22-05-2017

Decree No. 9,041/2017, which regulates Law 12,351/2010 regarding Petrobras’ preemptive rights to act as operator in the consortia formed for exploration and production of blocks under the production sharing regime, was published on March 3, 2017.

According to the Decree, Petrobras must express its interest in participating as the operator in the consortia formed for the exploration and production of blocks to be contracted under the production sharing regime within a period of 30 (thirty) days, from the date of publication of the National Council for Energy Policy (“CNPE”) Resolution which will contain the technical and economic parameters of the blocks to be tendered.

Petrobras must notify the blocks and the percentage of participating interest selected by it, which shall not be less than 30% (thirty percent).

After that, the CNPE will propose to the President the blocks to be operated by Petrobras, setting out its minimum interest in the consortium, which shall be a percentage between a minimum of 30% (thirty percent) and the percentage indicated in the notice from the company.

On the one hand, if the state-owned company does not exercise its preemptive right, it may still participate in the bid on equal terms with the other bidders.

On the other hand, if Petrobras exercises its preemptive right, the company must, after the making of the award in the bidding process:

(i) mandatorily form part of the consortium with the winning bidder, where the percentage of the Federal Government´s profit oil percentage is equal to the minimum percentage established in the tender protocol; or

(ii) optionally form part of the consortium, if the percentage of the Federal Government’s profit oil percentage offered in the bid for the offered area is higher than the minimum percentage established in the tender protocol.

In the event that Petrobras does not form part of the consortium, the winning bidder must give notice of the identity of the operator and the participating percentages of each contractor of the consortium, which is a condition for the ratification of the result by the National Agency of Petroleum, Natural Gas and Biofuels – ANP.

There is no doubt that, according to the new rules, Petrobras’s position is strengthened in the next bids involving the Pre-Salt. A comparative advantage is created by  the government’s broad interpretation of the Pre-Salt Law, which grants to Petrobras not only a preferential right regarding the blocks to be offered, but also the right to give up after the evaluation of the bids, if the profit oil percentage due to the Federal Government from the winning consortium is above the minimum set by the tender protocol.

The possibility of forming part of the winning consortium is undoubtedly a benefit that reinstates Petrobras’s role as the leading player in the process, in addition to conferring to the state-owned company a strong bargaining position in dealings with future partners.

This broad interpretation helps Petrobras and its controlling shareholder (the Federal Government), by granting it a “right of first refusal” at the time of presentation of the areas, and a “right of last refusal” after the award in the bidding process.

But it also creates operational difficulties for the winning consortium if the profit oil percentage due to the Federal Government is greater than the minimum parameters set by the tender protocol.

If the state-owned company withdraws from the bid, the consortium must have in its sleeve in advance an “ace of spades”, represented by a new operator to carry on the operatorship of the area. If Petrobras confirms its preference, the same consortium will also need a “wild card”, with flexibility to create a new game with the state-owned company as operator and a proportional reduction of participating interests of the other parties.

The Romans used to say that all roads lead to Rome. In this case, all negotiations before the bid lead to Petrobras taking back the Pre-Salt.

We remain available for any further clarification: 

            

http://mailchi.mp/4c428a6d66eb/schmidt-valois-miranda-ferreira-agel-oil-and-gas-265167?e=ba9c483185