The possibility that Petroecuador forms consortia with private companies to manage the various oil fields, the clarification of the route for the migration of current service contracts to participation contracts on a voluntary basis, a more agile governance system through the The Hydrocarbons Bidding Committee (COLH) are the key points of the new Regulations for the Application of the Hydrocarbons Law, which was signed on Tuesday by the President of the Republic, Guillermo Lasso.
President Guillermo Lasso announced it on Tuesday night. “I have just promulgated the new General Regulations for the Application of the Hydrocarbons Law, which has three important pillars: legal certainty, investment attraction and efficiency. This underpins the policy to strengthen investment in the sector and thereby generate more jobs,” he said on social networks.
This is the issuance of Executive Decree 342which introduces several reforms to the previous regulation.
According to the minister of Energy, Juan Carlos Bermeo, there are several key issues in the regulation. First of all, the possibility of enter to tender fields in production, because previously you could only enter from the exploration stage and then go on to production. The possibility that private companies can pass under a participation contract to manage fields in production is new, he explained.
In addition, he stressed that the regulation strengthens the associative capacity of Petroecuador so that it can form consortiums. Indeed, article 20 of the regulation establishes that public Ecuadorian hydrocarbon companies may form consortiums with national or foreign, public or private companies of recognized prestige, to carry out exploration and/or exploitation of hydrocarbons and associated substances, and must ensure the transfer technology, among other processes.
For Bermeo, there is a better formation of the Hydrocarbon Bidding Committee (COLH). Indeed, the COLH will be made up of the Minister of Energy, the Minister of Finance (or his delegate) and a delegate of the President of the Republic. Another key point is that the migration of contracts is regulated in an important way.
About the topic, former Minister of Energy Fernando Santos Alvite commented that the reforms that have been given to the already existing regulation are to adjust it to the changes that were introduced to the Economic Development and Fiscal Sustainability Law, that entered into force by the ministry of law and that in addition to tax issues had several points on the issue of hydrocarbons. For Santos, the most remarkable thing is precisely the issue of contractual modality.
The expert explained that the Committee (COLH) is very important, as it decides on all bidding processes that will be carried forward. He considered it positive that it is made up of a delegate of the president. “That will give it more dynamism and viability, because you will be able to count first-hand on someone who reflects the will of the presidency,” he said.
Santos expressed that the reform to the Hydrocarbons Law that came in the Development Law is broad and establishes that contracts and modalities that are applied in the world hydrocarbon practice can be used. “It is not limited to the classic contracts, but it opens the range to any subject”, he added.
In this sense, the issue of consortiums seeks to revive the good experience of the contract CEPE-Texaco in which the national company had 67% of the contract and the private company 33%. In this way, the companies would form a consortium that would sign a contract with the State for exploration and production. However, he said there is a risk that companies may not be interested in partnering with Petroecuador, which does not have clear balance sheets. He considered that this figure could take on greater force when the state company is better ordered and changes to a public limited company and can participate in international stock markets.
He stressed that through the regulation outlines the path for companies that voluntarily want to switch to a participation contract. The companies that wish to make the change of contracts must go through the review of the COLH, which must authorize the change, then establish a negotiation commission to put together the conditions of the new contract, to finally be able to sign it.
For the former minister, many companies are currently used to service provision contracts. Additionally, he assured that with high crude prices it is not a good time to renegotiate the contracts, since these contracts work well for the State when the price is high, since everything above the rate goes to the State.
Meanwhile, Minister Bermeo highlighted other points of the regulation such as those that have to do with issues of the expiration of contracts, “which at the end of the day are part of the legal certainty that is required to attract investment.”
He also considered it important to establish processes for the delegation of crude oil transportation and refining activities to the private company.
The minister believed that the existence of the regulation is like generating the clear tools that will lead to the final destination, which is the increase in oil production to one million barrels per day at the end of the Government. (I)
Source: Eluniverso
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