On March 27, 2020 the ANH issued Agreement 01 if 2020 “By means of which the rules for the Transfer of Exploration Activities or Investments between Contracts and Agreements executed with the ANH, are established” (the “Agreement”), which regulates the transfer of exploration activities or investments between Technical Evaluation Contracts, Hydrocarbon Exploration and Exploitation Contracts, Hydrocarbon Exploration and Production Contracts, Hydrocarbon Exploration and Exploitation Agreements, or other Hydrocarbon Contracts or Agreements for the exploration and/or production of hydrocarbons.

The Agreement establishes, among others, the following: 

•    Transfers of exploration activities or investments requires the prior, express and written authorization of the ANH, which will verify that at least one of the grounds for transfer is met, as well as the compliance with the rules and requirements included in the Agreement, in order to determine the legal, technical and economic viability of each transfer.

•    Transferred activities or investments will be part of the minimum or additional exploratory program of the current phase of the recipient contracts. If the transferred activities belong to the evaluation program or the PEP, then they will be transferred to the minimum exploration program of the current phase of the recipient contract.

•    The ANH has three moths to determine the technical, economic, and legal feasibility of the requested transfer and to adopt the corresponding decision. Lack of response by ANH in this term shall be considered as rejection of the request.

•    It is possible to transfer exploration activities or investments to the free areas to be proposed by the contractor, subject to the terms of the relevant Permanent Process For Areas Allocation (“PPAA”), provided that this ground shall only apply in case of supervening circumstance in the original contract, and provided that the proposed areas are identified as free in the Lands Map existing prior to the request.

Regarding this last point, and due to the issuance of Addendum No. 12 of the PPAA (“Addendum 12”), the ANH has provided the following:

•    Through the mechanism of incorporation of areas included in Addendum 12 of the PPAA, companies that meet the requirements established in the terms reference of the PPAA regarding the incorporation of areas, also meet the requirements of the Agreement, may request the incorporation of areas in order to carry out the transfer of exploration activities or investments.

•    In compliance with the provisions of the Agreement, the request for incorporation of areas in order to transfer exploration activities or investments requires prior approval of the ANH. Said approval must be obtained prior to the date of offers deposit. If the approval is given after the date of the offers deposit, the incorporation of areas will be considered for the next cycle of the PPAA.
 
•    In regards to the exploration programs of the offers that are submitted for the incorporation of areas in order to transfer of investments, it is important to highlight that the exploration program of the first phase of the submitted offer must include, at least, the equivalent in points of the investment subject of subsequent transfer, in accordance with the provisions of the Agreement.

•    In that sense, if the initial contract is not governed by the Agreement 02 of 2017, the number of points equivalent to the exploratory investment to be transferred will be determined according to the value assigned to within article 33 of Agreement 02 of 2017, by using the average of the Cushing reference, OK WTI “Spot price” FOB, taken from the Database “Administration of Energy Information of EE. USA, EIA”, of the six (6) calendar months prior to the offer deposit date. The purpose of this equivalence is to be able to compare the offers received on the areas incorporated into the PPAA.

•    Consequently, if the result of the sum of (i) the points equivalent to the Minimum Exploration Program set by the ANH for the first phase and (ii) the additional exploration activities offered for the same phase by the company that requested the incorporation of the area, is lower than the equivalence in points of the remaining or not executed investment in the initial contracts or agreements, the offer will not be valid and the obligation included in the Letter of Intent  will become enforceable.

For further information regarding Addendum 12 please refer to our newsflash is such regard in the following link:
https://bu.com.co/en/noticias/addendum-no-12-ppaa 

The Agreement is available in the following link: http://www.anh.gov.co/la-anh/sobre-la-anh/normatividad/Paginas/Acuerdos.aspx and the Addendum 12 is available in the following link: http://www.anh.gov.co/Asignacion-de-areas/Paginas/PPAADefinitivo.aspx