Considering the COVID-19 economic and social emergency, the fall of international oil prices, and that the measures established throughout Agreement 02 of 2017 are insufficient to mitigate the adverse effects derived thereof, the National Hydrocarbons Agency ( “ANH”) published on June 8, 2020, Agreement No. 4 (the “Agreement”), by means of which it adopts a deferral measure for the payment of the Production Share economic right (“X%”) in respect to contracts entered into with the ANH .
Pursuant to the Agreement, the ANH establishes an alternative opportunity for the payment of the X% caused by the production of liquid hydrocarbons and established in some exploration and production contracts entered into with the ANH.
The adoption of the new payment opportunity can be modified by signing an amendment to each contract, pursuant to the following rules:
(i) The accrual and payment opportunity of the X% on E&P contracts governed by Agreements 8 of 2004, and Agreement 4 of 2012 will be replaced by the provisions of article 84 of Agreement 2 of 2017, excluding section the multiplier factor referred to in section 84.3 thereof.
(ii) the conditions for deferring payment: the payment, in Colombian pesos, of the X% caused by the monthly production of liquid hydrocarbons may be deferred, provided that during the two previous consecutive months (including the month in which the obligation occurred), the average price of the Cushing OK WTI “Spot Price” FOB benchmark crude price (Pi), taken from the “US Energy Information Administration” is less than or equal to the low price (PB), defined as the 60% of the base price (Po), pursuant to the provisions of article 2.2 of this Agreement.
The payment deferment can only be used six times, whether consecutive or alternating. Upon fulfilling this condition, the full value of the debt must be paid to the ANH gradually within six months. When the debt has been paid in full, the payment deferral may be used again.
(iii) amortization: the monthly unpaid and accrued values must be gradually repaid in the following periods as per the formula set in article 2.3 of this Agreement.
However, if the contract to which the payment deferment was applied is terminated, for any reason, and there are outstanding payments with respect to X%, these will be enforceable.
Therefore, if a contractor is interested in applying for this mitigation measure, it must file a written request with the ANH. Once the proposal has been accepted by the entity, an amendment will be signed.
The Agreement is available in the following link: