Covid-19: ANP publishes resolutions softening the regulatory obligations

The Brazilian National Agency of Petroleum, Natural Gas, and Biofuels (“ANP”) published on April 20, 2020, two new resolutions which soften the agency’s rules and procedures during the new coronavirus (COVID-19) pandemic.

ANP Resolution No. 815/2020 grants the extension of terms of the contracts for exploration and production of oil and natural gas (“E&P”) and ANP Resolution No. 816/2020 establishes the procedures to be introduced by the regulated agents acting in E&P activities, during the period in which the federal government’s temporary measures against the COVID-19 outbreak are in force.

ANP Resolution No. 815/2020

Concessionaires may request ANP to extend for nine months the following terms provided for in E&P contracts:

• The expiration date of the exploratory period in force for (a) active E&P contracts and (b) for suspended E&P contracts that will return to be in force by December 31, 2020;
• Critical dates established in (a) a Discovery Appraisal Plan (“PAD”), which must be valid and already approved by ANP and (b) in suspended PADs that will return to be in force by December 31, 2020; and
• The final date for declaration of commerciality within the scope of a PAD.

ANP Resolution No. 816/2020

According to this resolution, during the period in which the temporary measures against the COVID-19 established by the federal government are in force, ANP may suspend obligations, which require the demobilization of operational personnel by the operators.

Among other measures, ANP established that:

Activities and Procedures

• Maintenance of activities: the activities of regulated agents must be maintained to guarantee necessary inputs and raw materials to sustain the national fuel supply. If an interruption of activities is necessary, it must be requested to and previously authorized by ANP.
• Procedural deadlines: the procedural deadlines for agent’s statements in sanctioning administrative processes are suspended, provided that such processes are not being conducted on an urgent basis and do not relate to matters of the government take.
• Delivery and filing of documents: the delivery of documents and filing of petitions to ANP must be done, primarily, through the Electronic Information System (Sistema Eletrônico de Informações – SEI), except for the financial guarantees required by ANP as a condition to enter into contracts and contract amendments.
• Notices to ANP about the COVID-19: operators of E&P contracts must notify ANP about: (a) any suspicion or confirmation of infection by COVID-19, per production unit, (b) impacts on drilling and production activities and operational safety, and measures taken to prevent the spread of the virus, (c) any alterations in the operational routine that may compromise the national supply of oil and natural gas, (d) the number of personnel embarked during the COVID-19 outbreak and in the ordinary course of business, and (e) the number of personnel dedicated for emergency response during the COVID-19 and in the ordinary course of business.

Terms

• Technical Data: the terms of adhesion contracts for accessing data of ANP’s Exploration and Production Database (Banco de Dados de Exploração e Produção – BDEP) were suspended, as well as BDEP’s deadlines for making technical data available. As for the technical data intended for the reduction of the Minimum Exploratory Program (“PEM”), these will be received by ANP through digital sharing or conventional media.
• Annual Work Program and Annual Work Budget (“PAT/OAT”):  the deadline for delivering the PAT/OAT files for contracts executed in 2020 was extended to October 31, 2020. Activities stated in the PAT/OATs for 2020 may be extended for one year, with no need of revision of the files.
• Revision of Development Plan and PAT/OATs: the deadlines for submission of revisions to the Development Plans and to the PAT/OATs are suspended, unless otherwise is expressly required by ANP.
• Monthly Production Report: the deadline for concessionaires to reply to ANP’s requests related to Monthly Production Reports was extended for 60 days. The deadline for submitting the monthly reports remains unchanged.
• Production measurement: ANP suspended the deadlines for conducting the following operational procedures: (a) fiscal measurement, ownership allocation and custody transfer measurements at metering stations to carry out physical-chemical analyses of oil and natural gas samples, (b) calibration of secondary elements to measure temperature and pressure, as well as measuring tape lines and thermometers associated with tanks, (c) calibration of primary elements, (d) inspection of the components of the measuring systems, (e) verification of flare gas flow meters, (f) tests on wells located exclusively on onshore fields. In addition, the requirement for prior inspection of installations by ANP to authorize the operation of metering stations was suspended.
• Internal audits: ANP authorized a deadline extension for the internal audit cycle relating to the following technical matters: (a) Well Integrity Management System, (b) Operational Subsea Safety Management System, (c) Technical Regulation of Inland Pipelines, (d) Structural Integrity Management System and (e) Operational Safety Management System.
• Risk assessment: E&P activities that are not essential to ensure the national supply will be conditioned to the performance of a risk assessment analysis, given the emergency scenario arising from the COVID-19 outbreak. In addition, the extension of the five-year risk assessment terminating in 2020 and 2021 was granted, upon the operator’s request.
• Government take: the deadline for delivering the composition analysis of natural gas for purposes of determining the natural gas reference price (“PRGN”) was extended to thirty days (counted as from the expiration date of ANP Resolution No. 816/2020). During the term of the resolution, the calculation of the PRGN will be carried out based on the last composition analysis of the natural gas delivered to ANP. The amounts to be collected must be paid within 15 days from ANP’s notice.
• Research, Development, and Innovation (“RDI”): it was postponed to September 30, 2020: (a) the deadline for making the corresponding RDI investments in relation to activities performed in 2019, and (b) the obligation to invest in the Balance of Uninvested Funds calculated on June 30, 2019. The deadline to deliver the annual report was postponed to December 30, 2020.
• Local Content: the deadline to deliver the local content reports of the exploration and development phases has been extended to the first business day of July, 2020. The Quarterly Expense Reports corresponding to the expenses of the first quarter of 2020 shall be delivered on the 15^th business day of August 2020. The Quarterly Certification Reports will be due on the 15^th business day of July 2020.

Other Matters

• Financial Guarantees: the financial guarantees referring to the monetary amounts of work units issued for the acquisition of raw seismic data will be deducted or refunded based upon preliminary ANP approval pursuant to the resolution, which will not be associated with the final approval of the raw data.
• Annual Production Program: a variation higher than 15% of the volume produced in relation to the production expected for the corresponding month as set out in the Annual Production Program was granted. Such variation can occur without the submission of justification or review to the referred program.
• Natural gas flaring: extraordinary flaring of natural gas up to 100 thousand m³/day in small production fields was authorized. 
• Operational Safety: ANP waived the obligation to submit updates to approved Operational Safety Documentation (DSO), which are modified during the validity of ANP Resolution No. 816/2020. Also, the obligation to send routine data files to ANP’s systems was suspended, except for those considered essential for monitoring E&P operations, such as incident notice, and information on the status of operating wells.

ANP Resolution No. 816/2020 is already in force and will remain in force until December 31, 2020, except if it is otherwise revoked – fully or partially – by ANP in case the calamity scenario from the COVID-19 outbreak changes.
For more information, contact Mattos Filho’s Infrastructure and Energy partners.