Ecopetrol S.A. (NYSE:EC) Q4 2023 Earnings Call Transcript March 1, 2024 9:00 AM ET
Company Participants
Ricardo Roa – CEO
Alberto Consuegra – COO
David Riano – VP of Low Emission Solutions
Milena Lopez – CFO
Conference Call Participants
Ricardo Sandoval – Bancolombia
Andres Duarte – Corficolombiana
Juan Jose Munoz – BTG Pactual
Andres Cardona – Citibank
Katherine Ortiz – Corredores Davivienda
Bruno Montanari – Morgan Stanley
Rodrigo Almeida – Banco Santander
Alejandra Andrade – JPMorgan
Operator
Good morning. My name is Natalia, and I will be your operator today. Welcome to Ecopetrol’s Earnings Conference Call, in which we will discuss the main financial and operational results for the fourth quarter and year-end 2023. There will be a questions-and-answer session at the end of the presentation.
Before we begin, it is important to mention that the comments in this call by Ecopetrol’s senior management include projections of the company’s future performance. These projections do not constitute any commitment as to future results, nor do they take into account risks or uncertainties that could materialize. As a result, Ecopetrol assumes no responsibility in the event that future results are different from the projections shared on this conference call.
The call will be led by Mr. Ricardo Roa, CEO of Ecopetrol; Alberto Consuegra, COO; David Riano, Vice President of Low Emission Solutions; and Milena Lopez, CFO. Thank you for your attention.
Mr. Roa, you may begin your conference.
Ricardo Roa
Good morning, everyone. With regards to the 2023 results call, a year of significant achievements [Technical Difficulty] by goals and progress in energy transition projects. We will have marked numerous operational records and value generation, overcoming a more challenging market environment. In 2023, we strengthened the traditional hydrocarbon business across all its segments. In 2023, we are strengthened the traditional hydrocarbon business, across all its sectors. We closed the year with a production of 757,000 barrels of oil equivalent per day, a figure not seen in eight years supported by our fields in Colombia and the Permian subsidiary contributing 9% to the total produce. We transport 1,130,000 barrels per day with 306,000 barrels per day through pipelines, the highest in the group’s history.
In refining, we achieved an unprecedented financial performance with over [COP73.3 trillion] (ph) in EBITDA, the highest refining load in history of 120 barrels per day, [Technical Difficulty] continues to supply and operation of the Cartagena refinery plant interconnection, IPCC. We achieved an exploratory [Technical Difficulty] 50% above industry standard, highlighting milestone like Glaucus-1 announced earlier and Orca Norte-1, the first deepwater well 100% drilled by Ecopetrol which confirm the presence of two gas accumulations in reservoirs different from the Orca-1 discovery. This expands our offshore gas potential, referring our commitment to the countries and energy security.
In the commercial front in October 2023, we announced the opening of the trading office in Houston to be closer to global markets and attain better results. This is ongoing effort to diversify customers and markets who currently sell more than 50% of our crude oil stores to the Asian market.
In Transmission, Roads and Telecommunications segment, secured contracts in 2023, representing investment of COP10 trillion for the coming years.
Let’s move to the next slide. We made significant progress in the commitment to decarbonization and to consolidate energy transition projects, achieving a cumulative reduction of green house gas emission up nearly 1.5 million tons of CO2 equivalent by the end of the year, aligning with the path to net zero emission [Technical Difficulty] of this emission relate to methane where Ecopetrol standard its emission to achieve zero methane emission initiative of the Oil and Gas Climate Initiative. The commitment to action on climate change is evident, showcased by our adherence to the global sector agreement to accelerate the decarbonization of oil and gas during COP28 alongside 49 other oil companies.
In 2023, we reused 152 million cubic meters of water, abiding, capturing and discharging this volume, representing 79% of the total water required for operations. This achievement was recognized by CDP Water Security, giving us and A minus leadership rating for outstanding water management practices, making us one of the best companies in the oil and gas sector in these practices.
In addition, in 2023, Ecopetrol was certified by ICONTEC in the calculation of water footprint in [eight] (ph) production fields and the two refineries, being the only oil and gas company in Latin America that have reached this achievement. Ecopetrol Group reported an energy saving of 3.89 petajoules at the end of 2023, the highest figure since 2018 when maturing began and 250% higher than that presented in 2022. Moreover, we added 472 megawatts of renewable energy to optimize our energy metrics and decarbonize our operations. In terms of sustainability, we invest COP1.9 trillion in the social dimension, we allocate COP520 million to education, public services and regional economic diversification, making a 17% increase from 2022.
We promote the energy transition by expanding the coverage of social gas service through networks benefiting more than 20,000 new homes in Colombia with physical connections. Regarding our human talent, it’s noteworthy that we successfully negotiated the 2023-2026 collective labor convention with nine labor organizations. Also, we highlight our recognition in 2023 Merco ranking as the Colombian company with the greatest capacity to attract and retain talent.
We also emphasize low accident levels with a total recordable injury frequency of 0.26 injuries per million hours worked. We rank among to the top high global oil and gas companies in this aspect, according to the International Association of Oil and Gas Producers’ data for 2023.
Let’s move to the next slide. We highlight the commitment to the country with historical transfer to the nation in 2023 represented in [COP23 trillion] (ph) dividends, COP26 trillion in taxes and COP10 trillion in royalties. Additionally, in 2023, Ecopetrol Group allocated resource for the execution of the sustainable territorial development portfolio worth COP594 billion, which includes social, strategical and mandatory environmental investments. Through this investment, Ecopetrol Group contributed to the economic and social development of the country, implementing projects with local authorities and the community alongside national partners and international cooperation to generate well-being and contributed to closing social gaps.
Key social investment milestone of Ecopetrol during the year include 150,203 students benefited from projects and programs aimed at improving the quality, increasing its overall retention and expanding coverage in higher education. 8,670 entrepreneurs, SMEs and youth benefit from programs for capacity development in entrepreneurship and innovation. With 15,019 people with improved access to clean water, 197.93 kilometers of roads network intervened contributing to dynamics of regions, weather terrestrial mobility and local job creation. I want to thank the firm commitment of all our workers, allies and communities where we operate, who with their dedication, make Ecopetrol the leading force in transforming Colombia’s energy.
Let’s move to the next slide. This result demonstrates that the roadmap outlined in the strategy affirmed in September 2023 during the celebration of Ecopetrol’s 15 years of the New York Stock Exchange is clear and guides our stalwart to define purpose. 2023, we attained the second best result in the history of the Ecopetrol Group, surpassing the previous year when the average Brent price approached $100 per barrel. In 2023, crude price dropped to $82 per barrel, combined with inflationary pressures and high energy costs, creating a very challenging environment for the company cost structure.
However, we exceptionally overcame this, generating revenues of COP143.1 trillion, equivalent to 9% of the national GDP, an EBITDA of COP60.7 trillion and net profit of COP19.1 trillion. The profit was impacted by a 10% in contracts such as an impairment that reduced the net income by COP0.9 trillion for the period. We closed the year with the highest record of transfers to the Nation in Ecopetrol’s history, COP58 trillion. Also, I emphasized that we ended the year with an account receivable from the Fuel Price Stabilization Fund with an accumulation 44% lower than 2022, leaving cash pressures and highlighting the active management of the Ecopetrol teams as well as the commitment of the nation has allowed us the highest execution level of 97% of the investment plan with the highest level in the last eight years equivalent to COP27 trillion.
