On October 12th, 2021 the National Hydrocarbons Agency (“ANH”) issued Agreement 009 of 2021 (the “Agreement 9”) adding  to the list of factors contained in Article 44 of Agreement 02 of 2017, a new tool for evaluating and qualifying the respective offers, consisting of the highest Economic Value of Exclusivity, which the Proponent and eventual Contractor undertakes to pay to the ANH at the end of the Exploration Period, constituting a guarantee for the purpose, and whose amount is subject to discount if it drills Exploratory Wells in the Contracted Area.

To that end, the ANH amends Articles 2, 3, 5, 6, 7, 8, 9, 10, 11, 13, 22, 23, 24, 25, 29, 30, 32, 33, 34, 35, 36, 37, 38, 44, 48, 53, 56, 69, 70, 72, 73, 74, 79, 80, 81, 82, 83, 85, 86, 88, 90, 91, 92, 93, 98 and 109 of Agreement 02 of 2017, Regulation of Selection of Contractors and Allocation of Areas for Exploration and Exploitation of Hydrocarbons, and add Annex No. 1 thereof, "Glossary of Terms, Units and Equivalences" 

The main modifications are: 

1.    The Primary Evaluation and Qualification Factor of the bids for: 

• Award of E&P Offshore contracts, and Technical Evaluation Contracts, TEA: Additional Exploration Activities
• Award of Continental E&P Contracts: Economic Value of Exclusivity. 

2.    The Secondary Evaluation and Qualification Factor and the and Tiebreaker (regardless of the type of contract) will be the Participation in Production (X%) 
3.    The Second Tiebreaker Criterion consists of the largest Additional Exploratory Activity offered, expressed in points, to be executed in Phase 1 (or Single Phase) of the Exploration Period. If the tie persists, the ANH will make the draw with ballots and based on the result of the draw will establish the Preliminary Selection Order.
4.    When offers are submitted on a same area, prevalence will be given  to Valid E&P Contract offers vs. TEAs offers. 
5.    Adoption of Areas previously delimited by the ANH, which mostly make up regular polygons of similar size, depending on whether they are Continental or Offshore; Mature, Emerging or Frontier, to which future Applications for Incorporation of Areas must be subject.

The Agreement  and its annexes are available at the following link: 

1. Agreement 9: https://www.anh.gov.co/la-anh/sobre-la-anh/normatividad/Normatividad/ACUERDO%20009%20DE%202021.pdf
2. Amended and reinstated Agreement 2 of 2017: https://www.anh.gov.co/la-anh/sobre-la-anh/normatividad/Normatividad/ANEXO%201%20ACUERDO%2009%20DE%202021%20-%20COMPILACI%C3%93N%20ACUERDO%2002%202017.pdf
3. Glossary: https://www.anh.gov.co/la-anh/sobre-la-anh/normatividad/Normatividad/ANEXO%202%20ACUERDO%2009%202021-%20%20GLOSARIO.pdf

PPAA ToR ADDENDA

On October 14th, 2021, National Hydrocarbons Agency (“ANH”) published the Addendum 23 to the Terms of Reference (“ToR”) for the Permanent Areas Allocation Process (“PPAA”) in order to modify the schedule of the fourth cycle of the PPAA (as known as “Ronda Colombia 2021”).

Addendum 23 brings some changes relevant to the PPAA and modifies the ToR as follows: 

1.    Right of participation: 

• Right to present Expression of Interest acquired by legal entities that present the Letter of Intent in a timely and correct manner.
• Right to submit Application for Incorporation, Proposal or Counteroffer, held by legal entities with sufficient Economic and Financial Capacity to support their applications or offers, according to the classification of the Area of interest. 

2.    Data Package: It is clarified that the purchase of the Data Package will not be mandatory or condition to acquire the Right to Participate in the Fourth Cycle of the Process. 
3.    Expression of Interest: Act by which a non-qualified legal entity, present to the consideration of the ANH one or more Available Areas of its interest, for its eventual incorporation as Areas of the Selection Process. On the other hand, the Application for Incorporation of Areas is the Act by which a qualified participant, presents to the consideration of the ANH one or more Available Areas of their interest, for their eventual incorporation as an Area of the Selection Process.

The Letter of Intent is the instrument through which both requests are made. 

• With the presentation of a Letter of Intent, the person who expresses interest acquire the obligation to demonstrate its capacity to contract with the ANH as of the date of the qualification cut following its expression of interest, and to present a valid offer for such area (if it has been incorporated.)
• In order to incorporate areas, the qualified interested party must be qualified and have sufficient economic-financial capacity. 
• If the application for incorporation was made prior to the publication of Addendum 23, the interested party must ratify the interest by expressly accepting the new contractual conditions and the offer of the Economic Value of Exclusivity (“VEE”), by submitting the Letter of Intent Format modified by said Addendum, no later than seven (7) business days following its publication, under penalty of deemed the application as withdrawn, without generating the payment in favor of the ANH of the USD 100,000 referred to in the Letter of Intent. 

