MercoPress. South Atlantic News Agency

Magallanes oil/gas exploration contracts ready for next March

Chile's Ministry of Mines expects to sign next March oil operating contracts with the corporations that have won licences to explore and exploit hydrocarbons in the extreme south of the country reports La Prensa Austral from Punta Arenas.

"We are contacting the successful companies of the Magallanes and Tierra del Fuego bidding process to agree on a basic operations contract and have accepted some of their recommendations", said Diego Vio head of the Legal Department from the Mining Ministry in Santiago. Meantime the corporations are complying with all the documents from the Central Bank, tax Department and Energy Commission which they will need to operate in Chile. Chile and the corporations actually are breaking ground since it's the first time the private sector has been invited in Chile to participate in oil/gas exploration. "We expect all the process can be over next March when we sign the contracts. We are hopeful the ceremony will take place in Punta Arenas", said Mr. Vio. The five successful corporations (out of a total of ten) involved in the Magallanes region hydrocarbons exploration are: Total S.A. (France); Apache Corporation (Canada), Pan-American Energy LLC (US); Greymouth Petroleum Holding Limited (New Zealand) and the IPR-Manas consortium (US/Switzerland). They have promised an initial investment of 267 million US dollars. According to contract conditions before six months after the signature the companies must begin exploratory operations and have a seven year timetable to comply with the production goal on three legs: 3+2+2. Corporations must also present collateral in each leg of the timetable in line with the promised minimum investments. The guarantee can be recovered as the investment advances. Exploitation of each well considered commercially viable extends for a maximum of 25 years, but can't exceed the 35 years of the original contract. The holder of the license is responsible for any contamination and is entitled to sell the oil and gas extracted in the open market. However the Chilean government has a first choice option. In the first leg of the hydrocarbons exploitation the licensed company keeps 95% of the selling price of oil and gas but the percentage declines gradually until the selling price doubles accumulated costs, when another 10% will be shaved off. Corporations must also pay a 17% income tax.