ANP published the resolution related to the royalties’ rates reduction
On September 28th, 2021, the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) published the Resolution Nº 853/2021, that establishes the reduction of royalties for oil and gas fields granted under the concession regime to medium and small-sized companies.
The new rule will become effective on November 1st, 2021 and is purported to increase the economic attractiveness and production continuation with the extension of the fields life-cycle, as well as an increase in the participation of medium and small-sized companies in the industry.
The Oil, Gas & Offshore team highlighted the main aspects brought by the Resolution:
Eligible companies to the royalties’ reduction:
- Medium and small-sized companies, as defined by the ANP Resolution Nº 32/2014, with E&P contracts granted under the concession regime. The main terms provided by the ANP Resolution 32/2014 regarding classification of companies are:
- Medium-sized companies: an independent company or a company thatbelongs to a group of companies linked by direct or indirect control, asdefined under Article 243 of the Brazilian Corporate Law (Law Nº 6,404/76)(“Corporate Group”), with technical qualification of operator B or C, with operatorshipin at least one concession contract and that has an average annual productionof less than 10,000boe/d (ten thousand barrels of oil equivalent per day) ofoil or natural gas, in Brazil and abroad.
- Small-sized companies: an independent company or a company thatbelongs to Corporate Group with ANP qualification as operator C or D, with operatorship in atleast one concession contract and that has an average annual production of lessthan 1,000boe/d (one thousand barrels of oil equivalent per day) of oil ornatural gas, in Brazil and abroad.
- Consortiums that have as a member a small ormedium-sized company, such company with 75% or more of participation interestin the consortium.
Requirements for obtention of royalties’reduction: allcompanies that are party of the corresponding Concession Contract must observethe following:
- compliance with all obligations withinthe corresponding concession contracts related to government takes and to thirdparties; and
- prove tax and labor regularitythrough the certificates listed in Article 5th, sole paragraph ofthe Resolution, which will be assessed by ANP within the public registries.
Term for analysis of the requests by ANP: 90 days from the date of filing. ANP may notifythe interested parties to provide additional documents in a 30-days term,counted from the request. Such notice will interrupt the initial term of 90days, being resumed from the date of the reply by the interested party.
Criteria for the RoyaltiesReduction: the applicableroyalties will be reduced to:
- 5% for the fields operated bysmall-sized companies; and
- 7,5% for the fields operated bymedium-sized companies.
Granting of Reduction: if reduction is granted, the concessionaries and ANP will execute anamendment to the relevant concession contract that will establish the new ratesand the conditions for suspension or loss of effectiveness of the granted reduction,pursuant to Articles 10 and 11 of the Resolution.
The Resolution nº 853/2021 is available here, in Portuguese.
The Oil, Gas & Offshore team is available in case of doubts.