Oil and Gas Newsletter no1

In order to keep our clients informed about the current landscape of the Oil and Gas sector, we have prepared this monthly newsletter with the main news of the market.

This Newsletter is organized into five sections:

NEW RESOLUTIONS – the main resolutions related to the oil and gas sector, all published during the month of February 2022;

CONSULTATIONS AND PUBLIC HEARINGS – calendar of upcoming public consultations and hearings and their respective deadlines for contributions;

RELEVANT DECISIONS – the latest regulatory updates and other news related to the oil and gas market, all taken during the month of February 2022;

OPPORTUNITIES – expectations and information about auctions, concessions, Petrobras’ divestment program, contracting opportunities with Petrobras and other industry events; and

OTHER SUBJECTS – diverse issues involving the oil and gas industry that may interest our readers.

Our goal is to make this vehicle a complete and reliable source of information about the dynamic Brazilian Oil and Gas market.  

This newsletter is for informative purposes only and does not constitute a legal opinion for any specific operation or business. For more information, please contact our team.

NEW RESOLUTIONS

Decommissioning – CMN publishes Resolution regarding opening foreign currency accounts

On January 31, 2022, the National Monetary Council (“CMN”) published CMN Resolution No. 4980/2022, which provides for the possibility of opening and moving bank accounts in foreign currency in Brazil. The purpose of this Resolution is to allow deposits, into escrow accounts, for the constitution of provisioning funds, which will serve to ensure, with the National Agency of Petroleum, Natural Gas and Biofuels (“ANP”), the decommissioning of production facilities in oil and natural gas fields. Despite the progress established through the new Resolution, which will be of great value to foreign groups working in the Brazilian Exploration & Production (“E&P”) market, the regulations applicable by the Central Bank should still be implemented, making it possible to implement the necessary procedures for opening a bank account in foreign currency in Brazil.

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Permanent Offer – CNPE publishes resolution on participation of Petrobras in the Permanent Offer of Production Sharing

In light of the legal provisions applicable to Petrobras’ participation in areas subject to the Production Sharing regime, the Brazilian National Council for Energy Policy (“CNPE”) published, on February 5, 2022, CNPE Resolution No. 01/2022, which establishes the participation of Petróleo Brasileiro S.A. (“Petrobras”) in the exploratory blocks of “Água Marinha” and “Norte de Brava”, which will be tendered in the Permanent Offer System. Petrobras had expressed its interest in serving as the operator of these blocks, both located in Campos Basin, with a 30% stake.

As a result, permission was granted to publish the relevant notice (related to the “pre-notice” made available on the ANP website), which should indicate the mandatory participation of Petrobras, as operator, in the exploratory blocks of “Água Marinha” and “Norte de Brava”. Subsequent to the publication of the notice, registered companies must submit their declaration of interest in the blocks made available by the ANP.  It is worth noting that the blocks of “Esmeralda”, “Ágata”, “Bumerangue”, “Sudoeste de Sagitário”, “Cruzeiro do Sul”, “Itaimbezinho”, “Turmalina”, “Jade” and “Tupinambá”, can be tendered without indication of mandatory participation of Petrobras.

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PD&I – ANP approves draft resolution amending ANP Technical Regulation No. 3/2015

In accordance with Board Resolution No. 53/2022, the ANP approved, on February 10, 2022, draft Resolution No.  866/2022, amending ANP Technical Regulation No. 3/2015, which established the rules, definitions, guidelines and standards for the application of resources referred to in the Research, Development and Innovation (“PD&I”) Clauses that are included in the Contracts for the Exploration, Development and Production of Oil and Natural Gas, as well as the rules regarding proof of activities and expenses incurred by the oil companies in compliance with the aforementioned contractual clauses. 

As stated by ANP, such standards seek to provide an environment of greater regulatory security and effectiveness for the investments of the PD&I clause. The final version of the new Resolution No. 866/2022 was published in the Official Gazette on February 14, 2022 and can be accessed here.

In alignment with the premises of the new Resolution, the ANP also launched an interactive tool that includes dynamic panels on research, development and innovation, providing information on the technical data that are part of the regulatory agency’s collection. Click  for more details on the topic.

 

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Unitization – Resolution that deals with deposits that extend beyond the concession area approved

Through Board Resolution No. 54/2022, the ANP Board approved a new Resolution No. 867/2022, on February 10, 2022. The text consolidates ANP Resolutions No. 25 of July 08, 2013, and No. 698 of September 06, 2017, and establishes the procedures that must be adopted when it is identified that an Oil, Natural Gas or other fluid hydrocarbon deposit extends beyond a granted Block, whether onerous or contracted. 