It is worth mentioning that as a result of these dynamics, as well as the market environment, Ecopetrol generated a total local return for its shareholders of 26% for the year and 46% for ADR investors, which adds to the confidence shown by the market in our issues and ratings. With this excellent result, we prepare for a challenging 2024 not only in terms of international prices and inflation, but also the impact of the El Nino phenomenon and the balance of the natural gas market. We will face these challenges by strengthening our operating capacity in the traditional business with the highest safety standards, maintaining capital discipline and with a clear focus on competitive returns.
I will give the floor to Alberto Consuegra, who will talk in more detail about the 2023 operating performance. Go ahead, Alberto.
Alberto Consuegra
Thank you, Ricardo. By year-end 2023, the net proven reserves of the Ecopetrol Group amounted 1,883 million barrels of oil equivalent, maintaining average levels of the last nine years even under challenging market conditions. Proved developed reserves increased by 4% versus 2022, showing an improvement in our CapEx execution. Organically, 307 million barrels of oil equivalent were incorporated, but at the same time, 188 million barrels of oil equivalent were debooked, mainly impacted by external factors associated with the lower Brent price, inflationary effects as well as decline in water breakthrough in gas fields such as Ballena, Cupiagua and Recetor for a net incorporation of 119 million barrels of oil equivalent.
Going forward, the main future sources of reserve additions are concentrated in fields such as Castilla, Rubiales, Cano Sur, CPO 09, Cira Infantas, Piedmonte, development of Colombian Caribbean gas discoveries and tertiary recovery in heavy oil fields. Contingent gas resources grew 79% as compared to 2022 from 1.9 to 3.4 tera cubic feet, leveraged mainly on the Uchuva and Gorgon offshore developments.
Let’s move on to the next slide, please. In 2023, Ecopetrol and its partners drilled 23 exploratory wells, in line with the plan. Three wells built in 2022 were declared successful in 2023, totaling 11 last year, with an estimated potential between 100 million and 150 million barrels of oil equivalent of resources, of which 70% is gas. Regarding offshore exploration, I would like to highlight the exploratory success of Glaucos-1 in the coal-fired block operated by Shell, which confirmed the presence of a gas reservoir. The Orca Norte-1 well drilled in 2023 and completed in 2024 confirmed two gas accumulations in reservoirs different from the Orca-1 discovery, triggering a reevaluation of the regional project while expanding the gas potential of La Guajira Offshore. Orca Norte-1 was the first deepwater well operated 100% by Ecopetrol SA, which was completed without any operational incidents and with the highest industry standards. The appraisal campaign of the Uchuva discovery located in the Tayrona block, starting with the Uchuva-2 well to be spotted in the second quarter of 2024.
On the onshore front, I would highlight the following. Appraisal of the frontier between the Castilla and Chichimene fields in block CPO 09 as a result of the Magnus and Kimera-1 discoveries in partnership with Repsol. And the Arauca 8 well drilled in 2023, which was completed in 2024, confirmed the presence of light crude in a new reservoir, extending the potential of the Arauca field in the channels basin.
Let’s move on to the next slide, please. As Ricardo mentioned, in 2023, the Ecopetrol Group reached a production of 737,000 barrels of oil equivalent per day, increasing by 27,000 barrels of oil equivalent per day when compared to 2022. I would like to highlight the startup of the first fluid treatment train at Cano Sur field, bringing field production to 41,000 barrels of oil in December 2023, as well as Permian’s incremental production and increased water management capacity in the Rubiales field. The aforementioned enabled an incremental production of 70,000 barrels of oil equivalent per day, an 18% increase versus 2022. By year-end, fields with secondary and enhanced recovery programs contributed nearly 41% of Ecopetrol Group’s daily production.
It is worth highlighting the greater execution capacity in the facilities front supported by the construction initiation of [indiscernible] station at CPO 09 and the commissioning of the fluid expansion of the Centauros station at Cano Sur and the water management facilities at Rubiales. The growth in production was achieved in a sustainable manner by reducing 486,000 tons of CO2 equivalent, 84% of the total emission reduction of the Ecopetrol Group. These results were leveraged by energy efficiency initiatives, elimination of venting and methane lakes, reduction of flaring and incorporation of renewable energy into the operation. In 2024, we expect production between 725,000 and 730,000 barrels of oil equivalent per day, driven mainly by drilling campaigns at Rubiales, Cano Sur and Permian, the continuation of secondary recovery projects with water injection in heavy oil fields and the production coming from new gas projects in Piedmonte. These target volumes incorporate challenges that are being managed, such as El Nino phenomenon, security and social unrest situations and ongoing environmental permits.
Let’s go to the next slide, please. With regards to our activities in the Permian Basin, 120 new wells were drilled in 2023 for a total of 318 wells on production since 2019, reaching a production of 66,400 barrels of oil equivalent per day for Ecopetrol before royalties, which represent 9% of the group’s production. We also highlight the strong financial results of Ecopetrol Permian. By year-end, we achieved an EBITDA of $799 million and an EBITDA margin of 88%. In addition, the following achievements of the Ecopetrol-Oxy Association are noteworthy. After four years, the association achieved a record in production of 163,000 barrels of oil equivalent per day before royalties in early December, of which 103,000 barrels of oil equivalent per day belongs to Ecopetrol, recording drilling and completion of a well with the longest lateral length of 18,000 feet.
In line with our TESG strategy, we highlight the progress in the decarbonization of our Permian operation with a low emission intensity of 7 to 8 kilograms of CO2 per barrel of oil equivalent. Likewise, the association is committed to the reduction of diesel consumption and managed to replace an average of 36% of the diesel used in drilling and completion operations by compressed natural gas, CNG. For 2024, the association is expected to drill more than 110 wells, and Ecopetrol expects an average production between 80,000 and 83,000 barrels of oil equivalent per day before royalties.
Next slide, please. Transported volumes increased by more than 42,000 barrels per day in 2023, primarily due to an increase in crude oil transportation, thanks to higher production, particularly in the Llanos region. In 2023, we achieved significant milestones, including a historical record in refined product evacuation of 306,000 barrels per day, leveraged mainly by increased product availability at both refineries and operational optimizations in transportation systems.
In oil pipelines, we reached a record with dilution of Rubiales crude at the Monterrey station. A total of 163,000 barrels of Nafta were received and around 858,000 barrels of Rubiales crude were diluted, achieving a quality of 21.2 degrees API crude. This leverages the midstream strategy to become an integrated logistics service provider. We ensure the evacuation of oil from the Cano Limon field, thanks to the execution of 13 reversal cycles of the Bicentenario pipeline. The segment maintained a carbon-neutral operation certified by ICONTEC since 2022 and achieved a reduction of over 15,000 tons of CO2 emissions.
Lastly, we highlight the segment’s financial results, generating revenues of nearly COP16 trillion and an EBITDA of COP11.8 trillion, contributing with 19% of the Ecopetrol Group’s EBITDA. With regards to regulation, on December 20, 2023, the Ministry of Mines and Energy issued Resolution 40745, which regulated the activity of transportation by multiphase pipeline. This regulatory framework allows the midstream segment to continue evaluating projects that would increase transport levels and use of current infrastructure.
