ANP Launches 13th Bidding Round For Oil And Natural Gas Blocks

ANP launches 13th bidding round for oil and natural gas blocks - Contributed by Kincaid | Mendes Vianna Advogados - August 03 2015 - 13th bidding round - Comment

The Brazilian Agency for Petroleum, Natural Gas and Biofuels (ANP) has launched a public consultation on drafts of the tender protocol and the concession agreement for the 13th bidding round for the exploration and production of oil and natural gas blocks in Brazil. A public hearing was held on July 9 2015. Final versions of the bidding round documents are expected to be issued by August 6 2015

Oil and gas players have welcomed this new bidding round in the aftermath of concerns regarding the credibility of state-owned company Petrobras. The round will offer 266 onshore and offshore blocks, which will be distributed in 10 sedimentary basins (ie, Amazonas, Parnaiba, Potiguar, Reconcavo, Sergipe-Alagoas, Jacuipe, Camamu-Almada, Espirito Santo, Campos and Pelotas). It will offer a mix of high potential areas, new exploitation frontiers and mature basins, creating opportunities for small, medium and large companies.

The 13th bidding round will be held under the concession model. Until the enactment of the pre-salt bills in 2010, this was the only regime available under Brazilian law. Under this regime, the winning bidder for an exploration and production block has the right to explore and produce in the block, and becomes the owner of any extracted oil or gas, subject to royalties.

The significant opportunities available in the pre-salt area led to the enactment of a new regime, which is applied solely in this area. Instead of concessions, the pre-salt area must be explored using production sharing contracts (PSCs), under which oil companies and the federal government split the resulting production according to contracted terms.

Oil companies may have an increased interest in this latest round, given that no PSC bids are expected. Congress is reviewing an important debate concerning the PSC regime (Bill 131/2015, proposed by Senator Jose Serra), which may change Petrobras's role as the sole operator in the presalt area.

However, unless this amendment to the legislation is passed, Petrobras will continue to be responsible for at least 30% of the investments in any pre-salt block. Considering Petrobras's financial situation, it is unlikely that new PSC rounds will take place before the company invests the substantial amounts required for this area. Therefore, the only ways to acquire new...