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Fuels – New ANP resolution determines daily sending of information on fuel stock

On February 16, 2022, ANP’s Board of Directors approved Resolution No. 868/2022, which will contribute to providing the Agency with information on fuel stocks in Brazil on a daily basis — but not applying to automotive fuel dealers, to which the National Department of Fuels (“DNC”) Regulation No. 26 of November 13, 1992, will be applied. The new Regulation implements rules, obligations and deadlines for sending inventory data to the ANP. The measure aims to boost the monitoring of fuel supply, through daily monitoring of inventories and information related to offers, demands and logistics flow. The ANP made available on its website the guidelines for fulfillment of ANP Resolution No. 868/2022. The Resolution entered into force on March 01, 2022, but there are specific deadlines for each type of regulated agent to commence the mandatory forwarding of daily information to the ANP.

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CONSULTATIONS AND PUBLIC HEARINGS

UPCOMING CONSULTATIONS AND PUBLIC HEARINGS

We listed below the public consultations published by the ANP and whose deadlines for contribution are still open:

PUBLIC CONSULTATION AND HEARING (ANP) SUBJECT CONTRIBUTION DEADLINE DATE OF PUBLIC HEARING
N° 1/2022 Upstream – Proposal for revision of the Technical Regulation for The Measurement of Petroleum and Natural Gas (RTM), approved by Joint Resolution ANP/Inmetro No. 1, 2013. The Regulation establishes minimum technical, constructive and metrological conditions and requirements that systems must observe in order to ensure the credibility of the measurement results. By March 21, 2022 April 05, 2022 | 2:00 pm to 6:00 pm
N° 2/2022 Upstream – Revision of ANP Resolution No. 757/2018 to clarify topics related to acquisition of seismic data By March 10, 2022 April 06, 2022, | 2:00 pm to 5:00 pm
N° 3/2022

Upstream and Downstream – Proposal of normative act for the amendment of ANP Resolution No. 19/2013, with the purpose of applying the normative alternative provided for in the Final Report of Regulatory Impact Analysis No. 001/2021/SCL/ANP-RJ.

By March 10, 2022 March 23, 2022| 10:00 am to 12:00 pm
N° 4/2022 Downstream – Obtain contributions and additional information on draft resolution revising DNC Ordinance No. 26 of November 13, 1992, which establishes the book of fuel transactions for retail resale of automotive fuels. By March 23, 2022 April 08, 2022 | 2:00 pm to 5:00 pm
Nº 05/2022 Upstream – Obtain contributions and additional information on the pre-notice and draft of the Permanent Offer contract models under the Production Sharing regime. By March 21, 2022 March 25, 2022 | 2:00 pm to 6:00 pm
Nº 06/2022 Upstream and Downstream – Enhancement of the incident reporting system regarding the form and content of the reported data, in order to enable the analysis of industry performance, as well as the reduction of administrative burden for sending and analyzing incident information. By April 18, 2022 April 29, 2022 | 2:00 pm to 5:00 pm

RELEVANT DECISIONS

ANP authorizes pilot project for LPG uses

Through ANP Ordinance No. 104/2022, published on February 4, 2022, the ANP authorized the implementation, for a period of 12 months from its publication, of a pilot project for laboratory experiments with liquefied petroleum gas (“LPG”), in a temporarily authorized modality that is prohibited by Article 33 of ANP Resolution No. 49/2016. Currently, this article forbids the use of LPG in (i) engines of any kind, including automotive purposes, except forklifts and industrial cleaning equipment powered by internal combustion engines; (ii) steam rooms; (iii) boilers; and (iv) heating of swimming pools, except for medicinal purposes.

ANP announces change in the date of public hearing on Exploratory Work Plan

Previously scheduled for February 16, 2022, public hearing No. 25/2021, which is set to deal with the motion for resolution to create the Exploratory Work Plan (“PTE”), was rescheduled for March 08, 2022, from 2:00 p.m. to 5:00 p.m. The registration period to participate in the public hearing will stay open until March 07, 2022. Those interested in participating must request their registration through an electronic form available on the ANP website and opt for the role of listener or exhibitor.

