With the closing date just a month away it is time to act for any businesses wanting to participate in the Colombia Bid Round 2014.

On 20 February 2014, the Agencia Nacional de Hidrocarburos – (ANH) launched the 2014 Colombia Licensing Round with 90 areas on offer (77 are onshore and 13 are offshore) located within the following basins:

  • Caguán, Catatumbo,
  • Colombia,
  • Cordillera Oriental,
  • Guajira Offshore,
  • Llanos Orientales,
  • Sinú Offshore,
  • Sinú San Jacinto,
  • Valle Inferior del Magdalena,
  • Valle Medio del Magdalena,
  • Valle Superior del Magdalena,
  • Tumaco, Tumaco Offshore,
  • Chocó y Chocó Offshore.

The process

Companies wanting to participate in the licensing round are required to submit the required documents from April 11th to June 11th, 2014. After the documents have been evaluated by ANH, qualified applicants are to deliver proposals on 23 July 2014. On 28 July 2014 the winners will be announced. The Schedule for the licensing round can be found in the official Agencia Nacional de Hidrocarburos website at www.anh.gov.co

Oil and gas frame work

Colombian laws and regulations provide for equal treatment of foreign and local investment, and both have the same legal rights to explore and exploit hydrocarbons in Colombia. Consequently, any qualified local or foreign company may explore and exploit hydrocarbons in Colombia independently, without having to partner with the National Oil Company (Ecopetrol SA.,) or any other entity of the State owned company to undertake such operations.

Private parties may explore and produce hydrocarbons, subject to the payment of royalties and certain other economic benefits to the State. The royalties, payable for the production of hydrocarbons, are established by Law 141 of 1994, Law 756 of 2002 and Decree-Law 4923 of 2011 for unconventional projects. Other payments are provided for in the contract executed between the investor and the state of Colombian. For a company to explore and produce hydrocarbons, it is necessary to obtain these rights from the ANH through two main types of contracts; (i) Exploration and Production (E&P) Contracts and (ii) Technical Evaluation Agreements.

The ANH and Ecopetrol require companies wishing to enter into new contracts or to be assigned interests in existing contracts for the exploration and production of hydrocarbons (including contracts signed by Ecopetrol prior to 2004) to evidence certain minimum financial, legal, technical operational and environmental capacities. Such requirements vary depending on the type of reservoir targeted by the interested party; being the most difficult to meet those needed to operate and target deep-water and unconventional resources.

Other points to be considered

During the exploration period, the ANH collects a “subsurface fee” which currently varies between US$0.88 and US$5.24 per hectare depending on the size of the area under exploration and the duration of the relevant exploration phase.

During the production period, the ANH collects a royalty which varies between 8 per cent and 25 per cent of production. If the area has produced more than 5 million barrels and the WTI price exceeds a reference price set out in the contract and updated every year, the ANH receives an additional payment.

Colombia is a signatory of several relevant Bilateral Trade and Investment Agreements BIT's. Consequently, the oil and gas activities are generally protected under BITs. Colombia has entered into treatises with Cuba, Chile, Canada Peru, United Kingdom, China, Spain, USA, Canada, Japan, Switzerland, India, Republic of Korea and the Belgium-Luxembourg Economic Union.