public Credit ~~Ministry~~ of Colombia. He has been Technical Vice President of the Banking Association of Colombia and Head of the Global Programming Unit of the National Planning Department. He was Dean of the Faculty of Economics ofat the Universidad Externado de Colombia and an appointed economist in the Western Hemisphere Department of the International Monetary Fund. ~~He holds a~~His studies include an undergraduate degree in Philosophy from ~~the~~ Universidad Javeriana, ~~and holds~~ a Master’s Degree in Economics from Universidad de los ~~Andes. He attended the~~Andes, and he took Ph.D. ~~program at~~classes from the London School of Economics. HeMr. Cabrera is ~~a Director~~currently part of ~~Industrias~~the Board of Directors of Industria de Licores del Valle, Clínica DIME, ASTORGA and Fabricato. Mr. Cabrera has served as aan independent Director of Ecopetrol’s Board of Directors since March 31, ~~2017.~~2016. Currently Mr. Cabrera is an independent Director of ~~Ecopetrol´s Board.~~Ecopetrol’s Board of Directors.

~~Yesid Reyes Alvarado (58)~~Jorge Londoño Saldarriaga (70)~~has been~~ is currently an Operating Partner of Advent International and serves as a ~~professor at the Universities Externado, Libre, Santo Tomás, Autónoma~~consultant in strategic and financial areas with a broad group of ~~Madrid and Los Andes. He has acted as Associate Judge~~companies in the ~~Tribunal Superior de Bogotá, Consejo Superior de la Judicatura, Supreme Court~~industrial, finance, and ~~Constitutional Court. He has also been a columnist for~~infrastructure and technology sectors. In 1993 he joined the ~~newspaper El Espectador. He served as Minister~~Board of ~~Justice and Law of Colombia during august 2014 to April 2016. He is currently Director~~Directors of the ~~Center~~BIC (now BANCOLOMBIA, NYSE CIB), and in 1996 he assumed the Presidency of the BIC, which he held for ~~Research in Philosophy~~15 years. Mr. Londoño has a business degree from Universidad EAFIT and ~~Law at the University Externado. Mr. Reyes holds~~later, he received a master’s degree in ~~law and a specialization and Master in Criminal, Criminological and Criminalistics Sciences in the same university. He holds a PhD in Law~~Economic Development (M.Phil.) from the University ~~Autónoma~~ of ~~Madrid~~Glasgow, Scotland. He is a member of the Board Directors of Organización Corona and ~~had a research fellowship in Alexander von Humboldt Stiftug at~~Corona Industrial, Banco Falabella Colombia, LifeMiles and member of the ~~University~~Superior Council of ~~Bonn (Germany).~~the Universidad EAFIT. Currently Mr. ~~Reyes has served as a Director~~Londoño is an independent member of Ecopetrol’s Board ~~since September 14, 2016. Currently Mr. Reyes is an independent Director~~ of ~~Ecopetrol’s Board.~~Directors.

~~Ana Milena López Rocha~~Claudia Isabel Gonzalez (48) ~~(36) serves~~has more than twenty years of experience in the public sector and is currently the Legal Secretary of the Presidency of the Republic. She served as ~~the Director~~General Secretary of ~~Public Credit and National Treasury at~~ the ~~Colombian~~ Ministry of Finance ~~since April 2015.~~and Public Credit from 2012 until the beginning of 2017 and from the Ministry of Mines and Energy from the end of 2011 until mid-2012. She also worked in the Ministry of National Defense, in the Financial Fund for Projects and Development (FONADE), she was the National Administrative and Financial Director of the Office of the General Prosecutor of the Nation and Technical Deputy Director of the National Planning Department. Additionally, she worked as a ~~Partner~~Ferrovías employee and as head of the Human Resources Division of the Territorial Development Financier (FINDETER). Ms. González is a lawyer from Universidad del Rosario and specialized in Financial Legislation 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.the Universidad de los Andes. She is currently a member of the Board of Directors of ~~Interconexión Eléctrica~~Central de Inversiones S.A (CISA) and Fiduprevisora S.A. ~~E.S.P. - (ISA) and Financiera de Desarrollo Nacional.~~Currently, Ms. ~~López has served as~~González is a ~~Director~~non-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)~~Gomez (62)~~was president~~served as CEO of General Motors for South America ~~and has~~from the year 2010 until February 2016. Within General Motors he held ~~various~~different positions ~~within General Motors. Among these, he acted~~such as President for Brazil and Mercosur; CFO for Latin America, Africa and the Middle East; CEO 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. He also served as Managing Director in Colombian Operations for ~~N.M~~N.M. Rothschild and Sons and Secretary General of the Ministry of Industry and Trade in Colombia. Mr. Ardila holds a 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 aChairman of the Board of Goldman Sachs BDC, member of the Board of Directors of ~~Goldman Sachs BDC,~~ Accenture ~~Council~~and founder of the ~~Americas and the Chamber of Commerce of Brazil.~~consulting firm The Hawksbill Group. Mr. Ardila has served as a Director of Ecopetrol’s Board of Directors since March 31, 2016. Currently Mr. Ardila is an independent Director of ~~Ecopetrol´s Board.~~Ecopetrol’s Board of Directors.

Carlos Alfredo Cure Cure ~~(72)~~(74)~~was~~served as Ambassador of Colombia ~~to Venezuela. He~~in Venezuela from August 5, 2011 until June 22, 2013. Before serving as ambassador, Mr. Cure was appointed CEO of Bavaria S.A., the largest brewery in Colombia. ~~He also served as~~Additionally, he was an advisor to the Board of ~~the Olympic Group~~Directors of Grupo Olimpica S.A. and member of the Board of Avianca S.A. (Colombia’s national airline)~~.He~~. He acted as deputy financial manager of Cementos del Caribe, CEO of Cementos Toluviejo and CEO of Astilleros Unión Industrial. Mr. Cure holds a degree in Civil Engineering from the National University of Medellin. Mr. Cure has served as aan independent Director of ~~Ecopetrol´s~~Ecopetrol’s Board of Directors since September 5, ~~2015.~~2015, in which he currently is the chairman of Ecopetrol’s Board of Directors. Currently Mr. Cure is an independent Director of ~~Ecopetrol´s Board.~~Ecopetrol’s Board of Directors.

Joaquín Moreno Uribe ~~(68)~~(69)earned a degree in civil engineering from Universidad Industrial de Santander and completed a The Advanced Management Program (AMP) at The Harvard University Business School. Mr. Moreno worked initiallystarted his career as Director for Constructions and Engineering of Urbanas, in Bucaramanga, Colombia. He joined then ~~joined~~ the Royal Dutch/Shell Group (RDS) of companies for more than 33 years. His career ~~with~~in Shell ~~included various positions~~was comprised by different roles at technical, ~~managerial~~management and leadership levels, in different sectors of the Oil & Gas Industries (Upstream and Downstream), Chemicals, Metals and Coal. He has worked ~~in different countries in~~across America and Europe, including several appointments at regional, global and corporate levels at the Headquarters of the RDS Group in London and The Hague. Mr. Moreno has also served as Country Chairman and President for Shell in Mexico, Colombia and Venezuela, as well as Regional CEO for the Northern Latin American ~~Region.~~Region (Peru, Ecuador, Venezuela, Colombia and Mexico). On his return to Colombia, he was appointed by the ~~Presidency~~President of the ~~Country,~~Republic, as High Presidential Commissioner ~~–Ad~~– 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.~~Joaquin Moreno earned a degree in civil engineering from Universidad Industrial de Santander and completed an Advanced Management Program (AMP) at Harvard University Business School. .Mr. Moreno has been a member of the boards of directors of various local and international companies, as well as ~~educational~~academic Institutions and ~~leadership institutions~~Think Tanks of Management and Leadership initiatives. Mr. Moreno has served as aan independent Director at Ecopetrol’s Board of ~~Ecopetrol´s Board~~Directors since March 27, 2008. During this period, he has acted as president of the Audit and Risk Committee, of the Compensation and Nomination Committee, as well as of the Business Committee.

Hernando Ramirez Plazas (64) 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 area of natural gas. Additionally, he has acted as a trainer in gas issues for production personnel at Canacol Energy Inc., and he currently provides professional services to Comfamiliar Huila. Mr. Ramirez is a Chemical Engineer graduated from Universidad Nacional de Colombia, with a Master's Degree in Public Health from the same University, and a Specialization in Gas Engineering from Universidad de Zulia (Venezuela). Currently, ~~Mr. Moreno~~Dr. Ramírez is an independent ~~Director~~member of ~~Ecopetrol´s Board.~~Ecopetrol’s Board of Directors.

~~Horacio Ferreira Rueda (47)~~ is an executive leader with more than 20 years of international experience in the oil industry. His knowledge and expertise stem from positions as CEO and President of an oilfield services company in Houston, TX to application of state of art technologies in the oil industry. He has led and executed numerous reservoir engineering projects in the Americas, Europe, Africa, Middle East and Far East and has conducted research 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 Petroleum 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. Mr. Ferreira 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 of Ecopetrol´s Board, nominated by the hydrocarbon producing provinces of Colombia.

Carlos Gustavo Cano Sanz ~~(70)~~(71)has been President of the Colombian Agriculture Association (SAC); founder and director of Corporación Colombia Internacional (CCI); President of the Agrarian Fund; President of the newspaper El Espectador; and he currently ~~serves as Professor~~teaches in the Master of Corporate Finance at ~~CESA. He was Director of Banco~~CESA University and in Universidad de ~~la República from February 4, 2005 to January 31, 2017.~~los Andes in the Business School. 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 a~~in England; postgraduate ~~degree~~ in Government, Business and International Economics ~~from~~at Harvard University in Boston and ~~from~~postgraduate studies at the ~~Institute~~Instituto de Alta Dirección Empresarial (INALDE) of ~~Higher Business Management (INALDE)~~Bogotá. He ~~has served as~~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,~~of the ~~National Coffee Growers~~Consultative Committee ~~among others. He doesn’t serve as a Director~~for Agriculture of ~~joint-stock company.~~Bancolombia, and of 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 is 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, 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 the Board may~~position and, 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 Director of State Participations 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~~23, 2018. 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 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 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 the ability to constitute the committees it considers necessary. The Board of Directors currently has four committees (audit and risk committee, corporate governance and sustainability committee, compensation and nomination committee and business ~~committee), which~~committee. 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 6560 – Composition of committees of the Board of Directors as of ~~April 20, 2017~~March 22, 2018

* Not elected to the Board of Directors at the General Shareholders Ordinary Meeting on March 23, 2018. Replacement will be elected to the Audit and Risk Committee after this annual report.

** Not elected to the Board of Directors at the General Shareholders Ordinary Meeting on March 23, 2018. Replacement will be elected to the Corporate Governance and Sustainability Committee after this annual report.

*** Not elected to the Board of Directors at the General Shareholders Ordinary Meeting on March 23, 2018. Replacement will be elected to the Business Committee after this annual report.

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 audit and risk committee will have no doubt that these additional services do not compromise 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.

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 (52)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 2526 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.

María Fernanda ~~Suárez (42)~~Suarez (43) has served as the Chief Financial Officer of Ecopetrol since August 2015. Ms. Suárez holds a degree in Business Administration from CESA and a master’s degree in Policy Management from Georgetown University. Ms. Suárez has 2022 years of experience in the public and private sectors. She has held various positions in these sectors, including Director of Public Credit and National Treasury at Ministry of Finance and Public Credit, ~~in the Treasury Department,~~Chief Investment ~~Chief~~ Officer at Porvenir (largest asset manager in Colombia with AUM~US$40 billion) and 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.~~and Ocensa.

Hector Manosalva~~(54)~~ (56) joined Ecopetrol in 1986 and has 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.

Max Torres ~~(59)~~(60)has served as Exploration Vice-President since September 2014. Mr. Torres holds a B.S. degree in Geology from Universidad Nacional of Tucumán in Argentina and an M.S. in Stratigraphy from Georgia State University. He has more than 28 years of experience in oil and gas exploration and production and is a proven world class oil and gas finder and a champion 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 as 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. *Voluntary resignation effective May 7, 2018.

Rafael Espinosa ~~(49)~~(50)has served as Vice-President of Transportation since September 2016. Mr. Espinosa holds a bachelor’s degree in Civil Engineering from Universidad Santo Tomas in Colombia and a MBA from ~~University of the~~Universidad de los 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)~~(51) 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 has held several positions as regional production manager. Prior to that, Mr. Guzman worked with ENI in managerial positions in Europe and Latin America.

~~Luisa Fernanda Lafaurie (56)~~Alberto Consuegra Granger (58) has served as ~~Cenit’s Chief Executive Officer~~Vice-President of Supply and Services since ~~September~~August 2016. ~~Ms. Lafaurie~~He is currently deputizing as President for Cenit Transportes, Ecopetrol’s brand in the Midstream segment. Mr. Consuegra holds a degree in ~~Economics~~Civil Engineering from ~~the~~ Universidad ~~Javeriana with~~de Cartagena and has a ~~Master’s Degree~~master’s degree in ~~Business Administration~~Pavements and ~~a Degree in Finance and Senior~~Construction Management from ~~Los Andes University (Bogotá). Ms. Lafaurie has accumulated extensive experience~~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 period 2011-2016. Alberto 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, working in the ~~energy sector, both in the public~~projects Group, afterwards, he went on to BP Exploration, where he worked for 16 years starting as a contract coordinator, then as procurement 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 advisorcontract manager, then human resource manager for the ~~Synergy Group corporations in Colombia with the exception of Avianca. Ms. Lafaurie worked at Carbocol (1985-1996)~~Andean area, and ~~has served~~finally as ~~a member~~leader of the ~~board~~Colombian Performance Unit until end 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, Financiera de Desarrollo Nacional (FDN), Emgesa, Ocensa and Oleoducto Bicentenario.2010.

Tomas Hernandez ~~(62)~~(63) has served as Vice-President of Refining and Industrial Processes in Ecopetrol since February 2016. He has over 3739 years of ~~international~~multinational experience in the field of oil and gas sector. He has ~~served~~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 ~~participates.~~holds a 30% interest. Mr. Hernandez ~~holds a degree in Chemical Engineering~~graduated from the University of Missouri – Rolla (University of Science and Technology Missouri). in 1978 with a Bachelor of Science Degree in chemical engineering.

Jürgen Loeber ~~(59)~~(60) 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 experience in the Oil & Gas industry. 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. 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)~~(53) was named Commercial and Marketing Vice President as of April 2017. Mr. Manrique holds a bachelor’s degree in Electrical Engineering from the Universidad Industrial ~~University of~~de 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)~~(48) has served as Vice-President of Transformation since December 2015. Mr. Vargas holds a degree in Petroleum Engineering from America University. He has 2325 years of experience across 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.

Fernán Ignacio Bejarano Arias ~~(60)~~(61) 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 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 at 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, 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 arbitrator before the Center for Arbitration and Conciliation of the Bogotá Chamber of Commerce.

María Juliana ~~Albán~~Alban (41) 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 2007, Ms. Alban has 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)~~(58)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 Mantilla ~~(46)~~(47) 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, 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 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)~~(58) has served as Vice-President of Sustainable Development and Environmental since August 2015. Mr. Uribe holds a degree in Agricultural Engineering from Caldas University, a master’s of science in Soil Chemistry and a Ph.D. in Fertility and Management of Tropical Soils. He has over 25 years of experience in the private and public sectors. In 1994, he was appointed the first Vice-Minister of the Environment in Colombia. In recent years he has served as a strategic, environmental and social advisor to companies and organizations in the fields of hydrocarbons, mining, energy, forestry, environmental and agribusiness through the consulting firm Optim Consulting.

~~Alberto Consuegra Granger (57)~~Carlos Andrés Santos Nieto (40)has ~~served~~been temporarily appointed as Vice-President of Supply and Services since ~~August 2016.~~February 2018. Mr. ~~Consuegra~~Santos is an Economist from Universidad Externado de Colombia and holds a post-graduate degree in ~~Civil Engineering~~International Economics from ~~Cartagena University~~the same institution and ~~has~~ a ~~master’s degree~~college diploma course in ~~Pavements~~Advanced Negotiations from Universidad CESA several and ~~Construction Management from Texas A&M University.~~other negotiations training provided by BP in Colombia, Alaska and London. His latest position was ~~Vice-President of Exploration~~Procurement and ~~Production~~Supply Chain Manager at the Company. Prior to joining the Company, he served as Offshore Business Unit General Manager in Coremar Group and 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)~~(42) has served as Secretary General of Ecopetrol SA since July 2016. Ms. Jiménez holds a law degree from University of the Andes (Bogotá) and has been allowed to practice 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 (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.

None of our Directors or executive officers has any familial relationship with any Director or executive officer.

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$4.4 million for 2017 and COP$4.1 million for ~~2016 and COP$3.9 million~~2016. See Note 3.1 to our consolidated financial statements for ~~2015. Fees 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~~2017 during ~~2016~~2017 amounted to COP$~~13,901 million.~~20.12 billion.

Only one of our executive officers is eligible to receive pension and retirement benefits from us. The total amount set aside to provide pension and retirement benefits to our eligible executive officers totals COP$~~4,674~~5,401 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,~~2017, 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 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,~~2017, 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, 2017 and December 31, 2016 were audited by Ernst & Young Audit S.A.S. Our consolidated financial statements for the fiscal ~~years~~year 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, 2017 and December 31, 2016.

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 tax fees listed in the table above correspond to (i) advising some subsidiaries about the tax consequences associated with new or proposed legislation, and (ii) rendering advice to some subsidiaries on the likely tax consequences of proposed transactions and the appropriate methods of structuring and reporting.

~~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~~2017 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,~~2017, please see Note ~~36 – Subsequent eventsto~~35 to our consolidated financial statements.

~~At December 31, 2016 and 2015 and for three years ended December 31, 2016, 2015 and 2014~~

At December 31, 2017 and 2016 and for three years ended December 31, 2017, 2016 and 2015

~~The~~To the Shareholders and the Board of Directors ~~and Shareholders~~ of Ecopetrol S.A. and subsidiaries

We have audited the accompanying consolidated ~~statement~~statements of financial position of Ecopetrol S.A. and subsidiaries (the Company) as of December 31, 2017 and 2016, ~~and~~ the related consolidated statements of profit or loss, ~~other~~ comprehensive income, changes in equity, and cash flows, for the ~~year~~years ended December 31, ~~2016. These financial statements are~~2017 and 2016, 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 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, 2017 and 2016, and the ~~consolidated~~ results of ~~their~~its operations and ~~their~~its cash flows for the ~~year~~years ended December 31, 2017 and 2016, 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,~~2017, 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 19, 2018 expressed an unqualified opinion thereon.

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.

~~The~~To the Shareholders and the Board of Directors ~~and Shareholders~~ of Ecopetrol S.A. and subsidiaries

We have audited Ecopetrol S.A. and subsidiaries’ internal control over financial reporting as of December 31, ~~2016,~~2017, 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. and ~~subsidiaries’~~subsidiaries (the Company) maintained, in all material respects, effective internal control over financial reporting as of December 31, 2017, 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, 2017 and 2016, the related consolidated statements of profit or loss, comprehensive income, changes in equity and cash flows for the years ended December 31, 2017 and 2016, and the related notes and financial statement schedules on exhibits 1 and 2, and our report dated April 19, 2018 expressed an unqualified opinion thereon.

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.

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 relatedaccompanying consolidated statements of profit orand 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.~~

~~In our opinion, the accompanying consolidated statement of financial position and the related consolidated statement of profit and loss, other comprehensive income, changes in equity and cash flows~~2015 present fairly, in all material respects, the ~~financial position~~results of operations and cash flows of Ecopetrol ~~S. A.~~S.A. and its subsidiaries (the ~~¨Company¨~~“Company”) ~~at December 31, 2015, and~~for the ~~results of their operations and their cash flows for each of the two years in the period~~year 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.~~audit. We conducted our ~~audits~~audit 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.~~

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.

(~~Figures expressed~~Expressed in millions of Colombian pesos, except for the ~~net~~ earnings (loss) per share expressed in ~~Colombian~~full pesos)

~~(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.~~

Notes to ~~Consolidated Financial Statements~~the consolidated financial statements

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.

These consolidated financial statements of Ecopetrol and its subsidiaries as of December 31, 2017 and 2016 and for the years ended on December 31, 2017, 2016 ~~2015~~ and ~~2014~~2015 have been prepared in accordance with International Financial Reporting Standards (IFRS) ~~and their interpretations,~~, 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.

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 19, 2018.

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:~~Group:

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 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 interest represents the proportion of profit, other comprehensive income and net assets in subsidiaries that are not attributable to ~~Ecopetrol’s~~Ecopetrol shareholders.

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:~~2017:

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.

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 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.

InTransactions in foreign currencies are initially recorded by the ~~preparation of the financial statements of Ecopetrol, transactions in currencies other than the Company’s~~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.

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.

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.

Other assets and liabilities are classified ~~in accordance with their maturities between current, those with maturity equal to or less than twelve months,~~as non-current.

Deferred tax assets and liabilities are classified as non-current ~~those with maturity exceeding twelve months.~~assets and liabilities.

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.

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 Group based ~~on the best available data for realized facts. Uncertainty on the~~its assumptions and ~~estimations~~estimates on parameters available when the 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 following are accounting judgments and estimates with the most significant effect for preparing the financial statements:~~

Measurements relating to depreciation, depletion, amortization, impairment and asset abandonment obligations are determined, in part, based on the Company's estimated reserves of oil and natural gas. Reserves estimation is an inherently complex process and it involves professional judgments.

Notes to ~~Consolidated Financial Statements~~the consolidated financial statements

In the process of applying the Group’s accounting policies, management has made the following judgments and estimates which have the most significant impact on the amounts recognized in the consolidated financial statements:

Hydrocarbon reserves are estimates of the amount of hydrocarbons that can be economically and legally extracted from the Group’s oil and gas properties.

The reserves estimation is conducted 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) of SEC Regulation 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, 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.

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 15 and 16.

~~The Company~~Management uses its professional judgment in assessing the existence of evidence of an expense for (recovery of) impairment, 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 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 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.

Future oil price assumptions are estimated at current market conditions. Expected production volumes, which comprise ~~proved~~proven and unproved 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.

The application of the 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~~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 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.

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~~ of non-financial assets for more information.

According to environmental and oil regulations, the ~~Company must recognize~~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.

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~~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.

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 assets. Due to the complexity ofin the valuation of these variables, as well as ~~the~~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.~~

~~The Company~~In December of each year, the 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 4.12 and its calculation requires assumptions and ~~estimations.~~estimates. The ~~Company~~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.

The ~~Company~~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~~Group and claims not yet initiated. A provision is recognized when the ~~Company~~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 such obligation can be made.

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~~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~~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~~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.