The motion for resolution aims to unify the Annual Work Program and Annual Work Budget (“PAT/OAT”), together with the Exploration Plan – mandatory for production sharing contracts – into a single instrument, the PTE. The goal of such unification is to simplify procedures, reduce the duplication of information and enable the ANP to be provided with more structured data. Among the benefits of establishing the PTE, highlights include the reduction of administrative costs for contractors and the ANP, which arises from the simplification and standardization of rules. In addition, there are improvements in the management of E&P contracts during the exploration phase, with a view to improving the efficiency of contract oversight.

Public Consultation on incident reporting is approved by the ANP

On February 23, 2022, the Board of Directors of the ANP approved a public consultation for a period of 45 days, followed by a public hearing, to obtain contributions on the proposed revision of ANP Resolution No. 44/2009. Such Resolution regulates the reporting of incidents and forwarding of information in regard to the outcome of investigations of incidents that occurred during activities regulated by the ANP. Among the main innovations are proposing stricter deadlines for initial communication, and prioritizing more critical and severe events, including situations of risk to the national supply of fuel. In addition, it is proposed that the deadline for sending the Incident Investigation Report be extended from 30 to 90 days.

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OPPORTUNITIES

UPSTREAM OPPORTUNITIES

ANP announces sectors of the 3rd Cycle of Permanent Concession Offer

The ANP announced, on February 16, which sectors will be offered in the 3rd Cycle of Permanent Concession Offer (OPC), whose public session is scheduled for April 13. The decision was taken on February 15, at a meeting of the Special Bidding Committee (CEL).” The sectors defined for the cycle follow the rules of the Permanent Offer, having been previously indicated as of interest by the companies previously registered for the corresponding Permanent Offer.

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ANP approves pre-notice and draft contracts for bidding blocks in the Pre-salt related to the Permanent Offer

As stated above in items 1 and 2 of this newsletter, the ANP Board of Directors approved, on February 16, 2022, the pre-notice and draft contracts that provide for the bidding rules of 11 blocks located in the Pre-salt area, in the cycle of the Permanent Offer of Production Sharing (OPP).” The pre-notice and draft contracts, published in the Official Gazette on February 22, 2022 will be subject to public consultation and public hearing, which can be accessed here

From the blocks on offer in the pre-notice, “Ágata”, “Água Marinha”, “Esmeralda”, “Jade”, “Turmalina” and “Tupinambá” were scheduled to be offered in the 7th and 8th rounds of production sharing, in the Santos Basin. The others that were not awarded in bidding rounds of production sharing carried out by the ANP are as follows: “Itaimbezinho” (4th Sharing Round, Campos Basin), “Norte de Brava” (6th Sharing Round, Campos Basin), “Bumerangue”, “Cruzeiro do Sul” e” “Sudoeste de Sagitário” (6th Sharing Round, Santos Basin).  

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OPPORTUNITIES FOR CONTRACTING WITH PETROBRAS

We list below the main public biddingopportunities made available by Petrobras so far, through the Petronect platform:

 

OPPORTUNITY SCHEDULE PETRONECT CODE
RSV 2022 – Chartering of Vessels type RSV – ROV Support Vessel + Provision of Specialized Technical Services with Remotely Operated Vehicle (ROV), 03/14/2022 | 15:00h 7003746593
SDSV 2022 – Chartering of SDSV Type Vessels – Shallow Diving Support Vessel + Provision of Shallow Diving Services + Provision of Specialized Technical Services with Remotely Operated Vehicle (ROV) 03/14/2022 | 15:00h 7003744874
UMS Chartering – N10 03/18/2022 | 12:00h 7003776614
UMS Chartering – N10 03/18/2022 | 12:00h 7003776616
UMS Chartering – N12 03/18/2022 | 12:00h 7003776617
Chartering of SESV and MPSV vessels with Service Provision with and without ROV 03/14/2022 | 16:00h 7003745931
Chartering of AHTS, AHTS-R and AHTS-Multipurpose vessels + provision of shallow diving services and specialized technical services with remotely operated vehicle (ROV) 03/11/2022 | 16:00h 7003656258
Chartering up to 3 UMSs 03/18/2022 | 12:00h 7003739493
Artificial oil lifting service with underwater centrifugal pumping system available 03/07/2022 | 10:00h 7003709611
Provision of Inspection Services in PIDF Pipelines 1, 2 and 3 and Subsea Equipment 03/04/2022 | 16:00h 7003697977
Provision of multimedia communication services for the Biodiesel Plant of Montes Claros of Petrobras Biocombustivel S.A. 03/08/2022 | 15:00h 7003739440
Supply (Buy and Sell) of FPSO 05/16/2022 | 16:00h 7003470660

* Dates expresses here as mm/dd/yyyy

 