Let’s move on to the next slide, please. In the downstream segment, we achieved outstanding financial and operational results with historical records in refining throughput and operational availability, thanks to the rigorous execution of scheduled major maintenance activities, operational efficiencies as well as a favorable pricing scenario. This resulted in an EBITDA of COP7.3 trillion, the second highest in the segment’s history. In 4Q 2023, the combined refining throughput reached 429,000 barrels per day, 84,000 barrels per day higher than in the same period of previous year. The integrated refining gross margin was $13.1 per barrel, mainly affected by weaker diesel jet and gasoline spreads.
In 2023, we accomplished multiple milestones, of which we highlight this. Operational availability of refining plants above 95% and the highest in the last five years. Successful execution of the pyrolytic oil test from post-consumer plastic waste at the Barrancabermeja refinery, enabling the production of around 19 tons of polypropylene in Esenttia, contributing to the Ecopetrol Group’s circular economy strategy. 95% progress in the construction of the mechanical recycling plant in Esenttia, which is expected to start operations during the first quarter of 2024. Finally, Ecodiesel received an ICONTEC carbon-neutral certification, becoming the first biodiesel company in Colombia to receive this certification.
Let’s move on to the next slide, please. In 2023, the Ecopetrol Group managed to incorporate efficiencies of COP4.5 trillion, leveraging outstanding operational performance and partially mitigating inflationary pressures, increases in energy costs, which combined with greater operating activity, raised the cost structure of our operations and investments. The total unit cost reached $47.6 per barrel, largely due to the effect of lower prices on crude and product purchases and imports. The incorporation of efficiencies of $0.68 per barrel allowed to partially offset the aforementioned effects.
The lifting costs increased by 18.45%, reaching $10.91 per barrel, mainly impacted by external factors such as El Nino phenomena, inflationary effects and the exchange rate, representing a $1.41 per barrel increase in 2023. However, the efficiency plan mitigated the increase in lifting costs by $0.33 per barrel. Likewise, the cost per barrel transported and the refining cash cost increased by 8.8% and 1.6%, respectively, mainly due to inflationary effects and higher activity in both segments. This year, we continue to focus on incorporating efficiencies to maintain business competitiveness and sustainability.
Now, I will turn it over to David Riano, who will discuss the main milestones of the Low Emission Solutions business line.
David Riano
Thanks, Alberto. Our Low Emission Solution business continues to move forward on the road of decarbonization, energy security and contribution to society. In 2023, we highlight the outstanding performance of our energy efficiency program, which between 2018 and 2023 achieved an optimization of the energy demand of 10.9 petajoules. This is equivalent to COP262 billion in savings with an impact of approximately 708,000 tons of CO2 equivalent.
Only in 2023, we achieved a reduction of 3.9 petajoules and 274,000 tons of CO2 equivalent in our operations, thanks to the incorporation of new technologies for energy optimization. These are the best results since the beginning of the measurement in 2018, 250% higher than those reported in 2022. And in orders of magnitude, it’s an optimization similar to the annual consumption of all households in the Colombia cities of Cartagena, Ibague and Cucuta. In alignment with our commitment to decarbonization of our operations, we ended 2023 with the incorporation to our energy metrics of 472 megawatts in operation, construction and execution of nonconventional renewable energy sources. The operation of renewable energy sources in 2023 allowed us to reduce close to 19,000 tons of CO2 equivalent and capture savings of more than COP28 billion. The above restate our goals within the framework of our strategy of incorporating 900 megawatts by 2025, growing with sustainability and generating value for our stakeholders.
On the social front, we highlight two important initiatives with positive impact on the welfare of the community. The social gas program, we so far in 2023, connected to the natural gas service, more than 20,000 families in rural areas of Arauca, Guajira and Atlantico and the successful completion of the micro LNG agreement in Buenaventura, giving support and reliability to the gas supply for 37,000 families in this area of the country. During 2023, gas and LPG production reached 162,000 barrels equivalent per day, representing 22% of the group’s production mix, 75% of the country market share and approximately COP3.5 trillion EBITDA. 2023 reaffirms our commitment to the energy transition, prioritizing the country’s energy security, while holding firm in the search of opportunities to meet our objectives.
Now I will pass the floor to Milena Lopez, who will tell us about the main results of the Transmission, Roads and Telecommunications segment. Over to you, Milena.
Milena Lopez
Thank you, David. The Transmission and Roads business generated positive operational and financial results, accompanied by significant awards throughout 2023, which will translate into investments of COP9.8 trillion in the coming years, reinforcing our subsidiaries’ growth trajectory across various geographies. In 2023, we sustained a growing trend in financial outcomes, with revenues reaching COP14.2 trillion and an EBITDA of COP9.1 trillion, representing nearly 6% growth in these two areas compared to 2022. Net profit attributable to Ecopetrol remained relatively stable at COP675 billion. As of the close of 2023, is achieved a committed investment balance of approximately COP30 trillion for the coming years, approximately 93% of the total of these investments correspond to bids and tenders that have been awarded to the company.
Among the most notable milestones for the fourth quarter are the following. In Peru, the award to ISA in consortium with the Grupo Energia de Bogota for the construction, operation and maintenance of two projects encompassing over 1,000 kilometers of electrical transmission grids, and with a referential CapEx of approximately COP3.2 trillion. In Chile, ISA Intervial was awarded the Southern Orbital Santiago concession for the design, construction and operation of 25 kilometers of a new urban highway. This project will have a reference CapEx of approximately COP1.9 trillion. In Brazil, the award through ISA CTEEP of 40 enhancements, which collectively will amount to a CapEx of around COP181 billion. The commencement of operations for the following projects, Guayepo Solar Park connection in Colombia, electrical interconnection, Itaunas and Triangulo Mineiro by ISA CTEEP in Brazil, three substations and the approval of integration into the National Electrical System of the private project, Puerto Chancay in Peru. ISA continues to progress in the construction of 34 energy transmission projects in countries where it operates, which upon completion, would add over 5,500 kilometers to the grid and generate approximately COP1.7 trillion in revenue between 2024 and 2030. Finally, progress continues in the execution of the Ruta del Loa project and works in the concessionaires, Ruta de la Araucania and Ruta de Los Rios in Chile, which will generate new income and extensions of the terms of these concessions.
Please let’s move to the following slide. Our financial results reflect the excellent operating performance of the Ecopetrol Group, allowing us to achieve in 2023, the second best results in the company’s history. Throughout the year, we achieved financial results that exceeded the targets set forth in our financial plan with superior results across key indicators. Our EBITDA margin reached 42%, with a return on average capital invested of 11.5%. We also achieved an EBITDA of COP60.7 trillion, with efficiency gains reaching COP4.5 trillion, representing a 25% annual growth. Our investment execution capacity reached its highest level in eight years, totaling approximately COP27 trillion, in line with our annual target. Of these investments, 63% were concentrated in Colombia, with the remaining 37% executed in the United States, Chile and Peru, among others. Approximately 70% of total investments were allocated to exploration and production activities in our primary assets such as Rubiales, Cano Sur and Castilla in Colombia as well as in Permian in the United States. This category also includes investments in natural gas totaling around COP3 trillion focused on assets like Florena and Cupiagua in the Piedemonte Janeiro and offshore blocks, Tayrona and Col-5. Investments in the transportation and refining business accounted for a combined 13%, focusing on intervention, maintenance and asset reliability improvements supporting increased activity levels throughout the year.
