Opportunities In Oil & Gas (14th Concession Round)

Business opportunities of large scale are flourishing again within the oil & gas sector in Brazil, driven by the upstream - exploration and production ("E&P").

Brazil is distinguished within the oil & gas industry. The country is blessed with favorable geology, and since the introduction of the concession regime by the end of the 90's Brazil provides the industry with stable rules and harmony with the best practices of the global oil & gas industry.

Official figures show that there is yet a long run of business to be developed. And it is within that perspective that an industry demanded calendar of oil & gas public bids was recently announced for 2017 onwards, under both legal regimes effective in Brazil - concession and production sharing. The coming one is the 14th concession round ("14th round").

The industry is of the view that the 14th round should set both the return of larger E&P bids in Brazil and an agenda of annual auctions (onshore, offshore, mature, new areas, concession and profit sharing type).¹

The effects of those bids will certainly echo in the mid and downstream, therefore it is a great opportunity also for suppliers, contractors and lenders.

In this issue, we present some of the main particulars of the 14th round, scheduled for September 2017 and which is the first of the large rounds of this new momentum of the industry.

What is on offer

287 blocks in the offshore basins of Sergipe-Alagoas, Espírito Santo, Campos, Santos and Pelotas and in the onshore basins of Parnaíba, Paraná, Potiguar, Recôncavo, Sergipe-Alagoas and Espírito Santo, amounting to a 122,622.40 km² area.

What the terms are

In spite of having a concession model that has been from time to time updated to keep harmonized with the best practices of the oil & gas industry, the government has recognized that lower international oil prices and local bottlenecks should be addressed rapid and efficiently in preparation for the return of the bid rounds.

Accordingly, the regulatory and contractual resulting efforts for the 14th round are remarkable.

We highlight two key changes: local content rules and contractual revision.

Local content requirements were substantially reduced and stand now as follows: " Offshore: exploration 18%, stationary production units 25%, well construction 25% and collection and disposal system 40% " Onshore: exploration 50% and production 50%

Those new targets aim to recognize (1) the capital intensity of earlier phases, when the operations...