Brazil O&G Permanent Offer – Drafts of Tender Protocol and Concession Agreements Released

On April 27, 2018, the National Agency of Petroleum, Natural Gas and Biofuels ("ANP") published the draft tender protocol concerning the Permanent Offer of exploration blocks and areas with marginal accumulations (“Tender Protocol Draft”), with the purpose of establishing the rules for this new contractual regime and the technical and economic parameters of the areas.

As previously mentioned in our legal update, the differentiating factor of this initiative is that the industry itself, through companies of different sizes, will be able to participate in the assessment and selection process of the areas to be offered in the next public sessions for presentation and judgment of offers.

Pursuant to Article 4 of CNPE Resolution No. 17, dated June 8, 2017, the ANP will offer relinquished fields (or fields in the process of being relinquished) and exploratory blocks that have not been awarded (or relinquished) during past bid rounds.

In this regard, Annex I of the Tender Protocol Draft lists 884 blocks with exploratory risks located in 40 sectors from 13 Brazilian sedimentary basins, as well as 14 areas with marginal accumulation, as follows: Camaçari, Fazenda Gameleira, Fazenda Sori, Lagoa Parda Sul, Lagoa Verde, Miranga Leste, Mosquito, Piaçabuçu, Pojuca Norte, Rio Ibiribas, Rio Joanes, Saíra, Tiziu, and Trapiá. These 14 areas with marginal accumulations are distributed in 4 mature sedimentary basins: Espírito Santo, Potiguar, Recôncavo and Sergipe-Alagoas.

The Permanent Offer procedure comprises the following steps: (i) publication of the Tender Protocol Draft; (ii) a public hearing, which may be preceded by public consultation; (iii) publication of the final tender protocol; (iv) registration and payment of the participation fee; (v) submission of bid guarantees; (vi) public session for presentation and judgment of offers; (vii) qualification of winning bidders regarding the public session for presentation of offers; (viii) award process and ratification of the bidding; and (ix) execution of the concession agreement.

According to the schedule of the Tender Protocol Draft, interested companies can already fill out the electronic form, submit the registration documents and proceed with the payment of the participation fee. Below you will find the schedule:

After approval of the registrations, the bidders that are interested in presenting an offer during the public session must submit to the ANP bid guarantees for blocks or areas of interest. Bid guarantees must be accompanied by a declaration of interest, in which the bidders will indicate the sectors that they intend to bid on.

The approval of the first bid guarantee - accompanied by a declaration of interest - will initiate the first cycle of Permanent Offer. In accordance with the Tender Protocol Draft, the cycles of Permanent Offer are related to public sessions for presentation of offers for one or more sectors that received a declaration of interest.

It should be noted that the Special Bidding Committee (CEL) will observe the period of up to 90 days between the approval of the bid guarantee accompanied by the declaration of interest and the public session for presentation of offers.

Regarding the bid evaluation criteria, it is worth mentioning that for blocks with exploration risks, the signing bonus and the minimum exploratory program (PEM) will be the criteria to define the winning bidder of the public session. For areas with marginal accumulations, the signing bonus will be the only bid criterion.

Tauil & Chequer Advogados in association with Mayer Brown will actively participate in the developments of this new contractual regime and will keep its clients informed.