CNPE APPROVES GUIDELINES FOR ROUND OF PETROLEUM AUCTION

Credit: MME

The Ministry of Mines and Energy (MME) held this Wednesday (14/12) the 33rd Meeting of the National Energy Policy Council (CNPE). The meeting was chaired by Minister Fernando Coelho Filho and was attended by the Minister of Planning, Budget and Management, Dyogo Oliveira.

Representatives of the member ministries participated in the meeting. This was the first meeting with the participation of the new members of CNPE, as representatives of civil society and Brazilian university, respectively, Plínio Nastari and Ivan Camargo.

At the opening of the meeting, the minister took stock of the actions of the MME under his management and wished to welcome the new members. “Despite so much turmoil that the country is living, the MME, together with the Planning, Civil House, and Finance, which are the Ministries we dialogue the most, have we achieved a series of very positive actions in the first seven and eight months? said the minister.

Among the main deliberations of the collegiate body and the definitions of today’s meeting are the approval of issues related to next year’s oil rounds; definition of guidelines for the natural gas sector; definition of the minimum price of the barrel of oil for purposes of calculation of royalties; and on computational models of the electric sector.

One of the highlights was the inclusion of ten blocks of ultra-deep water in the 14th. Round, located in the northern portion of the Campos Basin, with high potential. The ANP will publish the maps for this round. The rules were also released when unitization and local content.

During the CNPE, members also discussed the recent revisions in the projections for growth of electricity demand for 2017. In view of the current scenario, it was decided that the 2nd Reserve Energy Auction of 2016, scheduled to be held next Monday, (19/12), will be canceled.

At the end of the meeting, the MME executive secretary, Paulo Pedrosa, and the secretary of Petroleum, Natural Gas and Renewable Fuels, Márcio Félix, explained the main points of the meeting to the press. Pedrosa stressed that it was a very intense meeting, with great advances for the sector.

Check below the main points deliberated in the CNPE, that object of resolution or referral by the collegiate:

Guidelines for production individualization agreements involving non-contracted areas

The CNPE approved a Resolution that establishes guidelines for procedures for individualization of production in situations where oil and natural gas deposits extend to non-contracted areas.

The main rules approved were:

· The CNPE will decide the contracting of the non-contracted areas internal to the polygon of the pre-salt. The general rule in such cases will be the execution of bids and in case of non-hiring, a simplified procedure will be carried out.

· In areas outside the polygon of the pre-salt, the ANP is authorized to tender these areas.

· Regarding the local content rules in the non-contracted areas, the same percentage will be applied in the area under the adjacent agreement.

· Until there is hiring, the operator of the individualized area will be the operator of the area under the adjacent contract.

The individualization of production of oil, natural gas and other fluid hydrocarbons is a globally adopted and effective legal institute to prevent the predatory production of petroleum deposits that extend beyond the area granted.

The establishment of criteria for procedures for the individualization of production (unitization), in the case of deposits that extend to non-contracted areas (from blocks already granted, assigned onerous or under the production sharing regime), is necessary for the continuity of exploration and production activities in many of these areas, unlocking a series of investments that are virtually paralyzed today.

These guidelines will allow new investments for the sector, with the consequent increase in production and government revenues.

Strategic guidelines for the Natural Gas sector

The National Council for Energy Policy (CNPE) approved in a meeting held on Wednesday (December 14, 2016) the Resolution establishing the guidelines for the design of a new natural gas market, as well as establishing the Technical Committee for the Development of the Natural Gas Industry, within the framework of the Gas for Growth initiative.

The Resolution submitted to CNPE is the result of the analysis of the contributions received during the public consultation process. The premises and strategic guidelines for the natural gas sector were defined, such as the adoption of good international practices; investment attraction; diversity of agents; greater dynamism and access to information; and respect for contracts.

Among the strategic guidelines are the promotion of greater transparency and reduction of transaction costs; stimulation of competition and the formation of short-term and secondary markets; strengthening the separation of potentially competitive activities; non-discriminatory third-party access to pipelines, UPGNs and Terminas de Regas; improvement of the tax structure of the natural gas sector in Brazil; harmonization of state and federal regulations; integration between the natural gas and electric power sectors.

The Technical Committee for the Development of the Natural Gas Industry (CT-GN) was also created for a gradual, safe and rapid transition, with a deadline of 120 days to present a proposal for measures to be submitted to the National Congress to improve the legal framework of natural gas.

The Committee will be composed of representatives of the various organs of the Federal Government and associations and agents of the natural gas industry, civil society and the Brazilian university.

The Gas for Growth initiative was launched by the Minister of Mines and Energy, Fernando Coelho Filho, on June 24, 2016, based on the observation of the current natural gas sector, especially regarding the reduction of Petroleum’s share Brasileiro SA (Petrobras) and the consequent entry of new private agents, at the same time that presents itself as a great investment opportunity.

