ANH Publishes Transitional Measures to Support the O&G Industry 

April, 2020 - Marianna Boza

In order to implement transitional measures to mitigate the adverse effects of the fall in international hydrocarbons prices and the public health emergency caused by COVID-19, the National Hydrocarbon Agency (“ANH”), issued Agreement 2 of 2020 (the “Agreement”).

Among the measures taken by the ANH are:

  • Extension of terms may be agreed upon in respect to: (i) the duration term of the different phases of the exploration period; (ii) the term to complete the activities of the evaluation program and/or the integrated evaluation program; (iii) the term to submit possible commercial viability announcement, in the understanding that during the eventual extension, contractors may carry out financial economic studies and evaluations and socioenvironmental management; (iv) the term to submit exploitation plans, initial development plans or the updates thereof that are pending at the entering into effect of this Agreement; and (v) the deadline to submit exploitation work programs or the annual operation program of 2020.

  • The extension of terms of the aforementioned activities must be subject to the rules established in article 3 of the Agreement, as well as to certain specific requirements, among which are:

    • To extend the term to carry out activities inherent to the evaluation program and/or the integrated evaluation program, there must be pending activities within said programs.
    • The exploitation plans, initial development plans or the updates thereof can be submitted within 60 calendar days following the publication of the Agreement in the Official Gazette.
    • The pending work programs or annual operation programs of 2020 can be submitted within 60 calendar days following the publication of the Agreement in the Official Gazette. Within this same period, contractors who have already submitted the aforementioned programs can submit new exploitation work programs or annual operations programs and replace those initially filed before the ANH.
    • Upon contractors request and having prior authorization of the ANH, the terms and percentages of the compliance guarantees can be modified, provided that the resulting value is ensured by a letter of credit, bank guarantee or another instrument authorized by the ANH. Likewise, the ANH can authorize the reduction or constitution of new letters of credit, bank guarantees, or other instruments authorized by the ANH, provided that the requirements established in the Agreement for such purpose are met.
  • The contractors may request the transfer of exploration activities or investments between contracts and agreements signed with the ANH as established in Agreement 1 of 2020, but without them having to offer the 5% additional investment, as referred to in number 7.7 of Article 7 of Agreement 1 of 2020.

  • Contractors may allocate the resources amid to programs for the benefit of communities ("PBC") in the development of the measures adopted by the National Government to mitigate the effects caused by COVID-19 in territories where hydrocarbons exploration and production activities are carried out.

  • For the contractor to modify a PBC previously approved by the ANH in order to benefit from this measure, it must receive the approval of the initial beneficiary to modify the program, prior its submission before the ANH.

  • To benefit from any of the measures contained in the Agreement, contractors must request it in writing to the ANH, providing the supports that establish the satisfaction of the requirements established for each case.

  • It is important to mention that the application of these measure is subject to some rules, as follows:

    • The term subject to the request shall be in force.
    • Terms subject to the request shall expire within the following 12 months after the request.
    • Extensions will be of 12 months, extendable for one additional opportunity and for a six-month term.
    • Approval of the extensions is subject to the adoption of commitments and specific schedules.

  • For the extension of terms, it is required that the following two conditions occur:

    • WTI average price for the last 30 calendar days prior to the request is below US$40, pursuant to the US Energy Information Administration. b. WTI Light Sweet Crude Oil Futures CL average price remains in US$40, pursuant to the NYMEX, for at least one month of the following three months after submission of the request.



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