In 2003 the restructuring of Colombian hydrocarbons sector took place, with the creation of the National Hydrocarbons Agency as a response to the critical situation that Colombia was undergoing, due to decreasing petroleum reserves, which would eventually take the country into becoming a crude oil importer. (see Decree 1760 of 2003.)

This restructuring contemplates the decision to make Ecopetrol more competitive, separating its double role of regulating entity and petroleum company. For this reason, it was decided that Ecopetrol would focus on exploration, production, transportation, refining and marketing hydrocarbons; in other words, working exclusively with the oil business in all of the phases of the petroleum chain, competing at the same level with foreign companies

In this manner, the National Hydrocarbon Agency acquired from Ecopetrol it’s administrating and regulator tasks and began the transformation of Colombia into a country that again becomes an attractive prospective for domestic and foreign investors

Nonetheless, Ecopetrol keeps all the areas it had on the direct operation and all the Association Contracts signed on till December 31, 2003. (www.ecopetrol.com.co)

Another fundamental change was the adoption of a new royalty, tax and rights contract, which replaces the old Association Contract. This model contemplates three different and separate stages: Exploration, evaluation and exploitation, whose duration is aligned with international standards and generates a State share of 50 to 60%

The economic terms of the new way of contracting changes Colombia into one of the most attractive countries in the world, not only for governmental participation, but also with regard to investment profits, and the areas assigned by modern procedures, which are transparent and efficient, and it’s administration and follow-up is carried out according to the highest international standards

Likewise, the model is as agreeable for large projects or large companies, as it is for smaller and midsize companies, opening a broad gamma of investment opportunities

On another front, the Technical Evaluation Agreement (TEA) was instituted, enabling the assignment of a large area to perform surface work to obtain better information regarding the presence of hydrocarbons in a specific zone, and which may have a term of up to 18 months. A TEA contractor will have the first option to sign an exploration and production contract for such area

During the year 2003, all efforts of the agency were focused on designing strategies to regain competitiveness of the sector, seeking to place Colombia in the world’s petroleum map, incrementing the prospectivity index and attracting private investors

As a result of this important work, a great number of contracts were signed after the adoption of the new contracting scheme effective as of June 2004. Additionally, the implementation of the new contract has brought into the country in large companies like BHP Billiton and Exxon Mobil, who for more than 10 years had not explored Colombian territory

The exploration activity has increased after the dramatic drop experienced in the year 2000. Since the creation of the ANH, exploration areas have grown, the number of BNP contracts signed have increased, the number of kilometers explored by 2-D seismic have also expanded, and the number of wells drilled

Likewise, ANH is currently investing large sums of money for the acquisition of geologic information that will permit the identification of opportunities in mature fields along the frontier areas.