Overview of Regulation in Colombia

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Revenue Sharing Procedures

Current ANH contracts

When the National Hydrocarbons Agency (ANH) was formed in 2003, it took over the regulatory role formerly the responsibility of state-owned Ecopetrol. Simultaneously new contracts were designed with new procedures for the collection of royalties and taxes from oil companies.[1]

Following changes to the regulatory model made by President Uribe, royalty payments were cut from a flat 20% to a sliding scale of 8-25% depending on production levels. The state's share of revenues through royalties and taxes also fell from 70% to 50-55%.[2] Since 2003 it has also been possible for private companies operating in Colombia to own 100% stakes in oil ventures.[3]

The new contracts also envisage a heavy oil discount (for those grade of oil with an API gravity of less than 15) and a gas discount.[4]

After successfully bidding for and being awarded a block, the ANH contracts consist of three distinct phases:

  1. Initial exploration phase (six years to make a discovery, plus a possibility of extending for two years)
  2. Evaluation phase (two years to evaluate whether to develop the field further)
  3. Commerical phase (24 years are given to develop the deposit before the project is relinquished)[4]

Previous types of contract

1970-1999

Over the course of Colombia's oil producing history, there have been several amendments made to fiscal terms for oil companies. Under the terms of contracts negotiated between 1970-89, foreign investors were responsible for the entire exploration phase of development . If a discovery was considered commercially viable, state-owned Ecopetrol was "backed in" for a 50% working interest and the private company was paid a flat royalty rate of 20% on production. Under such contractual terms, the private company was allowed to recover 50% of their exploration costs before Ecopetrol received a portion of the "profit oil".

In 1990 a revision to the contractual terms stated that once cumulative production passed 60 million bpd, Ecopetrol's working interest started to increase above 50%. Another amendment was made in 1994, changing the conditions of Ecopetrol's working interest.[4]

1999 contracts

This regime constituted a combination of previous contractual arrangements, wherby Ecopetrol's working interest was 30% until a cumulative production limit has been passed, after which Ecopetrol's participation could rise as high as 65%. Although these contracts have now been replaced by the modern ANH contracts, they still apply to certain development blocks in Colombia.[4]

Licensing Rounds

Historically, access to oil and gas acreage in Colombia was achieved by acquiring blocks on a "first come, first served" basis, according to Tudor, Pickering and Holt bank. However as competition grew for Colombia's acreage, the newly created ANH organized a series of bid rounds from 2007 onwards.

The main rounds which have taken place up to 2011 are the Caribbean Round 2007, Mini‐Round 2007, Colombia Round 2008, Mini‐Round 2008 and Open Round Colombia 2010.

The criteria used for the awarding of blocks are the value of the operator's offer and their ability to meet commitments.[4]

As of early 2012 a further bidding round was expected to be held in November or December 2012.[5]

References

  1. HistoriaAgencia Nacional de Hidrocarburos, retrieved 22 January 2012.
  2. Colombia's Energy RenaissanceCouncil of the Americas, December 2010.
  3. Violent Protests Threaten Colombia's Oil BoomTime, 24 September 2011.
  4. 4.0 4.1 4.2 4.3 4.4 Initiating on South American E&PsTudor, Pickering, Holt and Co., January 2011.
  5. Colombian Bid Round 2012First Energy, January 2011.