July 18, 2019
The Court of Auditors of the Union (TCU) yesterday questioned the competence of the National Energy Policy Council (CNPE) to define the areas of the auction rounds in the sharing regime. The position of the court ministers was based on the fact that there is a lack of transparency in the selection criteria that define whether an area will enter this type of event because it is considered “strategic” or because it offers great economic potential.
From now on, the court requires the CNPE, made up of ministers, to submit more detailed technical justifications on the criterion of strategic reserve classification. “It is not a question of prescribing a contracting regime over the other, but of ensuring a proper valuation of the Union’s assets and of maximizing revenue collection,” said the Minister Aroldo Cedraz.
After the decision, TCU technicians informed that the new procedure should already be adopted in the previous presentation of information of the bidding round of the surplus of the Transfer of Rights assignment, scheduled for November. In this case, however, there is no controversy over the justifications for inclusion of the areas in the auction, which have a large volume and are within the pre-salt.
During the plenary session, Cedraz said that there was “obscurity” in the way of classification of areas. For TCU, the main problem is to include large reserves in auctions of the concession regime, which reduces considerably the gains of the Union.
The caution with the theme led the court to suspend the offer of the two areas in the Santos Basin of the fourth round of sharing and in the 15th of concession. One of the reserves would be offered under the concession regime, because it is outside the pre-salt limit. This area, however, had a large volume of oil. After the court’s decision, the area was classified again, but this time as strategic. The area then entered the subsequent auction, the fifth round of sharing.
In the same process, the TCU ministers indicated that the resource constraints to which Pre-Sal Petróleo S.A. (PPSA) is subject have compromised the work of managing the sharing agreements. The state-owned company is responsible for managing the contracts and marketing the Union’s oil extracted from the pre-salt reserves.
For the TCU, PPSA faces problems due to lack of personnel and technical-operational resources. TCU technicians reported that the company has not even been able to make the capital injection expected in its creation almost ten years ago.
At each sharing auction, PPSA is entitled to receive a small fraction of the subscription bonus paid by the winning oil companies. In the Libra auction, the first one held in the sharing model, PPSA was not able to receive the approximately $ 50 million it would have earned as part of the $ 15 billion subscription bonus.
Court officials question whether PPSA will be able to manage the Transfer of Rights surplus contracts if cuts continue to be made. They point out that the state-owned company, as the Union’s representative, has “antagonistic interests” over oil companies. Given the large volume of reserves, the government will charge the bonus of R $ 106 billion. This will be one of the biggest auctions in the world oil industry.