4.    A Valid Offer shall:

• Be presented by a qualified participant for the relevant type of Area.
• exceed the score of the Exploratory Program, or equals or exceeds the minimum VEE required by the ANH for each Area.
• in the case of Counteroffer, exceed the Additional Exploration Activities or the VEE offered by the Initial Proponent, in accordance with the Primary Factor of evaluation and qualification of Counteroffers.
• In case of Additional Exploration Activities offered, exceed the Initial Proposal must be subject to the following rules:

1. The Stratigraphic and Exploratory Wells must be executed integrally once each one has commenced.
2. The development of at least fifty percent (50%) of the activities corresponding to the total of the Additional Exploratory Program must be executed in the course of Phase 1 of that Period. 
3. The remainder in Phase 2, or Phase 3, if any. 

• contain an offer of Economic Rights for the concept of Participation in Production (X%), equal to or greater than that required by the ANH, in the case of Proposal, and not inferior to that made by the Initial Proponent, in the case of Counteroffer. 
• if related to the offer submitted by the Initial Proponent, it equal or exceed the Additional Exploration Activities or the VEE, as appropriate, and the Percentage of Participation in Production (X%) of the Most Favorable Counteroffer. 
• In case of the Additional Exploration Activities offered to overcome the Most Favorable Counteroffer, be equivalent to at least the number of points indicated in Annex B thereof. 
• Submit a Bid Bind (Garantia de Seriedad) of the offer. 

5.    The procedures for accepting applications for incorporation and expressions of interest in a same area are modified. 
6.    A restriction is introduced to submit offers on returned deposits and fields to:

• those Participants who have returned to the ANH Undeveloped Discovered Deposits or Fields in Production (Yacimientos Descubiertos No Desarrollados o Campos en Producción) within the year immediately prior to the opening date of the Selection Process.
• those Participants who have resigned during the two (2) Years immediately prior to the opening date of the Selection Process.
• if the return took place due to non-compliance, they cannot submit an offer for the Areas in which the returned Deposits and Fields are located. 
• This rule also applies to parents or controllers, affiliates or subsidiaries and, in general, companies of the same business or corporate group controlled directly or indirectly by the former, of the Participant. Lack of compliance with this this rule leads to the rejection of the respective offers.

7.    A chapter on the Economic Value of Exclusivity ("VEE") is introduced, which is applicable to continental E&P contracts.

• Bear in mind that on the occasion of the Fourth Cycle of the PPAA, with the creation of the VEE, contractors are free to configure or select the activities to be executed during the Exploration Period and its possible extensions, assuming the obligation to pay the ANH, the VEE in US dollars. 
• Bear also in mind that the VEE includes both the Minimum required by the ANH, and the Additional.
• The VEE grants the exclusive right to explore and produce the Hydrocarbons owned by the State that are discovered in the Assigned Area.
• The value of the VEE is determined by the ANH based on the classification of the Sedimentary Basin to which the Area of Interest belongs, information that is contained in Annex B of the ToR. It is valued in points in accordance with Article 33 of Agreement 2 of 2017.

8.    Considering that in the contracts granted since 2021, the right to explore and exploit any type of deposit identified in the contract area (subject to the provisions of the same contract) is granted, the ANH will require the Financial Economic Capacity for Prospective Areas for the development of Unconventional Deposits (Áreas prospectivas para el desarrollo de Yacimientos en Rocas Generadoras) prior to the start of the production period. Hence, to participate in the Fourth Cycle of the PPAA and to tend to the award of a Continental E&P Contract, interested parties must accredit the Economic and Financial Capacity required for the Exploration of "Prospective Continental Areas for the development of Deposits in Traps" (Áreas “Continentales prospectivas para el desarrollo de Yacimientos en Trampas”,) that is, 24,000 points.

Finally, it is indicated that the land map with the update of the Areas of the selection process – Fourth Cycle will be published on November 26th, 2021.

To access Addendum 23 and the modification to the PPAA ToR, please visit the following links:

https://www.anh.gov.co/Asignacion-de-areas/Documentos%20PPAA/1.%20Adenda%20No.%2023%2014%20de%20octubre%202021%20.pdf

https://www.anh.gov.co/Asignacion-de-areas/Documentos%20PPAA/2.%20TRD%20PPAA%20Adenda%20No%2023%2014%20de%20octubre%202021.pdf