The process of identifying ~~hedge relations among~~ hedging ~~elements~~relationships between hedged items and the underlying instruments (derivative and non-derivative such as ~~long term debt in~~long-term foreign ~~currency)~~currency-denominated debt), and ~~the related~~their corresponding effectiveness, requires ~~management judgment.~~the use of judgment by management. The ~~Company~~Group periodically ~~assesses~~monitors the alignment between ~~identified hedges~~its hedge instruments and its risk management policy.

The accounting policies indicated below have been applied consistently ~~applied in~~for all the periods ~~presented, unless otherwise indicated.~~presented.

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 are ~~stated~~measured subsequently measured at amortized cost using the effective interest method.

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 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.

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::

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.

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.

The ~~Company assesses, at~~Group evaluates, on each reporting date, ~~whether~~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.

Ecopetrol derecognizes a financial asset only upon the expiration of the contractual rights to ~~receive~~the cash flows ~~from~~of the ~~financial~~ asset or, when it has transferred its rights to receive such cash flows ~~from the asset~~ or has ~~assume an~~assumed the obligation to pay the ~~received~~ cash flows received in full without material delay to a third party and ~~either~~ (a) it has transferred substantially all the risks and ~~rewards~~benefits inherent in the ownership of the financial asset or (b) it has neither transferred nor retained substantially all the risks and ~~rewards~~benefits of the asset, but has transferred control of the asset.

When the ~~Company~~Group does neither transfer nor retain substantially all the risks and ~~rewards~~benefits of the asset ~~nor transferred~~or transfer control of the asset, the ~~Company~~Group continues ~~recognizing~~to recognize the transferred asset, to the extent of itits continuing ~~involvement,~~participation, and it also recognizes anthe associated liability.

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.

The ~~Company~~Group classifies its financial assets in the following categories:

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~~They are recognized at their fair value ~~through profit~~and losses or ~~loss~~profits arising at the time of re-measurement are ~~carried at fair value with net changes in fair value~~ recognized in the statement of profit or loss.

These are equity instruments of other non-controlled and non-strategic companies not allowing for any type of control or ~~material~~significant influence thereon and where the ~~Company~~Group’s management isdoes not ~~intended~~intend to negotiate with them in the short-term. These ~~instruments~~investments are ~~recognized for~~recorded at their fair value and unrealized ~~losses~~gains or ~~gains~~losses are recognized in other comprehensive ~~income. The sales revenues received by these equity instruments are recognized as financial sales revenues in~~income and credited to the ~~period results.~~

Atavailable for sale reserve until the investment is derecognized, at which 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~~gain or loss ~~in sale are~~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.

Loans and receivables are 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.

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.

Financial liabilities correspond to the financing obtained by the ~~Company~~Group through bank credit facilities and bonds, accounts payable to suppliers and creditors.

Bank credit facilities and bonds are initially recognized at their fair value, net of 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 method. The effective interest method amortization is included as a financial expense in the statement of profit or loss.

Accounts payable to suppliers and creditors are ~~short term~~short-term financial liabilities recorded at ~~their~~ nominal value, ~~which~~since it does not significantly differ ~~significantly~~ from ~~their~~ fair value.

A financial liability is derecognized when the obligation ~~under~~specified in the ~~liability~~corresponding contract is ~~discharged~~paid or ~~cancelled expires.~~expired. 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.

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 on which the derivative is ~~entered into~~recorded and ~~are~~ subsequently measured 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 and 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.

At the inception of ~~a hedge~~the hedging 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~~together with its risk management objectives and strategy to perform hedging transactions. ~~Furthermore, such~~Such hedges are expected to be highly effective in achieving offsetting changes in fair value or cash flows and ~~are~~are; assessed on an ongoing basis to determine that they ~~actually~~ have been highly effective throughout the financial reporting periods for which they were designated.

Hedging instruments are classified as non-current assets or liabilities when their expiration is more than 12 months from the statement of financial position date, otherwise they are classified as current assets or liabilities.4.1.5.1Cash flow hedge

The effective portion of the gain or loss onof the hedging instrument is recognized in other comprehensive income, while any ineffective portion is recognized in the consolidated statement of profit or loss, in the net financial results line item.

The amounts previously recognized in other comprehensive income are transferred to profit or loss, when the hedged transaction affects profit or loss. When the hedged item is the cost of a non-financial asset or liability, the amounts previously recognized in other comprehensive income are transferred ~~and included in~~to the initial carrying amount ~~of the cost~~ of the non-financial 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 term~~long-term loans as hedging ~~instrument~~instruments for ~~their~~its exposure to the exchange risk in future oil exports. See Note 3130 for further information.

Hedges of net investment in a foreign operation are accounted ~~for~~ in a way similar to the cash flow hedges.

Gains or losses on of the hedging instrument related to the effective portion of the hedge are recognized in other comprehensive income, while any gains or losses relating to the ineffective portion are recognized in the statement profit or loss. Cumulative gains or losses recorded in equity is transferred to the consolidated statement of profit or loss when the foreign ~~subsidiary~~operation is partially or totally disposed of.

Ecopetrol ~~uses long term~~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 3130 for further information.

Inventories mainly comprise crude oil, fuels and petrochemicals and consumable inventories (spares and supplies).p.

The ~~crude~~cost required to bring the 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 is ~~reversed.The~~reversed. The reversal cannot be greater than the amount of the original write-down, so that the new carrying amount will always be the lower of the cost and the revised net realizable value.

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~~Group considers related parties to be associates, joint ventures, key management executives, entities managing resources for payment of employee 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 4.16).

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 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 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 is not tested for impairment separately.

The ~~Company's~~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.~~Group.

After application of the equity method, the ~~Company~~Group determines if it is necessary to recognize an impairment ~~loss~~ on its investment in its associate. At each reporting date, the ~~Company~~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~~Group makes adjustments to the accounting policies of associates to ensure consistency with the policies adopted by the ~~Company. In addition,~~Group. Additionally, the equity method of these companies is measured on their most recent financial statements.

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.

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 partner, it records the assets, liabilities, sales revenues, ~~costs~~cost of sales and expenses based on the ~~operators'~~operator’s report. When Ecopetrol is the direct operator of ~~the~~ joint venture contracts, it records its percentage of ~~the~~ assets, liabilities, sales revenues, costs and expenses, based on the participation of each ~~partner’s participation interests~~partner in the items corresponding to assets, liabilities, ~~expenses,~~sales revenues, costs and ~~sales revenues.~~expenses.

When the 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.

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 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. See Note 13 for further information.

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 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 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.

~~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.

Property, plant and equipment is depreciated using the straight-line method, except for those associated with exploration and production activities which are depreciated using the 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.

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:

Land is recorded separately from buildings and facilities and ~~they are~~is not subject to depreciation.

Depreciation methods and useful lives are reviewed annually and adjusted if appropriate.

~~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)

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.

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 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.

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.

Depletion of natural and environmental resources is determined using the 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 by internationally recognized external consultants and approved by the Company’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.

Assets associated to exploration, evaluation and production are subject to review for possible impairment in their ~~recoverable~~carrying amount. See notes 3.2 – Asset impairment (recovery) and 4.12 - Impairment ~~in the value~~ of non-financial assets.

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~~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~~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.

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 line~~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.

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~~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.

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 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.

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 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.

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 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”; 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 of the ~~group~~Ecopetrol Business Group and for the ~~segment of~~ Transportation segment; each pipeline is taken as 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~~statement 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~~

(Figures expressed in millions 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.Colombian pesos, unless otherwise stated)

~~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.

~~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.

Provisions are recognized when Ecopetrol has a current obligation (legal or implied) 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 specific risk.

~~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.

Liabilities associated towith the retirement of assets are recognized when there are current obligations, either legal or implied, 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 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 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 specific risk. 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 the ~~Consolidated~~consolidated statement of profit or loss. The financial cost of updating these liabilities is recognized in results for the period as financial expense.

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 within fiscal jurisdictions and an intention to settle such balances on a net basis.

The ~~Company~~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.

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~~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 Group 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 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 Group companies and, therefore, will not be distributed to Ecopetrol.

The ~~Company~~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.

Salaries and benefits for Ecopetrol staff 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, 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 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~~Group is determined by means of a mortality table, prepared based on facts occurring during the year.

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 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 they can be returned to the ~~Company~~Group until all of the pension obligations have been fulfilled. The commuted obligation covers allowances and pension bonds payments; while health and education remains under the labor liability in charge of Ecopetrol.

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 benefits of defined contributions correspond to the periodic payments for severance, pensions and labor risk payments that the ~~Company~~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.

In the defined benefits plan, the ~~Company~~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 defined benefit plans recognized in the financial statements according to the calculations of an independent actuary:

Liabilities recognized in the statement of financial position in respect of these benefit plans are 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 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 discount rate, future salary increases, mortality rates and future pension increase. Because of the complexity of the calculation, the underlying assumptions and 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 latest version is the RV08 mortality table published in resolution 1555 of October 2010. The future salary and pension increases are linked to the country's future inflation rates. Note 22 - Provisions for employee benefits provides further details on key assumptions used.

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 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~~

(Figures expressed in millions 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.~~Colombian pesos, unless otherwise stated)

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.

Other long-term benefit is the 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~~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 are recognized only when a detailed plan exists for such process and there is no possibility to withdraw the offer. The ~~Company~~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.

Sales revenue from crude oil and natural gas sales is recognized at the time of transfer of title to the buyer, including risks and rewards of ownership. In the case of refined and petrochemical products, sales revenue is recognized when products are shipped by the refinery and subsequently adjusted in accordance with price changes when dealing with regulated price ~~products.~~products, as explained bellow. Sales revenue from transportation services is recognized when products are transported and delivered to the buyer in accordance with ~~sale~~contractual terms. In all other cases, sales revenue is recognized at the time it is earned and a true, probable and quantifiable right to demand its payment arises.

Under current regulations, Ecopetrol and Refinería de Cartagena S.A., sell regular gasoline and mid-distillates 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 throughout the six-month period and the result is an~~ amount ~~in Colombian pesos in favor of the Company and chargeable~~ to ~~the FEPC. The differential~~be settled is calculated as the volume ~~reported by~~sold during the ~~Company at the time of sale~~corresponding period multiplied by the difference between the international parity price and the ~~regulated price.~~reference price actually charged. The net position is calculated by adding all differentials throughout the six month period in Colombian pesos in favor of the Group and chargeable to the FEPC. The international parity price is the daily price of gasoline and diesel oil of the respective month in Colombian pesos, indexed to the United States of America Gulf market price, calculated in accordance with Resolution 18 0522 of ~~2010 and~~2010. The reference price is the ~~Producer Price reference defined~~price per gallon fixed by the Ministry of Energy and Mines, ~~and Energy.~~at which refiners or importers sell gasoline or diesel to the national market. Therefore, this difference represents a higher or lower value of ~~sale~~ sales revenues for Ecopetrol S.A. andRefinería de Cartagena S.A.

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.

~~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 term~~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 presents the respective disclosures relative to its business segments in its consolidated financial statements in accordance with paragraph 4 of IFRS 8 - Operation segments.

The operation of the Ecopetrol Business Group is performed through three business segments: 1) Exploration and ~~production,~~Production, 2) Transport and ~~logistics,~~Logistics, and 3) Refining, ~~petrochemical~~Petrochemical and ~~biofuels.~~Biofuels. This segmentation is based on management of objectives and corporate strategic plan, considering that these businesses: (a) are engaged in differential commercial activities, which generate sales ~~revenues~~revenue and incur costs and expenses; (b) the operational results are revised regularly by the 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 segments and are registered and presented at market prices.

~~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)

Ecopetrol adopted for the first time the following amendments to the IFRS issued by the IASB, applicable for the period covered by this report:

The following ~~rules, interpretations~~accounting standards will become effective in future periods and ~~amendments issued by the IASB~~ are ~~applicable to yearly periods commencing on January 1, 2017~~being implemented and ~~thereon:~~/or assessed:

In relation to classification and measurement, the Group made and assessment on its financial assets and liabilities and concluded that: a) the valuation of financial assets and liabilities measured at amortized cost is consistent with the Group’s business model, which seeks to pay or receive cash flows at a certain moment; b) the amortized cost valuation method does not apply to short-term accounts payable and receivables, as they do not have an associated interest rate and their settlement is less than one year; and c) investment portfolios and financial derivatives continue to be measured at fair value with changes in fair value through profit or loss, in compliance with their function within the Group’s business model.

Based on the aforementioned evaluations, the current classification of the Group's financial instruments is consistent with its business model and no significant change to the current accounting is expected.

With respect to the impairment assessment model applied to financial assets valued at amortized cost, Management believes that the adoption of IFRS 9 will not result in any impact, taking into account processes executed to monitor credit risk, knowledge prior to the financial situation of the counterparties with which transactions are made, and the quality of the portfolio.

Finally, with respect to the hedging accounting model, as an accounting policy, the Group decided to continue applying the guidance of IAS 39 for existing operations. Should Ecopetrol decide to establish new hedges, the requirements of IFRS 9 will be assessed to establish the relationship of those hedges to and their alignment with risk management objectives, as well as the qualitative and quantitative components to be considered for effectiveness of the assessment.

The Ecopetrol Business Group will apply this standard on January 1, 2018, using the modified retrospective method, which allows adjusting the calculated impacts within equity, at the date of initial application, without adjusting the comparative years. Management estimates that the adoption of the new standard ~~is applicable~~will not have a material effect; nevertheless, the adoption will required the implementation of new internal controls, changes in accounting procedures and policies to ~~all entities~~allow documentation on the adoption of the standard and ~~will derogate all previous standards~~its future application.

During the process of implementing IFRS 15, sources of ordinary income were assessed, considering the identification of contracts with customers, performance obligations, the determination of transaction prices, the association of prices with performance obligations, and the recognition of income when such obligations are fulfilled. The analysis included the following aspects by segment:

Exploration and production: Revenues in this segment correspond to the sale of oil and natural gas. The Group assessed the following: agreements with partners in joint operations, long-term contracts, over and underlifting, production, royalties, role of principal and agent, purchase and sale agreements, take-or-pay agreements and variable price components. No significant impacts were identified for the recognition, measurement or presentation of revenue in this segment.

The Group assessed whether the operating partner in a joint operation can have a contract with another non-operator partner to market and sell the non-operator product to a third party. The analysis included whether one of the parties acts as principal or agent in the agreement. The operator evaluates whether it records gross income based on ~~sales~~total production or net income based on its net operating interest. The non-operator evaluates the moment of revenue recognition. The Ecopetrol Business Group does not maintain significant agreements with non-operating partners whereby it assumes the role of agent.

Transport and Logistics: Revenues in this segment correspond to the income from transport, storage and wholesale commercialization of crude or refined products derived from petroleum either by pipeline, rail, barge or truck. Pipelines and other transportation systems can be used to move crude oil from production sites to refineries and deliver the various refined products to fuel distributors. The main aspects evaluated are ship or pay and ship and pay contracts, variable price components and deposit agreements. The Ecopetrol Business Group has evaluated the performance obligations established in the provision of service, noting that there are no conditions with effects on the variable price related to volumetric adjustments or other contractual conditions that prevent recognition of income.

Take-or-pay contracts: Commodity sales contracts and some firm storage and transportation contracts can be structured as more complex purchase or minimum payment contracts, which specify minimum quantities of product that a customer will pay, even if they choose not to receive or use them. The quantities of products that a customer chooses not to take or use in the specified delivery period are called "deficient quantities."

No significant impacts were identified for recognition, measurement or reporting of revenue for this segment.

Refining, Petrochemicals and Biofuels: Revenues in these segments correspond to the refining of oil, the processing and purification of natural gas, and the production of petrochemicals and biofuels. The main aspects assessed are long-term contracts, variable price components, non-monetary agreements, discounts, financing components and refinery network deliveries. No significant impacts were identified for the recognition, measurement or reporting of revenue for this segment.

For each of these segments, income is recognized when the goods or services have been delivered to customers at the established delivery points (when the performance obligation is fulfilled), whereby the transfer of the goods takes place and the risks associated with the products have been accepted by customers.

Regarding the agent and principal structure, as part of the process of selling products or services, the Ecopetrol Business Group enters into contracts to acquire, on behalf of the customer, other products or provide services. Under these contracts, the Ecopetrol Business Group is considered as the entity responsible for fulfilling the specific performance obligation. In some cases an inventory risk is not maintained before or after having sold the good or rendered the service. The Ecopetrol Business Group has assessed the impact on recognition in both cases and does not expect significant effects in the adoption of the new standard.

As a result of the analysis of these segments, it was concluded that: a) for contracts with several performance obligations, the Group concluded that such contracts are interdependent; therefore, the prices assigned are not independent and the application of a pricing methodology was not required; b) the Ecopetrol Business Group acts as principal in its transactions where it controls assets before transferring them to a client; c) the Group recognizes variable considerations in transaction prices unless they cannot be reliably measured, in which case the recognition is deferred until the uncertainty is resolved; d) the product's method is used by the Group to recognize income from long-term contracts with partial deliveries of goods; e) no effects associated with contract costs were identified when they were recognized in the accounting period and capitalization of the costs is not required; and, f) non-monetary agreements are recognized at fair value.

IFRS 16 "Leases" contains a new model for the identification of leases and their treatment in the financial statements for lessees. As a result of its implementation, oil and gas companies could recognize more assets and liabilities, mainly derived from the rental of drilling equipment and offices.

Ecopetrol has completed its initial assessment and started an action plan for its implementation. The Group will continue to perform a more detailed analysis of the potential impact on the financial statements from the adoption of IFRS 16 and does not expect to adopt it in advance.

The amendments address the conflict between IFRS 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 constitutes a business, as defined in IFRS 3, between the investor and its associate or joint venture, is recognized in its entirety. However, any gain or loss resulting from an asset sale or contribution that is not a business, is recognized only up to the interests of investors who are not related to the associate or joint venture. The IASB has deferred the effective date of these amendments indefinitely, but an entity that early adopts it must apply them prospectively.

~~Ecopetrol is not expecting to adopt~~The Interpretations Committee reached 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.following conclusions:

These new accounting policies are ~~no new or amended standards or interpretation adopted in 2016 that had a material impact~~subject to change until the Group presents its first financial statements on the ~~consolidated financial statements.~~initial application date.

~~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)

~~The balance of cash~~Cash and cash equivalents atdetails as of December 31, 2017 and 2016 ~~and 2015~~ is ~~comprised~~ as follows:

As of December 31, 2017, cash and cash equivalents balance included COP $ 96,758 and COP $ 114,206 as of December 31, 2016, ~~it includes~~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 financial investments depends on the liquidity ~~requirements~~needs of the ~~Company.~~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.~~nature.

The ~~average~~ return on cash and cash equivalents ~~as of~~for the year ended December 31, ~~2016~~2017 was ~~3.5% (2015~~approximately 4.2% (2016 - ~~2.6%~~3.5%).

The following table reflects the credit quality of issuers ~~and counterparties~~of investments included in ~~transactions involving~~ cash and cash ~~equivalents is described~~equivalents:

The balance of trade and other receivables, net of ~~provision~~allowance for doubtful accounts, is comprised as follows atas of December 31, ~~2016~~2017 and ~~2015:~~2016:

The following shows the changes in the allowance for doubtful accounts ~~related to trade~~for the year ended December 31, 2017 and ~~other receivables, provisioned in full, at December 31:~~2016:

The balance of ~~Inventories,~~inventories, net of ~~a provision at~~allowance for losses, as of December 31, 2017 and 2016 ~~and 2015~~ is ~~comprised~~ as follows:

The following ~~shows a breakdown~~is the changes of the ~~changes in~~allowance for losses, for the ~~provisions for inventories:~~years ended December 31, 2017 and 2016:

The balance of other financial assets atas of December 31, 2017 and 2016 ~~and 2015~~ is ~~comprised~~ as follows:

The average return ~~on investments~~of the investment portfolio in Colombian pesos and USU.S. dollars ~~portfolio~~ was 7.4% (2016- 8.1% ~~(2015 - 5.5%~~) and ~~0.8% (2015~~1.1% (2016 - ~~0.5%~~0.8%), 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)~~(Note 29).

As of December 31, 2017 and 2016, 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.~~with a restricted use.

On November 6, 2016, through the Ministries of Mines and Energy and Finance and Public Credit, the termination of Ecopetrol's ~~condition as~~ sequester status in the process ~~for~~of nullity and re-establishment of rights filed against the Comuneros de Santiago de las Atalayas was confirmed. In view of the foregoing, the restricted ~~resources~~assets related to this case ~~belong to~~were released Ecopetrol (see Note 23.3 ~~- Provisions and contingencies,~~– Comuneros – Santiago de las Atalayas provisions, for further information).

The following are the maturities of other financial assets atas of December 31, ~~2016~~2017 and ~~2015:~~2016:

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~~2017 and ~~2015:~~2016:

There were no transfers between hierarchy levels ~~during~~for the years ~~2016~~ended December 31, 2017 and ~~2015.~~2016.

The securities comprising 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 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.

~~For~~Within the investment hierarchy process, ~~of establishing levels of the fair value for investments,~~ in addition to the information used for the 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 Ecopetrol, ~~thus making~~which makes it possible to establish the appropriate hierarchy level for investments.

The following table reflects the credit quality of the issuers of other financial assets measured at fair value through profit or loss:

The balance ~~at December 31, 2016 and 2015~~ of current tax assets and tax liabilities as of December 31, 2017 and 2016 is ~~comprised~~ as follows:

~~Income tax asset is related with prepayments made by the group companies which cannot be offset with the income tax liability because they are generated by different companies.~~

~~The current~~In accordance with Law 1819/2016 (Tax Reform), the tax ~~regulations~~regulation applicable ~~to Ecopetrol~~in Colombia for the 2017 taxable year ~~2016 establish that:~~and subsequent years is as follows:

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~~entities with taxable ~~base~~income above COP$800 million, at rates of 5%, 6%, 8% and 9% per year, respectively.

For taxable year 2016, the Ecopetrol Business Group ~~has~~had companies ~~that measure taxes at the ordinary~~subject to a 40% income tax rate, ~~of 40%. Companies~~companies in free trade zones ~~are~~ subject to a 15% and 20% income tax ~~at 15%,~~rate, and other entities that were subject to statutory income tax rates in the country where they are incorporated, and some ~~have~~other entities that pay taxes under presumptive taxable income ~~calculated based on presumptive income, as explained above, and others with foreign income are taxed at the respective foreign income tax rates.~~in Colombia.

~~The impact~~As of December 31, 2017, deferred tax assets related to unused accumulated tax losses, which do not expire, amounted to COP$611,766 attributable to the Refinería de Cartagena. Such deferred tax assets were calculated based on COP$4,078,439 of accumulated income tax losses. The recognition of this deferred tax is based on the refinery's operational stability of the refinery presented in 2017, the projection of margins and the optimization of costs.

The assessment of the accumulated tax losses related to companies Ecopetrol Costa Afuera S.A.S., Bioenergy and Bioenergy Zona Franca with respect to deferred tax is mentioned in this ~~Note~~note under the chapter titled "Deferred ~~Tax on Income"~~Income Tax".

