On 04.11.2017, the 1st Extraordinary Meeting of the National Counsel for Energy Policy (“CNPE”) was held. At the meeting, the CNPE Board approved several matters of interest to the industry, such as future bidding rounds under the concession and production sharing regimes, as well as a calendar for 2017-2019, with a schedule for forthcoming bids, and local content guidelines.

There is no doubt that the measures approved by CNPE are positive and are on the right track for the development of a sound business environment to attract investments for the upstream, especially in times of increasing international competition with multiple rounds and opportunities in several jurisdictions worldwide .
CNPE’s goal was to bring predictability to the auctions in the period 2017-2019, and to make opportunities in the Brazilian upstream more attractive. Below we list the main subjects approved at CNPE’s extraordinary meeting:

  • 3rd Bidding Round under the production sharing regime in the Pre-Salt
The CNPE approved the 3rd Bidding Round under the production sharing regime of Pre-Salt areas, scheduled to take place in November 2017. In this round, the federal government intends to offer four areas located in the Campos and Santos Basins, in the Pre-Salt polygon, being the prospects of Pau Brasil, Peroba, Alto de Cabo Frio-Oeste and Alto de Cabo Frio-Central.
  • Schedule of Bidding Rounds in the period of 2017 to 2019
A multi-year calendar which anticipates 10 bidding rounds of exploratory blocks  under concession and production sharing regimes, and blocks located in mature basins, between 2017 and 2019 has been approved, as follows:
Round Announced Areas Schedule
2nd Round of Production Sharing
(Pre-Salt)
Prospects of Norte de Carcará, Sul do Gato do Mato, Entorno de Sapinhoá, in the Santos Basin, and Sudoeste de Tartaruga Verde, in the Campos Basin.  Second semester of 2017
3rd Round of Production Sharing
(Pre-Salt)
Prospects of Pau Brasil, Peroba, Alto de Cabo Frio-Oeste and Alto de Cabo Frio-Central, in the Santos and Campos Basins.  November, 2017
4th Round of Production Sharing
(Pre-Salt)
Prospects of Saturno, Três Marias and Uirapuru, located in the Santos Basin.

Exploration Blocks C-M-537, C-M-655, C-M-657 and C-M-709, located in the Campos Basin.

May, 2018
5th Round of Production Sharing
(Pre-Salt)
Prospects of Aram, Sudeste de Lula, Sul de Jupiter, Sudoeste de Jupiter and Bumerangue (Santos Basin). Second semester of 2019
14th Concession regime Bidding Round Offshore exploration blocks located in the Campos, Sergipe-Alagoas, Espírito Santo, Santos and Pelotas Basins.

Onshore exploration blocks located in the Parnaiba, Parana, Potiguar, Reconcavo, Sergipe-Alagoas and Espirito Santo Basins.

September, 2017
15th Concession regime Bidding Round

Exploration blocks located in ultra-deep waters outside the pre-salt polygon in the Campos and Santos Basins.

Offshore exploration blocks in the Foz do Amazonas, Ceara and Potiguar Basins.

 

Onshore exploration blocks in the Paraná and Parnaíba Basins.

Onshore blocks in the Sergipe-Alagoas, Reconcavo, Potiguar, and Espirito Santo Basins.

May, 2018
16th Concession regime Bidding Round Exploration blocks in the Camamu-Almada, and Jacuípe Basins.

Exploration blocks in ultra-deep waters outside the Pre-Salt Polygon of the Campos and Santos Basins.

Onshore Exploration blocks in the Solimões, and Parecis Basins.

Onshore exploration blocks in the Sergipe-Alagoas, Recôncavo, Potiguar, and Espírito Santo Basins.

Second semester of 2019
4th Marginal Fields Bidding Round Araçás Leste, Garça Branca, Iraúna, Itaparica, Jacumirim, Noroeste do Morro Rosado, Rio Mariricu, Urutau, and Vale do Quiricó Fields.  In progress
 5th Marginal Fields Bidding Round  Yet to be defined May, 2018
 6th Marginal Fields Bidding Round 
Yet to be defined Second Semester of 2019
Please see on this link the presentation prepared by our partner GEOPOST with a map with details of the areas appointed for the next Bidding Rounds.
  • Local Content

Regarding the local content commitment to be followed in cases of unitization involving areas of open acreage, the CNPE prescribed that the local content commitments in force for the adjacent contracted area will also apply to the open acreage area. Based on this guideline, the CNPE held that the local content for areas not contracted in the 2nd Bidding Round of Production Sharing should be equivalent to the ones established in the contracts of the adjacent areas.

For the 4th Bidding Round of Areas with Marginal Accumulations, local content will no longer be required. It should be noted that such provision is already included in the model contracts for such round.

In addition, the minimum local content rate for the 3rd Bidding Round under the Production Sharing Regime (Pre-Salt) was confirmed as follows: (i) 18% in the exploration phase and (ii) 25% for well construction, 40% for collection and drainage systems and 25% for stationary units of production, in the development stage.

Regarding the 14th Bidding Round under the concession regime, local content commitments will not be adopted as a criterion for selecting winning bids. As such, the percentage applicable will be defined in specific clauses of the concession contract.

For onshore blocks to be offered in the 14th Bidding Round under the concession regime, the minimum rates of local content will be the following: (i) 50% in the exploration phase and (ii) 50% in the development stage. For offshore blocks, the minimum rates of local content will be as follows: (i) 18% in the exploration phase, and (ii) 25% for well construction, 40% for collection and drainage systems and 25% for stationary units of production, in the development stage.

  • Extension of the Exploratory Term of the 12th Round:

Considering the oil price drop in the international market and the reduction of the investment capacity of companies, and also considering issues of public interest and the need for investments in the country, the CNPE recommended that the ANP should review the possibility of extending the term of the exploration phase for blocks awarded in the 12th Bidding Round, of November 2013.

Initially, the CNPE recommendation for extension was restricted to concession contracts entered into as a result of the 11th Bidding Round. Currently, the ANP is preparing a normative resolution draft on the subject, having held a public hearing on April 3rd, 2017, to obtain inputs from the market.

  • Guidelines for biofuel import:
The resolution that establishes the guidelines for biofuel import was also approved at the CNPE meeting. According to the regulation, agents intending to carry out the importation of biofuels must comply with the same obligations for qualification and for maintenance of minimum stocks as required for biofuel producers.
We remain available should you need any further information on this matter:

               

http://mailchi.mp/47af19630c7b/schmidt-valois-miranda-ferreira-agel-oil-and-gas-240115?e=ba9c483185.