The transmission and toll road businesses represent 17% of the CapEx for Grupo Ecopetrol. These investments were prominently directed towards power transmission, which accounts for approximately 87% of the investments, advancing projects in electrical transmission in Colombia and reinforcements and network improvements in Brazil. Traditional business lines, including natural gas, contributed to approximately 85% of EBITDA in 2023. Additionally, our transmission and toll roads businesses made a significant contribution of 15%, contributing to the stability of the group’s income and operating cash. The gross debt-to-EBITDA ratio stood at 1.7 times, aligned with our long-term guidance to remain below 2.5 times gross debt to EBITDA. As part of our financing strategy, we successfully issued a $1.85 billion bond in the international markets in January 2024. This bond was 3.2 times oversubscribed, confirming investment appetite for our paper. This issuance was accompanied by the repurchase of a bond maturing in 2025, reflecting a proactive debt management strategy of our future maturities. These operations allowed us to optimize short-term liquidity management while maintaining debt costs at competitive levels. For 2024 maturities, we’re in the process of renewing a committed line for $1.2 billion, and we’ll be covering the remaining amortizations with the resources from the aforementioned bond.
Let’s move on to the next slide, please. Regarding our liquidity position, the Ecopetrol Group closed 2023 with a robust cash position of COP14.3 trillion. Our operating cash flow was COP19.8 trillion, which ascends to COP41.4 trillion when including the fuel price stabilization fund compensation. Additionally, there were significant cash disbursements for CapEx, and the net movement of debt and interest totaled COP5.8 trillion. In terms of the fuel price stabilization fund, we ended 2023 with positive news. The outstanding balance from 2022 was fully settled through dividend payments to the Nation, totaling COP2.6 trillion and COP4.7 trillion that were received in cash. In addition, due to a gradual increase in gasoline prices in the country by approximately COP4,800 per gallon over 2023, we experienced a lower accumulation in the account receivable when compared to 2022, closing 2023 with a FEPC balance of COP20.5 trillion.
Regarding taxes. The effective tax rate for 2023 was 36.6% compared to 31.4% in 2022, mainly due to the windfall tax established by the recent tax reform. For the fourth quarter of 2023, two tax adjustments were made. The first one regarding the income tax provision in accordance to the Constitutional Court ruling in November of 2023 that enabled the tax deductibility of royalty payments. The second associated to the income tax surcharge, which ended the year at 10% due to the average price of Brent throughout 2023.
Let’s move to the next slide, please. As part of the 2040 strategy, our investment plan for 2024 maintains high levels of investment, reflecting our commitment to the country’s energy security and transition. We expect to execute investments between COP23 trillion and COP27 trillion, with approximately 45% of these directed towards energy transition initiatives, including low emission solutions, natural gas supply, TESG investments, decarbonization, electric transmission and roads. The remaining 55% will focus on energy security and long-term cash protection, in line with strengthening our traditional business. These investment levels allow us to plan for profitable production between 725,000 and 730,000 barrels per day, maintain transported volumes around 1 million barrels per day and throughput at our refineries between 420,000 and 430,000 barrels per day. Considering an average Brent price scenario of $75 per barrel for the year, we expect to maintain competitive returns with a return on average capital invested of around 9% and an EBITDA margin of 38% as well as transfers to the nation exceeding COP38 trillion. Furthermore, with a focus on cost control and mitigation, between 2024 and 2026, we will incorporate targets for commercial and operational efficiencies, expense control and austerity totaling over COP7 trillion.
I now hand over to Ricardo for closing remarks.
Ricardo Roa
We closed a challenging 2023 marked by lower oil prices and higher inflationary pressures. However, we achieved the group’s second best year ever with the tactical operational results in terms of producing in the throughput of the refinery in volumes transported through our pipeline system and progress on energy transition projects. Today, the Ecopetrol Group aspires to be the leader in energy diversification in Latin America, in line with our 2040 strategy, Energy That Transforms. I want to express special thanks to the subsidiaries of the Ecopetrol Group, which alongside us, have contributed to making history. I express my gratitude to Ecopetrol Permian, would contribute to the production with its exceptional performance as well as to semi connecting the entire country and achieving an unprecedented annual production evacuation of pipelines. I thank the refineries for reaching a history load with the highest operational availability in the last five years.
I also highlight the performance of Hocol, contributing to the 11 successful wells on the Ecopetrol Group during the year, reaffirmed our commitment to the preservation of the traditional business. In ISA, I highlight the transition awards worth COP10 trillion that we will see in the coming years as well as its contribution to the EBITDA of the business growth. We remain committed to generate value for our shareholders, investors and our country and those countries where we have a presence, always maintaining responsible and sustainability operations that accelerate steps towards the energy transition.
Thank you all for your participation. With this, we open the question-and-answer session.
Question-and-Answer Session
Operator
Thank you very much. We’ll start with our Q&A session. Ricardo Sandoval from Bancolombia is online with a question. Mr. Sandoval, you can ask.
Ricardo Sandoval
Good morning, everyone. Thank you for this space and for the explanations. If it is possible to know a little bit more information about the reservoirs, when you mentioned that the organic growth, I would like to know if you can tell me how much — was it because of better forecast, because of new project, because of extensions and findings? And for 180 million of barrels, how much was due to the price effect or in general by each of these items you mentioned in the report?
Alberto Consuegra
Good morning, Ricardo. Thank you for your question. It is Alberto Consuegra. Yes, we can give you the details. I’m going to start mentioning around the 307 million barrels. Let’s talk about that. So in the report, we are very clear about the impact of about the 31 million barrels. If you add the maturity process of the project, which is normal, in five years’ view, it’s 103 million barrels. Others that are associated to new findings is 2 million barrels and 109 million are related with better behavior of the production basic curve. That gives you 307 million. On the other hand, in terms of impact, when you talked about external effects, we’re talking about 58 million barrels, which — 30 million are associated with price and 28million with the inflation. So what this does is that when we remove the cash flows of each field, the tail will be affected by the impact both of price as well as the inflation. And second, place due to conditions or technical revisions, 130 million barrels. The largest impact is in gas due to water and decline of our mature fields, particularly in Ballena, Cupiagua and Recetor. But besides that, we had around 30 million which are related with regular technical revisions in the plan in the Magdalena Medio and Villa.
Ricardo Sandoval
Thank you very much.
Operator
The next question is from Andres Duarte from Corficolombiana. Mr. Duarte, you can ask now. Andres Duarte, please, you can ask your question now.
Andres Duarte
Thank you. I have three questions. I think they’re short. The first one is please, can you explain how you can justify the impairment evolution in the downstream, considering that price differentials between the products of oil have annual and quarterly decreases? And annually, they have annual decreases. So I would like to understand why are you showing an improve of COP1.4 million there? And the other question is related with production. And congratulations — sorry for not saying this before, but congratulations for the production data of this quarter. The production that you show in the fourth quarter, it’s only overcome by the 2015 quarter — fourth quarter. But if you consider the permit from outside of Colombia, well, basically, without the increase in the Permian production that has — that we’ve had, this wouldn’t be a case. So you have a participation of 11.7% in the fourth semester — quarter of 2023. This is not bad. That’s — well, you are in different countries. So I would like basically just to understand what are your expectations in terms of production of Permian in the US, considering that — as far as I understand, that will go down faster? And the last question, if it’s possible, otherwise, I understand because they asked me to ask just two questions. But considering the increase, for example, in the cost of — on that lifting cost of the — it’s above $13 in the fourth quarter. And considering the decrease of over 6% of the reservoirs, how do you justify that decrease of — a 90% decrease in the exploration and production CapEx for 2024, if you don’t take the average numbers of ’24, ’26 — 2024, 2026 that you published last December? So these are my three questions and thank you for allowing me ask questions and good luck for 2024.