~~Effective for the year 2015, in~~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 articleArticle 290 of Law 1819 of 2016, the unused 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~~can be used based on a formula contained in said ~~article~~Article and subject to the ~~term~~terms established in ~~article~~Article 189 of the Tax Code.

(Figures expressed in millions of 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.pesos, unless otherwise stated)

Tax returns may be reviewed by the tax authorities within ~~the next~~ 5 years following the filing date and/or amendment, ~~considering that~~if the returns reflected tax losses.

~~According to law 1819~~As of the ~~general rule extended from 2 to 3 years~~year 2017, the statute of ~~limitation of~~limitations covering tax ~~returns. Tax~~ returns extemporarily filed will have a 3 year statute of limitations from 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 date of expiration or as of the filing date, when these have been filed extemporaneously. With respect to transfer pricing, the ~~offset~~statute of limitations will be 6 years.

With respect to tax returns with favorable balances, the statute of limitations will be 3 years as of the filing date of the request for devolution or ~~refund request is filed. Tax~~offsetting.

With regard to tax returns in which tax losses are ~~originated,~~offset, 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 within the last 2 years of the ~~12 year period.~~

~~Tax returns in which tax losses are offset will have a 6-year~~12-year period, the statute of ~~limitation period.~~

~~The taxable income of the tax payer cannot~~limitations will be ~~lower than 3% of its net equity as of December 31 of immediately preceding taxable period. As of~~extended up to 3 additional years from the year ~~2017, it will be at a rate~~ of ~~3.5%.~~offsetting.

The following ~~table shows~~is a ~~breakdown~~detail of the income tax recognized in profit or loss for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

The reconciliation between the income tax ~~expense~~expenses and the tax determined based on the official ~~tax~~ rate applicable to the ~~Company~~Group in Colombia is as follows:

The effective tax rate (ETR) as of December 31, ~~2016~~2017 was 42.1% (2016 - 58.3% ~~(2015: 12.7%~~). The ~~increase~~decrease compared to the previous year is mainly due to the following: a) The effect of the increase of unrecognized deferred tax assets on tax carryforwards in the group that according to the financial projections will not be able to be recovered in a predictable future, and b) the increaseDecrease in non-deductible expenses due to the ~~amendment~~effects of the ~~2015 income tax.~~transportation tax; b) Adjustment for differential of taxable bases; c) The adjustment for differential tax rates of the Group other than the nominal 40%, where the most significant item is the deferred tax asset to be amortized in the long term, with a rate lower than the nominal rate; and d) The adjustment of the wealth tax due to the effect of the rate, which is 0.4% for 2017, compared to 1% in 2016.

Income and supplementary tax returns for taxable years 2011, 2012, to2014, 2015 and 2016, and CREE ofreturns for taxable years ~~2013~~2014, 2015 and 2016 of the Ecopetrol Business Group 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 as a liability for ~~the tax~~ payable istaxes are sufficient and are supported by ~~tax~~current 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 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.

The following is the detail of the deferred tax balance aton gains as of December 31, 2017 and 2016:

The deferred income tax assets and liabilities are reported net in compliance with the requirements of international financial reporting standards (IAS 12). As of December 31, 2017 and 2016, ~~and 2015 of~~the deferred ~~taxes~~tax detail is ~~comprised~~ as follows:

~~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:~~

~~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)

The ~~movements~~table above takes into consideration the offsetting of deferred ~~income~~ tax assets and deferred tax liabilities within the same tax jurisdiction. The overall deferred tax position in a particular tax jurisdiction determines if a deferred tax balance is presented within deferred tax assets or deferred tax liabilities. Accordingly, certain deferred tax assets are presented within deferred tax liabilities, and certain deferred tax liabilities within deferred tax assets.

The following is the detail of the deferred tax assets (liabilities) for the years ended December 31, ~~2016~~2017 and ~~2015 is as follows:~~2016:

~~Deferred tax~~The Ecopetrol Business Group offsets assets and liabilities ~~are offset~~for deferred taxes only if ~~there is~~it has a legally enforceable right to offset current tax liabilities and assets; and in the case of deferred tax on assets ~~andthey relate~~and liabilities, to the extent that they also correspond to income taxes ~~levied~~required by the same tax ~~authority on~~jurisdiction and 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.~~authority.

~~In accordance with the~~Pursuant to 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~~forth in ~~article~~Section 5, Article 290 of Law 1819 of 2016. Tax losses determined must not be tax ~~re-adjusted.~~readjusted.

~~Starting in~~As of the tax year 2017, companies can offset tax losses obtained in the current period defined, 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~~Deferred tax assets related to tax losses generated by Bioenergy S.A. and Bioenergy Zona Franca in the amount of COP$(53,328), and excess presumptive income of Refinería de Cartagena in the amount of COP$(44,475) were written off in 2016 because, even though they can be offset in the long term, Management concluded that having a conservative position, it is not likely that the ~~asset~~ deferred tax assets related to such tax losses and excess of presumptive income would be recoverable in the short term.

If the ~~Ecopetrol~~ Group ~~could~~would have recognized the deferred tax ~~asset~~assets that ~~was~~were not recognized, the income for the period ended on December 31, ~~2016~~2017, would have increased by COP$~~83,595.~~ 97,803.

~~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)

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~~the minimum 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~~Group in the next five years, using for such purpose the formula set ~~out~~forth in ~~number~~Section 6, ~~article~~Article 290 of ~~law~~Law 1819 of 2016.

The movements of deferred income tax for the years ended December 31, ~~2016~~2017 and ~~2015~~2016 are as follows:

As of December 31, 2017, deferred tax assets (liabilities) are not recognized in the difference between the accounting and tax bases related to investments in companies of the Ecopetrol Business Group, as there is no intention to sell any of these investments in the foreseeable future.

The new tax on dividends will be applicable to foreign companies and entities on profits generated starting 2017.

~~Dividends will be taxed at 5%. For Colombian individuals the~~The rate ~~would be up to 10%. Profits that did not pay tax at the corporate level, would be subject to a 35% withholding tax at the time~~ of ~~distribution. In~~ this ~~case, the distribution, after being reduced by the 35% withholding tax, would be subject to the dividend tax. Dividends~~ tax will be ~~applicable~~5%. Furthermore, the tax rate for dividends will be 35%. In this scenario, the 5% tax on dividends will apply to ~~profits generated as~~the amount of ~~2017.~~the tax distribution, once it has been reduced with the 35% income tax.

For taxed individuals residing in Colombia, the tax on dividends will have a maximum 10% rate that will be applied on non-taxed dividends, and 35% with respect to taxed dividends distributed.

There are no effects on income tax related to dividend payments made by the Group to its shareholders during 2017 and 2016.

~~Colombian Taxpayers~~Income tax payers carrying out operations with related parties abroad or located ~~abroad are required to submit~~in free trade zones or companies located in countries considered tax havens, must determine their ordinary and extraordinary revenues, costs and deductions, considering the ~~disclosure return of transactions with related parties. For these taxpayers it is necessary to prepare and maintain supporting documentation only~~arm's length principle for ~~those types of operations, if~~such transactions.

Such companies submitted their transfer-pricing information statement for the ~~annual amount accumulated in the relevant~~2016 tax year ~~exceeds ten thousand units of taxable value units (10.000 UVT) (For 2016: COP$ 29,753).~~

~~The Companies are required to file~~and their ~~transfer pricing information for the taxable year 2015 and the related~~respective supporting documents.

For ~~fiscal~~the 2017 tax year, ~~2016~~ the transactions performed with ~~foreign economically~~ related parties abroad, as well as the business conditions for such operations and their general structure, did not vary significantly as compared with the previous year. Therefore, it can be inferred that said transactions were performed in accordance with the arm's length principle. It is estimated that no adjustments will be required ~~derived~~ from the analysis of transfer ~~pricing~~prices in ~~2016~~2017, which ~~imply~~entail amendments of the income provision of taxable year ~~2016.~~2017.

~~General VAT~~As of tax year 2017, the general sales tax rate ~~increased from 16% in 2016 to~~is 19% ~~and~~, with a differential 5% rate ~~of 5%~~ for ~~certain~~some goods and services is ~~maintained. The modification on the general rate is effective from January 1st, 2017.~~maintained in accordance with Articles 184 and 185 of Law 1819 of 2016.

As of tax year 2017, the VAT ~~taxable event is expanded~~was extended to ~~all~~the sale of goods at large, the sale or concession of intangibles related to industrial property and to the provision of services in ~~general, including intangible goods (related~~Colombia, or from services abroad, except for express exclusions of the norm, pursuant to ~~intellectual property) and real estate property (unless provided otherwise).~~Article 173 of Law 1819 of 2016.

~~Fixed assets are still not levied with~~Likewise, Article 194 of this Law stipulated that the term for filing requests for 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, whichdeductions 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,~~3 bimonthly ~~and quarterly. The statute of limitations for the request of VAT credit tax balance is increased to three bimonthly~~ periods immediately following the period of causation.

Law 1739 of 2014 ~~stablished~~established the wealth tax ~~(“impuesto a la riqueza”)~~ for natural and juridical persons whose possession of wealth at January 1, 2015 exceeds COP$1,000 million. The taxable base for companies is the ~~years 2015-2018. According to~~gross equity value held as of January 1, 2015, 2016 and 2017, less the ~~Law, entities that own wealth in Colombia –exceeding~~debts valid on the ~~limits established to be considered taxpayers, this is COP$ 1,000 million- have 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 paid value will not be deductible ~~nor~~or discountable on income and supplementary taxes ~~for~~or income tax for equality - CREE, nor can they be offset ~~with~~by these, ~~nor~~or any other taxes.

In ~~2016,~~2017, the wealth tax paid by the ~~Ecopetrol~~ Group amounted to COP$~~569,756,~~226,778, which was recognized as an expense in the period ~~(2015~~(2016 - COP$~~649,800)~~569,756).

~~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)

~~The balance at~~As of December 31, 2016, ~~and 2015 of equity~~Equity instruments measured at fair value ~~is comprised~~mainly included the shares that Ecopetrol owned in Empresa de Energía de Bogotá S.A.E.S.P, which were sold as ~~follows:~~

~~For~~ the ~~period~~shareholding sales plan, authorized by the National Government through Decree 2305 of ~~authorization and December 31, 2016~~November 13, 2014. During the 2017, Ecopetrol ~~sold in three auctions 95.5%~~completed the sales of ~~its equity share equivalent to 602,632,965~~ shares ~~for COP$1,067,313 as follows:~~under the sales plan with the following:

~~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.~~

~~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~~equity instruments measured at fair value as of December 31, ~~2016~~2017 and ~~2015~~2016 is as follows:

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.

The balance atas of December 31, ~~2016~~2017 and ~~2015~~2016 of other assets is comprised as follows:

~~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.

~~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)

AtThe balance as of December 31, 2017 and 2016 ~~the balance~~ of ~~assets classified as non-current~~ assets held for sale ~~amounted~~and their related liabilities, which do not correspond to ~~COP$132,216 and it was comprised of:~~discontinued operations, included:

~~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.

~~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)

The details on the participations, economic activity, address, area of operations and financial information of the investments in joint ventures and associates can be found in Exhibit 1.

The balance atas of December 31, 2017 and 2016 ~~and 2015~~ of ~~the~~ investments in associates and joint ventures, is as follows:

~~The detail of the investments, economic activity, domicile, area of operation and financial information of the investments in joint ventures and associates is shown in Exhibit I.~~

The following is the movement of ~~these investments:~~investments in companies:

~~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)

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:~~

~~The main assumptions used for determining the fair value less costs to sell of the investments, which perform hydrocarbon exploration and production activities, include:~~

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.

The number of shares held by Ecopetrol in Invercolsa S.A. has been ~~subjected~~subject to a legal dispute with another shareholder of this company. The ~~Courts~~courts decided in favor of Ecopetrol through a ruling ofIN 2011, whereby it was determined that 324 million shares, equivalent to 11.58% of ~~Invercolsa’s social~~Invercolsa S.A.’s share capital should be returned to Ecopetrol. ~~The~~ Ecopetrol’s equity share in said company is 43.35%. The dividends paid in relation ~~with~~to the shares returned to Ecopetrol are also subject to ~~controversy, as well as the ownership~~controversy. As of ~~the shares that represent 8.53% of Invercolsa. At~~ December 31, ~~2016,~~2017, the settlement of these claims is still pending.

The breakdown of assets, liabilities and results of the two main investments in associates and joint ventures, Equion Energy Limited and the Offshore International Group, as of December 31, 2017 and 2016 is as follows:

~~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)

~~The balance of assets, liabilities and results of most relevant associates and joint ventures at December 31, 2016 and 2015 is comprised as follows:~~

Included below, there is a reconciliation of equity between the most significant participations and the carrying amount of investments atas of December ~~31:~~31, 2017 and 2016:

~~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)

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~~2017 and ~~2015:~~2016:

~~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)

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.

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~~2017 and ~~2015. The depletion method used is units of production.~~2016:

~~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)

The following table shows the classification by ages, from the completion date, of the exploratory wells that are suspended as of December 31, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

~~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)

~~In accordance with that~~The following is the movement of intangibles and their amortization and impairment for the years ended December 31, 2017 and 2016:

As mentioned in ~~section~~Note 4.12, ~~of the accounting policies every~~each year the ~~Company~~Group assesses ifwhether there are ~~any~~ indications of impairment inof its assets or ~~cash generating units.~~cash-generating units or whether an impairment loss recognized in previous periods may be reversed.

The ~~Company~~impairment of our non-current assets includes expenses (or recovery) of impairment of property, plant and equipment and natural resources, investments in companies, goodwill and other non-current assets. The Group is exposed to ~~certain~~ future risks derived mainly from variations in: a)(i) the oil prices b)outlook, (ii) refining margins and profitability, c)(iii) cost profile, ~~d) investment~~(iv) investments and maintenance ~~e) amount~~expenses, (v) amounts of recoverable reserves, f)(vi) market and country risk assessments reflected onin the discount rate, g)and (vii) changes in domestic and international regulations, ~~etc.~~ 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 or 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 the~~changes in product and crude oil prices, discount rate, ~~given~~refining margins, changes in environmental regulations, cost structure and the ~~leveraging~~level of ~~said~~capital expenditures; and (iii) in the transport and logistics segment, ~~as well as the refining margins.~~changes in tariffs regulation and volumes transported.

Based on impairment tests conducted by the ~~Company,~~Group, the following (recoveries) losses for impairment ~~losses (reversals) were recorded~~of long term assets for the years ended on December 31, 2017, 2016 and 2015 ~~and 2014:~~are presented:

The ~~expense (recovery)~~expenses for (recovery of) asset impairment of ~~assets of~~ the ~~exploration~~Exploration and ~~production~~Production segmentfor the years ended December 31 of 2017, 2016 and 2015 ~~and 2014 comprises:~~is as follows:

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 animpairment recognized in previous years for the oil fields that operate in ColombiaCPO09, Casabe and Oripaya and in fields operated abroad Gunflint Dalmatian and K2, and an impairment in the Tibú, Underriver, Provincia and Orito fields.

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.

The breakdown of the expenses for (recovery of) impairment of fields for the years ended December 31, 2017, 2016 and 2015 includes:

The assumptions used in the model to determine the recoverable ~~amounts~~amount include:

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.

The aggregation of assets to identify the ~~CGU's~~CGUs is consistent as compared to the ~~prior~~previous period.

In 2015, the impairment expense was caused mostly by the adverse economic context of the hydrocarbon industry, which translated into a decrease in the oil price forecast and increase in the market and country risks reflected on the discount rate and the reduction on the recoverable amount of reserves. The most representative cash generating units impacted for the foregoing factors were the oil fields operated at domestic level: Casabe, Chichimene, Tibú, CP09, Apiay, Llanito and La Hocha and the fields in the Gulf of Mexico K2 and Dalmatian.

~~Assets~~Investments in associated companies and joint ventures in the segment are recorded through the equity method. Ecopetrol evaluates if there is any objective evidence to determine if the value of such investments has deteriorated in the period, especially those Companies that were acquired with goodwill.

As a result, Ecopetrol recognized an expense for (recovery of) impairment in the ~~refining~~value of its investments in companies as of December 31, as follows:

The assumptions used to determine the recoverable amount of the companies assessed are those described in Note 18.1.1, except for the use of a discount rate in real terms in 2017 for Equion Energía Limited of 8.2% (2016 - 8.9%) and ~~petrochemicals~~for Offshore International Group of 8.6% (2016 - 8.0%).

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 animpairment 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.

The Cash Generating Units with an expense for (recovery of) impairment in the Refining and Petrochemical segment for the years ended December 31 of 2017, 2016 and 2015 ~~and 2014 comprises~~:include:

~~2014~~The aggregation of assets for identifying the CGUs is consistent across these periods.

The recoverable amount ~~for~~of the Refinería de Cartagena was calculated based on the 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 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 and refined products. The fair value category is level 3.

The assumptions ~~used in the model~~ to determine the recoverable ~~amounts~~amount included: a) ~~an average~~a gross refining margin ~~of US$18.9/barrel (2015 - US$17.5),~~ determined by ~~specialists of market participants;~~crude oil feedstock and products price outlook provided by an independent third party expert; b) ~~adjustments associated with effects of the stabilization period; c)~~ an actual discount rate of ~~6.3% (2015~~6.0% (2016 - ~~7.2% and 2014 – 7.1%~~6.3%) determined under ~~the~~ WACC methodology; ~~and d) extension of~~c) 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; d) level of costs and long-term operating expenses in line with international refinery standards of similar configuration and conversion capacity, e) refinery throughput and production, and f) level of continued investment.

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 that observed ~~data~~ during the stabilization period, offset by a lower discount rate and better refining margins.

In compliance with the provisions of IAS 36 - Impairment of the value of assets, during 2017 the Refinería de Barrancabermeja recognized COP$273,987 for impairment, ~~expense~~mainly related to the write off of certain management and financial capitalized balances associated with the suspended the modernization project of the Refinery. This suspension is in ~~2015 was caused mostly by~~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 ~~economic~~ context ofthat the ~~hydrocarbon industry, which translated into reduction of~~hydrocarbons sector experienced in previous years. This project is being assessed within the ~~refining market expectations~~Group’s strategic plan; and when the project is reactivated, any impairment loss recognized in ~~coming~~previous years ~~an increase country and market risk that was reflected on the discount rate.~~may be subject to recovery.

The recoverable amount ~~for~~of Bioenergy was calculated based on the fair value ~~in use,~~less the costs of disposal level with value hierarchy 3, which is greater than the ~~fair~~ value ~~less cost of disposal~~in continued use and corresponds to the future cash flows discounted ~~before taxes.~~ after taxes on profit.

The assumptions used in the model to determine the recoverable amount included: a) forecast of ethanol prices based on projections made by ~~home office specialists;~~Ecopetrol specialists based on independent third party sources; and b) a ~~6.7%~~6.2% discount rate in ~~actual~~real terms ~~(2015~~(2016 – ~~6.8%~~6.7% in ~~actual~~real terms) determined under the WACC methodology.

In 2017 and 2016, ~~and 2015, the Company~~we recorded an impairment ~~loss,~~mainly due to ~~mainly by~~updating of the dates of entry into operation of the project, the stabilization process of the industrial plant, and the updating of ~~the start date of operations and changes in product price projections.~~operational variables.

In ~~2016,~~2017, there was a recovery of an impairment ~~recovery~~ for the ~~transport~~Transportation and ~~logistics~~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 ~~(2015 - COP$81,387 and 2014 - COP$496 of impairment expense)~~in 2016 was caused mainly by the incorporation of flows associated towith the San Fernando - Apiay system project, ~~that~~which affects the recoverable amount of ~~the~~Los Llanos transport line, but was offset ~~with greater~~by the impairment onof the ~~southern~~Sur transport line.

The recoverable amount of these assets was determined based on its fair value ~~less~~with costs of disposal ~~costs~~ with ~~level of~~value hierarchy 3, which corresponds to discounted cash flows based on the hydrocarbon production curves and ~~rates~~tariffs regulated by the Ministry of Mines and Energy and the Energy and Gas Regulating Commission - CREG. The ~~actual~~real discount rate used in the valuation was ~~4.98% (2015 - 5.9% and 2014 -7.2%~~5.0% (2016 -4.98%).

~~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)

~~The following shows a breakdown of the changes in Intangibles and their amortization for the years ended December 31, 2016 and 2015:~~

The balance atas of December 31, 2017 and 2016 ~~and 2015~~ of ~~Goodwill from~~goodwill in acquisitions of ~~controlled companies~~subsidiaries is ~~comprised~~ as follows:

AtAs of December 31, 2017 and 2016, the ~~Company~~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 factors such as price curves and margins and fundamental assumptions of supply and demand. As a result of the analysis, the ~~Company~~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.~~

~~Notes to Consolidated Financial Statements~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Exhibit 2 details the main conditions of the most significant loans of the Business Group.

The ~~balance~~balances of the loans and financing, which are recorded at amortized cost, as of December 31, 2017 and 2016 ~~and 2015 is comprised as follows:~~are:

~~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 following are the ~~acquisition~~maturities of loans and borrowing as of December 31, 2017:

The following are the maturities of loans and borrowing as of December 31, 2016:

(1) Includes short-term credit and the current portion of long-term debt, as applicable.

The following is the breakdown of loans and borrowing by type of interest rate as of December 31, 2017 and 2016:

The floating rate loans in local currency are indexed mainly to the CPI (Consumer Price Index) and the DTF (Fixed Term Deposits); and those in foreign currency loans at LIBOR plus a spread.

As of December 31, 2017, the Group designated US$8,532 million (2016 - US$10,512 million) of foreign currency debt as a hedging instrument of which, US$5,200 million is used to hedge the net investment in foreign operations with the US dollar as their functional currency and US$3,332 million is used to hedge the cash flows of future crude oil exports. See Note 30 - Risk management, for further information.

Financing obtained directly by Ecopetrol S.A. in capital markets has no guarantees ~~have been~~ granted or financial covenant restrictions, due to the support of the Colombian Government through the Ministry of Finance and Public Credit.

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.

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

(Figures expressed in millions of ~~the most significant loans of the Ecopetrol Business Group at December 31, 2016:~~Colombian pesos, unless otherwise stated)

* Bullet: Nominal value is fully paid onUntil December 13, 2017, when Ecopetrol voluntarily assumed the ~~maturity date.~~

** Loans designatedinternational loan held by Reficar, in its capacity as ~~hedging instrument (see Note 31).~~

~~The~~sponsor, the following ~~is the maturity profile of loans as of December 31, 2016:~~

~~Local currency loans and borrowings at floating rates are mainly indexed~~restrictions applied to ~~the CPI (Consumer Price Index) and DTF (Fixed Term Deposit). The foreign currency loans and borrowings at floating rates are indexed mainly to Libor plus~~Reficar: maintain a ~~spread.~~

~~As of December 31, 2016 the Company designated US$10,512 million of foreign currency~~minimum debt as a hedging instrument; of which US$5,312 million correspond to the cash flow hedge for future crude exports and US$5,200 million to hedge investments in subsidiaries with the US dollar as their functional currency. See Note 31 - Risk management, for further information.

