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, as explained bellow. Sales revenue from transportation services is recognized when products are transported and delivered to the buyer in accordance with 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 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 amount to be settled is calculated as the volume sold during the corresponding period multiplied by the difference between the international parity price and the 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. The reference price is the price per gallon fixed by the Ministry of Energy and Mines, at which refiners or importers sell gasoline or diesel to the national market. Therefore, this difference represents a higher or lower value of sales revenues for Ecopetrol S.A. and Refinería de Cartagena S.A.