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OTHER SUBJECTS

Petrobras has local content clause amended to reflect predictions of the new resolution of the ANP

Until December 2020, local content requirements in individualized deposits and related areas were established in ANP Resolutions No. 25/2013 and No. 38/2016, which established, respectively, the institutes of Individualization of Production (Agreement of Individualization of Production (AIP) and Commitment of Individualization of Production (CIP) and Annexation of Areas.  Earlier in 2020 ANP Resolution No. 833/2020 had already been published, which provides for the local content criteria to be adopted for AIP, CIP and annexation of areas, establishing, as a general rule, the local content selection clause for one of the contracts involved, as well as the extent of the effects of the clause chosen since the declaration of commerciality of the shared deposit. In addition, the possibility of amending the local content clause of the AIPs, CIPs or Annexations in force was also reported, enabling, optionally, the adoption of the parameters of the aforementioned Resolution.

As provided for in ANP Resolution No. 833/2020, Petrobras expressed to ANP its decision to adhere to the execution of the amendment of the local content clause. Thus, after analysis by the Local Content Superintendence, the ANP Board of Directors approved the execution of the Amendment to the AIP of the Shared Deposit of Tupi, Sul de Tupi and Tupi Leste.

Agreement on oil and gas production approved by Shale Industrialization Unit

On February 10, 2022, the ANP Board approved the final versions of the agreement for collection of royalties regarding oil and gas production in the Shale Industrialization Unit (SIX), operated by Petrobras, located in São Matheus do Sul, State of Paraná. In addition, ANP also approved the respective concession agreement for the exploration and production of oil and natural gas originated from shale.

The agreement consensually settles pending issues regarding payment of royalties and the regulatory regime for shale mining activities. Such agreement provides for the payment of BRL 576 million in royalties by Petrobras (to be updated before the signing of the agreement), of which BRL 144 million must be paid in cash, while the remainder is to be paid in 60 installments. In addition, the concession agreement to be executed provides for the application of a 5% royalty rate.

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ANP publishes press release on local content exemption

On February 17, 2022, the ANP published a statement on Board Resolution No. 12/2022, which authorized the exemption from compliance with local content of supply contracts for chartering  of  Offshore Drilling Rigs  executed  in the period between 2008 and 2014, accompanied by of technical note that supported the decision, so that interested third parties mentioned in art. 58 of Law 9,784/1999 can file an administrative appeal against the exemption in reference, within ten days from  aforementioned publication, as provided for in article 22 of ANP Resolution No. 726/2018.

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ANP public hearing discusses study on delimitation of oil fields

On February 18, 2022, the ANP held a public hearing on the regulatory impact analysis report (“AIR”) that studies possible improvements to ANP Resolution No. 17/2015, regarding the criteria for delimitation of oil and natural gas producing fields. The Agency pointed out that the AIR was a vital resourceto identify the need for improvements in regulation, mainly related to: (i) absence of clear and transparent criteria in current regulations for delimitation of oil fields; (ii) absence of definitions of technical terms featured in the definition of “field” according to Petroleum Law (Law No. 9478/97); and (iii) disputes regarding the time of delimitation of the field area by the ANP.

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Temporary Suspension of Gasbol Public Call 03 reported

On February 23, 2022, the ANP announced the temporary suspension of the process of the Public Call for Contracting of Transportation Capacity ANP No. 03/2021 of Transportadora Brasileira Gasoduto Bolivia-Brasil S.A. [Bolivia-Brazil Gas Pipeline Brazilian Carrier] (TBG). The decision by the Agency was due to a motion to annul the event submitted to the ANP by the Gas Company of the State of Rio Grande do Sul (Sulgás). In addition to the suspension of the event, ANP opened a term of 5 working days for statements by all participants, counted from February 24, 2022, the date of publication of the order in the Official Gazette.

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Arbitration award prevents the refund of amounts in arbitration of the 12th Bidding Round

In an arbitration award issued in early February 2022, the ANP was declared partial winner, by delimiting the validity and application of the Act of God and force majeure clauses provided for in the concession contract. Such measures would exempt the need to refund signing bonuses paid for the blocks of the 12th Bidding Round, held in 2013, as sought without success by companies Petra Energia and Bayar Empreendimentos e Participações Ltda.   

In short, the arbitral award established that appeals and decisions made by government bodies that affected the performance of concession contracts would constitute factum principis (an unforeseen government authority act) and, consequently, Act of God and force majeure, which is beyond the control of the ANP.

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