For financing obtained by Ecopetrol in the capital markets, which correspond to issuance of local and foreign bonds that, are not guaranteed due to the support of the Colombian Government through the Ministry of Finance and Public Credit.

~~Refinería de Cartagena (Reficar)~~ carried out an international commercial loan for US$3,497 million 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 to maintain aservice coverage ratio of ~~minimum debt service of~~ 1.35: ~~1 at certain times of the loan’s life. This subsidiary is in compliance with all covenants and debt commitments as of December 31, 2016.~~

~~Under the same transaction Reficar entered into~~1; obligation to maintain a commercial trust and ~~Security and Depositary Agreement to receive the~~a depositary agreement for receiving 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 loan instruments of ~~the project~~Ecopetrol’s subsidiaries:

Ecopetrol and ~~startup~~its subsidiaries were in compliance with these restrictions as of ~~the pipeline the creation of a main fund was established to manage the funds for the payment of the syndicated loan.~~December 31, 2017 and 2016.

The fair value of ~~the~~ loans and borrowings is COP$~~52,109,438~~45,781,317 and COP$~~49,668,119~~52,109,438 as of December 31, 2017 and 2016, ~~and 2015,~~ 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) and the ~~Company's~~Group’s credit risk (spread).

The following is the movement of net financial debt as of December 31, 2017, 2016 and 2015:

~~Notes~~

(1)

The balance of other financial assets as of December 31, 2015 includes the value of the securities related to ~~Consolidated Financial Statements~~

~~(Figures expressed~~Santiago de las Atalayas for COP$699,832, which at that date were restricted.

(2)

Corresponds to operations with remittances financed in ~~millions~~dollars with domestic banks for the payment of ~~Colombian pesos, unless otherwise stated)~~

imports.

The balance ~~at December 31, 2016 and 2015~~ of trade and other payables, as of December 31, 2017 and 2016, is comprised as follows:

The carrying amount of trade accounts and other accounts payable approximates their fair value due to ~~its~~their short-term nature.

The following are the balances of provisions for employee benefits as of December 31, ~~2016~~2017 and ~~2015:~~2016:

~~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)

The following table shows the movement in liabilities and assets, net of post-employment benefits and termination benefits, atas of December 31, ~~2016~~2017 and ~~2015:~~2016:

~~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)

The following table shows the movement in ~~results~~profit and loss and in other comprehensive income as of December 31, ~~2016~~2017 and ~~2015:~~2016:

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~~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:~~

~~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~~2017 and 2016:

46.0% 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 54.0% are classified as ~~of December 31, 2016 and 2015:~~level 2.

The fair value of ~~the~~level 2 plan assets is calculated using prices quoted in the ~~relevant~~ assets’ market. The ~~Company~~Group obtains these prices through reliable financial data ~~suppliers~~providers recognized in Colombia or abroad depending on the investment.

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.

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:

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~~2017 and ~~2015:~~2016:

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 of the Colombian Social Security ~~Institute – ISS.~~Institute.

The cash ~~flow~~flows required for payment of post-employment ~~benefits liability is comprised as follows:~~obligations are the following:

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:~~2017:

~~The Company conducted a sensitivity analysis related to the interest rate variation on plan assets. See section 30 – Risk management.~~

In August 2016, the ~~Company~~Group offered a voluntary retirement plan to 200 employees who met certain criteria. As of December 31, 2017 and 2016, 137 employees were part of plan, with a corresponding cost of COP$~~161,796.~~155,286 (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.

~~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)

~~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~~2017 and ~~2015:~~2016:

~~Asset~~The estimated liability for asset retirement obligation costs corresponds to the ~~Company's~~ future obligation 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 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~~Group's financial obligations, taking into account the temporality 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~~2017 were: Exploration and Production 6.93% (2016 - ~~7.28%~~7.93%), Transportation and Logistics 7.02% (2016 - 8.20%) and Refining and Petrochemicals 7.37% (2016 - 8.99%).

~~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)

The following is a summary of the main legal proceedings recognized in the statement of financial position whose amount exceeds COP$13,000 million, where the expectation of loss ~~expectations are highly~~is probable and could imply an outflow of resources atas of December 31, ~~2016~~2017 and ~~2015:~~2016:

On November 8, 2016, the Ministry of Mines and Energy concluded that the ~~amounts being held~~resources that were restricted in relation to this process were not royalties and, therefore, were 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~~its property, without any claim or discussion to date regarding ownership title thereof. On November 8, 2016, the amount ~~of the controversy added up to~~claimed reached COP$688,664, originated mostly from the valuation and financial ~~yields~~yield of the fund where the resources were deposited. The ~~reversal~~recovery of this provision was recognized in the net financial results of the period ending December 31, 2016.

These ~~are mainly~~corresponds 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 ~~the region. On December 22, 2016,~~Colombia.

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, 2017, 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 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.

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Ocensa

Some requests for arbitration were filed by some of Ocensa’s shippers in connection with the tariff and monetary conditions established in the transportation contracts for the use of the increased capacity of the pipeline resulting from the P-135 project. Similar claims could be brought by other shippers of the aforementioned project.

Frontera Energy Colombia Corp. Sucursal Colombia entered into a memorandum of understanding for a comprehensive settlement agreement that is pending the approval by Frontera’s arbitration panel. If the arbitration panel approves the settlement agreement, it will resolve any pending proceedings and controversies among the parties, and both parties will execute the amendments to the Agreements.

The recognized provision is based on the risk assessment carried out by Ocensa and its advisors, without implying the recognition of the validity of the claims of the shippers.

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

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 Group, the expectation of loss is not probable as at December 31, ~~2016~~2017 and ~~2015:~~2016:

~~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)

~~Included below, there~~The following is a ~~detail~~breakdown of the ~~major~~Group’s principal contingent assets, ~~contingencies~~where the associated contingent gain is likely, but not certain as of ~~which occurrence is possible at~~ December 31, ~~2016~~2017 and ~~2015:~~2016:

On March 8, 2016, Reficar presented a request for Arbitration before the International Chamber of Commerce ~~(ICC)~~ against Chicago Bridge & Iron ~~Company~~Group NV, CB&I (UK) Limited and CBI Colombiana S.A. (collectively, "CB&I") related to the contract for the construction, procurement and engineering entered into by Reficar and CB&I for the expansion ofRefinería de Cartagena, in Cartagena, Colombia. Reficar is the claimant in the arbitration process of the ~~ICC~~CCIO and requests at least US$2 billion from CB&I. On May 25, 2016, CB&I filed a counterclaim of approximately US$213 million. On June 27, 2016, Reficar ~~answered this request~~filed its reply to CB&I’s counterclaim denying ~~any responsibility. The International Chamber~~and disputing the declarations and the relief requested by CB&I. On April 28, 2017, Reficar submitted its Non-Exhaustive Statement of ~~Commerce process is currently~~Claim and CB&I submitted its Statement of Counterclaim. According to the latest modification of the procedural calendar, the arbitral tribunal will hold the hearing in ~~its preliminary stage~~2019 and ~~a hearing is scheduled for October 2018.~~will likely issue the final award in the second half of 2019.

In relation to this matter, as of December 31, 2017, there is an amount of approximately US$122 million, in invoices paid by Reficar to CB&I, under the PIP and MOA agreements, of the EPC contract. The proof of the sources for these invoices, delivered by CB&I, have not been accepted by of AMEC Foster Wheeler - PCIB.

~~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)

23.7

Investigations of control entities

As part of the investigations carried out by various control entities of the modernization and expansion project (the “Project”) of Refinería de Cartagena, Reficar has been officially informed of the following investigations and proceedings:

Office of the Comptroller General (Contraloría General de la República)

Because of the modifications of the schedule and budget related to 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 a result of the findings described above, 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 current and former members of Ecopetrol’s Board of Directors; former members of Reficar’s Board of Directors; current and former employees of Ecopetrol; and former employees of Reficar, as well as Chicago Bridge & Iron Group N.V., CBI - Chicago Bridge & Iron company (CB&I) Americas Ltd., Chicago Bridge & Iron Group CB&I UK Limited, CBI Colombiana S.A., Foster Wheeler USA Corporation and Process Consultants Inc.

One current member of Ecopetrol’s Board of Directors being investigated in these proceedings.

In January 2017, the Office of the Comptroller General initiated another 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 material aspects, the entity’s financial position as of December 31, 2016.

Attorney General’s Office (Procuraduría General de la Nación)

Reficar has been officially informed that the Attorney General’s Office currently has one ongoing investigation relating to the Project. The investigation initiated in 2012 against members of Reficar’s Board of Directors at the time, as well as certain current and former officers of Reficar.

On September 12, 2017 the Attorney General’s Office issued a list of charges 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 (vi) 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 current and former officers of Reficar.

Prosecutor’s Office (Fiscalía General de la Nación)

The Prosecutor’s Office is conducting an investigation. In connection therewith, 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).

F-80

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

The arraignment hearing is scheduled to take place on May 30, 2018.

Ecopetrol is not in a position to forecast the results of these investigations; nor is it possible to evaluate the probability of any consequence that may impact the financial statements, such as additional provisions, fines or ignorance of tax deductions that affect the amounts of deferred tax assets.

As of the date of this report, the financial statements continue to adequately disclose the financial and operational situation of Ecopetrol in all material aspects and its internal controls remain in force.

24.

Equity

The main components of equity are ~~comprised as follows:~~detailed below:

24.1

Subscribed and paid-in capital

Ecopetrol’s authorized capital amounts to $36,540,000, and is comprised of 60,000,000,000 ordinary shares, ~~41,116,694,690~~ of ~~such shares~~which 41,116,694,690 have been subscribed, ~~represented by~~and 11.51% (4,731,905,873 shares) ~~of natural and non-government entities~~are held privately and 88.49% (36,384,788,817 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~~2017 and ~~2015,~~2016, subscribed and 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

Additional 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~~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$2,118,468, and (iv) ~~Additional~~additional paid-in capital ~~receivable~~receivables for ~~$(143)~~COP$(142).

~~24.3 Equity reserves~~

24.3

Equity reserves

The ~~balance~~following is the composition of the Group’s reserves as of December 31, 2017 and 2016:

	2017		2016
Legal reserve		1,426,151		1,269,680
Fiscal and statutory reserves		512,632		289,164
Occasional reserves		239,086		-
Total		2,177,869		1,558,844

The movement of equity reserves is ~~comprised as follows at~~the following for the years ended December 31, ~~2016~~2017 and ~~2015:~~2016:

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

	2017			2016
Opening balance		1,558,844			5,546,570
Release of reserves		(289,164	)		(406,983	)
Allocation to reserves		908,189			289,164
Legal reserve used to offset previous year loss (Note 24.4)		-			(3,869,907	)
Closing balance		2,177,869			1,558,844

F-81

~~The following shows~~Ecopetrol S.A.

Notes to the ~~balance and a breakdown~~consolidated financial statements

(Figures expressed in millions of ~~the changes in equity reserves at December 31, 2016 and 2015:~~Colombian pesos, unless otherwise stated)

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~~that 10% of net income is allocated to ~~the~~ legal reserves until ~~the legal reserves are equal to~~their balance reaches 50% of ~~the~~ subscribed capital. The legal reserve can be used to offset losses or ~~for distribution~~distributed in the event of athe 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~~Occasional reserves correspond to allocation of net income as approved at the ~~appropriation of earnings ordered by~~shareholders at the Stockholders’ meeting to carry out new ~~explorations and future investments, as well as unrealized profits between group companies.~~explorations. On March ~~26, 2015,~~31, 2017, the Stockholders’ Meeting approved ~~after~~ the appropriation ~~of the occasional reserves of the 2014 period, the capitalization~~ of occasional reserves for ~~$14,760,895 through~~ the ~~mechanism~~establishment of ~~face value increase.~~a reserve for new explorations for the amount of COP $ 239,086.

Tax and mandatory reserves

The Colombian tax regime ~~contemplates~~allows for the ~~appropriation~~allocation of up to 70% of the period’s ~~profits equivalent~~net income to ~~70%~~a reserve when the value of the depreciation ~~deduction for tax purposes exceeds~~expense recorded in the ~~accounting depreciation.~~financial statements. This reserve may be released in future periods to the extent that depreciation expenses exceeds the ~~depreciations subsequently accounted exceed those annually claimed~~amount deducted for income tax purposes or the assets that generated the higher value deducted are sold.

In addition, Decree 2336 of 1995 set out the obligation to establish a reserve for the changes in 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 takenUnrealized fair value gains are allocated to a reserve.

24.4

Retained earnings and ~~payment of~~ dividends

The following ~~shows~~is the balance and ~~a breakdown~~movement of ~~the changes in~~ retained earnings atas of December 31, ~~2016~~2017 and ~~2015:~~2016:

	2016			2015			2017			2016
Opening balance		(6,814,432	)		8,192,040			(402,462	)		(6,814,432	)
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
Profit attributable to owners of Ecopetrol’s shareholders								7,178,539			2,447,881
Release of reserves								289,164			406,983
Allocation to reserves								(908,189	)		(289,164	)
Dividends declared (1)		-			(5,468,521	)		(945,684	)		-
Legal reserve used to offset previous year loss (2)								-			3,869,907
Other movements		(23,637	)		3			(1,066	)		(23,637	)
Closing balance		(402,462	)		(6,814,432	)		5,210,302			(402,462	)

(1)

The Company distributes dividends based on its separate annual financial statements, prepared under ~~Colombian IFRS.~~International Financial Reporting Standards accepted in Colombia (NCIF, by its acronym in Spanish). The Ordinary General Shareholders' Meeting, held on March 31, 2017, approved the proposal for profit distribution proposal for 2016 and set the distribution of dividends of COP$945,684.

The Ordinary General Meeting of Shareholders held on March 31, 2016, approved the proposal for profit distribution, which established that there would be no distribution for 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 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 paid in ~~2016~~2017 attributable to ~~non-controlling~~the shareholders of ~~subsidiaries~~Ecopetrol S.A. amounted to COP$~~1,022,121.~~945,661 (2016 - COP$690,177) and those of the non-controlling interest of subsidiary companies to COP $ 558,986 (2016 - COP$1,022,121).

On 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 amounted 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 COP$715,053.

(2)

The Ordinary General Meeting of Shareholders, held on March 31, 2016, approved the proposal for profit distribution, which established that there would be no distribution for 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 of the Colombian Code of Commerce. The amount of losses offset by releases from the legal reserve after tax and mandatory allocations amounted to COP$3,869,907.

~~F-78~~F-82

~~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)

24.5

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 company, Ecopetrol S.A., net of tax atas of December 31, ~~2016~~2017 and ~~2015:~~2016:

	2016			2015			2017			2016
Actuarial gain on defined benefit plans		994,953			2,148,395			(553,091	)		994,953
Gain (loss) on equity instruments measured at fair value (1)		7,828			(49,881	)		-			7,828
Cash flow hedges for future exports		244,131			(217,291	)
Hedge of a net investment in a foreign operation		(155,359	)		-
Cash flow hedges for future exports (Note 30.2.2)								159,295			244,131
Hedge of a net investment in a foreign operation (Note 30.2.3)								(97,362	)		(155,359	)
Cash flow hedge with derivative instruments		(19,042	)		(43,590	)		6,942			(19,042	)
Others		11,817			58,643			-			11,817
Foreign currency translation		8,138,382			8,949,728			7,883,231			8,138,382
		9,222,710			10,846,004			7,399,015			9,222,710

(1)

During 2016 the ~~Company~~Group reclassified to the statement of profit or ~~losses COP $68,497~~loss COP$68,497 (2015 - ~~COP $19,405)~~COP$19,405) arising from the realization of ~~the valuations at market~~accumulated fair value ~~of the accumulated amount in~~gains on equity of assets available for sale - Empresa de Energía de Bogotá and Interconexión Eléctrica S.A. ~~(Note 11).~~

24.6

Earnings (loss) per share ~~(basic and diluted)~~

	2016		2015			2017		2016		2015
Profit (loss) attributable to Ecopetrol’s shareholders		2,447,881		(7,193,859	)		7,178,539		2,447,881		(7,193,859	)
Weighted average number of outstanding shares		41,116,694,690		41,116,694,690			41,116,694,690		41,116,694,690		41,116,694,690
Net basic earnings (loss) per share (basic and diluted -Colombian pesos)		59.5		(175.0	)
Net basic earnings (loss) per share (Colombian pesos)							174.6		59.5		(175.0	)

~~There is no potential dilution of shares.~~

~~F-79~~F-83

~~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)

25.

Sales revenue

The following is athe breakdown of sales revenue for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

	2016		2015		2014		2017		2016		2015
National sales
Mid-distillates		8,553,503		10,215,224		11,983,455		9,590,326		8,553,503		10,215,224
Gasoline		6,092,739		6,128,208		6,394,422		6,990,187		6,092,739		6,128,208
Services		4,043,284		4,435,274		3,778,073		3,873,352		4,043,284		4,435,274
Natural gas		1,988,336		1,845,345		1,346,625		1,815,754		1,988,336		1,845,345
Crude oil								909,871		553,666		491,279
Plastic and rubber		724,708		724,392		667,563		833,982		724,708		724,392
L.P.G. and propane		405,869		335,494		426,450
Crude		553,666		491,279		1,213,718
LPG and propane								509,619		405,869		335,494
Asphalts		340,400		461,188		459,072		275,803		340,400		461,188
Other products		994,645		988,346		1,001,321		1,207,245		994,645		988,346
		23,697,150		25,624,750		27,270,699		26,006,139		23,697,150		25,624,750
Recognition of price differential (1)		1,048,022		441,871		485,409		2,229,953		1,048,022		441,871
		24,745,172		26,066,621		27,756,108		28,236,092		24,745,172		26,066,621
Foreign sales
Crude		17,278,579		21,181,265		30,835,510
Crude oil								21,479,063		17,278,579		21,181,265
Fuel oil		2,158,539		2,166,469		3,921,703		1,982,408		2,158,539		2,166,469
Trading of crude		-		1,309,196		1,486,060
Gasoline and turbo fuels								1,223,994		1,046,758		93,125
Diesel		1,594,945		81,982		179,738		1,213,740		1,604,498		81,982
Plastic and rubber		1,171,342		1,096,730		975,282		1,169,101		1,171,342		1,096,730
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		-
Other products		457,152		344,237		690,397
Natural gas								32,303		58,809		182,950
LPG and propane								15,631		8,568		-
Trading of crude								-		-		1,309,196
Cash flow hedge for future exports – Reclassification to profit or loss (Note 30.2.2)								160,772		33,074		7,646
Other								441,124		380,222		161,287
		23,740,389		26,280,650		38,215,780		27,718,136		23,740,389		26,280,650
Total sales revenue		48,485,561		52,347,271		65,971,888
								55,954,228		48,485,561		52,347,271

(1)

Corresponds to the application of Decree 1880 of September 2014 and Resolution 180522 of 2010, which defined the procedure for price differentials (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.

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, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

	2016		%			2015		%			2014		%			2017		%			2016		%			2015		%
Colombia		24,745,172		51.0	%		26,066,621		49.8	%		27,756,108		42.1	%		28,236,092		50.5	%		24,745,172		51.0	%		26,066,621		49.8	%
United States of America		11,956,967		24.7	%		11,921,720		22.8	%		14,977,109		22.7	%
United States																	12,532,932		22.4	%		11,956,967		24.7	%		11,921,720		22.8	%
Asia		2,717,414		5.6	%		6,123,593		11.7	%		13,416,506		20.3	%		6,136,796		11.0	%		2,717,414		5.6	%		6,123,593		11.7	%
Central America and the Caribbean																	6,070,565		10.8	%		3,551,894		7.3	%		3,366,978		6.4	%
South America and others																	1,947,226		3.5	%		2,568,163		5.3	%		886,433		1.7	%
Europe		2,945,951		6.1	%		3,981,926		7.6	%		5,915,190		9.0	%		1,030,617		1.8	%		2,945,951		6.1	%		3,981,926		7.6	%
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	%
																	55,954,228		100	%		48,485,561		100	%		52,347,271		100	%

~~F-80~~F-84

~~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)

Concentration of customers

During ~~2016~~2017, Organización Terpel ~~accounted~~S.A. represented 14.3% of sales revenue for ~~14.4% of total sales in~~ the period ~~(2015~~(2016 - 14.4% and ~~2014~~2015 - ~~13.7%~~14.4%)~~. No~~; no other customer ~~has~~represented more than 10% of ~~total consolidated~~our sales. ~~There was no exposure that affects the financial position 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.~~services. Sales to this customer are recognized byin the Refining and Petrochemical and ~~transportation~~Transport and ~~logistics Segments. Organizacion~~Logistics segments. Organización Terpel is the leader in these areas thanks to its network of ~~petrol~~gas stations and its strategy of sales to the industrial ~~sales strategy~~ and in the aviation ~~segment.~~segments.

26.

Cost of sales ~~(before impairment of non-current assets)~~

The following is the ~~detail of~~ cost of sales ~~per~~breakdown by function for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

	2016			2015			2014		2017			2016			2015
Variable costs
Imported products (1)		12,049,477			12,935,878			13,264,700		11,637,419			12,049,477			12,935,878
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
Depreciation, amortization and depletion										5,765,186			5,333,245			5,166,455
Purchases of hydrocarbons - ANH (2)										4,338,576			3,178,199			3,741,010
Purchases of crude in association and concession		1,517,829			1,928,938			3,293,594		2,240,704			1,517,829			1,928,938
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										889,122			608,535			366,454
Hydrocarbon transport services										665,714			783,307			1,380,733
Electric energy										561,424			618,675			424,920
Purchases of other products and gas		519,884			703,163			1,021,327		488,056			519,884			703,163
Taxes and contributions (3)										449,959			478,332			481,029
Services contracted in associations		305,326			563,032			612,013		195,689			305,326			563,032
Others ~~(3)~~(4)		(432,694	)		(322,547	)		98,904		(663,916	)		(432,694	)		(322,547	)
		24,960,115			27,369,065			32,740,968		26,567,933			24,960,115			27,369,065
Fixed costs
Depreciation and amortization		2,050,739			1,433,263			1,144,437		2,366,849			2,050,739			1,433,263
Maintenance		1,998,128			2,334,130			2,646,832		2,038,970			1,998,128			2,334,130
Labor cost		1,571,511			1,542,701			1,369,654
Labor costs										1,815,213			1,571,511			1,542,701
Services contracted										1,414,056			1,083,176			1,301,094
Services contracted in associations		1,260,470			1,415,422			1,674,322		1,008,336			1,260,470			1,415,422
Services contracted		1,083,176			1,301,094			1,578,918
Taxes and contributions		391,032			461,624			607,494
General costs		383,842			461,994			441,718		510,128			383,842			461,994
Materials and operating supplies		333,258			435,238			500,934		468,205			333,258			435,238
Hydrocarbons transportation services		157,463			147,733			74,976
Non-capitalized project costs		61,689			92,252			194,875
Taxes and contributions										343,505			391,032			461,624
Hydrocarbon transport services										333,671			157,463			147,733
Non-capitalized costs of projects										41,459			61,689			92,252
		9,291,308			9,625,451			10,234,160		10,340,392			9,291,308			9,625,451
		34,251,423			36,994,516			42,975,128		36,908,325			34,251,423			36,994,516

(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~~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 concepts of cost of sales are presented at 100%.~~production costs to inventory.

