Overview of Regulation in Colombia
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.
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%. Since 2003 it has also been possible for private companies operating in Colombia to own 100% stakes in oil ventures.
After successfully bidding for and being awarded a block, the ANH contracts consist of three distinct phases:
- Initial exploration phase (six years to make a discovery, plus a possibility of extending for two years)
- Evaluation phase (two years to evaluate whether to develop the field further)
- Commerical phase (24 years are given to develop the deposit before the project is relinquished)
Previous types of contract
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.
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 Although these contracts have now been replaced by the modern ANH contracts, they still apply to certain development blocks in Colombia.
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 criteria used for the awarding of blocks are the value of the operator's offer and their ability to meet commitments.
- “Historia” Agencia Nacional de Hidrocarburos, retrieved 22 January 2012.
- “Colombia's Energy Renaissance” Council of the Americas, December 2010.
- “Violent Protests Threaten Colombia's Oil Boom” Time, 24 September 2011.
- “Initiating on South American E&Ps” Tudor, Pickering, Holt and Co., January 2011.
- “Colombian Bid Round 2012” First Energy, January 2011.