The Legislative Assembly approved reforms to the Hydrocarbons Law, aiming primarily to open the door for studies on the existence of oil and natural gas resources in El Salvador, according to government suspicions.

Oscar Giralt, our partner, commented on the importance of these reforms: “The proposed reform implies a significant shift in the law’s focus, transforming it into the ‘Law of Exploration and Exploitation of Hydrocarbon Reservoirs.’ This will enable a more specific regulatory framework for the responsible search and utilization of these resources if their presence in the country is confirmed.”

Among the changes, it highlights granting exclusivity to the Executive Hydroelectric Commission of the Lempa River (CEL in Spanish) in the exploration and exploitation of hydrocarbon reservoirs. “Assigning this role to the CEL aims to regulate activities related to hydrocarbons, ensuring efficient and careful management of these resources,” added Giralt.

The reforms include prohibiting carrying out oil operations without being the holder of contracts established in the law or without authorization from the CEL. Additionally, specific definitions such as “Raw Data” and “Data License” are introduced, referring to unprocessed information obtained by investment contract holders.

“It is crucial to highlight that the General Directorate of Energy, Hydrocarbons, and Mines will determine the national hydrocarbon policy, while the CEL will develop the specific policy for its exploration and exploitation,” Giralt emphasizes.

The reform also establishes a new process for contracting and awarding investment contracts, with the particularity that the CEL may make direct contracts under specific resolutions.

Finally, a direct settlement procedure is established to resolve disputes arising from contracts regulated by the law, with the possibility of resorting to the International Centre for Settlement of Investment Disputes (CIADI in Spanish) in case the internal process is exhausted.