~~F-81~~F-85

~~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)

27.

~~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, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

	2016		2015		2014		2017		2016		2015
Administration expenses
Administrative expenses
General expenses								723,341		556,563		393,971
Labor expenses								624,424		657,051		491,748
Taxes (1)		663,889		730,841		102,028		362,963		663,889		730,841
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		53,796		45,765		84,425
		1,923,268		1,700,985		1,031,035		1,764,524		1,923,268		1,700,985
Operation and project expenses
Exploration expenses		728,590		1,584,249		2,576,294
Operations and project expenses
Exploration costs								1,341,940		728,590		1,584,249
Commissions, fees, freights and services		568,513		878,259		1,244,045		471,657		568,513		878,259
Corporate projects		301,854		456,159		269,495
Taxes		286,331		348,871		449,824		324,223		286,331		348,871
Labor expenses		278,383		309,021		266,362		310,947		278,383		309,021
Maintenance								122,273		147,197		181,630
Depreciation and amortization		177,252		86,215		103,834		95,516		177,252		86,215
Maintenance		147,197		181,630		241,313
Fee for regulatory entities		87,325		77,909		108,263		63,470		87,325		77,909
Various		176,242		111,955		260,895
Corporate projects								29,702		301,854		456,159
Others								166,337		176,242		111,955
		2,751,687		4,034,268		5,520,325		2,926,065		2,751,687		4,034,268

(1)

~~It mainly includes~~Mainly corresponds to the recognition of the wealth tax. See Note 10 ~~taxes.~~- Taxes.

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.~~

Other operating income ~~and (expenses),~~ net

The following is the detail of other operating income ~~and (expenses)~~or expenses for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

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

	2017			2016			2015
(Expense) recovery of provisions for litigations		(72,408	)		112,999			205,879
Expense for gas pipeline availability BOMT contracts (1)		(72,318	)		(125,077	)		(124,957	)
Impairment expense of short-term assets		(68,800	)		(98,739	)		(2,858	)
Profit (loss) on sale of assets		40,227			(82,200	)		6,744
Gain on acquisition of interests in joint operation (Note 32.3)		451,095			-			-
Compensation received		-			17,790			29,848
Deferred income BOMT contract’s (2)		-			211,768			193,197
Other income		227,607			237,571			70,685
		505,403			274,112			378,538

(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.

F-86

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

29.

Financial result, net

The following is the detail of financial results ~~net~~ for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

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 )

	2017			2016			2015
Finance income
Results from financial assets and others		739,148			136,715			164,615
Yields and interests		405,562			386,001			293,506
Gain on sale of equity instruments		13,236			47,129			72,339
Resources from Santiago de las Atalayas (1)		-			688,664			-
Other financial income		1,410			53,234			91,464
		1,159,356			1,311,743			621,924
Finance expenses
Interest (2)		(2,385,994	)		(2,765,024	)		(1,768,618	)
Financial cost of other liabilities (3)		(753,047	)		(580,491	)		(627,827	)
Results from financial assets		(481,308	)		(48,997	)		(167,869	)
Other financial expenses		(40,252	)		(69,028	)		(154,100	)
		(3,660,601	)		(3,463,540	)		(2,718,414	)
Foreign exchange gain (loss), net		5,514			976,430			(5,566,614	)
Financial result, net		(2,495,731	)		(1,175,367	)		(7,663,104	)

(1)

Corresponds to the ~~reversal~~recovery of athe provision ~~relating to a litigation~~“Comuneros – Santiago de las ~~Atalayas which mostly~~Atalayas”. Its balance consisted mainly from the valuation and financial ~~yields~~gains generated ~~in the time of permanence of~~while the cash that was subject to the ~~caution~~reserve (see Note 23.3 for more information).

(2)

~~Interest was capitalized during~~As of December 31, 2017, borrowing costs for the ~~period to~~financing of developing natural resources and property, plant and equipment ~~for~~of COP$191,651 (2016 - COP$341,209 ~~(2015 –~~and 2015 - COP$~~744,426 and 2014 – COP$640,698)~~744,426) were capitalized.

(3)

Includes the financial ~~cost~~expense of the asset retirement obligation and the liabilities for post-employment ~~benefits liabilities.~~benefits.

~~(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.~~30.

Risk management

~~31.1~~30.1

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~~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~~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.

F-87

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

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~~Group's international trade strategy on exports of crude and imports of products.

~~As of December 31,~~In 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.

~~31.2~~30.2

Exchange rate risk

The ~~group~~Ecopetrol Business Group operates mainly ~~operates~~ in Colombia ~~and~~ makes sales in the local and international markets. ~~For this reason, it~~It is exposed to ~~the~~ exchange rate risk, ~~that~~which arises from various foreign currency exposures due tocommercial transactions and assets and liabilities ~~held~~denominated in foreign currency.The impact of ~~fluctuations in~~ exchange ~~rates,~~rate fluctuations, especially the ~~Pesos/US$~~Colombian peso/U.S. dollar exchange rate, ~~on operations~~ has been ~~material.~~material in previous years. To mitigate this risk, the 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 ~~US$/pesos~~U.S. dollar/Colombian peso exchange rate has fluctuated over the last few years. The Colombian peso appreciated on average by 3.3% in 2017. During 2016 and 2015, the Colombian peso depreciated by ~~an average of~~ 11.2% and 37.3% ~~in 2016 and 2015, respectively; on the other hand, the~~, respectively. The closing exchange rates were COP$~~3,000.71, COP$3,149.47~~2,984.00 COP $3,000.71 and ~~COP$2,392.46 as of December 31,~~COP $3,149.47 to US$1.00 for 2017, 2016 ~~2015~~ and ~~2014,~~2015, respectively.

When the Colombian peso appreciates in ~~comparison with~~relation to the U.S. dollar, export sales revenue ~~decrease~~decreases when ~~translated into COP. However,~~converted to Colombian pesos; however, imported goods, ~~the~~ oil services and interest on ~~external~~foreign debt denominated in U.S. dollars become less expensive. Conversely, when the Colombian peso depreciates, ~~in comparison with the U.S. dollar sales~~export revenues, ~~from exports,~~ when translated ~~into COP, increase,~~to Colombian pesos, increases, and imports and servicing of the external debt ~~service~~ become more expensive.

The following table sets out the carrying ~~values~~amount for financial assets and liabilities denominated in foreign ~~currencies at~~currency as of December 31, ~~2016~~2017 and ~~2015:~~2016:

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)~~

(in US$ Million)	2017			2016
Cash and cash equivalents		1,203			1,916
Other financial assets		1,072			1,367
Trade receivables and payables, net		(7	)		(282	)
Loans and borrowings		(12,590	)		(15,172	)
Net liability position		(10,322	)		(12,171	)

Of the total net liability position, US$~~2,878~~8,532 million relates to financial ~~assets and~~ liabilities ~~for companies that have the Colombian peso~~designated as their functional currency whose value has affected results for the financial year. Likewise, US$(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-derivatenon-derivative hedging instruments ~~from~~of Ecopetrol, ~~whose value is~~on which unrealized foreign exchange gains and losses are recognized in other comprehensive ~~income.~~income, within equity. Likewise, US$ 1,699 million corresponds to the net liability position in U.S. dollars of Ecopetrol Business Group companies whose functional currency is the U.S. dollar, without affecting profit or loss and US$91 million correspond to the net liability position in U.S dollars of Ecopetrol Business Group companies whose functional currency is Colombian pesos with foreign exchange affects the profit or loss.

F-88

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

30.2.1

Sensitivity analysis for exchange rate risk

The ~~Company’s~~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, 2017:

Scenario / Variation in the exchange rate			Effect on income before taxes (+/-)		Effect on other comprehensive income (+/-)
	1	%		2,715		305,293
	5	%		13,577		1,526,465

The sensitivity analysis only includes financial assets and liabilities in foreign currency at the closing date.

~~31.2.1~~30.2.2

Cash flow hedge for future exports

Ecopetrol is exposed to foreign exchange risk given that a ~~high~~significant percentage of its income from crude ~~export sales revenues are~~oil exports is denominated in U.S. dollars. In recent years, the ~~Company~~Group has acquired long-term debt for investment activities in the same currency ~~that projects receiving~~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 ~~to Ecopetrol´s~~when booked in Ecopetrol’s functional currency (Colombian pesos) are naturally hedged with the foreign exchange ~~valuation risks~~variances of the long-term debt, in ~~U.S. dollars, aligned~~line with the ~~company’s~~Group's risk management strategy.

With the objective of presenting in the financial statements the effect of the ~~mentioned~~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~~Ecopetrol's foreign currency debt as a hedge instrument of ~~its~~ future ~~export sales~~revenue from crude oil exports, for the period ~~2015- 2023,~~2015-2023, in accordance with IAS 39 –- Financial instruments: ~~recognition~~Recognition and ~~measurement.~~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~~converted to Colombian pesos atbased on the closing ~~exchange~~ rate for the period, the effects ~~on foreign~~for exchange ~~differences~~difference are recognized ~~as part of the~~in other comprehensive ~~income. Once~~income, within equity and, as crude oil exports take place and the ~~hedged operation~~hedge occurs and sales revenue is recognized, ~~the~~ cumulative exchange differences held within in other comprehensive income isare reclassified to profit or loss statement, impacting operating ~~income and EBITDA.~~income.

~~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 of foreign currency debt designated as a non-derivative hedging instrument for the years ended December 31, 2017 and 2016:

(US$ Million)	2017			2016
Hedging instrument at the beginning of the period		5,312			5,376
Reassignment of hedging instruments		1,803			870
Realization of exports		(1,803	)		(870	)
Capital payments (1)		(1,980	)		(64	)
Hedging instrument at the end of the period		3,332			5,312

(1)

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.

F-89

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 cash flow hedge recognized in other comprehensive income ~~as of~~for the years ended December ~~31:~~31, 2017 and 2016:

	2016			2015			2017			2016
Opening balance		217,291			-			(244,131	)		217,291
Exchange difference on hedging instruments		(724,395	)		352,482
Exchange difference								15,934			(724,395	)
Reclassification to profit or loss		(33,074	)		(7,646	)		160,772			(33,074	)
Ineffectiveness								(9,247	)		-
Deferred income tax		296,047			(127,545	)		(82,622	)		296,047
Closing balance		(244,131	)		217,291			(159,294	)		(244,131	)

The expected reclassification of the cumulative exchange ~~differences accumulated~~rate difference in other comprehensive income to the profit or loss~~setting the~~ statement, taking an exchange rate atof COP$~~3000.71~~2,984 per US$1.00 is as follows:

Year	Peso equivalents		Income tax			Net		Before taxes		Taxes			After taxes
2017		102,454		(41,838	)		60,616
2018		117,447		(47,960	)		69,487		95,462		(33,439	)		62,023
2019		102,307		(41,778	)		60,529		66,039		(23,132	)		42,907
2020		33,981		(13,876	)		20,105		23,804		(8,338	)		15,466
2021		16,847		(6,880	)		9,967		21,541		(7,545	)		13,996
2022		16,847		(6,880	)		9,967		21,541		(7,545	)		13,996
2023		22,750		(9,290	)		13,460		16,786		(5,880	)		10,906
		412,633		(168,502	)		244,131		245,173		(85,879	)		159,294

~~31.2.2~~30.2.3

Hedge of a net investment in a foreign operation

The Board of Directors approved the application of net investment hedge accounting ~~of net investment~~ from June 8, 2016. The measure ~~seeks~~is intended to reduce the volatility of non-operating income due to ~~the~~ exchange ~~difference.~~rate variations. The ~~hedge of a~~ net investment ~~applies to~~hedge will be applied on a portion of ~~the~~Group’s investments ~~the Company has~~ in foreign ~~currency,~~operations, in this case on investments in subsidiaries ~~with~~which have the US ~~dollars~~dollar as their functional currency, using ~~as hedging instrument~~ a portion of the ~~Company’s~~Group’s US dollar denominated debt ~~denominated in US dollars.~~as the hedging instrument.

Ecopetrol designated ~~as hedged items~~the net investments in Ocensa, Ecopetrol America Inc., Hocol Petroleum Ltd. (HPL) and ~~Reficar;~~Reficar and as hedged items and as a hedging instrument ~~a portion~~and US$5,200 million of ~~its~~the Group’s US dollar debt ~~denominated in US dollars in a total amount equivalent to US $5,200 million.~~as the hedging instrument.

~~From~~The following is the ~~implementation to~~movement of accumulated foreign currency gains and losses in respect of the ~~date of this report this~~net investment hedge ~~has been effective.~~

~~Gain on exchange difference of these debts net of taxes~~ recognized in ~~the~~ other comprehensive income atfor the years ended December 31, ~~2016, was COP$155,359.~~2017 and 2016:

	2017			2016
Opening balance		155,359			-
Exchange difference		(86,892	)		231,879
Ineffectiveness		329			-
Deferred income tax		28,566			(76,520	)
Closing balance		97,362			155,359

F-90

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~31.2.3~~30.2.4

~~Hedges~~Hedging with derivatives to minimize currency risk

The ~~Company~~Group carries out forwards hedging operations using the Non-Delivery modality, ~~whose purpose is~~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 ~~dollars.~~dollar. The forward hedging instruments used enable setting ~~the sale price~~sales prices in US dollars, ~~seeking to counteract~~mitigating the ~~effects from devaluation or revaluation at the time in which Ocensa monetizes the resources necessary to fulfill its monthly or specific~~foreign exchange variation given Ocensa’s obligations relative to operational cost and tax payments ~~which~~ 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, ~~2016~~2017, there are ~~forwards~~forward contracts with a net short position ~~of US $323~~for US$325 million ~~(2015~~(2016 - ~~US $387).~~ US$323 million) with maturities between January and December 2018.

The impact on the ~~income~~ statement ~~resulting from~~of profit or loss for the ~~liquidation~~settlement of these hedges ~~amounting~~amounted to COP$99,971 (2016- COP$42,865 of ~~profit (2015- COP$86,914 of loss)~~profit) and the amount recognized onin the other comprehensive income was ~~COP$33,869~~a gain of ~~profit (2015 –~~ COP$~~60,083~~35,769 (2016 gain of ~~loss)~~COP$33,869).

~~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~~30.3

Credit risk

Credit risk is the risk that the ~~Company~~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~~

30.3.1

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~~Group may be exposed to credit risk in the event that customers fail to ~~comply with~~fulfill their payment obligations. ~~Risk~~The 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~~Group's cash flow.

The ~~Company~~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 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.~~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~~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, 2017 and 2016 ~~and 2015:~~is as follows:

	2016		2015		2017		2016
Less than 3-month overdue		179,008		71,791		65,354		179,008
Between 3- and 6- month overdue		14,275		4,862
Between 3- and 6-month overdue						1,131		14,275
More than 6-month overdue		103,574		116,849		79,688		103,574
Total		296,857		193,502
						146,173		296,857

~~F-87~~F-91

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~Credit quality~~Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of ~~resources in financial assets~~Colombian pesos, unless otherwise stated)

30.3.2

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 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 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.

Ecopetrol’s investment portfolio in U.S. dollars is segmented into four tranches, each one matching our liquidity needs. The ~~Company complied with this policy~~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 7 - Other financial assets and Note 21 - Provisions for employee 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~~30.4

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 and floating-rate instruments ~~in Ecopetrol’s investment portfolio~~ and ~~issuances of~~has issued floating rate debt linked to LIBOR, DTF and IPC interest rates. Thus, interest rate volatility may affect the fair value and cash flows ~~related to~~of the ~~Company's~~Group's investments and the financial expense of floating rate loans and financing.

As of December 31, ~~2016 and 2015~~2017, 19% (2016, 31%) of the 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.

F-92

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~~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		(66,120	)		112,383			(171,031	)
-100 basis points		66,120			(112,282	)		183,988

~~Sensitivity~~A sensitivity analysis of discount rates on pension ~~plans~~plan assets and liabilities is ~~shown~~disclosed in ~~the~~ Note 22 – Provisions for employee benefits.

~~31.5~~30.5

Liquidity risk

The ability to access ~~the~~ capital necessary to finance the ~~Company´s~~Group’s investment plans on acceptable terms can be limited due to deterioration in market conditions. A new 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 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~~Group’s results of operations and financial ~~condition.~~position.

Liquidity risk is managed in accordance with the ~~Company´s~~Group’s policies aimed at ensuring that there are sufficient net funds to meet the ~~Company's~~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 2017, the Group used US$2,400 million as part of its liquidity surpluses to prepay part of its foreign currency debts that had original maturities between 2020 and 2021. The details of these movements are described in Note 20 - Loans and borrowings.

The following is a summary of the maturity of financial liabilities atas of December 31, ~~2016.~~2017. 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$2,984.00 per US 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

	Up to 1 year		1-5 years		5-10 years		> 10 years		Total
Loans (payment of principal and interest)		5,040,130		28,151,892		18,873,280		15,484,650		67,549,952
Trade and other payables		6,968,207		134,815		-		-		7,103,022
Total		12,008,337		28,286,707		18,873,280		15,484,650		74,652,974

~~F-89~~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)

~~31.6~~30.6

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, 2017 and 2016:

	2017			2016
Loans and borrowings (Note 20)		43,547,835			52,222,027
Cash and cash equivalents (Note 6)		(7,945,885	)		(8,410,467	)
Other financial assets (Note 9)		(6,533,725	)		(6,686,895	)
Net financial debt		29,068,225			37,124,665
Equity (Note 24)		48,215,699			43,560,501
Leverage		37.61	%		46.01	%

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 20.8.

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 %

~~(1)~~

~~Net financial debt / (Net financial debt + Equity)~~

~~F-90~~F-94

~~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)

~~32.~~31.

Related parties

Balances with ~~associated companies~~associates and joint ventures as of December 31, ~~2016~~2017 and ~~2015~~2016 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)		4,010		-		7,716		101,472		259,760		7
Ecodiesel Colombia S.A.		362		-		-		22,228		-		-
Associates
Invercolsa S.A.		18,641		-		-		-		-		-
Offshore International Group Inc. (2)		-		154,810		-		-		-		-
Serviport S.A.		-		-		-		5,820		-		-
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

Accounts
receivable Other assets Accounts
payable Loans
Joint ventures
Equion Energía Limited 64,583 28,668 62,861 45,913
Ecodiesel Colombia S.A. - - 22,243 -
Associates
Serviport S.A. 141 - 2,359 -
Balance at December 31, 2015 64,724 28,668 87,463 45,913

	Accounts receivable		Accounts receivable - Loans		Other assets		Accounts payable		Loans
Joint Ventures
Equion Energy Limited		97,601		-		7,135		89,666		30,644
Ecodiesel Colombia SA		129		-		-		20,765		-
Offshore International Group (2)		-		170,121		-		-		-
Associates
Serviport SA		-		-		-		3,989		-
Balance as of December 31, 2016		97,730		170,121		7,135		114,420		30,644
Current		97,730		-		7,135		114,420		30,644
Non-current		-		170,121		-		-		-
		97,730		170,121		7,135		114,420		30,644

(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 US$ 77 million with maturity in January 2018 and a weighted average rate of 1.44%.

(2)

Loan granted by Ecopetrol SA to Savia Perú SA (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, 2017 is US$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.

F-95

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, 2017, 2016 ~~2015~~ and ~~2014~~2015 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

	2017				2016				2015
	Sales and services		Purchases and others		Sales and services		Purchases and others		Sales and services		Purchases and others
Joint Ventures
Equion Energy Limited		425,881		598,636		491,698		418,618		515,968		190,158
Ecodiesel Colombia SA		6,583		259,269		5,744		265,584		7,245		267,647
Offshore International Group		15,188		-		6,285		-		-		-
Associates
Serviport SA		-		-		-		24,572		-		-
Total		447,652		857,905		503,727		708,774		523,213		457,805

The dividends received byfrom these ~~companies~~Companies are ~~listed~~related in ~~Note~~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)~~

associates and joint ventures.

~~32.1~~31.1

Key executives management

~~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$4,426,000 for ~~2015~~2017, from COP$4,140,000 for 2016 and ~~COP $4,140,000 pesos~~COP$3,870,000 for ~~2016. Fees for attendance at virtual meetings are set at~~2015. For non-face-to-face sessions, 50% of the quota for face-to-face ~~meeting fee.~~meetings is set. The members of the Board of Directors isdo not ~~subject~~have any kind of variable remuneration. The amount paid in 2017 for compensation to ~~any variable remuneration.The amount canceled in 2016 for fees to~~members of the Board ~~members~~of Directors amounted to COP$~~1,253 (2015~~1,877 (2016 - COP$~~1,238)~~1,253).

The total compensation paid to Directors ~~executive officers and senior management during the year ended~~as of December 31, ~~2016~~2017 amounted to COP$~~13,901 (2015~~20,669 (2016 - COP$~~6,690)~~13,901). ~~The~~ Directors are not eligible to receive pension and retirement benefits. The total amount ~~set aside~~reserved as of December 31, ~~2016~~2017 to provide pension and retirement benefits to our eligible executive officers amounted to COP$~~4,674 (2015~~5,401 (2016 - COP$~~10,341)~~4,674).

As of December 31, ~~2016,~~2017, the following 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		<1% of outstanding shares
Héctor Manosalva Rojas		<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~~31.2

Post-employment benefit plans

The administration and management of resources for payment of 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.~~sources. These funds were established in compliance with the provisions of ~~decree~~Decree 2153 of 1999 which authorized, as of December 31, 2008 partial commutation of the value corresponding to monthly payments, bonuses and contributions, transferring said obligations and money supporting them to autonomous patrimonies ~~of a pensional nature.~~for pensions.

As of December 31, 2017 and 2016, the entities managing these resources were: Fiduciaria Bancolombia, Fiduciaria de Occidente and Consorcio Ecopetrol PAAC (comprised byof Fiduciaria La Previsora, Fiduciaria Bancoldex, Fiduciaria Agraria and Fiduciaria Central). These entities will manage pension resources for a five-year term (2016 - 2021) and as consideration they receive a remuneration with fixed and variable components which is calculated on the gross yield of the portfolios and are charged to manage resources.

