Brazil – Oil and gas industry debates new rules


November 23, 2017 SetecoNews

After the two pre-salt auctions, whose balance was considered positive by the government, both in terms of current and future revenues – R $ 6.15 billion in signing bonus and expectation of investments of R $ 600 billion over the 30 years of production in the areas – as well as in the participation of large global oil companies (ten companies), the industry is already beginning to discuss improvements in the rules of the oil and gas market.

The most awaited item on the sector’s agenda is the proposal to end production sharing, made by House Leader Rodrigo Maia (DEM-RJ). Also in the legislative sphere, the draft law presented by Deputy José Carlos Aleluia (DEM-BA), which foresees liberating the sale by Petrobras of up to 70% of the reserves of 5 billion barrels of oil equivalent included in the onerous assignment agreement.

In addition to the legal discussions, there is the market expectation regarding the approval, in the Chamber, of MP 795, which deals with the extension of Repetro, a special customs regime of the sector, until the end of 2040, the “waiver” or easing of the local content requirements of existing concession contracts and the negotiation between Petrobras and the Union over the onerous assignment agreement.

At the top of the agenda, the end of the sharing model is of interest to the market, since it would reduce the complexity of the contracts signed with the Union and eliminate the role of PPSA in the consortia responsible for the development of the areas of the pre-salt. The expectation, however, is that the discussion in Congress will not end until the next pre-salt auction.

At the beginning of the month, the National Energy Policy Council (CNPE) marked the 4th round of the pre-salt, under the production sharing regime, for June 7, 2018. The blocks of Três Marias, Dois Irmãos, Uirapuru , Saturn and Itaimbezinho, in the Campos and Santos basins.

“Probably the next years pre-salt auction will still be in the sharing regime. But we will have the discussions of the projects in Congress. I think the discussion about the end of the sharing model is positive, “said economist Adriano Pires, director of the Brazilian Center for Infrastructure (CBIE).

“I was positively surprised that [the end of sharing] was put on the agenda as something of great importance, a priority. I hope it gets approved next year, before the elections. That would be very good for the industry, “said Giovani Loss, a gas and business associate at Mattos Filho.

In the short term, the biggest concern of the industry is with respect to the MP of the Repetro, which needs to be voted by mid-December, so that it does not lose its validity. Also awaited for this year is still the publication of ANP’s ruling regulating the “waiver” for the local content requirements of the concession contracts. The document will extend to the old contracts the more flexible levels of nationalization of goods and services applied as of the 14th round of bids in September of this year.

“These measures have an effect on the economic evaluation of ongoing projects. Eventually, it could be the difference between a project being developed or not, “said Loss. “The project will only be developed if it makes economic sense. Incentives such as the solution to the local content issue and the extent of Repetro would help to make projects economically viable and developed. ”

The approval of Repetro and the regulation of the “waiver” of local content will also bring legal certainty for the contracting of equipment. Last week, Shell’s president in Brazil, André Araujo, signaled that the company awaits the settlement of these two items to close the contract for the oil and gas maritime platform (FPSO) Libra 1, the first unit of long-term production in the Libra field, in the pre-salt of the Santos Basin.

“I hope we can get the job right away and that the shareholders feel comfortable to decide on the investment,” Araujo said after a speech at Firjan in Rio. “We have some important points to be resolved. The Repetro, we have the waiver discussion. We are following these movements. This helps shareholders decide. ”

Shell has a 20% stake in Libra. The other partners are Petrobras (operator, with 40%), Total (20%), CNPC (10%) and CNOOC (10%). Auctioned at the first pre-salt auction, Libra is the first field to be developed under the sharing regime. While the contracting of Libra 1 remains indefinite, the consortium plans to extract the first Libra oil in the coming weeks, from the unit that will do the Field Long-Term Test (TLD).

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