Financing for the Brazil onshore mature fields can count on a new modality

6/28/18

The ANP wants to make feasible a new financing alternative for operators of onshore fields in production. The agency is expected to insert in a resolution on contract assignment rules, which will enter into public consultation between the end of July and the beginning of August, that will allow operators giving the reserves as guarantee.

Today, this modality – known as reserve base lending – is not feasible because if the borrower fails to pay the loan and the bank consequently executes the guarantee, the environmental license of the enterprise can not be transferred to a provisional operator to be contracted by the financial institution to manage the project until it is sold.

According to the ANP Onshore coordinator, José Fernandes de Freitas, the viability of this new financing line is one of the items planned by Reate, a program to revitalize the onshore industry in Brazil. This funding alternative is important to unlock this industry segment.

The development of the Brazilian onshore today is conditional on the success of Petrobras’ divestment plan. Traditionally, the exploratory effort of this segment is developed financed by the cash flow of production activities. In Brazil, however, this does not happen because the onshore is practically all Petrobras, whose focus is investments in ultra-deep waters.

This cycle, in the executive’s assessment, will be broken with the sale of Petrobras assets. He said the agency approached Petrobras to help with possible problems that may arise during the process.

Another obstacle to onshore is the end of the term of the concession contracts of the fields that are granted to Petrobras. As most originate from Round Zero, the contracts are ending, which gives rise to fears from potential buyers about their renewal.

“The extension of contractual deadlines is not an obstacle as long as the new entrant submits a development plan. We are working to make this transition into ANP resolution, “said Freitas.

This Friday (29/6), the ANP holds a public hearing for the structuring of the proposed resolution of reduction of royalties in incremental production in mature fields. This is another item that can help unlock onshore investments in the country, Freitas’ assessment.

EPE estimates the recoverable volume of oil and gas in the Brazilian onshore at 1.5 billion boe to 5 billion boe. The country closed 2017 with 1P reserves of 597 million barrels and five discoveries reported to the ANP. Production is at 130,000 barrels / day, a decline of about 40% compared to 2000, when production reached 210,000 barrels / day.

Source: Brazil Energy

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