Brazil Energy Journal - Abandonment And Decommissioning

• Published date: 12 May 2022
• Subject Matter: Environment, Energy and Natural Resources, Energy Law, Environmental Law, Oil, Gas & Electricity
• Law Firm: Tauil & Chequer
• Author: Mr Bruno Belchior and B'rbara Eiroa Leite

Overview

Abandonment and decommissioning activities are a normal part of the life cycle of oil and natural gas fields, work usually done when production is no longer economically feasible and output has become insufficient to sustain operating costs. Such activities may include the final interruption of the facilities' operation, the permanent abandonment and razing of wells and the removal of facilities.

Acknowledging this reality, Brazil's exploration and production (E&P) contracts establish that contractors must carry out the decommissioning activities and present abandonment guarantees to cover the estimated costs. From a regulatory perspective, the decommissioning of E&P facilities must comply with specific rules issued by different entities, such as environmental entities, the Brazilian Navy and the National Agency of Petroleum, Natural Gas and Biofuels (ANP).

Around 2015, ANP initiated discussions and additional studies on decommissioning activities in Brazil to review and standardize the framework. With the subject increasingly importantce as the number of mature fields grows in Brazil.

n 2020, ANP published Resolution No. 817/2020, which was a milestone for the energy industry, consolidating and modernizing the technical regulation for decommissioning of E&P Facilities and making ANP's analysis more dynamic.

Later, ANP published Resolution No. 854/2021, reinforcing its commitment to promote legal certainty and clarity on the obligations and deadlines for the presentation of abandonment guarantees. ANP Resolution No. 854/2021 also expressly stated the acceptance of other types of abandonment guarantees and their specific requirements.

Moreover, the Decommissioning Facility Plans submitted by contractors to ANP are publically available, in compliance with the provisions of ANP Resolution No. 817/2020, making the procedure more transparent. ANP forecasts a investment of BRL 30,92 billion from 2021 until 2025 in decomissioning activities, pursuant to ANP's Painel Din'mico de Descomissionamento de Instalaç'es.

Decommissioning Procedure

ANP Resolution No. 817/2020

ANP Resolution No. 817/2020 was published on April 24, 2020, and modernized the legal framework for decommissioning in Brazil by establishing the Technical Regulation for Decommissioning of Exploration and Production Facilities.

The resolution was the result of a joint effort of ANP, the Brazilian Institute for the Environment and Renewable Natural Resources (IBAMA) and the Brazilian Navy. The...