Legislative Decree No. 923 of 3 January 2024, published in the Official Gazette No. 6 of 10 January 2024, which came into force 8 days after its publication, approved amendments to the Hydrocarbons Law, which was published in the Official Gazette No. 52 of 17 March 1981. As a result of these reforms, the law was renamed “Law for the Exploration and Exploitation of Hydrocarbon Deposits”.
This law was reformed with the objective of encouraging investment, exploration, and exploitation of hydrocarbons, without the expenditure of State funds, through the innovative award of contracts to natural or legal persons interested in investing in this sector, as well as the discovery of oil and natural gas in the country or geological and geophysical data essential for the formulation of plans and policies that promote the hydrocarbon sector.
The most relevant novelties of the reform:
Investment contract: this is a new form of contracting that was added to the Law. Among its most important aspects are the following:
- The investment contract is the one by which a person, natural or legal, undertakes to carry out, at its own cost and risk, operations or scientific activities such as research related to exploratory hydrocarbon activities that allow obtaining information for the formulation of policies or plans in hydrocarbon matters
- A special modality of investment contracts was established called “investment contract multi-client modality”. This is a contract between the Comisión Ejecutiva Hidroeléctrica del Río Lempa (CEL) and a natural or legal person, through which the contractor is granted an exclusive right to commercialize raw data obtained during research and information gathering activities in the hydrocarbon sector. Of the income generated by the commercialization of the information collected in the different research activities, the percentage established in the contract must be delivered to CEL
- Data license: CEL will grant the investors contracted through the multi-client investment contract a data license, which will allow them to commercialize the data and information elaborated through the research carried out.
Process of awarding investment contracts: Section II was created, entitled “The process of contracting and awarding investment contracts”, in which the following process is developed:
- Bidding: CEL will create a database in which it will enter relevant information such as financial and geological figures, and location maps, among other information of technical relevance, in order to inform those interested in participating in the awarding process, following the process determined by law
- Direct contracting: the Law enabled CEL to carry out direct contracting, as long as a duly motivated resolution is made.
The reform came into force on 18 January 2024.
Source: LEXOLOGY and The Legislative Assembly of El Salvador.
