On May 18, 2017, the National Agency for Petroleum, Natural Gas and Biofuels (“ANP”) published in the Federal Official Gazette the Pre-Tender Protocol and the draft Concession Contract for the 14th Bid Round.
The Pre-Tender Protocol sets out the areas offered, the rules for applying and qualifying in the bid, as well as the preliminary timetable for the round. Both the Pre-Tender Protocol and the draft Concession Contract are in the public consultation phase and may be changed upon receipt of suggestions which may be offered by players in the oil and gas sector up to June 19, 2017.
The 14th Bid Round comprises an offer of 287 blocks in the offshore sedimentary basins of Sergipe-Alagoas, Espírito Santo, Campos, Santos and Pelotas, and in the onshore basins of Parnaíba, Paraná, Potiguar, Recôncavo, Sergipe-Alagoas and Espírito Santo.
Below, we list the main points provided for in the Pre-Tender Protocol and in the draft Concession Contract for the 14th Bid Round.
As previously resolved by the National Energy Policy Council (“CNPE”) at the Extraordinary Meeting held on April 11, 2017, Minimum Local Content requirements will no longer be part of the bidders’ offer, which will be restricted to the Signature Bonus, with a bid weighting of 80% and the Minimum Exploration Program (“MEP”), with a bid weighting of 20%.
Compliance with the MEP will be ensured by an instrument of guarantee to be presented by the Concessionaire to the ANP from among the following categories: (i) letter of credit, (ii) guarantee insurance, (iii) oil pledge, and (iv) guarantee escrow deposit. Multiple instruments may be provided and the instruments must comply with the form set out in the tender protocol.
Even though not part of the selection criteria, the concessionaire must comply with the following mandatory minimum percentages of local content:
- 50% in the exploration phase for onshore blocks;
- 18% in the exploration phase for offshore blocks, with water depths above 100 metres;
- 50% in the development phase for onshore fields; and
- 25% for the construction of a well, 40% for a collection and a production runoff system, and 25% for a stationary production unit in the development phase of offshore fields, with water depths above 100 metres.
According to the Pre-Tender Protocol, government interests include: (i) signature bonus, (ii) royalties, (iii) special interest, and (iv) occupation or retention fee. Regarding royalties, the ANP has established percentages of 5%, 7.5% and 10%, depending on the sector and basin where a block is located.
However, the Pre-Tender Protocol has established that the royalty rate will be 10% whenever a Concessionaire is to pay a special interest due to the production levels of the field.
- Qualification as Operator or Non-operator
Each bidder must meet the economic, technical and legal criteria which vary depending on the location of the block. In order to qualify as “Operator A” and present offers for blocks in ultra-deep and deep waters (depths of more than 400 metres), shallow waters (up to 400 metres deep) and onshore, the bidder must demonstrate a minimum net worth (“MNW”) of at least R$ 152 million. To qualify as “Operator B” and present offers for blocks in shallow water and onshore, the MNW required will be at least R$ 68 million. “Operator C” may submit offers only for onshore areas, and must demonstrate a MNW of at least R$ 5.5 million.
In order to be a non-operator and participate in bids as part of a consortium, a bidder must demonstrate a MNW of at least 25% (twenty-five percent) of the above values for each area of interest.
- Reutilization of documents
As in the 13th Bid Round, the 14th Bid Round allows bidders to reutilize documents contained in the companies’ registry which have been submitted to the ANP for the purpose of application and qualification in previous bid rounds or in transfer procedures of previous contracts.
To do so, the interested party must list the documents to be used, as required by Annex II of the Pre-Tender Protocol. It is worth noting that only documents listed in Annex II and which are within their validity period may be used. In addition, documents whose expiration date is not identified may only be used if they have been submitted to the ANP within one year of the application.
In addition, the draft Concession Contract provides that the Exploration Phase, unlike previous Rounds, shall no longer be divided into separate periods.
