Offshore Activity

Brazil – New bidding rules for the production sharing regime

Rio de Janeiro, May 3, 2017 – Petróleo Brasileiro S.A. – Petrobras reports that Decree 9.041/2017 entered in force yesterday, regulating Law 12.351/2010, on Petrobras’ preferential rights to act as operator in consortium for the exploration and production of blocks under the production sharing regime.

In its original wording, Law 12.351/2010 defined Petrobras as the sole operator of areas under the production sharing regime. This law was amended by Law 13.365/2016, which removed the Company’s obligation to act as sole operator in such areas, whereas the legislator has granted preferential rights to acquire a minimum 30% stake in the winning consortium and the possibility to operate them. The Decree regulates the manner in which such preferential rights, provided by law, shall be exercised.

In this sense, Petrobras shall express interest in participating in the blocks to be offered within 30 days from the publication date of the resolution by the National Energy Policy Council (CNPE), which will include the technical and economic parameters of the blocks to be offered under the production sharing regime.

This expression of interest must contain the list of blocks of interest and the desired percentage of participation. After that, CNPE will propose which blocks to be operated by Petrobras, indicating its minimum participation in the consortium, which cannot be lower than 30%.

If Petrobras does not exercise its preferential rights, the blocks shall be the object of bidding, in which the company may still participate on equal terms with other bidders.

Should Petrobras exercise its preferential rights, upon completion of the assessment phase of the bidding, there will be two alternatives: (i) if the percentage of ‘profit oil’ offered to the Federal Government in the auction for the bidding area is equal to the minimum percentage defined in the call for tenders, Petrobras shall obligatorily participate with the winning bidder in the consortium; or (ii) if the percentage of ‘profit oil’ offered to the Federal Government in the auction for the bidding area exceeds the minimum percentage defined in the call for tenders, Petrobras may decide whether or not to participate with the winning bidder in the consortium and state its decision during the bidding round.

If Petrobras decides not to participate, the winning bidder shall specify the operator and the participation percentages of each consortium participant.

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