Ricardo Roa
Ricardo Roa — this is Andres. Thank you for your acknowledgment to our results for the fourth quarter production of the year we just finalized. First of all, to explain that, yes, the impairment of — the impairment of our assets has an impact on the results, close to COP0.9 trillion. Second, about the details, I’ll give the floor related to these elements of cost increases, our expectations of the Permian production in the next years. I’ll give the floor to Alberto Consuegra. He will share details.
Alberto Consuegra
Andres, good morning. About the Permian well, I would like to first give you a number that I think it’s relevant. Permian effectively pushes the production in the last quarter, but it’s not less what Cano Sur and Rubiales provide because as you already know, we — every year, we replace around 100,000 barrels per year due to the natural declination of the fields. So those three assets were — did great. They did the job. About the Permian, well, the goal is to keep growing our production. The plan for 2024 is to bring the production to close to 80,000, 83,000 barrels per day. And for 2025, it should be around 100,000 barrels because it is important for the contribution of the last acquisition, which is the Delaware area. So Permian, very well. The important thing is to sustain the production within the country, and this is what — the effort that we’re going to do in terms of the CapEx for 2024 towards — all the way to 2026. And the fall in the CapEx is not as you are presenting it. When you look at 2024, the investment level that we will have in the upstream is of $300 million, $900 million, which is very similar to what we did in 2023. We were in $4,200 million. We have — it’s lower, but the greatest investment we had in 2023 was in the Permian. So our expectation is to continue with investment levels, similar to what — in Colombia, similar to the 2 previous years, 2022 and 2023.
Unidentified Company Representative
Andres, I would like to clarify that when I was talking about 2024 CapEx, I’m considering that annual average of the maximum and minimum range that you published, and I am comparing both the plan that you published in the previous year as well as what was executed this year. And the other thing, well, if you didn’t hear me well in the impairment, I asked specifically about the downstream. So that’s all I wanted to clarify, and excuse me for interrupting. Let me mention something before giving the floor to Milena about the impairment. She will talk of impairment. Andres, when you look at the CapEx distribution in 2024, the second part of the year is going to be affected due to the exploration investments, particularly on the offshore. So these could make a difference.
Milena Lopez
Hi, Andres. This is Milena Lopez talking about downstream impairment. Maybe to illustrate a little bit more that impairment topic, there are two components that I believe are important to consider. The first one is that when we are making the impairment analysis of our assets, these analyses are value exercises in the medium and long and short term. So they cannot be compared to a picture of our particular quarter. So when we look at the projection of the performance of the downstream, we see two specific things. First, an improvement in the availability of the refineries would allow us to have greater loads when we are making projections, forecast. And the second, which is more significant, is that when we look at the refining management in the mid and long term and we compare those what we see in the future with what we saw last year ago, we have better refinery margins. This leads to a recovery of around $370 million at the downstream. Now another important topic that you have to consider when you compare these two mid- and long-term impairment comparisons is that well, generally that differentials of the products are cyclic during the year, particularly gas. So when we look at the numbers of the differentials of the fourth quarter, fees don’t reflect the annual average nor the perspectives on the mid and long term. So maybe that could explain the differential between what we see in the fourth quarter and what we see on the impairment exercise on the long term.
Andres Duarte
Thank you very much.
Operator
Juan Jose Munoz is online, and he’s going to ask a question. Mr. Munoz, you can ask.
Juan Jose Munoz
Good morning. Juan Jose Munoz from BTG Pactual. Thank you for the time. And just a quick question about the sales cost. In this quarter, why did you have a strong increase in the cost — sales cost that led the net margin very below what we signed of the first quarter? Was there something specific? And what are you going to do in the next quarters in order to recover that net margin that you previously had? Thank you.
Milena Lopez
So two components that I believe are important in understanding the quarterly cost, historically in Ecopetrol, in the fourth quarter, we you see costs that are above the other quarters because of greater execution as well as accrues. So if you look at the fourth quarter of last year, it was around 14% above the costs versus the third quarter. This year is even higher. We are seeing an increase of around 19% in cost, when we compare the previous quarter. So let me make a comparison of the fourth quarter of this year and the fourth quarter of last year to eliminate the cycles that will provide us a better perspective of what happens in the cost. So when we look at the variable costs — and then let me — I’ll tell you the fixed. When we look at the variables, there are two components that impact variable costs when we make this comparison. Basically, we have, first, an inventory, which is significant comparing the number fourth quarter versus third quarter, the inventory has a cost of COP1.7 trillion, and this is due to a decrease on the cost or value of the inventory. And this has several components, a volumetric component because we had more sales, and a very important evaluation because when we evaluate, we give up — versus how we evaluate them. We have an exchange rate that is below COP740, around that. So we have a large decrease of the exchange rate. We also went from $86 to $82 per semester and a decrease in the product differentials. There’s a large decrease in the diesel differentials around above $20 and a fall of $7 in the gasoline differentials. So this impact is COP1.7 trillion, and it is important that as we don’t have large numbers in the exchange rate differentials and the Brent, this is not a cost that should repeat it. So this has just happened in this quarter, I won’t repeat itself. Second impact in variable cost is the increase in power cost. Power cost increased in COP300 billion. So this is something that happened because in the third quarter of this year, we see an increase in this energy cost due to our exposure to the stock market and increase in the power and electric costs due to the phenomenon El Nino, which is something that we will — that will have an impact in the first quarter of this year because we still have high cost — power cost due to phenomenon, El Nino. But at the end of this year, this could — should be corrected. This in terms of the variables that have an important situations. Now fixed cost. Fixed cost do have structural challenges that are larger. Basically in services hired by — for the operation, we see an increase of COP300 billion. And in maintenance in this semester, we — this quarter, we see greater maintenance and an increase in the inflation of this cost and an increase of COP100 billion. These two components that add around an increase of COP700 billion when we compare with the previous quarter last year, the same quarter last year. Yes, we have the inflationary aspects and challenges of cost challenges that with our efficiency plans, we are seeing how to adjust them. So yes, this is a temporary component and a long-term inflationary component that makes a distinction between both.
Juan Jose Munoz
Thank you, Milena.
Operator
The next question comes from Andres Cardona from Citibank. Mr. Cardona, you can ask now.
Andres Cardona
Thank you. Good morning to everyone. I have two questions. The first one is related with the production guide of 2024. 725,000 to 730,000 barrels. So how could you connect with the 758,000 barrels of the third — or the fourth quarter? Why are you — when are you going to explain this decline? And about the reservoirs, can you please explain in terms of the inflation, which are the components that vary the most and which was the magnitude? The certification of reservoirs of the previous year, understanding the price effect. There’s a price fall, and the price is relatively high historically. And I understand that — why? Why do you have this revision due to price effect from $82 per barrel?