F-96

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

~~32.3~~31.3

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:

Purchase of oil ~~form~~from the National Hydrocarbons Agency - ANH

~~Because of the business nature the Company~~The 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.

AtFrom December 2013 the ~~Company~~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 - Cost of sales.

Additionally Ecopetrol, like other oil companies, takes part in "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.

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 - Sales revenue and 7 – Trade and other receivables, net.

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.

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-93~~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)

~~33.~~32.

Joint operations

The ~~Company~~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~~2017 are as follows:

~~Contracts in which Ecopetrol is not the operator~~:

32.1

Contracts in which Ecopetrol is not the operator

Partners

Contract

Type

%
Participation

Geographic area of
operations

~~Chipirón~~

~~30-47%~~

~~Cosecha~~

~~30%~~

Occidental Andina LLC

~~Cravo norte~~

Chipirón

Production

30-40%

Colombia

Harvest

30%

Cravo Norte

50%

~~Colombia~~

Rondón

50%

Chevron Petroleum ~~Company~~

Group

Guajira

Production

57%

Colombia

Mansarovar Energy Colombia Ltd

Nare

Production

50%

Colombia

Meta Petroleum Corp

Quifa

Production

~~30%~~

40%

Colombia

Equion ~~Energía~~Energy Limited

Piedemonte

Production

50%

Colombia

~~Casanare~~

~~64%~~

~~Corocora~~

~~56%~~

Perenco Colombia Limited

~~Estero~~

Casanare

Production

64%

Colombia

Corocora

56%

Estero

89%

~~Colombia~~

Garcero

76%

Orocúe

63%

~~Casanare~~

~~13%~~

~~Estero~~

~~Perenco Colombia Limited~~

~~Garcero~~

~~Production~~

~~15%~~

~~Colombia~~

~~Orocue~~

~~23%~~

~~Corocora~~

~~28%~~

~~Noble Energy~~

~~Gunflint~~

~~Production~~

~~32%~~

~~Murphy Oil~~

~~Dalmatian~~

~~Production~~

~~30%~~

~~EEUU~~

~~Anadarko~~

~~Production~~

ONGC Videsh Limited ~~Sucursal Colombia~~

~~Ronda Caribe~~ 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

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

Lion

Exploration

40%

~~29%~~

Gulf of Mexico

~~Repsol~~

~~Leon~~

~~Exploration~~

~~40%~~

~~Stone~~Noble Energy

Gunflint

~~Parmer~~Production

32%

~~Exploration~~

~~30%~~

~~EEUU~~

Gulf of Mexico

Murphy Oil

Dalmatian

~~Sea Eagle~~Production

30%

~~Exploration~~

~~50%~~

Gulf of Mexico

Anadarko

~~Warrior~~Production

21%

Gulf of Mexico

Equion Energia Limited

Niscota

Production

20%

Brazil

Chevron

CE-M-715_R11

Exploration

50%

~~20%~~

Brazil

~~F-94~~F-98

~~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~~Colombian pesos, unless otherwise stated)

32.2

Contracts in which Ecopetrol is the operator

Partners	Contract	Type	% Participation	Geographic area of operations
ExxonMobil Exploration Colombia	VMM29	Exploration	50%	Colombia
	CR2
	C62
Talisman Colombia Oil	CPO9	Exploration	55%	Colombia
ONGC Videsh Limited Colombia Branch	RC9	Exploration	50%	Colombia
CPVEN Sucursal Colombia	VMM32	Exploration	51%	Colombia
Shell Exploration and Production	CR4	Exploration	50%	Colombia
Hocol S.A.	AMA4	Exploration	100%	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
Gas Ltd.	CPO9 - Akacias	Production	55%	Colombia
Occidental Andina LLC	La Cira Infantas	Production	58%	Colombia
Occidental Andina LLC	Teca	Production	86%	Colombia
Ramshorn International Limited	Guariquies I	Production	50%	Colombia
Equion Energy Limited	Cusiana	Production	98%	Colombia
Perenco Oil And Gas	San Jacinto 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 Energia Limited	Alto Magdalena Pipeline	OAM	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%	Gulf of Mexico
JX Nippon	FAZ-M-320_R11	Exploration	70%	Brazil
JX Nippon	POT-M-567_R11	Exploration	100%	Brazil

F-99

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

32.3

Relevant operations during the period

During 2017 and ~~Pirirí contracts~~2016, the following significant events occurred in respect of our joint operations contracts:

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%.

~~Since~~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 the year.

Termination of the Rubiales and Pirirí field contracts

On July 1, 2016, Ecopetrol took over the direct operation of the Rubiales ~~field,~~and Pirirí fields, which up to that date had been operated by Pacific Rubiales Energy. Upon termination of the contract Ecopetrol ~~received~~gained control over the assets ~~from said operation~~ and the obligations associated with the BOMT contracts for US$46 million.

~~Termination ofTauramena association agreement~~

Termination of the Tauramena 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~~Equion 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~~	~~CR2~~	~~Exploration~~	~~50%~~	~~Colombia~~
	~~C62~~
~~Talisman Colombia Oil~~	~~CPO9~~	~~Exploration~~	~~55%~~	~~Colombia~~
~~ONGC Videsh Limited Sucursal Colombia~~	~~Ronda Caribe Nueve~~	~~Exploration~~	~~50%~~	~~Colombia~~
~~CPVEN Sucursal Colombia~~	~~VMM32~~	~~Exploration~~	~~51%~~	~~Colombia~~
~~Shell Exploración and Producción~~	~~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 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 Ltd.~~	~~CPO9 - Akacias~~	~~Production~~	~~55%~~	~~Colombia~~
~~Occidental Andina LLC~~	~~La Cira Infantas~~	~~Production~~	~~54%~~	~~Colombia~~
	~~Teca~~		~~87%~~	~~Colombia~~
~~Ramshorn International Limited~~	~~Guariquies I~~	~~Production~~	~~50%~~	~~Colombia~~
~~Equion Energía Limited~~	~~Cusiana~~	~~Production~~	~~98%~~	~~Colombia~~
	~~Planta de gas~~
~~Perenco Oil And Gas~~			~~18%~~
~~Cepsa Colombia~~	~~San Jacinto y Rio Paez~~	~~Production~~	~~18%~~	~~Colombia~~
			~~18%~~
~~Equion Energía Limited~~ ~~Emerald Energy~~ ~~Pacific Rubiales~~	~~OAM~~	~~Production~~	~~45%~~	~~Colombia~~

~~F-95~~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)

~~34.~~33.

~~Segment information~~Information by segments

~~The~~A description of the Group’s business segments ~~can be seen~~is in ~~note~~Note 4.19 – Information by business segment.

~~34.1~~33.1

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, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

	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		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		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

~~F-96~~F-101

~~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															For the year ended December 31, 2016
	Exploration and production			Refining and petrochemicals			Transportation and logistics			Eliminations			Total			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			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	)		-			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			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			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			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			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			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
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			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			196,448			773,361			(41,062	)		-			928,747
Other operating income and expenses, net		(349,419	)		20,947			53,559			801			(274,112	)		(349,419	)		20,947			53,559			801			(274,112	)
Operating income		2,912,307			(595,712	)		6,589,251			(1,298	)		8,904,548			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			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	)		(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			923,573			94,715			(41,858	)		-			976,430
		(110,596	)		(810,822	)		(243,329	)		(10,620	)		(1,175,367	)		(110,596	)		(810,822	)		(243,329	)		(10,620	)		(1,175,367	)
Share of profit of associates		39,397			22,785			(837	)		-			61,345			39,397			22,785			(837	)		-			61,345
Income before tax		2,841,108			(1,383,749	)		6,345,085			(11,918	)		7,790,526			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	)		(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			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
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			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			5,482,827			1,145,780			978,394			-			7,607,001

																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
Administrative 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:
Group owners of parent																	(5,851,620	)		(4,016,050	)		2,819,759			(145,948	)		(7,193,859	)
Non-controlling interest																	-			(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-97~~F-102

~~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
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~~33.2

Sales by product

The sales by product offor each ~~of the segments~~segment are detailed below for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

												For the year ended on December 31, 2017
												Exploration and Production		Refining and Petrochemicals		Transport and Logistics		Eliminations			Total
Local sales
Mid-distillates													1,334		9,588,992		-		-			9,590,326
Gasoline													-		8,052,289		-		(1,062,102	)		6,990,187
Services													181,384		221,910		10,597,698		(7,127,640	)		3,873,352
Natural gas													2,540,233		4		-		(724,483	)		1,815,754
Crude oil													11,668,529		-		-		(10,758,658	)		909,871
Plastic and rubber													-		833,982		-		-			833,982
LPG and propane													199,796		309,823		-		-			509,619
Asphalts													34,834		240,969		-		-			275,803
Other products													214,059		1,103,089		-		(109,903	)		1,207,245
													14,840,169		20,351,058		10,597,698		(19,782,786	)		26,006,139
Recognition of price differential													-		2,229,953		-		-			2,229,953
													14,840,169		22,581,011		10,597,698		(19,782,786	)		28,236,092
Foreign sales
Crude oil													21,426,665		52,398		-		-			21,479,063
Fuel oil													-		1,982,408		-		-			1,982,408
Gasoline and turbo fuels													-		1,223,994		-		-			1,223,994
Diesel													-		1,213,740		-		-			1,213,740
Plastic and rubber													-		1,169,101		-		-			1,169,101
Natural gas													32,303		-		-		-			32,303
LPG and propane													15,631		-		-		-			15,631
Cash flow hedge for future exports – Reclassification to profit or loss													160,772		-		-		-			160,772
Other													19,393		421,364		367		-			441,124
													21,654,764		6,063,005		367		-			27,718,136
													36,494,933		28,644,016		10,598,065		(19,782,786	)		55,954,228

	For the year ended December 31, 2016											For the year ended December 31, 2016
	Exploration and production		Refining and petrochemicals		Transportation and logistics		Eliminations			Total		Exploration and Production		Refining and Petrochemicals		Transportation and Logistics		Eliminations			Total

Local sales
Med-distillates		-		8,553,503		-		-			8,553,503		-		8,553,503		-		-			8,553,503
Gasoline and turbo fuel		-		6,465,939		-		(373,200	)		6,092,739		-		6,465,939		-		(373,200	)		6,092,739
Services		73,247		41,736		10,572,170		(6,643,869	)		4,043,284		73,247		41,736		10,572,170		(6,643,869	)		4,043,284
Natural gas		2,383,323		11,763		-		(406,750	)		1,988,336		2,383,323		11,763		-		(406,750	)		1,988,336
Plastic and rubber		-		724,708		-		-			724,708		-		724,708		-		-			724,708
L.P.G. and propane		90,783		319,644		-		(4,558	)		405,869		90,783		319,644		-		(4,558	)		405,869
Crude oil		5,284,554		-		-		(4,730,888	)		553,666		5,284,554		-		-		(4,730,888	)		553,666
Asphalts		31,277		309,123		-		-			340,400		31,277		309,123		-		-			340,400
Aromatics		-		186,228		-		-			186,228		-		186,228		-		-			186,228
Oil fuel		1,382		146,866		-		-			148,248		1,382		146,866		-		-			148,248
Other products		424,952		669,568		75,793		(510,144	)		660,169		424,952		669,568		75,793		(510,144	)		660,169
		8,289,518		17,429,078		10,647,963		(12,669,409	)		23,697,150		8,289,518		17,429,078		10,647,963		(12,669,409	)		23,697,150
Recognition of price differential		-		1,048,022		-		-			1,048,022		-		1,048,022		-		-			1,048,022
		8,289,518		18,477,100		10,647,963		(12,669,409	)		24,745,172		8,289,518		18,477,100		10,647,963		(12,669,409	)		24,745,172

Foreign sales
Crude		19,516,197		-		-		(2,237,618	)		17,278,579		19,516,197		-		-		(2,237,618	)		17,278,579
Oil fuel		-		2,158,539		-		-			2,158,539		-		2,158,539		-		-			2,158,539
Med-distillates				1,594,945		-		-			1,594,945		-		1,594,945		-		-			1,594,945
Plastic and rubber		-		1,171,342		-		-			1,171,342		-		1,171,342		-		-			1,171,342
Gasoline and turbo fuel				1,046,758		-		-			1,046,758		-		1,046,758		-		-			1,046,758
Natural gas		350,685		-		-		(291,875	)		58,810		350,685		-		-		(291,875	)		58,810
L.P.G. and propane		6,342		2,225		-		-			8,567		6,342		2,225		-		-			8,567
Cash flow hedging – Reclassification to profit or loss		33,074		-		-		-			33,074		33,074		-		-		-			33,074
Other products		25,395		363,250		814		316			389,775		25,395		363,250		814		316			389,775
		19,931,693		6,337,059		814		(2,529,177	)		23,740,389		19,931,693		6,337,059		814		(2,529,177	)		23,740,389
Total sales revenue		28,221,211		24,814,159		10,648,777		(15,198,586	)		48,485,561		28,221,211		24,814,159		10,648,777		(15,198,586	)		48,485,561

~~F-100~~F-103

~~Ecopetrol S.A.~~

~~Notes to 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 25,782 10,206,599 - (17,157 ) 10,215,224
Gasoline - 6,464,661 - (336,453 ) 6,128,208
Services 118,812 198,369 10,822,078 (6,703,985 ) 4,435,274
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 products 262,906 1,070,725 22,472 (367,757 ) 988,346
8,656,936 19,266,697 10,844,550 (13,143,433 ) 25,624,750
Recognition of price differential - 441,871 - - 441,871
8,656,936 19,708,568 10,844,550 (13,143,433 ) 26,066,621
Foreign sales
Crude 21,495,762 - - (314,497 ) 21,181,265
Fuel oil - 2,166,469 - - 2,166,469
Trading of crude 1,309,196 1,309,196
Natural gas 233,500 - - (50,550 ) 182,950
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
23,075,675 3,537,108 - (332,133 ) 26,280,650
Total revenue 31,732,611 23,245,676 10,844,550 (13,475,566 ) 52,347,271

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 December 31, 2015
	Exploration and Production		Refining and Petrochemicals		Transportation 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
Services		118,812		198,369		10,822,078		(6,703,985	)		4,435,274
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 products		262,906		1,070,725		22,472		(367,757	)		988,346
		8,656,936		19,266,697		10,844,550		(13,143,433	)		25,624,750
Recognition of price differential		-		441,871		-		-			441,871
		8,656,936		19,708,568		10,844,550		(13,143,433	)		26,066,621
Foreign sales
Crude		21,495,762		-		-		(314,497	)		21,181,265
Fuel oil		-		2,166,469		-		-			2,166,469
Trading of crude		1,309,196									1,309,196
Natural gas		233,500		-		-		(50,550	)		182,950
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
		23,075,675		3,537,108		-		(332,133	)		26,280,650
Total revenue		31,732,611		23,245,676		10,844,550		(13,475,566	)		52,347,271

~~34.2.2~~33.3

Capital expenditures by ~~segment~~segments

The following are the investments amounts ~~of investments~~ made by each segment for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014:~~2015:

2016 Exploration and
production Refining and
petrochemicals Transportation
and logistics Total
Property, plant and equipment 1,208,464 1,099,850 1,338,615 3,646,929
Natural and environmental resources 2,121,295 - - 2,121,295
Intangibles 53,774 10,274 5,205 69,253
3,383,533 1,110,124 1,343,820 5,837,477

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
2017									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		927,282		606,749		829,252		2,363,283
Natural and environmental resources (Note 2.8)		6,601,680		-		-		6,601,680
Natural and environmental resources										3,568,355		-		-		3,568,355
Intangibles		26,610		10,636		74,772		112,018		154,155		4,941		16,772		175,868
		10,184,826		3,740,925		1,711,515		15,637,266		4,649,792		611,690		846,024		6,107,506

2016									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
Natural and environmental resources										2,121,295		-		-		2,121,295
Intangibles										53,774		10,274		5,205		69,253
										3,383,533		1,110,124		1,343,820		5,837,477

2015									Exploration and Production		Refining and Petrochemicals		Transport and Logistics		Total
Property, plant and equipment										2,460,975		3,590,279		2,497,679		8,548,933
Natural and environmental resources										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

~~F-102~~F-104

~~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.~~34.

Contractual obligations

~~Ecopetrol business group enter into various~~The Group has several commitments and contractual obligations that may require future ~~cash payments.~~ disbursement of funds. The main commitments are related to a) payments of loans and borrowings, which are disclosed in Note 30.5, b) payment of benefits post-employment, the amounts of which in the next 5 years are disclosed in Note 22.4 c) future payment commitments in service contracts, operational leasing, gas and energy supplies, purchase of assets and others, and d) commitments of exploration activities and others with the National Hydrocarbons Agency in current contracts.

The details of the commitments and contractual obligations can be found in section 4.8 Financial Review - Financial Indebtedness and Other Contractual Obligations.

~~36.~~35.

Subsequent events

1.-

On ~~February 15, 2017 the fourth auction was carried out corresponding to the Second Stage~~April 13, 2018, Ecopetrol redeemed all of ~~the Alienation and Awarding Program~~its outstanding 4.250% notes due September 18, 2018 in an aggregate principal amount of ~~28,465,035 shares of Empresa de Energía de Bogotá S.A. E.S.P, the auction was declared deserted.~~US$350 million. The notes were issued in September 2013.

2.-

~~The Ordinary General Shareholders’ Meeting, held on~~On March ~~31, 2017, approved~~14, 2018, Ecopetrol formed the ~~profit distribution project, which establishes that~~ subsidiary Ecopetrol Energía ~~common dividend per share~~SAS E.S.P., domiciled in Colombia, whose corporate purpose is the commercialization of ~~twenty-three pesos (COL $ 23) will be distributed. The shareholders’ dividend was paid~~electric energy for the Ecopetrol Business Group. Ecopetrol has a direct participation of 99% in ~~a single installment on April 28, 2017.~~the capitalization of the new subsidiary, and indirect participation in the remaining 1% interest through Andean Chemicals Ltd.

3.-

On ~~April 28, 2017~~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 ~~transferred~~activated its contingency plan to contain the ~~fields Santana~~spill. It is estimated that 550 barrels of crude, mixed with mud and ~~Nancy-Maxine-Burdine~~rainwater, seeped into the streams of La Lisama and Caño Muerto. As of March 30, 2018, the Lisama 158 well was sealed and stopped flowing. Ecopetrol has ordered an investigation to ~~Gran Tierra~~determine the cause of the seepage. As of the date of this annual report, the National Environmental Licenses Agency (ANLA) has opened an investigation into the incident and the Prosecutor’s Office and other control entities may also open investigations. Besides the notice of seven constitutional actions for ~~a total amount~~protection of ~~US$30.41 million. On May 26, 2017 the company IHSA paid US$21.74 million~~fundamental rights. Ecopetrol is not aware of any other third party claims in connection with this incident, it cannot offer any assurance as to ~~acquire the fields Rio de Oro and Puerto Barco, Rio Zulia and Valdivia Almagro, which~~whether or not there will be ~~transferred on May 30 and 31, 2017. All of these fields were awarded through an auction offered~~third party actions in ~~November 2016.~~the future.

4.-

As part of the investigations carried out by various control entities onof the ~~Cartagena refinery~~ modernization and expansion project of Reficar 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 interestfollowing developments in the ~~execution of agreement, misappropriation of public funds~~investigations and ~~unjust enrichment.~~proceedings have occurred:

~~The Prosecutor’s~~ Office ~~has~~of the Comptroller General (Contraloría General de la República): 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 ~~yet made public~~close the ~~factual basis~~General Budget, Treasury Account or the National Balance Sheet for ~~such charges, and accordingly we are~~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 have been ordered to initiate disciplinary, fiscal and/or penal investigations.

Ecopetrol is not in a position to ~~predict~~forecast the ~~outcome~~results 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,~~these investigations; nor is it ~~is not~~ possible to ~~assess~~evaluate the probability of any ~~other consequences~~consequence that ~~might~~may impact the financial statements, such as additional provisions, fines ~~legal costs, disallowance~~or ignorance of tax deductions that ~~may impact~~affect the ~~recognition of tax reserves or the carrying amount~~amounts of deferred tax ~~assets or any other impact that is not known at the present time.~~

assets.

~~F-103~~F-105

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

~~37.~~

~~Supplemental information on oil and gas producing activities (unaudited)~~

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

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”.

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, Accounting Standards Codification 932 and the 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.~~Group. The information included in sections a) to 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) and 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 2017, 2016 ~~2015~~ and ~~2014,~~2015, and includes information related to the ~~Company’s~~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~~Group opted not to do so. Ecopetrol estimated its reserves without considering non-traditional resources.

(a)

Capitalized costs relating to oil and gas exploration and production activities

December 31,
2016 2015 2014
Natural and environmental properties 47,097,475 45,789,713 40,356,524
Wells, equipment and facilities – property, plant and equipment 29,931,039 21,822,897 17,839,350
Construction in progress 6,855,832 9,145,198 8,110,401
Accumulated depreciation, depletion and amortization (49,714,944 ) (39,743,147 ) (32,003,657 )
Net capitalized costs 34,169,402 37,014,661 34,302,618

	2017			2016			2015
Natural and environmental properties		48,129,595			47,097,475			45,789,713
Wells, equipment and facilities - property, plant and equipment		30,405,565			29,931,039			21,822,897
Exploration and production projects		6,632,812			6,855,832			9,145,198
Accumulated depreciation, depletion and amortization		(51,791,897	)		(49,714,944	)		(39,743,147	)
Net capitalized cost		33,376,075			34,169,402			37,014,661

It includes information of the ~~exploration~~Exploration and ~~production~~Production segment subsidiaries.

In accordance with IAS 37, costs capitalized to natural and environmental properties include provisions for asset retirement obligations ~~amounting~~of COP$598,125, COP$766,909 and COP$580,575 during 2017, 2016 and ~~COP$1,061,392 during 2016,~~ 2015, ~~and 2014,~~ respectively.

(b)

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

	2017		2016		2015
Acquisition of proved properties (1)		591,875		-		-
Acquisition of unproved properties (2)		164,180		-		357,772
Exploration costs		1,095,588		852,097		1,012,264
Development costs		3,599,385		2,190,426		8,018,131
		5,451,028		3,042,523		9,388,167

(1)

ItOn 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 20.8%.

(2)

Corresponds mainly to investments made by Ecopetrol América Inc in offshore exploration projects of the Warrior and Rydberg wells. For 2015, relates to drilling for the Leon 2 exploratory project, operated by Repsol as well as acquisition of the ~~Lease~~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).

