In order to continue with the Bidding Process for the development of Research Projects on the use of the Multi-Stage Hydraulic Fracturing technique with Horizontal Drilling in Unconventional Oilfields – FHPH ("CEPI Bidding Process"), the National Hydrocarbons Agency ("ANH") published Agreement 04 of 2021, by which it modified Agreement 06 of 2020, which adopted the regulations for the selection of contractors and special contractual conditions for the development of Research Projects within the framework of the comprehensive Research Pilot Projects – PPII.
The aforementioned Agreement 04 of 2021 consists of 2 articles through which it established the following:
1. Modifies article 11. 5 of Agreement 06 of 2020 (Requirements of the Counteroffer) by including that the promise of payment shall not include the value that had been credited to the fulfillment of the exploratory commitments of other contracts or agreements, and that the facilities that have been built for the execution of the Special Research Project Contract ("CEPI" from its acronyms in Spanish) may be used for the benefit of the operation of the contract resulting from the exercise of the area nomination right (which is the right of the CEPI holder to nominate or designate an area with the purpose of entering into a contract that grants the rights to explore and produce unconventional reservoirs), as well as for the exploration and production contracts of hydrocarbons in unconventional fields and in the additional exploration and production contracts of hydrocarbons in unconventional fields when the suspension thereof is lifted through a legal regime that allows their development.
2. Modifies Article 17 of Agreement 06 of 2020 (Accreditation of Commitments) by establishing that the investment executed in (i) the research and operational activities program; (ii) non-operational activities necessary for the development of the PPII; and (iii) all those activities that are directly related to the PPII and that the holder submits for verification by the ANH for such purpose, shall entitle the holder of the respective CEPI to credit the value therein invested to:
a. The compliance with the commitments of the minimum, additional and subsequent exploration program of exploration and exploitation contracts of hydrocarbons in conventional reservoirs, additional contracts, agreements or additional agreements or exploration and production contracts of unconventional reservoirs entered into as a consequence of the exercise of the area nomination right, or other contracts entered into with the ANH to explore and/or produce hydrocarbons.
b. The fulfillment of exploratory commitments pending to be executed, or remaining investment in favor of the ANH in respect to suspended exploration and production contracts and agreements, or that have been renounced as of the date of entry into force of Agreement 04 of 2021, prior verification by the ANH of the executed value in the development of the research and operational activities program.
Furthermore, and in line with the above, on March 1, 2021 the ANH issued Addendum No. 8 to the CEPI Selection Process whereby:
1. Added section 6.4 of the Terms of Reference ("TOR") by including the faculty of the CEPI holder to match the best counteroffer submitted by the nominated area to explore and produce unconventional reservoirs.
2. Modified Annex 17 of the TOR, called "Research and Operational Activities Program", to: (i) include the requirement to indicate the number of wells offered to be drilled, and (ii) modify numeral 2 by specifying that for purposes of crediting the commitments, the ANH will verify that the non-operational activities executed by the Contractor, that does not use the unit price table, are necessary for the development of the Research Project and its investment corresponds to market prices.
3. Additionally, the ANH introduced, among others, the following modifications to the CEPI Minutes:
a. Modified the definition of "Preliminary Stage" by establishing that this stage is between the Effective Date and the date on which the administrative act granting the environmental license becomes enforceable and included the definition of "Table of Unit Prices" as the creditable reference value of the activities that conform the research and operational activities program, adopted by the ANH, and to which the contractor may apply.
b. Modified literal f) of clause 4.3.1 and the first paragraph of clause 27.3.1, by extending the term for submitting the corresponding environmental license application to 240 calendar days following the date on which it obtains certification of not proceeding with prior consultation, or that such consultation has taken place.
c. Added paragraph j) to clause 4.3.1 "Obligations of the Previous Stage," establishing the term to inform the modality of accreditation of commitments selected by the Contractor.
d. Added clause 5.6, numeral 5.6.2, to specify the effects of the non-execution of any or some of the activities that compose the program of research and operational activities (non-executed investment).
e. Modified clause 18, "Accreditation of Commitments," differentiating the procedure for the accreditation of commitments of the investment effectively executed concerning that which is recognized according to the Unit Price Table.
f. Modified clause 20 by establishing a maximum monthly ceiling of fifty million pesos (Col$50,000,000) to contribute to the Transparency Center.
g. Modified clause 41, in respect to the value of the monetary penalty clause to one million dollars of the United States of America (USD 1,000,000).
h. Adds clause 50, with the inclusion of international arbitration.
i. Modifies paragraphs d) and e) of clause 51.4 regarding the area nomination process under the modifications introduced by Agreement 4 of 2021.
To review Agreement 04 of 2021, please refer to the following link
For more information on Addendum No. 8 to the CEPI Selection Process, please click on the following link
Finally, we encourage you to review our previous coverage of the CEPI Selection Process in the following links:
https://bu.com.co/en/noticias/anh-launches-process-award-special-agreements-ppii
https://bu.com.co/en/noticias/cepi-selection-process-advances
https://bu.com.co/en/noticias/anh-set-forth-conditions-second-round-cepi-award
https://bu.com.co/en/noticias/second-round-cepi-selection-process-already-has-dates
https://bu.com.co/en/noticias/anh-modified-cepi-selection-process-through-addenda-no-4-and-5
https://bu.com.co/en/noticias/anh-issued-agreement-9-and-addendum-no-6-cepi-process
https://bu.com.co/en/noticias/second-round-cepi-selection-process