On April 20, 2017, the Ministry of Mines and Energy ("MME") released for public hearing the National Council for Energy Policy ("CNPE") bill on the "Brazilian Policy for Exploration and Production of Oil and Natural Gas."
Providing guidelines for the oil industry in Brazil, the bill aims to improve the planning and conduction of bid rounds, which must be organized in a multi-year context, and highlights:
i. Greater Competitiveness. The National Agency of Petroleum, Natural Gas and Biofuels (“ANP”) shall establish bidding and contractual criteria that increase the attractiveness of Brazil’s oil and gas sector in view of the international competition for exploration and production resources and the industry scenarios at the time that the criteria are defined;
ii. Environmental Licensing. The bill establishes that the planning of bid rounds must take into consideration the conclusions from multidisciplinary studies about sedimentary basins in order to better predict obtainment of environmental licenses in oil and gas projects, following the international best practice; and
iii. Term Extensions of the Contracts Executed in Bid Round Zero. The ANP may grant, at its discretion, a reduction of royalties, up to 5 percent, on the increased production generated by a new investment plan implemented in an oil field.
In addition to the topics above, the bill establishes guidelines for the implementation of the new exploration and production policy in Brazil. The guidelines address areas including (i) the adequacy of contracting mechanisms for areas that present a greater risk (geological, technological, logistical or economic), (ii) facility sharing, (iii) the engagement of economic players to recommend areas for the bid rounds, (iv) the encouragement of the transfer of rights in order to avoid the return of concessions, (v) less regulatory bureaucracy, (vi) a multi-year calendar for bid rounds and (vii) the technological development and the proper decommissioning of facilities.
For those who are interested in contributing to the improvement of the guidelines, MME will accept comments on the bill until May 2, 2017, via its website.
For more information in relation to this legal update, please contact [email protected].
Observations in this update about Brazilian law are by Tauil & Chequer Advogados and are not intended to provide legal advice. Any entity considering the possibility of a transaction must seek advice tailored to its particular circumstances.