The arbitration clause of the draft Concession Contract has been amended to align the concept of “transferable property right” (direito patrimonial disponível) with that defined by Law No. 9,307/1996, which addresses the matter. Previously, the arbitration clause of the Concession Contract was considered by many to be too restrictive regarding the right of the parties to enforce the arbitration agreement and was subject to harsh criticism from the legal community. According to the new draft Concession Contract, disputes must be submitted to ad hoc arbitration in accordance with the rules set forth in the Arbitration Rules of the United Nations Commission on International Trade Law – UNCITRAL. The arbitration must be conducted in Portuguese and must be based in the City of Rio de Janeiro.
Under the new provisions, prior authorization for the assignment of the Concession Contract will only be granted by the ANP if the assignor complies with the obligations set forth therein, in addition to paying in full amounts due to the government and third-parties under all concession contracts or production sharing contracts of which the assignor and assignee are parties. However, the aforementioned constraints do not apply when the ANP requires a compulsory assignment of a Concession Contract.
In addition to the termination events already provided for in previous versions of the Concession Contract, the draft for this 14th Bid Round provides that the concessionaires will have their respective contracts terminated in full if the Development Plan of the concession area is not submitted to the ANP on a timely basis, or the it is not approved by the ANP.
According to the Pre-Tender Protocol, the preliminary timetable for the 14th Bid Round will be as follows:
|Publication of the Pre-Tender Protocol and the draft Concession Contract
||May 18, 2017
|Beginning of the period for completing the application form, delivery of application documents and payment of the participation fee
||May 18, 2017
|Provision of the technical data package
||May 18, 2017
|Deadline for contributions to the Pre-Tender Protocol and the draft Concession Contract and end of the public consultation
||June 19, 2017
|Public hearing (city of Rio de Janeiro)
||June 27, 2017
|Publication of the tender protocol and the model of the Concession Contract
||July 20, 2017
||July 2017 – no fixed date
|Environmental and legal/tax seminar
||July 2017 – no fixed date
|Deadline for completing the application form, delivery of application documents and payment of the participation fee.
||August 04, 2017
|Deadline for the presentation of instruments of guarantee
||September 12, 2017
|Public bid submission session
||September 27, 2017
|Deadline for the presentation of qualification documents (winning bidder)
||October 02, 2017
|Award and ratification of the winning bid
||Up to December 07, 2017
|Deadline for the presentation of the following documents: (i) signature of concession contracts; and (ii) the qualification of the affiliate indicated to sign the contract, if applicable
||December 22, 2017
|Deadline for the payment of the signature bonus and sending the proof of payment
||Up to December 22, 2017
|Concession contract signature
||Up to January 31, 2018
To participate in the bid, interested companies must (i) complete the electronic application form available on the website http://www.brasil-rounds.gov.br, (ii) pay the participation fee, (iii) present ANNEX IV of the tender protocol informing the sectors of interest, and (iv) present the other documents listed in section 4.2 of the Pre-Tender Protocol. The application deadline is August 4, 2017.
The Shapefile files for the areas offered are available on the website:http://www.brazilrounds.gov.br/arquivos/Round14/Mapas/Areas/SHAPES_v14.zip
CNPE approves Petrobras’s obligatory percentage in the Pre-Salt Bid Rounds
According to Resolution No. 13, dated June 8, 2017, the CNPE has approved the percentage of thirty percent, notified by Petrobras for the adjacent area of Sapinhoá Field, to be offered in the 2nd Pre-Salt Bid Round, and for the Peroba and Alto de Cabo Frio areas, expected for the 3rd Pre-Salt Bid Round.
Petrobras publicly announced on May 25, 2017 that it had submitted to CNPE its intention to operate the aforementioned assets, in compliance with the procedure introduced by Decree No. 9,047 / 2017. However, Petrobras’ intention was still to be ratified by CNPE.
According to Decree No. 9,407/2017, after the initial results of the above-mentioned bid rounds, Petrobras must re-confirm its participation as operator of the adjacent area of Sapinhoá Field, and of the Peroba and Alto de Cabo Frio areas, in a situation where any of these assets is acquired by a third party with a profit oil percentage higher than the minimum established in the tender protocol.