Final Tender Protocol for the transfer of rights agreement surplus bid round is published by ANP
As anticipated by the Ministry of Mines and Energy (“MME”), the National Agency of Petroleum, Natural Gas and Biofuels (“ANP”) published last Friday, September 06th, 2019, the tender protocol for the Transfer of Rights Surplus Bid Round. The “Transfer of Rights” agreement was entered into between Petrobras and the Federal Union in 2010, without a bidding round, and allowed the company to explore 5 billion barrels of oil equivalent in Santos Basin in the pre-salt layer. The Government, however, now estimates that the area can yield an additional 6 billion barrels.
It will be the first bid in Brazil of areas under ongoing operation, in the development phase, the major investment period in the lifecycle of E&P assets. The four areas (Atapu, Búzios, Itapu, Sépia) will remain being operated by Petrobras under the current Transfer of Rights Agreement, which will continue valid after the bid award.
Once Petrobras achieves a certain volume of production specified in the Tender Protocol, the respective Transfer of Rights Agreement will be terminated. The production threshold for the areas are:
- 550,000,000 (five hundred and fifty million) boe in the Atapu Block;
- 3,150,000,000 (three billion, one hundred and fifty million) boe in the Búzios Block;
- 350,000,000 (three hundred and fifty million) boe in the Itapu Block; and
- 500,000,000 (five hundred million) boe in the Sépia Block.
The Production Sharing Agreements for each area will be valid since their execution, yet, until the end of the existing Transfer of Rights Agreements, the provisions from the latter will supersede those from the Production Sharing Agreements whenever they conflict.
Regarding the relationship between the bid winners and Petrobras, the Tender Protocol provides that a contract, namely, a Co-Participation Agreement, shall be negotiated and executed by the bid winners and Petrobras and regulate, among other matters:
- The pecuniary compensation due to Petrobras for investments made in the respective area (matter regulated by MME Ordinance n° 213/2019), including those to be made until the termination of the respective Transfer of Rights Agreement; and
- The Development Plans to be observed by Petrobras in the co-participation area until the termination of the respective Transfer of Rights Agreement.
If the bid winners and Petrobras do not reach agreement on the terms of the Co-Participation Agreement, ANP will define such terms according to industry best practices. Should any dispute or controversy arise regarding specifically the calculation of the amount and form of payment of the compensation due by the bid winner to Petrobras, the matter shall be submitted to a Binding Expert Procedure in accordance with the International Chamber of Commerce (“ICC“) rules.
Aiming to increase the attractiveness of the bid, the National Council of Energy Policy (“CNPE“) also published last Friday its Resolution n° 20, which establishes the possibility to parcel the payment of the signature bonus, provided that the offer presents a premium of goodwill of at least 5% in the bid. The bid is scheduled for November 6th, 2019.
Last but not least, the final version of the tender protocols was submitted for the approval of the Federal Audit Court (“TCU”) this week, whose technical experts have already issued a favourable opinion to the drafts provided by the Ministry.
To consult the tender protocol and the drafts of the production sharing agreements with and without the participation of Petrobras, click here.