Colombia: SSJ Tender Raises Expectations
October 20, 2017
The 14-week schedule that was initially established by the National Hydrocarbons Agency (ANH) for the Sinú- San Jacinto tenders was extended to 24 weeks, after different companies interested in participating in the auction had expressed their discomfort with the "tight" schedule.
In response to the companies’ concern, the ANH decided to extend the schedule by 10 weeks, so that firms had enough time to study and analyze the geological information, and, based on the prospectivity of the reservoirs, decide on their investments.
"Several companies interested in participating in the auction have already said that the new waiting period will give them enough time to analyze the data that the subsoil reveals of its estimated potential, and thus make the financial projections that are required," said Carlos Mantilla McCormick, consultant and former ANH director.
According to the new schedule, the deadline for receiving suggestions and observations on the terms of reference was set for October 11th, and the adjusted text will be published two days later (October 13th).
The final terms of reference, annexes and drafts will be available to interested parties from October 17th to November 14th.
The presentation of documents for the qualification of proponents was established between October 17th and December 27th. The list of preliminary qualified companies will be published on December 29th.
ANH’s comments on the winning companies will be made public from January 2nd to January 15th, 2018. The replies and the publication of the final list are scheduled for the 19th of the same month.
The opening of proposals is now scheduled for January 30th. The publication of the definitive list, award of contracts or null declarations will be set for February 14th. From that day, contracts will be signed.
Following the schedule, the Colombian Petroleum Association (ACP) had published four recommendations on the tender’s terms of reference on October 10th:
1. To extend the deadlines to qualify bidders because this process has a more extensive information package, and it takes more time for companies to evaluate their participation in the process.
2. To define whether the areas that were not assigned in the current process will still be available.
"It is difficult for the ANH to take into account this recommendation because only 15 blocks will be auctioned in this competitive process. This will only be possible next year, when the Register of Interested Parties is enabled," said an analyst consulted by Portafolio; Colombia’s most important economic newspaper.
3. Qualified companies should have free, permanently access to the terms established Agreement 02, 2017, and should be able to participate in future tenders without having to go through the registration process again.
"Only one qualification is enough for when the permanent competitive process begins," said National Hydrocarbons Agency (ANH) president, Orlando Velandia, who added that companies can participate again for blocks offered by the entity in the future.
4. Clarifications on the Additional Investment (PIA) and Community Benefit (PBC) programs.
Interested companies requested the additional investment be taken into account when picking the winners.
"What is included in the proposal is a percentage of participation proposed by the companies, and that will be one of the items to be taken into account when granting blocks, based on a mathematical formula that allows weighting the participation," Velandia added.
Portafolio’s analyst said that "these supplementary activities, which according to the Agreement must be executed in the exploration stage, put companies in a ‘straitjacket’ to develop social and environmental programs. The projects should be developed whenever the operation allows it.”
He added that in the draft, guarantees do not have the same flexibility or favorable conditions as in the Agreement. For this reason, they request their reduction to lower costs and meet the obligations required by the contract.
Bottom-line: We spoke about the SSJ process a few weeks ago, and we said that it seems like the framework is more inclined in the government's favor than investors' favor.
On a positive note, the government listened to companies’ requests and modified the schedule, showing good will on its part.
The original schedule and the early modifications showed some urgency to finish the adjudication process before the end of the year. We thought that had something to do with a law which limits a sitting government’s ability to transact new business in an election year. This concern must have been overcome: by the time the winners are announced, the country will be in full pre-electoral fervor.
It is necessary for the ANH to continue to listen to companies now, when changes can still be made, and for the government to show the will to help them, especially after anti-oil referendums sent the wrong message to foreign investment.