Alberto Consuegra
Andres, Alberto Consuegra. Thank you for your questions. So I will begin with the production guide. And first, I’ll make reference to the Permian. Who — the behavior of Permian is historical. At the end of the year, we had — the production is always higher and then we have to live with two things. One, the normal decrease of the wells that are already in production and the next, perforation campaign. So the production of the Permian, which was a peak of 113,000 barrels per day of oil. When you see these in the production average for 2024, it’s between 80,000 and 83,000 barrels. So that’s the first impact. The second is with our liability management, which — or our risk management that we can attribute to the phenomena of El Nino that is related with the closure of — for example, or specifically Rubiales and Castilla fields. When we have long droughts, the — these will be affected and what the corporate — environmental corporations do is they close the waterfalls gradually. This is what we are seeing right now. And we also need to know the physical safety situation that — and if you look at the history, usually during January to March, we see this in the previous years as well. So this risk management is also in our production vision. That is why we have that vision between 725,000 to 730,000 barrels on one hard side. In terms of the reserves, we need to mention something. I was mentioning in our previous intervention that yes, we do have an impact due to price and inflation. When we run our cash flows to the economical limit of the fields, we have an impact on that SEC price that is $15.5 per barrel plus the inflation. So that’s the reason that we have to make a technical revision. It’s not related with the fact that right now, we are talking about a — the higher [indiscernible] in each of our fields. Nevertheless, it is true that the fact that we have a price that it’s unfavorable compared to 2022 and the inflation, well, it does affect the development plans of some fields that I already mentioned. And those fields will be outside of the norm of the 5 years, and they won’t in terms of reservoirs. They lose reservoirs compared to the previous year. So these are the effects that we see right now, Andres, and thank you for your questions.
Operator
Katherine Ortiz from Corredores Davivienda is going to ask a question. Ms. Ortiz, you can ask.
Katherine Ortiz
Good morning, everyone. I hope you can hear me well. Good morning. Thank you for providing me this space. I have a question related with the price stabilization fund of the fuels. We learned about the dividend proposal for 2024. And we have heard the Ministry — the Minister talking that this year, dividends — Ecopetrol capital dividends will not cross with the price stabilization fund. So I would like to know if you are clear about how you’re going to pay this amount? Especially because when we look at the budget availability and the financial — government’s financial plan, we cannot see that the Ecopetrol payment is going to be incorporated or if we decided that, at least, in 2024, they are not going to pay this money, and in that sense, well, which leverage indicators are you expecting in order for the — to close this year without considering the payment and including what you already mentioned with the — talked about with the government? Thank you very much.
Ricardo Roa
Thank you, Katherine. Good morning. this is Ricardo Roa. Yes, effectively, one of the aspects that we have acknowledged about the national government support is the appropriation and the payment of the FEPC resources with the amount after the closure of 2022, COP36.7 million. These have been made, and that’s why we have the execution level of 97% in around COP27 trillion in 2023. For this year, this fund closes in [$20.5 million] (ph) of what was caused of the subsidy delivered to the demand of 2023 in gasoline and diesel. And resources at this time don’t come under the previous of the methodology of 2023, due to the payment of dividends donation, but because now they have a different methodology that I think Milena Lopez to explain.
Milena Lopez
Hi Katherine, this is Milena Lopez. So right. We, during 2024, we must receive COP20.7 trillion as a payment of FEPC by the national government. According to what has happened before and what is agreed with the government, each quarter, we cost the subsidies and they must be paid during the next 12 months. So we are going to receive quarterly payments from the government paying those debts. Which is — what is the different this year, in the past? We’ve done what we denominate, crossing the dividends, which is an accounting movement. We just exchange the invoice that we — the government is going to pay us with the one that we need to pay for dividends. So we don’t give or receive anything. But this year, we’re going to receive a quarterly payment from the government. And we, on our side, on the date that we must pay the dividends, we will be paying the dividends to the nation. So that’s what it means that we are not going to — crossing accounts. It’s important to highlight that these — well, we need an approval from the Board meeting. This is going to be submitted to voting. This includes a dividends to the Nation of COP11.3 trillion, less than of that COP20.3 trillion that we are going to receive from FEPC. So the net amount is going to be received in cash payments that improve the liquidity position of our company.
Katherine Ortiz
Thank you very much.
Operator
Let’s begin with questions in English. Bruno Montanari from Morgan Stanley has a question. Mr. Montanari, you can ask now.
Bruno Montanari
Hi, hello everyone. Thank you for taking my questions. I have two questions and a follow-up. The first question is about the lifting costs. So we saw some increases in lifting costs in the second half of the year, now finishing the year at $13 per barrel. I remember previously, the company used to talk about a short to medium-term level of lifting costs between $9 and $10 per barrel. So I was wondering if we should think of lifting costs staying at the current level, so around $12 to $13 per barrel in 2024? Or if we should expect costs can still go back to lower levels between $9 and $10 per barrel? My second question is about the refining margin. So I just wanted to understand why the realized margins of the company were so much lower than the international frac spreads and get an idea of what we expect in the next few quarters, if margins can go back to more healthy levels. And then I just wanted to confirm on the production. Is the reason for the spike in production in the fourth quarter was only because the Permian? And if we should expect now production to decline more pronounced in the first quarter of the year. Thank you very much.
Alberto Consuegra
Bruno, Alberto Consuegra. Thank you for your questions. About the lifting cost. What did we see in the last quarter of 2023? Well, yes, there was an increase in the cost. We — the average was around $13 per barrel, so an average cost of $10.91 for the whole year. These plus the great power cost, plus of general services, services that if you look at — if you disaggregate the net cost, 70%, 75% is in pesos and 25% is in dollars. And the effect in pesos was impacted by inflation accumulated by 2022 and 2023, which for Colombia, we’re talking about 30%. And this, we see the impact in 2023 and, of course, in part of 2024. The energy power cost, we are also having an impact because of the El Nino phenomenon. You will see this on the first quarter of this year as well with a greater stock market cost price. So what is our expectation? Yes. In 2024, we must be around $13 per barrel. And with the ITL starting to renegotiate services that — helped by our efficiency plans to make the interventions in order to have a more competitive lifting cost. But yes, we see the impact both of the inflation as of the power costs in this first quarter of 2024. Also, about the downstream. And I’ll give the floor to Walter so he can add. But I would say that when we look at 2023, we had three quarters with very positive margins due to the behavior of the product prices, both diesel as gasoline. And in the fourth quarter, the margins of the product, the spread of the product, falls to around 10%, especially during December. This affected the result in terms of margins. What is the expectation for 2024? Well, what we’ve seen during January, February, our margins a little bit above of our plan. We’re talking about $13 and $14 per barrel. So we have a very positive outlook. Walter, I don’t know if you would like to add something.