4th Round of Areas with O & G Marginal Accumulations

The CNPE approved the mandatory Local Content non-enforceability for the 4th Round of areas with marginal accumulations of oil and natural gas. Considering the profile of companies operating in the areas of marginal accumulation (national and small and medium-sized), as well as the amount of investments required for the operation in these areas of marginal economics, much lower than those of other onshore areas, considers the requirements of local content for these actors and for the supply chain that serves this segment, in the same way as those for other concession agreements, are disproportionate.

Because they are marginal fields, the local content in these activities is already quite high, and local content requirements (such as certifications and percentage calculation processes) would make it difficult to explore these fields.

Round 14 of Exploratory Block Tenders

CNPE approved a Resolution authorizing the ANP to hold the 14th Round of Bids for the exploration and production of oil and natural gas in accordance with the rules of Law 9,478 of 1997, in the concession modality. For this event, 291 exploratory blocks were selected, distributed in 29 sectors, of 9 sedimentary basins, located in areas of interest in the states of Maranhão, Piauí, Rio Grande do Norte, Alagoas, Sergipe, Bahia, Espírito Santo, Rio de Janeiro, Mato Grosso do Sul, São Paulo, Paraná, Santa Catarina and Rio Grande do Sul.

It was approved the inclusion of 10 blocks of ultra-deep waters, located in the northern portion of the Campos Basin, with high potential. The ANP will publish the maps for this round.

The pre-bid and the draft contract should be published in early 2017, aiming at the realization of the offers in the third quarter of the same year. It is estimated that the areas that may be completed in this Round may in the first instance contribute to the generation of jobs and income for the local populations and, in case of discovery of commercial petroleum resources, there will also be the benefit to the federated entities with the collection of governmental participation, taxes and increase of the energy security of the Country.

The Local Content for this Round will be set in January 2017.

Extension of the Operation Phase of the offshore blocks of the 11th Round of Bids

CNPE approved Resolution with recommendation to the ANP to prioritize the analysis of the requests for extension of the Exploration Phase of the exploration and production contracts of blocks located in the sea of ​​the 11th Round of Bids in force in the Country, aiming to guarantee the fulfillment of contracted activities, even if with delay of term. Such a measure will allow society not to be deprived of investment in order to increase the geological knowledge of the Brazilian sedimentary basins, which are fundamental for the discovery of petroleum resources.

2nd Production Sharing Round

The CNPE authorized the 2nd Round of Bids under the Production Sharing regime, which is expected to occur in the third quarter of 2017. The Round will be composed of four areas with unitizable deposits involving areas not contracted to the Union in the region of Pre -sal, in the Campos and Santos basins. The areas mentioned are related to the discoveries called Cat do Mato and Carcará, and the fields of Green Turtle and Sapinhoá.

This event has great importance in relation to the continuity of investments in the development of oil and natural gas production from these areas. In addition, it should be mentioned that the contracts in the areas of Cat do Mato and Carcará meet with their exploration and production contracts suspended by the ANP, awaiting the definition of the actions necessary for the evaluation of the part not yet contracted.

According to Unitization guidelines, the same percentage of local content applicable in the area under the adjacent agreement will be applied.

Guidelines for the Marketing of Oil and Natural Gas in Union in Production Sharing Contracts

The National Council of Energy Policy (CNPE) approved in a meeting held on December 14, 2016 the Resolution that establishes the policy of commercialization of the oil and natural gas of the Union.

The Resolution assessed by CNPE contemplates a marketing policy with general and transitional guidelines, valid for up to 36 months, which will allow the Union to commercialize the hydrocarbons it is entitled to, while at the same time acquiring the fundamental experience for the long-term model that will take into account not only operational but also strategic issues for the national interest.

The Resolution defines the general marketing guidelines, such as maximizing the economic result; the priority to the national supply in the case of Natural Gas; the marketing will be preferably in combined loads; and will seek to minimize the risks of the Union.

The resolution also stipulates that the deposit of revenues will be made to the single account of the National Treasury and defines the rights and obligations of PPSA, with mechanisms of accountability of the activity.

It was also defined that, whenever possible, short-term auctions for the sale of natural gas in the domestic market by the marketing agent to be contracted by PPSA.

The establishment of the policy will enable the commercialization of oil and natural gas destined for the Union, whose revenues from this activity have already been considered in the Budget of the Union in the order of R $ 800 million (estimated collection in 2017, already considering amounts receivable relative to the years 2015 and 2016), considering the expectation of hydrocarbon production in the Libra prospectus and in the unitizable areas in the third half of 2017.

Definition on minimum price

The CNPE discussed the issue of the minimum price of a barrel of oil for purposes of calculating royalties. The studies presented by the ANP, arising from the public hearing, are being analyzed by the MME and will be compared with studies on the competitiveness of Brazil in the international scenario of this sector. After this step, guidelines will be defined that value the market price and preserve the minimum price as a parameter to the transactions in the same economic group, establishing advance and periodicity for the rule revisions and transition to its implementation.

In addition, the ANP, which has the technical and regulatory responsibility for establishing minimum prices, should ensure that all characteristics related to national oils are considered.

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