On 12th September, the Colombian Minister for Energy presented the ‘Sinú San Jacinto competitive process’, under which the government will later this year offer exploration licences for 15 blocks in the Sinú-San Jacinto basin in the north-east of the country. The blocks include both mature and emerging areas. Colombia’s Agencia Nacional de Hidrocarburos (ANH) expects approximately 50 companies to participate in the licensing process, which would generate around $300 million of investment.
This proposed round follows a three-year hiatus in oil and gas licensing activity by the Colombian government. The recommencement of oil and gas licensing activities is one of the strategies by which the Colombian government is seeking to extend and guarantee self-sufficiency in hydrocarbons for a further five years. Interestingly, Sinú-San Jacinto will be the first block allocation process to be carried out under the new Acuerdo No. 002 (the latest regulation issued by the ANH). This new regulation was intended to ensure a more demand-led licensing process than in the past, and to allow operators a greater degree of flexibility in how they manage their investment commitments. Under the new contracts, the government will receive income from tax revenues and royalties, as well as a production sharing percentage to be proposed by the bidders. This percentage and the proposed minimum work commitments will be the criteria used to evaluate the bids.
It is important to highlight that the ANH has gone to great effort to boost the quality and quantity of data available to potential bidders. According to Orlando Velandia, head of the ANH, “the Colombian government has invested more than $250 million in the last five years and this will allow us to offer areas with really good geological data”.
Further information on the blocks:
- all blocks to be licensed in this round are onshore;
- two of the blocks (SN20 and SN21) are mature fields; and
- the other 13 blocks are classified as emerging areas.
Requirements / guidelines for potential bidders:
- Structure of bidders: Interested parties may prequalify and bid either as individuals or jointly with other interested parties, by way of a consortium or a “promise to incorporate a company”. Bidders may not present (individually or jointly) more than one offer per block.
- Guarantees: Together with the offer, bidders must present a bid bond and, if awarded the licence, a performance bond. Accepted forms of guarantee include standby letters of credit, insurance policies, or security trusts.
- Information: As part of the bid process, interested parties must purchase an “information package” containing relevant data regarding the blocks, for US$200,000 (non-reimbursable). Where potential bidders are submitting a joint offer by way of a consortium, not all participants are required to purchase the information package.
Proposed timeline for licensing process:
Click here to view table.