Unidentified Company Representative
[indiscernible]. Just to add, in 2023, in its context, was an excellent year. We had the best EBITDA historical with a margin close to $18 per barrel, the second best historical after 2022. We had a good amount of barrels with some — we have never achieved these amounts, thanks to a high — overcoming that 95%, a historical record. In the load of Cartagena, we closed 200,000 barrels a day, thanks to the implementation of the EPCC project that added 50,000, 60,000 capacity barrels to that refinery at the end of 2022. Barranca finished — we had 241 barrels a day there in Barranca. So the greatest in the last 16 years. So these in the fourth Q, we had the greatest historical for our refineries. And even though we had these good operational results and the fourth Q, we see a decrease in our refinery margins associated to a fall of gasoline price — gasoline in the fourth quarter, especially in December, due to seasonal has a lower price. But in the fourth Q, that price had fall, we saw it even since — starting in October with the gasoline was in prices in 1 digit of around $7, $8 per barrel, and we saw a fall in the price of diesel and said fuel. So these weakened the refinery margins in the fourth Q compared to the third quarter. And in our EBITDA in the fourth Q, it decreased even though it was the second best historical year consolidated for 2023. What we see in 2024, as I — as Alberto mentioned, we see that the margins — we are projecting two digit margins on the low side, maybe for project — average of 2024. But saying this, what we’ve seen in January and February is that the margins are stronger compared to what we forecasted originally, and maybe they’ll be closer to $15 per barrel, plus or minus $2 per barrel. And the refinery loan, we were so considering that we’re going to be above 415,000 barrels a day average for both refineries. So in a range of 415,000, 425,000 which is our forecast, our projection for 2024. So Bruno, thanks for your question, and I hope I gave you the answer with — Bruno, about production. About the first quarter of this year 2024, the outlook, I cannot share it, but — or can tell and give it to you, but I will let you know what is happening in the production compared to the last quarter of the previous year. First of all, there was a decrease that was expected in the Permian while we make the next perforation activity. Please recall that we have over 300 wells in production. So that decline, that behavior is given particularly in this first quarter. Second, the impact of the maintenance of the Cupiagua plant that we had at the beginning of the year, that also has an effect on gas production. And third, the blockages, strikes that have — particularly in Rubiales and in Arauca, Capachos, assets that we have with our associate parks. So in total, we’re saying that due to this impact, we have around 400,000 barrels that we have deferred in terms of production. And the other impact mentioned is the closure due to the droughts that also impact our production.
Milena Lopez
Thank you, Bruno. And here, Milena. About the lifting cost that can give you some clarity of the impact of the different components. That lifting of — in Ecopetrol is similar to what I mentioned in the cost, where we have a greater lifting at the end of the year, the fourth quarter, due to greater cost execution. So that’s why comparing the lifting in the fourth quarter of last year and this year, we see a significant increase of 45%. And I believe it is important to see the different components. When you look at these, the most — the largest component is the impact of the exchange rate. Around 75% of costs — of the lifting costs are in pesos. And of the 45% increase, 23% corresponds to an exchange rate that is COP900 below what we had on the third quarter of last year. So this is a very important component to understand the lifting cost. The second are the power energy cost. Of that 45%, 9% are energy cost. And as I mentioned before, both this quarter as in the first quarter of 2024, we will have some power costs that are going to be above of what we expected due to the impact of the El Nino phenomenon. These should be transitory and should be corrected by the end of the year. And the impact are — the other impacts are the inflation. If you look at those three components and you quantify them, it’s easier to understand what’s happening with the lifting cost and how we see it in the future, that we should see a range between 12 and 13, assuming that we don’t have large movements in the exchange rate.
Operator
Rodrigo Almeida from Banco Santander is online with a question. You can ask now.
Rodrigo Almeida
Hi, Ricardo, Milena and the whole Ecopetrol team. I have a couple of follow-up questions, actually, and then one actual question. I think I will just go back to the discussion we’re having just now on the upstream side. And I understand there are three main components to the short-term production outlook. We mentioned the Permian, the maintenance and then the strikes. I just wanted to understand here because we have, I would say, a big difference in lifting costs from the Permian to the rest of the production in Colombia. So I wanted to understand out of these three components, how much is the Permian weighing on the impact for the first quarter? So I can better try to understand here the lifting cost outlook for the short term as well, I think, would be helpful. The second follow-up that I had is regarding refining. The downstream margin, just to understand a little bit better. If I did understand correctly, you had some impacts from inventory turnover or something like this. So if you could just confirm that. And I think we might have got something lost in translation throughout the way, but I just wanted to understand that a little bit better. And then the actual question that I have with the third point is related to the US operation, right? The Permian, and now you resumed production in the Gulf of Mexico through the JV as well. I wanted to see — I mean, you’re doing — it seems like you’re doing more stuff outside Colombia, right? Does this show any shifting strategy there in terms of mindset regarding potentially investing more outside the Colombia for upstream projects? I think those are the questions. Thank you.
Ricardo Roa
Thank you, Rodrigo, for your questions. Ricardo Roa, President. Yes, we have had, as I mentioned before in detail, that differences in the short term and in the midterm related with the Permian. This was a very profitable, more very efficient asset from Ecopetrol. And yes, we are evaluating the expectations of our greater production in that area, where that evaluation will allow us to see those expectations will come true. So I’ll give the floor to Alberto Consuegra so he can also talk about the streaming — the margin in the streaming, how it affects the strategy of investing more outside of Colombia. Well, I do want to answer that. We are focused in our projects of increasing our exploration. And we have important resources invested there. We are focused in the greater recovery through the improved recharging in our fields, better perforation and maintenance of our wells right now. That’s where we have focused our investments. Yes, we have important investments outside, but they are not done by Ecopetrol. They are done by ISA. Last year, almost COP10 trillion in assets to invest in Panama, the development of roads and assets for transmission in Peru, Brazil and roads in Chile. So this is what has been managed from the budget, and these are made by ISA.
Alberto Consuegra
Rodrigo, thank you for your questions. About the impact of let’s say, the inflation in the Permian cost and how the premium lifting cost, well, I can tell you this. When you look at dollars, the inflation we had in the Permian assets, that also impact the inverter CapEx, we’re talking about 17% from one year to the next one. These affects 2022 and 2023. So the lifting cost goes from $4 per barrel in 2022 in the fourth Q to more than $5 per barrel in the fourth Q of last year. That trend is going to be between $4.5 and $5.5 for these, 2024, while we reverse the impact of inflation, product of two things, the efficiency interventions as well as the growth in production. It is important to highlight that since this is an asset that has a primary charging, it’s not compared with the mature because we have secondary recharging. So these marks are different. So these just to clarify. About downstream, I’m going to just ask — I mentioned two things, which were [queuing] (ph) the margin deterioration. First of all, in the spreads in the product differentials, diesel and gasoline and the other related with greater costs that we saw in the fourth Q of last year. So these two variables affect the net margin we had in the fourth Q of last year, and I’m sure that they will also have an impact this year. But as we mentioned before, we see a margin expectations with the behavior of January and February of this year that are more favorable than what we had in our plan.
Rodrigo Almeida
Perfect. Thank you.
Operator
Next question from Alejandra Andrade from JPMorgan.
Alejandra Andrade
Hi, I think my previous — my first question was already answered, was related to the downstream margins, which you explained was both spreads and cost. And then I just wanted to ask you in terms of opportunities to acquire any assets for Colombia, particularly on the gas side, if there’s anything that you’re looking at or if you’re more focused simply on the exploration at this point? Thank you.
Unidentified Company Representative
Good morning, Alejandra. Nicolas Azcuenaga, Vice President, Strategy and New Business, Vice President, answering. In terms of inorganic options were, yes, looking as always, and part of our systematic procedure growth options both for gas as for oil in Colombia and other geographies. This is part of the exercise we are permanently making. As those opportunities mature our approval process, we will publicly — make them public to the market. That’s all I could say about that. Thank you very much.
Alejandra Andrade
Thank you.
Operator
Luiz Carvalho with a question.
Operator
[Technical Difficulty] with dividends. So I’m just trying to reconciliate and understand what will be the management approach in terms of proposal in terms of dividends for 2024.