~~F-104~~F-106

~~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)

Results of operations for oil and gas exploration and production activities

The ~~Company’s~~Group’s results of operations from oil and gas exploration and production activities for the years ended December 31, 2017, 2016 ~~2015~~ and ~~2014~~2015 are as follows:

	2016			2015			2014			2017			2016			2015
Net revenues
Sales		21,322,662			26,039,708			36,678,579			29,823,565			21,322,662			26,039,708
Transfers		7,734,195			5,692,902			8,476,612			7,518,216			7,734,195			5,692,902
Total		29,056,857			31,732,610			45,155,191
											37,341,781			29,056,857			31,732,610
Production cost (1)		5,785,950			6,006,563			6,457,013
Production costs (1)											6,535,794			5,785,950			6,006,563
Depreciation, depletion and amortization (2)		6,123,914			9,887,331			6,129,538			6,349,382			5,927,466			6,234,190
Other production costs (3)		12,370,540			14,457,836			16,406,789			14,066,593			12,370,540			14,457,836
Exploration expenses (4)		730,393			1,586,940			2,590,778			1,342,952			730,393			1,586,940
Other expenses (5)		1,488,143			2,711,274			2,478,563			882,743			1,684,590			6,364,414
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
											29,177,464			26,498,939			34,649,943
Income before income tax expense											8,164,317			2,557,918			(2,917,333	)
Income tax expense											(3,678,955	)		(1,367,357	)		(371,376	)
Results of operations for exploration and production activities											4,485,362			1,190,561			(3,288,709	)

(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 2017, 2016 and 2015 ~~and 2014 amounting approximately~~of COP$380,810, COP$305,653 ~~COP$206,570~~ and COP$~~184,648,~~206,570, respectively.

(2)

In accordance with IAS 37 the expense related to asset retirement obligations that were recognized during 2017, 2016 ~~2015~~ and ~~2014~~2015 in depreciation, depletion and amortization, ~~amounted approximately to~~were COP$179,601, COP$188,370 ~~COP$294,849~~ and COP$~~160,106,~~294,849, respectively.

(3)

Corresponds to transportation costs and naphtha that are not part of the ~~Company´s~~Group’s lifting cost.

(4)

Exploration expenses include the costs of geological and geophysical activities as well as the non-productive exploratory wells.

(5)

Corresponds to administration and marketing expenses.

During 2017, 2016 and 2015, ~~and 2014 ,~~ the ~~Company~~Group transferred approximately ~~17.7%~~20.1%, ~~17.9%~~17.7% and ~~18.8%~~17.9%, 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 ~~46.1%~~48.4%, ~~37.4%~~46.1% and ~~38.8%~~37.4%, respectively of crude oil and gas production volume (including Reficar).

The intercompany transfers were ~~performed~~realized at market prices.

~~F-105~~F-107

~~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)

(d)

Reserve information

Ecopetrol follows international standards for estimating, classifying and reporting reserves framed under SEC definitions. The process is led by the Reserves Department which submits the report to the Board of Directors for approval.

The reserves were audited at a level of 99% by 2 specialized auditing companies: DeGolyer and MacNaughton and Ryder Scott ~~Company.~~Group. According to these certifications the reserves report complies with the content and guidelines set forth in Rule 4-10 of Regulation S-X issued by the United States SEC.

The following information relates to the net proven reserves owned by the Ecopetrol Business Group in 2017, 2016 ~~2015~~ and ~~2014,~~2015, and corresponds to the official reserves statements prepared by the ~~Company:~~Group:

	2016									2015									2014									2017									2016									2015
	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			1,033			3,218			1,598			1,239			3,479			1,849			1,465			3,529			2,084
Revisions of previous estimates (1)		(50	)		(23	)		(54	)		(64	)		225			(25	)		154			666			270			124			294			175			(50	)		(23	)		(54	)		(64	)		225			(25	)
Improved recovery		11			1			11			16			3			17			33			-			34			72			4			73			11			1			11			16			3			17
Purchases																													3			2			4			-			-			-			-			-			-
Extensions and discoveries		22			25			27			24			-			24			41			59			51			44			-			43			22			25			27			24			-			24
Production		(189	)		(264	)		(235	)		(202	)		(278	)		(251	)		(197	)		(264	)		(243	)		(188	)		(264	)		(234	)		(189	)		(264	)		(235	)		(202	)		(278	)		(251	)
Closing balance		1,033			3,218			1,598			1,239			3,479			1,849			1,465			3,529			2,084			1,088			3,254			1,659			1,033			3,218			1,598			1,239			3,479			1,849

Proved developed reserves:
Opening balance		913			3,176			1,470			1,042			3,284			1,618			933			2,663			1,400			779			3,131			1,329			913			3,176			1,470			1,042			3,284			1,618
Closing balance		779			3,131			1,329			913			3,176			1,470			1,042			3,284			1,618			818			3,158			1,372			779			3,131			1,329			913			3,176			1,470

Proved undeveloped reserves:
Opening balance		326			303			379			423			245			466			501			405			572			254			87			269			326			303			379			423			245			466
Closing balance		254			87			269			326			303			379			423			245			466			270			96			287			254			87			269			326			303			379

(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 section~~~~Overview Business – Exploration and Production – Reserves~~ ~~contains~~For additional information ~~of the process of estimating reserves and main explanations~~ about the changes in Proved Reserves and the process for estimating reserves, see section 3.4.3 - Business Overview - Exploration and Production - Reserves.

F-108

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

(e)

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. Estimated future cash inflows from production under SEC requirements are computed by applying unweighted arithmetic average of the first-day-of-the-month for oil and gas price to 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
Future cash inflows 140,458,230 176,865,586 310,138,127
Future costs
Production (60,705,779 ) (76,363,169 ) (107,629,865 )
Development (12,005,835 ) (16,498,118 ) (23,504,455 )
Income tax expenses (15,400,000 ) (30,052,830 ) (60,366,272 )
Future net cash flow 52,346,616 53,951,469 118,637,535
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

~~F-106~~

~~Ecopetrol S.A.~~

~~Notes to Consolidated Financial Statements~~

~~(Figures expressed in millions of Colombian pesos, unless otherwise stated)~~

	2017			2016			2015
Future cash inflows		182,114,282			140,458,230			176,865,586
Future costs
Production		(70,159,534	)		(60,705,779	)		(76,363,169	)
Development		(14,860,992	)		(12,005,835	)		(16,498,118	)
Income taxes		(23,660,328	)		(15,400,000	)		(30,052,830	)
Future net cash flow		73,433,428			52,346,616			53,951,469
10% discount factor		(22,216,583	)		(18,221,004	)		(19,117,422	)
Standardized measure of discounted net cash flows		51,216,845			34,125,612			34,834,047

The following are the principal sources of change in the standardized measure of discounted net cash flows in 2017, 2016 ~~2015~~ and ~~2014:~~2015:

	2016			2015			2014			2017			2016			2015

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
Net change in sales and transfer prices and in production cost (lifting) related to future production											26,918,170			3,603,876			(50,472,025	)
Changes in estimated future development costs		(4,767,340	)		592,529			(10,987,031	)		(1,978,913	)		(4,767,340	)		592,529
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	)		-			-
Sales and transfer of oil and gas produced, net of production costs											(30,805,987	)		(23,270,907	)		(25,726,047	)
Net change due to extension discoveries											284,374			154,352			(93,190	)
Net change due to purchase and sales of minerals in place											211,777			(83,450	)		-
Net change due to revisions in quantity estimates		(2,570,103	)		(985,217	)		18,866,518			9,090,882			(2,570,103	)		(985,217	)
Previously estimated development costs incurred during the period		5,042,697			10,769,369			8,702,964			3,482,570			5,042,697			10,769,369
Accretion of discount		5,423,781			11,321,221			11,018,459			4,416,512			5,423,781			11,321,221
Timing and other		6,394,404			(4,381,037	)		2,103,078			11,934,458			6,394,404			(4,381,037	)
Net change in income taxes		9,364,255			18,775,304			(1,254,706	)		(6,462,611	)		9,364,255			18,775,304
Aggregate change in the Standardized measure of discounted future net cash flows for the year		(708,435	)		(40,199,093	)		1,772,915
Aggregate change in the standardized measure of discounted future net cash flows for the year											17,091,232			(708,435	)		(40,199,093	)

~~F-107~~F-109

~~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)

Exhibit ~~1 -~~1. Consolidated subsidiaries, associates and joint ventures

Consolidated subsidiary companies ~~associates~~(1/2)

Group	Functional currency	Ownership interest Ecopetrol			Activity	Country/Domicile	Geographic area of operations	Equity, net		Profit (loss) of the year			Total assets		Total liabilities
Ecopetrol Global Energy SLU	U.S. Dollar		100	%	Investment vehicle	Spain	Spain		3,056,580		102,120			3,056,719		139
Ecopetrol Oleo é Gas do Brasil Ltda.	Real		100	%	Exploration and exploitation of hydrocarbons	Brazil	Brazil		36,385		(54,591	)		50,933		14,548
Ecopetrol del Perú S.A.	U.S. Dollar		100	%	Exploration and exploitation of hydrocarbons	Peru	Peru		48,969		(2,271	)		51,792		2,823
Ecopetrol America Inc.	U.S. Dollar		100	%	Exploration and exploitation of hydrocarbons	United States	United States		2,964,718		163,529			3,368,997		404,279
Black Gold Re Ltd.	U.S. Dollar		100	%	Reinsurer of Ecopetrol and its subordinates	Bermuda	Bermuda		607,199		28,135			729,125		121,926
Ecopetrol Germany Gmbh	U.S. Dollar		100	%	Exploration and exploitation of hydrocarbons	Germany	Angola		2,345		(118	)		2,773		428
Hocol Petroleum Limited	U.S. Dollar		100	%	Investment vehicle	Bermuda	Bermuda		2,223,406		(135,261	)		2,223,464		58
Hocol S.A.	U.S. Dollar		100	%	Exploration, exploitation and production of hydrocarbons	Cayman Islands	Colombia		1,529,052		(60,103	)		2,747,950		1,218,898
Andean Chemicals Ltd.	U.S. Dollar		100	%	Investment vehicle	Bermuda	Bermuda		5,168,133		(526,869	)		5,169,911		1,778
Refinería de Cartagena S.A *	U.S. Dollar		100	%	Refining, commercialization and distribution of hydrocarbons	Colombia	Colombia		17,008,913		39,195			25,805,231		8,796,318
Propileno del Caribe Propilco S.A.	U.S. Dollar		100	%	Production and commercialization of polypropylene resin	Colombia	Colombia		1,414,530		225,175			1,927,883		513,353
COMAI - Compounding and Masterbatching Industry	Colombian Peso		100	%	Manufacture of polypropylene compounds and masterbatches	Colombia	Colombia		141,580		114,241			202,879		61,299

* Information taken from the audited financial statements.

F-110

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Consolidated subsidiaries (2/2)

Group	Functional currency	Ownership interest Ecopetrol			Activity	Country/Domicile	Geographic area of operations	Equity, net		Profit (loss) of the year			Total assets		Total liabilities
Bioenergy S.A.	Colombian Peso		99,04	%	Production of biofuels	Colombia	Colombia		335,858		(237,846	)		433,582		97,724
Bioenergy Zona Franca SAS	Colombian Peso		99,04	%	Production of biofuels	Colombia	Colombia		246,866		(197,949	)		702,627		455,761
Amandine Holdings Corp.	Colombian Peso		99,04	%	On sale	Panama	Panama		6,657		-			6,657		-
The Arces Group Corp.	Colombian Peso		99,04	%	On sale	Panama	Panama		5,100		-			5,100		-
Cenit SAS	Colombian Peso		100	%	Storage and transportation by hydrocarbon pipelines	Colombia	Colombia		13,801,943		3,014,820			15,243,690		1,441,747
Oleoducto Central SA - Ocensa	U.S. Dollar		72,65	%	Transportation by crude oil pipelines	Colombia	Colombia		3,014,831		1,667,219			6,205,436		3,190,605
Oleoducto de los Llanos	Colombian Peso		65	%	Transportation by crude oil pipelines	Panama	Colombia		1,106,571		321,792			1,919,509		812,938
Oleoducto de Colombia SA - ODC	Colombian Peso		73	%	Transportation by crude oil pipelines	Colombia	Colombia		351,308		202,432			555,250		203,942
Bicentenario de Colombia SAS	Colombian Peso		55,97	%	Transportation activity by crude oil pipelines	Colombia	Colombia		1,069,490		385,500			3,205,369		2,135,879
Ecopetrol Capital AG	U.S. Dollar		100	%	Financing, liquidation of financing of group companies or any type of company	Switzerland	Switzerland		1,240,473		145,970			5,806,746		4,566,273
Ecopetrol Global Capital SLU	Euro		100	%	Investment vehicle	Spain	Spain		20		(51	)		39		19
Esenttia Resinas del Perú	U.S. Dollar		100	%	Marketing polypropylene resins and masterbatches	Peru	Peru		3,866		(84	)		15,981		12,115
Ecopetrol Costa Afuera SAS	Colombian Peso		100	%	Offshore Caribbean exploration	Colombia	Colombia		15,671		(69,242	)		139,192		123,521
ECP Hidrocarburos de México SA de CV	U.S. Dollar		100	%	Offshore Caribbean exploration	Mexico	Mexico		4,100		(3,653	)		5,851		1,751

F-111

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 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

~~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)~~

~~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 )

Group	Functional currency	Ownership interest Ecopetrol			Activity	Country/Domicile	Geographic area of operations	Equity, net		Profit (loss) of the year			Total assets		Total liabilities
Associates
Invercolsa SA (*)	Colombian Peso		43	%	Holding with investments in transport and distribution of natural gas and LPG	Colombia	Colombia		516,640		84,628			560,368		43,728
Serviport SA (*)	Colombian Peso		49	%	Services for the support of loading and unloading of oil ships, supply of equipment, technical inspections and load measurements	Colombia	Colombia		20,212		2,031			70,966		50,754
Sociedad Portuaria Olefinas y Derivados S.A. (*)	Colombian Peso		50	%	Construction, use, maintenance and administration of port facilities, ports, private docks.	Colombia	Colombia		2,847		178			3,189		342
Joint Ventures
Equion Energy Limited	U.S. Dollar		51	%	Exploration, exploitation and production of hydrocarbons	United Kingdom	Colombia		1,336,811		253,709			1,865,776		528,965
Ecodiesel Colombia SA (*)	Colombian Peso		50	%	Production, marketing and distribution of biofuels and oleo chemicals	Colombia	Colombia		76,766		13,236			128,420		51,654
Offshore International Group (*)	U.S. Dollar		50	%	Exploration, development, production and processing of hydrocarbons	United States	Peru		1,007,754		(178,280	)		1,858,013		850,259

(*) Information available as of November 30, ~~2016.~~2017

~~F-111~~F-112

Ecopetrol S.A.

Notes to the consolidated financial statements

(Figures expressed in millions of Colombian pesos, unless otherwise stated)

Exhibit 2 - Conditions of the most significant loans

Class of
credit

Group

Initial Date

Expiry Date

Currency

Original/nominal
value in original
currency

Outstanding
balance
Dec 31, 2017

Outstanding
balance
Dec 31, 2016

Type of
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

Banks,

Aug-13

Aug-18

COP

120,950

Floating

Bullet

Half-yearly

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

Ecopetrol S.A.

May-13

May-25

COP

1,839,000

1,532,500

1,736,833

Floating

Half-yearly

Currency

Bicentenario SAS

Jul-12

Jul-24

COP

2,100,000

1,373,750

1,549,625

Floating

Quarterly

syndicated loan

ODL Finance SA

Aug-13

Aug-20

COP

800,000

352,000

480,000

Floating

Quarterly

Jul-09

Jul-19

USD

1,500

Fixed

Bullet

Half-yearly

Sept-13

Sept-18

USD

350

Fixed

Bullet

Half-yearly

Sept-13

Sept-23

USD

1,300

Fixed

Bullet

Half-yearly

Sept-13

Sept-43

USD

850

Fixed

Bullet

Half-yearly

Bonds, foreign

Ecopetrol S.A.

May-14

May-45

USD

2,000

Fixed

Bullet

Half-yearly

currency

Sept-14

May-25

USD

1,200

Fixed

Bullet

Half-yearly

June-15

June-26

USD

1,500

Fixed

Bullet

Half-yearly

June-16

Sept-23

USD

500

Fixed

Bullet

Half-yearly

Oleoducto Central S.A.

May-14

May-21

USD

500

Fixed

Bullet

Half-yearly

Feb-15

Feb-20

USD

1,925

Floating

Bullet

Half-yearly

Jul-13

Jul-23

USD

245

147

171

Floating

Half-yearly

International

Ecopetrol S.A.

Jul-13

Jul-19

USD

151

Floating

Half-yearly

commercial

May-16

May-21

USD

300

Floating

Bullet

Half-yearly

credits

Feb-16

Feb-21

USD

175

Floating

Half-yearly

Dec-11

Dec-27

USD

2,747

2,012

2,177

Fixed

Half-yearly

Ecopetrol S.A.

Dec-11

Dec-27

USD

310

227

246

Floating

Half-yearly

Dec-11

Dec-25

USD

440

344

374

Floating

Half-yearly

**Financial debt designated as hedging instrument (See Note 30.2).

F-113

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
		Name:	María Fernanda Suárez
		Title:	Chief Financial Officer

	By:	/s/ ~~Juan Carlos Echeverry~~Felipe Bayón Pardo
		Name: ~~Juan Carlos Echeverry~~	Felipe Bayón Pardo
		Title:	Chief Executive Officer

~~Dated: May 30, 2017~~

Dated: April 19, 2018

~~152~~153

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))23, 2018 (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~~(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 (incorporated by reference to Exhibit 4.13 on Form 20-F filed with the U.S. Securities and Exchange Commission on May 31, 2017 (File No. 001-34175)) (English Translation).

~~153~~154

~~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 (incorporated by reference to Exhibit 4.14 on Form 20-F filed with the U.S. Securities and Exchange Commission on May 31, 2017 (File No. 001-34175)) (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		Third-Party Reserve Report of Ryder Scott Company, L.P.
99.2		Third-Party Reserve Report of DeGolyer and MacNaughton.
101*		The following materials from the Ecopetrol S.A. Annual Report on Form 20-F for the year ended December 31, 2017 formatted in Extensible Business Reporting Language (XBRL): (i) the Consolidated Statements of Financial Position, (ii) the Consolidated Statements of Profit or Loss, (iii) the Consolidated Statements of Other Comprehensive Income, (iv) the Consolidated Statements of Changes in Equity, (v) the Consolidated Statements of Cash Flows and (vi) related notes to the Consolidated Financial Statements.

* To be filed by amendment.

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 and 1817 to the consolidated financial statements
		E. Oil and Gas Disclosures	3.3 – 3.6; Notes 15, ~~and~~ 16 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, 3029 and ~~31.6~~30.6 to the consolidated financial statements
		C. Research and development, Patents and Licenses, etc.	3.7; Note 1817 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, 22 and 32 to the consolidated financial statements~~
	~~C. Board Practices~~	~~7.3~~
	~~D. Employees~~	~~3.12~~
	~~E. Share Ownership~~	~~7.7~~

~~154~~155

	~~Sections~~ B. Compensation	7.6; Notes 4, 22 and 31 to the consolidated financial statements
	C. Board Practices	7.3
	D. Employees	3.12
	E. Share Ownership	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 3231 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
	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 3130 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~~156

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		Name of each exchange on which registered:
7.625% Notes due 2019		~~New York Stock Exchange~~
~~4.250% Notes due 2018~~		New York Stock Exchange
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		400 - 450		11	%
Production		2,580 – 2,950		74	%
Transportation and Logistics		270 - 300		8	%
Refining, Petrochemicals, and Biofuels		220 - 250		6	%
Others		30 - 50		1	%
TOTAL		3,500- 4,000		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.

1.	Introduction					1	Introduction					1

	1.1	About This Report				1	1.1	About This Report				1

	1.2	Forward-looking Statements				1	1.2	Forward-looking Statements				1

	1.3	Selected Financial and Operating Data				2	1.3	Selected Financial and Operating Data				2

2.	Strategy and Market Overview					4	Strategy and Market Overview					4

	2.1	Our Corporate Strategy				5	2.1	Our Corporate Strategy				5

3.	Business Overview					6	Business Overview					7

	3.1	Our History				6	3.1	Our History				7

	3.2	Our Corporate Structure				7	3.2	Our Corporate Structure				7

	3.3	Our Business				9	3.3	Our Business				8

	3.4	Exploration and Production				9	3.4	Exploration and Production				9

		3.4.1	Exploration Activities			9		3.4.1	Exploration Activities			9

			3.4.1.1	Exploration Activities in Colombia		9			3.4.1.1	Exploration Activities in Colombia		9

			3.4.1.2	Exploration Activities Outside of Colombia		12			3.4.1.2	Exploration Activities Outside of Colombia		11

		3.4.2	Production Activities			13		3.4.2	Production Activities			13

			3.4.2.1	Production Activities in Colombia		14			3.4.2.1	Production Activities in Colombia		13

				3.4.2.1.1.	Ecopetrol S.A.’s Production Activities in Colombia	14				3.4.2.1.1	Ecopetrol S.A.’s Production Activities in Colombia	13

				3.4.2.1.2.	Ecopetrol S.A.’s Affiliates and Subsidiaries’ Production Activities in Colombia	19				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			3.4.2.2	Production Activities Outside Colombia		21

			3.4.2.3	Marketing of Crude Oil, Natural Gas and Refined Products		23			3.4.2.3	Marketing of Crude Oil, Natural Gas and Refined Products		22

		3.4.3	Reserves			25		3.4.3	Reserves			24

		3.4.4	Joint Venture and Other Contractual Arrangements			30		3.4.4	Joint Venture and Other Contractual Arrangements			30

	3.5	Transportation and Logistics				34	3.5	Transportation and Logistics				34

			3.5.1.1	Transportation Activities		34			3.5.1.1	Transportation Activities		34

			3.5.1.2	Pipelines		37			3.5.1.2	Pipelines		36

			3.5.1.3	Export and Import Facilities		39			3.5.1.3	Export and Import Facilities		37

		3.5.2	Other Transportation Facilities			39

	3.5.3	Marketing of Transportation Services			39

3.6	Refining and Petrochemicals				40

	3.6.1	Refining			40

		3.6.1.1	Barrancabermeja Refinery		40

		3.6.1.2	Reficar		41

		3.6.1.3	Polipropileno del Caribe S.A.		43

		3.6.1.4	Biofuels		43

	3.6.2	Marketing and Supply of Refined Products			44

3.7	Research and Development; Intellectual Property				44

3.8	Applicable Laws and Regulations				44

	3.8.1	Regulation of Exploration and Production Activities			44

		3.8.1.1	Business Regulation		44

			3.8.1.1.1.	Environmental Licensing and Prior Consultation	45

			3.8.1.1.2.	Royalties	46

	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		50

	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		54

		3.9.1.3	Refinería de Cartagena		55

	3.9.2	Human Rights			55

	3.9.3	Environmental Sustainability			56

		3.9.3.1	Environmental Practices		56

		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

							4.5.1.11	Refining and Petrochemicals Segment Results	84

	4.6	Liquidity and Capital Resources		84	4.6	Liquidity and Capital Resources			85

		4.6.1	Review of Cash Flows	85		4.6.1	Review of Cash Flows		86

		4.6.2	Capital Expenditures	86		4.6.2	Capital Expenditures		87

		4.6.3	Dividends	86		4.6.3	Dividends		87

	4.7	Summary of Differences between Internal Reporting (Colombian IFRS and IFRS)		86	4.7	Summary of Differences between Internal Reporting (Colombian IFRS and IFRS)			87

