News and Business
Brazil’s ANP permits suspension of concession contracts in the exploratory phase
The agency has made it possible to suspend contracts while it works on facilitating companies’ regulatory compliance with the Minimum Exploratory Programs outside the concession area
Subjects
On September 28, 2023, the Brazilian Agency of Petroleum, Natural Gas and Biofuels (ANP) published Board Resolution No. 511/2023, allowing concessionaires to suspend concession contracts with certain attributes (see below) in the exploratory phase. The ANP’s decision is part of a response to overly rigid requirements that concessionaires faced in complying with the Minimum Exploratory Program (PEM) outside the concession area – a regulatory problem identified by the Superintendence of Exploration (Superintendência de Exploração – SEP).
In an effort to provide more flexibility and clarity on the issue, the ANP prepared a draft report on Regulatory Impact Analysis No. 1/2023 (AIR). The draft report was submitted to Public Consultation No. 5/2023, during which it received contributions from the market and the public before being approved by the ANP’s Board of Directors on September 14, 2023.
The AIR report recommended that the ANP issue a resolution establishing the criteria and requirements for giving concessionaires more flexibility in complying with the PEM outside the concession area. This draft resolution will also be subject to a public consultation and hearing.
In the meantime, the ANP has issued Board Resolution No. 511/2023 to avoid the termination of contracts for blocks that could benefit from the agency’s future resolution. It permits concessionaires to suspend Exploration and Production (E&P) contracts in the exploratory phase:
- That have been granted under the concession regime;
- That are active on the date the suspension is requested;
- That still have outstanding PEM obligations; and
- Whose current exploratory period ends by December 31, 2024.
If requested, the suspension is valid as of the date it is approved. Concessionaires looking to ensure their contracts remain suspended will have 90 days to adhere to the new resolution once it is issued – otherwise, the suspension will automatically end. While the contract is suspended, the financial guarantees linked to the PEM will be adjusted as per the rules of the bidding procedure and the specific contract.
If a suspended contract is set to become active again before the future resolution is published, it is possible to request it be suspended, provided it meets the established requirements.
As a consequence of its decision to permit the suspension of contracts in the exploratory phase, the ANP has also revoked item V of Board Resolution No. 645/2022. This provision allowed for the consensual termination of concession contracts and transfer of investments provided for in the PEM to outside the concession area – provided such contracts fit criteria established in an agreement signed with Petrobras (i.e., contracts suspended for long periods due to environmental licensing delays).
For further information on this topic, please contact Mattos Filho’s Infrastructure & Energy practice area.