Ricardo Roa
Ricardo Roa, President of Ecopetrol. Thank you, Luiz, for your questions. Some of which we had already mentioned before, answered before. So yes, of course, the production level in the fourth quarter of 2023 is one of the highest records of the previous eight years. And second, it’s a consequence of the effort we made to recover with income and grade production, the — lack we had due to the fall of oil price and to the excellent performance we had in our fields, particularly in — at Magdalena, Medio and at [indiscernible]. But the expectation for production in 2024 is you have the reference, a decrease in the price first, which does it make it viable, the extraction of all the fields that we are exploring — commercially exploring right now, and exploiting right now. And this is not the window of the mid and long term, the maximum peak that Ecopetrol could have. We see it towards the [29, 30] (ph) with 800, 830 barrels production day. That’s the analysis we’ve done internally in the analysis of our strategy in the macro numbers for this strategy. And of course, in what you — in about the dividends, yes, we already mentioned that this year, it’s not going — we are not going to apply what we did last year. We are not going to make an accounting — crossing accounts between the debt that we had with the subsidies of 2022 with the government across — crossing with the risk of what that nation paid so — because the previous time, we could leverage our investment plan and the cost related with the operation. But we are not going to do that this year. And the last point, I’ll give the floor to Milena so she can clarify, but I think that she already mentioned the methodology.
Milena Lopez
As we said before, dividends is a payout of 67% corresponding to a dividend of COP12.8 trillion, COP11.3 trillion are to the majority shareholder, which is the nation, and COP1.5 trillion to the minority shareholders. So dividends for the nation, they can be paid up to December 31. So we will paying the nation after paying the FEPC payments that we will receive quarterly.
Operator
So we have no more questions live. Chat questions, Stefania Moskia from Credicorp Capital asks. Can we give more details about the tax movement in the upstream before impairment? Which is the effective rate that you expect for 2024 in that segment?
Milena Lopez
Hi, Stefania. This is Milena Lopez. Important to highlight, a couple of topics in terms of taxes. First, November, we had the Constitutional Court said that, yes, the cost of royalties are deductible from taxes. Otherwise, this would have an increment payment of COP1.6 million in taxes throughout that 2023. Since the — this is given in the third quarter, that quarter we need to remove the savings of taxes we had during the year. So we have a favorable taxes to save somehow of COP1.3 trillion because we reversed it in the fourth quarter. So this is — this is something that we think fourth quarter that affects are the specific rate of the quarter. Additionally through the year, we were making provisions assuming an over rate of 15%. Now we have the decree that ends the applicable over rate. And in 2023 due to the average of the price of the price spread, we are in the quarter that implies an overrate of 10%. So yes, we need to make a reverse the taxes that we had cost during the year of $800 billion, something that you can see on the fourth Q. So the effective rate that you see, if you calculate it every quarter in the fourth Q, it is impacted by these two topics. When we see the numbers on the whole year, Ecopetrol has an effective tax rate of 36.6%, which differentiates from what we had in 2022 of 31%. And that main impact here is the effect of the tax reform that impacts for the first time in 2023. I don’t know if this makes the fourth Q tax clear.
Operator
Bruno from Goldman Sachs asks. Where is the local diesel and gasoline price compared to the international?
Milena Lopez
Hi Bruno, Milena Lopez. So when we see the diesel prices, I’m going to talk specifically about the average of February to provide more updated information. We have a diesel price of around COP9,500. When we look at the parity price, it is closer to COP15,000. So we have an effective subsidy of 63%. Nevertheless, when we look at the gasoline prices in February, we see a price of around COP15,700 and the priority price is a little below this. So in reality, what we see right now is a subsidy of around COP2,000 of gasoline facing what we are lacking in diesel. So on one side, diesel, we have a subsidy, and on gasoline, we have — we are a little bit above, which help us to improve our deficit. And with the FEPC questions, well, it is important here to highlight not only that we’re going to have a lower monthly accumulation of FEPC due to the increase of gasoline price that the national government did last year, but this reduction in the market prices will lead us to that. If we project what the deficit of the prices for 2024, it gives us something around COP3 trillion and COP4 trillion. Of course, these changes according to the exchange rate and the differentials. But in effect, we see that if there is no movements in diesel price, which is not the base scenario, we hope that we have some adjustments. We see at the end of the year, a deficit of — due to FEPC that will be inferior to what we’ve seen in the last two years, which is a great news for the company and for the position of Ecopetrol.
Operator
[indiscernible] has two questions. First one, do you have an update or expectation about the no deductibility of royalties for March due to the Supreme Court? And second, could we see an extraordinary dividend greater to what we — this year to help that fiscal — the tax deficit?
Milena Lopez
Thank you, [indiscernible], for your questions. Milena Lopez again. Yes. So about the Constitutional Court. In November, we had the rule out that says that the royalty prices are deductible — tax deductible. At the beginning of the year, the Ministry of — said an incident of impact — of tax impact. And the Ministry of Treasury has a time that would be like this record metric to eradicate in the court, the sustentation of that, of such tax impact. Once the court receives this, they will accept the incident, discuss it. And during that period of time, they will have an answer. So the important thing here is that at the time the court decides to revise and accept that tax impact incident to — we will suspend that. And we will have to wait for final ruling. And in Ecopetrol, we will accept what the court says. So right now, we don’t have additional information. Second question about extraordinary dividend. Now up to the date, we haven’t discussed with Treasury Ministry about this, except the payout of 67%, which — of payout, which is taken to the Shareholders’ Meeting.
Operator
Congratulations for the results and milestones. About the possibility of making businesses with PDVSA. How much have you advanced in that option?
Ricardo Roa
Thank you, Jose Daniel. Ricardo Roa, President. The evaluations that we’re doing internally, the possibility of making businesses with PDVSA in the short term are focused on the contract that has been constantly reactivated since 2007 until 2027 between PDVSA and Ecopetrol, where we say that we can transfer. So the interaction that we’ve had in the last months with PDVSA Gas as owner of the transportation — asset transportation, gas transportation is to work hand in hand, inspecting and revising the conditions of — maintaining the commitment that we have to activate actions. To support any emergency in the context of the production exploration. So this is one of the options. In between four or five more that we are talking about in order to attend the demand that we will have, we have a deficit of 169 gigabytes. So basically, we are, among many options, evaluating the opportunity of working with these legal project. And this will occur as we don’t have any restrictions from VAC that would avoid this transaction.
Operator
From Standard and Poor’s asks, for 2024, what is the capacity you consider for the refineries and how this affect gasoline imports to Colombia?
Alberto Consuegra
Manuela, good day. Alberto Consuegra. Thank you for your question. What are we seeing from the load point of view in 2024, an average between 415,000 and 425,000 barrels. Particularly in the case of imports, well, what is the co-relationship in gasoline? Well, the production capacity of both refineries is between 80,000 and 90,000 barrels depending on the maintenance we have through the year. And the imports are going to be between 40,000 and 50,000 barrels around that. So what do we see in the first months of this year? Well, a fall in imports below that range of 45,000 barrels. This is good news. And nevertheless, we need to await for a reactivation of the demand and this will depend on the behavior of the gasoline prices, international gasoline prices. So this is the variable we’re managing right now. And from the production point of view, we are safe with our plan.
Operator
No more questions. So we give the floor to the President for the final message.
Question-and-Answer Session
Ricardo Roa
Thank you. Thank you again for your participation. Please keep firm confidence on our company and our subsidiaries with this great team that’s working with us that has shown a very important leadership, Ecopetrol, and the margin of critical conditions of the market situations. We’ll keep working and will keep being responsible to consolidate and to continue to making Ecopetrol the great company it is, not only in Colombia, but with an important participation in each of the economies of the countries we are present at. Thank you very much for your participation. Thank you.