	4.8	Financial Indebtedness and Other Contractual Obligations		88	4.8	Financial Indebtedness and Other Contractual Obligations			89

	4.9	Off Balance Sheet Arrangements		89	4.9	Off Balance Sheet Arrangements			90

	4.10	Trend Analysis and Sensitivity Analysis		89	4.10	Trend Analysis and Sensitivity Analysis			91

5.	Risk Review			92	Risk Review				93

	5.1	Risk Factors		92	5.1	Risk Factors			93

		5.1.1	Risks Related to Our Business	92		5.1.1	Risks Related to Our Business		93

		5.1.2	Risks Related to Colombia’s Political and Regional Environment	103		5.1.2	Risks Related to Colombia’s Political and Regional Environment		104

		5.1.3	Legal and Regulatory Risks	106		5.1.3	Legal and Regulatory Risks		107

		5.1.4	Risks Related to our ADSs	108		5.1.4	Risks Related to Our ADSs		109

		5.1.5	Risks Related to State Ownership	111		5.1.5	Risks Related to State Ownership		111

	5.2	Risk Management		111	5.2	Risk Management			111

		5.2.1	Managing Risk through our Internal Control System	111		5.2.1	Managing Risk through Our Internal Control System		111

		5.2.2	Managing Information Security and Cybersecurity	112		5.2.2	Managing Information Security and Cybersecurity		113

		5.2.3	Managing Financial Risk	113		5.2.3	Managing Financial Risk		113

	5.3	Legal Proceedings and Related Matters		115	5.3	Legal Proceedings and Related Matters			115

6.	Shareholder Information			118	Shareholder Information				120

	6.1	Shareholders’ General Assembly		118	6.1	Shareholders’ General Assembly			120

	6.2	Dividend Policy		119	6.2	Dividend Policy			121

	6.3	Market and Market Prices		119	6.3	Market and Market Prices			121

	6.4	Ecopetrol ADR Program Fees		122	6.4	Ecopetrol ADR Program Fees			124

	6.5	Taxation		123	6.5	Taxation			125

		6.5.1	Colombian Tax Considerations	123		6.5.1	Colombian Tax Considerations		125

		6.5.2	U.S. Federal Income Tax Consequences	127

						6.5.2	U.S. Federal Income Tax Consequences	129

	6.6	Exchange Controls and Limitations		130	6.6	Exchange Controls and Limitations		132

	6.7	Exchange Rates		131	6.7	Exchange Rates		133

	6.8	Major Shareholders		132	6.8	Major Shareholders		134

	6.9	Enforcement of Civil Liabilities		132	6.9	Enforcement of Civil Liabilities		134

7.	Corporate Governance			134	Corporate Governance			136

	7.1	Bylaws		134	7.1	Bylaws		136

	7.2	Code of Ethics		137	7.2	Code of Ethics		140

	7.3	Board of Directors		138	7.3	Board of Directors		140

		7.3.1	Board Practices	140		7.3.1	Board Practices	142

		7.3.2	Board Committees	141		7.3.2	Board Committees	143

	7.4	Compliance with NYSE Listing Rules		142	7.4	Compliance with NYSE Listing Rules		144

	7.5	Management		143	7.5	Management		146

	7.6	Compensation of Directors and Management		147	7.6	Compensation of Directors and Management		149

	7.7	Share Ownership of Directors and Executive Officers		147	7.7	Share Ownership of Directors and Executive Officers		149

	7.8	Controls and Procedures		147	7.8	Controls and Procedures		149

8.	Financial Statements			151	Financial Statements			152

9.	Signature Page			152	Signature Page			153

10.	Exhibits			153	Exhibits			154

11.	Cross-reference to Form 20-F			154	Cross-reference to Form 20-F			155

Operating Information	2016			2015			2014			2013			2012			2017			2016			2015			2014			2013
Oil and gas production (mboed)		717.9			760.7			755.4			788.2			754.0			715.1			717.9			760.7			755.4			788.2
Proved oil and gas reserves (Mmboe)⁽¹⁾		1,598			1,849			2,084			1,972			1,877			1,659			1,598			1,849			2,084			1,972
Exploratory Wells⁽²⁾		6			5			28			22			23			20			6			5			28			22
Refinery Through-put (bpd)⁽³⁾		332,751			234,861			240,484			283,362			296,340			347,483			332,751			234,861			240,484			283,362
1P Reserves replacement ratio		(7	%)		6	%		146	%		139	%		108	%		126	%		(7	)%		6	%		146	%		139	%

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	%

	For the year ended December 31,																		For the year ended December 31,
	2016						2015						2014						2017						2016						2015
	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		577.3		121.6		698.9		582.5		123.3		705.8		619.2		130.4		749.6
Total International production⁽³⁾		9.6		2.5		12.1		7.3		3.8		11.1		8.6		2.6		11.2		13.6		2.6		16.2		9.6		2.5		12.1		7.3		3.8		11.1
Total production of Ecopetrol Group		592.1		125.8		717.9		626.5		134.2		760.7		619.5		135.9		755.4		590.9		124.2		715.1		592.1		125.8		717.9		626.5		134.2		760.7

	2016 (mbod)		Year-on-Year ∆ (%)			2015 (mbod)		Year-on-Year ∆ (%)			2014 (mbod)		2017 (mbod)		Year-on-Year ∆(%)			2016 (mbod)		Year-on-Year ∆(%)			2015 (mbod)
Light		44.6		(0.0	)%		44.6		0.2	%		44.5		42.4		(4.9	)%		44.6		(0.0	)%		44.6
Medium		161.5		(13.7	)%		187.1		(5.8	)%		198.6		151.6		(6.1	)%		161.5		(13.7	)%		187.1
Heavy		346.0		(2.4	)%		354.5		5.3	%		336.6		351.0		1.4	%		346.0		(2.4	)%		354.5
Total		552.1		(5.8	)%		586.2		1.1	%		579.7		545.0		(1.3	)%		552.1		(5.8	)%		586.2

	As of December 31, 2016 (number of wells)								As of December 31, 2017 (number of wells)
	Crude Oil⁽¹⁾				Natural Gas⁽²⁾				Crude Oil⁽¹⁾				Natural Gas⁽²⁾
	Gross		Net		Gross		Net		Gross		Net		Gross		Net
COLOMBIA
Ecopetrol S.A.
Central region		2,286		1,807		9		9		2,301		1,813		6		6
Orinoquía region		952		946		17		17		978		972		17		17
Southern region		583		520		6		6		578		513		11		11
Eastern Region		780		780		0		0		804		804		0		0
Region of Associated Operations		2,829		1,425		27		10		2,987		1,499		25		9
Total (Ecopetrol S.A.)		7,430		5,478		59		42		7,648		5,601		59		43

	Production acreage as of December 31, 2016								Production acreage as of December 31, 2017
	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		20,892		12,726		627		528
Equion		20,867.4		5,269.0		84,826.9		19,853.0		16,300		4,024		54,666		12,162
Total (Subsidiaries in Colombia)		39,654.8		13,816.0		85,173.7		20,182.6		37,192		16,750		55,293		12,690

	For the year ended December 31, 2016								For the year ended December 31, 2017
	Crude Oil				Natural Gas				Crude Oil				Natural Gas
	Gross		Net		Gross		Net		Gross		Net		Gross		Net
	(number of wells)								(number of wells)
Hocol		231		163.9		5		4.5		286		222		7		5.5
Equion		22		11		22		11		15		8		15		8
Total (Subsidiaries in Colombia)		253		174.9		27		15.5		301		230		22		13.5

	As of December 31, 2016				As of December 31, 2017
	Crude Oil				Crude Oil
	Gross		Net		Gross		Net
	(number of wells)				(number of wells)
INTERNATIONAL
Savia Perú		639		320		626		313
Ecopetrol America Inc.		14		2.4		14		3.3
Total (International)		653		322.4		640		316.3

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		849		3		6		858
At December 31, 2016		710		6		7		723		710		6		7		723
At December 31, 2017										747		10		6		763
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		54		0		1		55
At December 31, 2016		55		0		1		56		55		0		1		56
At December 31, 2017										54.6		0		0.8		55.4
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		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
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		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

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		747		54.6		3,143		1,353
International:
North America		6		0		9		8		10		0		10		11
South America		7		1		8		10		6		0.8		5		8
TOTAL PROVED DEVELOPED RESERVES		723		56		3,131		1,329		763		55.4		3,158		1,372
PROVED UNDEVELOPED RESERVES
Total (Colombia)		238		13		85		266		247		19		93		282
International:
North America		3		0		2		3		4		0		3		5
South America		0		0		0		0		0		0		0		0
TOTAL PROVED UNDEVELOPED RESERVES		241		13		87		269		251		19		96		287
TOTAL PROVED RESERVES		964		69		3,218		1,598		1,014		74		3,253		1,659

	As of December 31,									As of December 31,
	2016			2015			2014			2017			2016			2015
Consolidated Company (million barrels oil equivalent)
Revisions of previous estimates		(54	)		(25	)		270			174			(54	)		(25	)
Improved Recovery		11			16			34			73			11			16
Extensions and discoveries		27			24			51			44			27			24
Purchases											4			-			-
Total reserves additions		(16	)		16			355			295			(16	)		16
Production		(235	)		(251	)		(243	)		(234	)		(235	)		(251	)
Net change in proved reserves		(251	)		(235	)		112			61			(251	)		(235	)

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~~ (Companies(million barrels oil equivalent)
Revisions of previous estimates	~~(60.4~~9	)
Improved recovery	~~7.1~~36
Extensions and discoveries	~~11.8~~25
Proved Undeveloped converted to Proved Developed	(~~68.4~~53	)
Net change in unproved reserves	~~(109.9~~17	)

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
Revisions		264.7			1.7			4.0			270.4
Purchase of Minerals		0.0			0.0			0.0			0.0
Improved Recovery		34.1			0.0			0.0			34.1
Extensions and discoveries		50.1			0.8			0.0			50.9
Sales		0.0			0.0			0.0			0.0
Production		(239.6	)		(1.5	)		(2.0	)		(243	)
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			1,821			14			14			1,849
Revisions		(51	)		(0.7	)		(2.5	)		(54	)		(51	)		(0.7	)		(2.5	)		(54	)
Improved Recovery		11			0			0			11			11			0			0			11
Extensions and discoveries		27			0			0			27			27			0			0			27
Production		(231	)		(2.3	)		(1.7	)		(235	)		(231	)		(2.3	)		(1.7	)		(235	)
At December 31, 2016		1,577			11			10			1,598			1,577			11			10			1,598
Revisions														170			4.6			(0.3	)		174
Improved Recovery														73			0			0			73
Extensions and discoveries														44			0			0			44
Purchases														0			4			0			4
Production														(229	)		(4	)		(1.5	)		(234	)
At December 31, 2017														1635			16			8			1659

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		87.29	%
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	%		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	⁽¹⁾	Crude Oil	East fields	Monterrey Cusiana		65.00	%
Oleoducto Bicentenario de Colombia		230		110	⁽¹⁾	Crude Oil	Araguaney	Banadia		55.97	%		230		110	⁽²⁾	Crude Oil	Araguaney	Banadia		55.97	%

	For the year ended December 31,⁽¹⁾						For the year ended December 31,⁽¹⁾
	2016		2015		2014		2017		2016		2015
	(bpd)						(bpd)
LPG, Propylene and Butane		6,080		0		0		6,791		6,080		0
Motor Fuels		35,012		1,558		1,997
Gasoline Fuels and Naphta								43,728		35,012		1,558
Diesel		40,950		2,282		2,254		60,467		40,950		2,282
Jet Fuel and Kerosene		5,768		1,202		812		6,700		5,768		1,202
Fuel Oil		24,602		2,826		3,352		10,150		24,602		2,826
Sulfur		241		0		0		446		241		0
Total		112,653		7,868		8,415		128,282		112,653		7,868
Difference between Inventory of Intermediate Products		911		2,476		1,896		3,916		911		2,476
Total Production⁽²⁾		113,564		10,344		10,311		132,198		113,564		10,344

Petcoke (Metric tons)		601,163		0		0		704,073		601,163		0

METRIC	2016		2015⁽¹⁾		2017		2016		2015⁽¹⁾
Man-hours		10,351,896		32,944,698		7,495,531		10,351,896		32,944,698
Recordable accidents		29		57		9		29		57
Total recordable cases (TRIF)*		2.80		1.73		1.2		2.80		1.73
Environmental Incidents (EI)		0		0		0		0		0
Process Safety Incidents (ISP)*		0.19		0.03		0.13		0.19		0.03

Income Statement	For the Years ended December 31,									% Change						For the Years ended December 31,									% Change
(Colombian Pesos in millions)	2016			2015			2014			2016/2015			2015/2014			2017			2016			2015			2017/2016			2016/2015
Revenue		48,485,561			52,347,271			65,971,888			(7.4	)		(20.7	)		55,954,228			48,485,561			52,347,271			15.4			(7.4	)
Cost of Sales		34,251,423			36,994,516			42,975,128			(7.4	)		(13.9	)
Cost of sales																	36,908,325			34,251,423			36,994,516			7.8			(7.4	)
Gross Profit		14,234,138			15,352,755			22,996,760			(7.3	)		(33.2	)		19,045,903			14,234,138			15,352,755			33.8			(7.3	)
Operating Expenses		4,400,843			5,356,715			6,243,166			(17.8	)		(14.2	)
Operating expenses																	4,185,186			4,400,843			5,356,715			(4.9	)		(17.8	)
Impairment of non-current assets		928,747			7,864,875			2,304,567			(88.2	)		241.3			(1,311,138	)		928,747			7,864,875			(241.2	)		(88.2	)
Operating Income		8,904,548			2,131,165			14,449,027			317.8			(85.3	)		16,171,855			8,904,548			2,131,165			81.6			317.8
Finance results, net		(1,175,367	)		(7,663,104	)		(3,510,669	)		(84.7	)		118.3			(2,495,731	)		(1,175,367	)		(7,663,104	)		112.3			(84.7	)
Share of profit of companies		61,345			(46,687	)		166,070			(231.4	)		(128.1	)		93,538			61,345			(46,687	)		52.5			(231.4	)
Income before income tax		7,790,526			(5,578,626	)		11,104,428			(239.6	)		(150.2	)		13,769,662			7,790,526			(5,578,626	)		76.7			(239.6	)
Income tax		(4,543,046	)		(710,353	)		(5,434,855	)		539.5			(86.9	)		(5,800,268	)		(4,543,046	)		(710,353	)		27.7			539.5
Net Income (loss)		3,247,480			(6,288,979	)		5,669,573			(151.6	)		(210.9	)		7,969,394			3,247,480			(6,288,979	)		145.4			(151.6	)
Net Income (loss) attributable to:
Net income (loss) attributable to:
Company’s shareholders		2,447,881			(7,193,859	)		5,046,517			(134.0	)		(242.6	)		7,178,539			2,447,881			(7,193,859	)		193.3			(134.0	)
Non-controlling interest		799,599			904,880			623,056			(11.6	)		45.2			790,855			799,599			904,880			(1.1	)		(11.6	)
Net Income (loss)		3,247,480			(6,288,979	)		5,669,573			(151.6	)		(210.9	)		7,969,394			3,247,480			(6,288,979	)		145.4			(151.6	)

	Year ended December 31,									% Change						Year ended December 31,									% Change
	2016			2015			2014			2016/2015			2015/2014			2017			2016			2015			2017/2016			2016/2015
	(Colombian Pesos in millions)															(Colombian Pesos in millions)
Exploration and Production		28,221,210			31,732,611			45,155,191			(11.1	)		(29.7	)		36,494,934			28,221,210			31,732,611			29.3			(11.1	)
Third parties		20,527,332			25,669,213			35,903,045			(20.0	)		(28.5	)		25,004,320			20,527,332			25,669,213			21.8			(20.0	)
Local crude oil		553,666			491,279			1,213,718			12.7			(59.5	)		909,871			553,666			491,279			64.3			12.7
Foreign crude oil		17,278,579			21,181,265			30,835,510			(18.4	)		(31.3	)		21,426,666			17,278,579			21,181,265			24.0			(18.4	)
Trading of crude oil		-			1,309,196			1,486,060			(100.0	)		(11.9	)		-			-			1,309,196			-			(100.0	)
Natural gas local		1,988,336			1,845,345			1,346,625			7.7			37.0			1,815,754			1,988,336			1,845,345			(8.7	)		7.7
Foreign natural gas		58,809			182,950			423,461			(67.9	)		(56.8	)		32,303			58,809			182,950			(45.1	)		(67.9	)
Other income		647,942			659,178			597,671			(1.7	)		10.3			819,726			647,942			659,178			26.5			(1.7	)
Inter-segment net operating revenues		7,693,878			6,063,398			9,252,146			26.9			(34.5	)		11,490,614			7,693,878			6,063,398			49.3			26.9
Refining and Petrochemicals		24,823,714			23,245,676			27,172,300			6.8			(14.5	)		28,644,016			24,823,714			23,245,676			15.4			6.8
Third parties		24,194,024			22,456,866			26,612,204			7.7			(15.6	)		27,343,359			24,194,024			22,456,866			13.0			7.7
Local refined products		17,771,166			18,806,063			20,952,495			(5.5	)		(10.2	)		21,187,091			17,771,166			18,806,063			19.2			(5.5	)
Foreign refined products		6,330,648			3,535,666			5,431,828			79.1			(34.9	)		6,005,556			6,330,648			3,535,666			(5.1	)		79.1
Foreign crude oil																	52,397			-			-			-			-
Other income		92,210			115,137			227,881			(19.9	)		(49.5	)		98,315			92,210			115,137			6.6			(19.9	)
Inter-segment net operating revenues		629,690			788,810			560,096			(20.2	)		40.8			1,300,657			629,690			788,810			106.6			(20.2	)
Transportation and Logistics		10,648,776			10,844,550			8,343,934			(1.8	)		30.0			10,598,064			10,648,776			10,844,550			(0.5	)		(1.8	)
Third parties		3,764,205			4,221,192			3,456,639			(10.8	)		22.1			3,606,549			3,764,205			4,221,192			(4.2	)		(10.8	)
Inter-segment net operating revenues		6,884,571			6,623,358			4,887,295			3.9			35.5			6,991,515			6,884,571			6,623,358			1.6			3.9
Eliminations of consolidations		(15,208,139	)		(13,475,566	)		(14,699,537	)		12.9			(8.3	)		(19,782,786	)		(15,208,139	)		(13,475,566	)		30.1			12.9
Total revenues		48,485,561			52,347,271			65,971,888			(7.4	)		(20.7	)		55,954,228			48,485,561			52,347,271			15.4			(7.4	)

	Year ended December 31,									% Change
Net income by segment	2016			2015			2014			2016/2015			2015/2014
	(Colombian Pesos in millions)
Exploration and Production		1,322,370			(5,851,619	)		5,089,841			(123	)		(215	)
Refining and Petrochemicals		(1,823,020	)		(4,016,050	)		(1,627,705	)		(55	)		147
Transportation and Logistics		2,960,449			2,819,759			1,758,777			5			60
Eliminations of consolidations		(11,918	)		(145,949	)		(174,396	)		(92	)		(16	)
Net Income attributable to owners of Ecopetrol S.A.		2,447,881			(7,193,859	)		5,046,517			(134	)		(243	)

	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, 2017								1,088			3,253			1,659
Sensitivity Scenario		1,182		3,252		1,752		1,143			3,267			1,716
Difference (million barrels)		149		34		154		55			14			57
Difference (%)		14.4		1		9.6		5.1	%		0.4	%		3.4	%

	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 2017			Income Statement Case ICE Brent⁽¹⁾+ US$1			Difference Between Real 2017 and Case ICE Brent			Income Statement Case TRM⁽²⁾- 1%			Difference Between Real 2017 and Case TRM
	(COP$ in billions)															(COP$ in billions)
Revenue		48,485,56			49,398,37			912,81			48,931,98			446,42			55,954.23			56,929.63			975.40			56,519.30			565.07
Cost of sales		34,251,42			34,606,79			355,37			34,472,25			220,83			(36,908.33	)		(37,279.43	)		(371.11	)		(37,175.09	)		(266.76	)
Gross Income		14,234,14			14,791,58			557,44			14,459,73			225,60			19,045.90			19,650.20			604.29			19,344.21			298.31
Operating expenses		4,400,84			4,400,84			-			4,400,84			-			(4,185.19	)		(4,185.19	)		-			(4,185.19	)		-
Impairment of non-current assets		928,75			928,75			-			928,75			-			1,311.14			1,311.14			-			1,311.14			-
Operating income		8,904,55			9,461,99			557,44			9,130,14			225,60			16,171.86			16,776.15			604.29			16,470.16			298.31
Finance results, net		(1,175,37	)		(1,175,37	)		-			(1,175,37	)		-			(2,495.73	)		(2,495.73	)		-			(2,495.73	)		-
Share of profit of associates and joint ventures		61,35			61,35			-			61,35			-			93.54			93.54			-			93.54			-
Income before income tax		7,790,53			8,347,97			557,44			8,016,12			225,60			13,769.66			14,373.96			604.29			14,067.97			298.31
Income Tax		(4,543,05	)		(4,868,12	)		(325,07	)		(4,674,60	)		(131,56	)		(5,800.27	)		(6,054.82	)		(254.55	)		(5,925.92	)		(125.65	)
Net Income		3,247,48			3,479,85			232,37			3,341,52			94,04			7,969.39			8,319.14			349.74			8,142.05			172.66

VARIATION ON ICE BRENT REFERENCE PRICE	VARIATION ON AVERAGE EXCHANGE RATE
	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

	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

	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
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
2017		1,480		1,290		0.7492		0.4373		11,420,810
Most recent quarters
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
Second quarter 2017		1,480		1,325		0.5067		0.4537		14,076,659
Third quarter 2017		1,405		1,350		0.4727		0.4542		8,247,688
Fourth quarter 2017		2,210		1,395		0.7406		0.4675		13,447,615
First quarter 2018		2,800		2,210		0.9800		0.7735		19,795,943
Most recent six months
November 2017		1,820		1,700		0.6045		0.5646		14,409,722
December 2017		2,210		1,775		0.7391		0.5936		9,771,858
January 2018		2,800		2,210		0.9777		0.7717		21,066,624
February 2018		2,770		2,335		0.9680		0.8160		21,606,463
March 2018		2,775		2,450		0.9749		0.8607		17,676,641
April 2018 (through April 16, 2018)		2,980		2,615		1.0801		0.9478		14,416,613