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Regulatory changes related to the Oil and Natural Gas sector

Published: Tuesday, 24 October 2017 14:32 | Last Updated: Tuesday, 09 June 2020 14:36

Since the beginning of 2017, the Federal Government and the ANP have been conducting a series of regulatory improvements related to the Oil and Natural Gas sector, in order to make the bidding rounds more attractive, to encourage new investments and to release projects in progress. 

Below are the main recent regulatory changes: 


Bidding Rounds Calendar 

The Nation Energy Policy Council (CNPE) established, for the first time, a multi-year calendar for the bidding rounds of exploration and production of oil and natural gas. In 2017, the 14th Bidding Round for Exploratory Blocks (concession regime) and the 2nd and 3rd Production Sharing Bidding Rounds were held. In 2018, there was the 15th Bidding Round for Exploratory Blocks and the 4th and 5th Production Sharing Rounds. In 2019, four bids were made: 1st Cycle of the Open Acreage, 16th Bidding Round of Exploratory Blocks, under the concession regime, and 6th Production Sharing Bidding Rounds and Transfer of Rights Surplus Bidding Round, under the production sharing regime.


 Changes in the Pre-salt 

The Federal Government published, on May 2, the Decree n. 9.041/2017, which regulated the preference right of Petrobras to act as operator in the consortia formed for the exploration and production of blocks to be contracted under the regime of production sharing. In the ending of 2016, changes in the legislation have already excluded the mandatory participation of Petrobras as operator, with a minimum participation of 30% in the pre-salt.


Local content 

From the 14th Bidding Round, held on September 27, 2017, the local content rules were simplified. The local content commitments were designated in the specific clauses of the contract and they were not used as a basis of offer in the bidding round. 

The ANP has put in public consultation the draft resolution that deals with the exemption from compliance with the obligation, percentage adjustments and transfers of exceeding local content. These rules, which are present in the contracts since the 7th Bidding Round, were still pending regulation by the Agency. The public hearing on the subject took place on October, 3rd. ANP is analyzing the received contributions for subsequent publication of the resolution. 

The possibility of a contractual addendum to adopt the same local content rules approved for the next bidding rounds was also included. Therefore, the companies could either choose to maintain the original terms of their contracts or, based on the regulatory changes, comply with the new model, which establishes reduced indicators of local content, but without the possibility of exemption (waiver). 


Contracts improvements 

The ANP has been working in the improvement of the tender protocol of the bidding rounds and the concession contracts. For the 14th Bidding Round, the main changes includes: incentives to the participation of investment funds; the adoption of the a single exploration phase; the removal of local content as a basis of offer in the bidding round; distinct royalties for the new frontier areas and mature basins of greater risks; reduction of the minimum net equity for non-operators (investors); and incentives to increase the participation of small and medium-size companies.

The main changes for the 2nd and 3rd Production Sharing Bidding Rounds includes: specific information regarding the procedures for individualization of production for the 2nd Round; inclusion of rules that allow the participation, in the form of non-operator, of the Investment Funds in Participations (FIPs); possibility of using the documents already presented in a bidding round; adequacy of the P, D & I clause to Pedefor Resolution nº 1/2017; modification of the local content clause to adapt to CNPE Resolution nº 07/2017; adjustment of the texts to Petrobras' right of preference to act as operator.


Open Acreage   

The CNPE authorized the Open Acreage of areas returned and those already authorized by the Council in previous rounds, but not contracted. With this initiative, hundreds of areas will be offered to the market again, starting in 2018.

In 2019, there were more than 600 blocks with exploratory risk on offer and fourteen areas with marginal accumulations. In 2020, there are plans to offer more than 700 blocks with exploratory risk and three areas with marginal accumulations.


Revision of the reference oil price

After holding a public consultation and a public hearing on the subject, ANP issued on September 26, 2017, the Resolution No. 703, which establishes the criteria for fixing the reference price of oil produced monthly in each field.


Individualization of production

On September 8, ANP published in the Federal Gazette, the Resolution n. 698/2017, which modifies the Resolution n. 25/2013, establishing changes in the regulation of the proceedings for individualization of production in situations in which oil and natural gas deposits extend beyond the contracted areas. The new rule follows the CNPE guidelines, published on June 6, in CNPE Resolution nº 8/2016.


Adjustments in royalties 

The CNPE published Resolution nº 17, of June 8, 2017, which establishes, among the guidelines for the ANP, the concession, based on pre-established criteria and provided that the economic benefit to the Federal Union is proven, in the ambit of the extensions of the deadlines of existing contracts, of a reduction of royalties, up to 5% (five percent), on the incremental production generated by the new investment plan to be executed, in order to allow the extension of the lifespan, maximizing the recovery factor of the fields. 

Currently, the Agency is conducting studies to establish the criteria to the resolution that will regulate the subject.


Free access to transport pipelines

The ANP launched, on September 1, a public consultation on the draft of the resolution regarding the revision of ANP Ordinance nº 255/2000, which regulates the free access to oil, its products and biofuels transport pipelines, whose extend is 15 km or lower. The revision of the ordinance aims to simplify proceedings and optimize the system of conflict mediation. The public hearing on the subject took place on October, 24. ANP is analyzing the received contributions for subsequent publication of the resolution.


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