Permanent Offer: Public Consultation on the Revision of the Tender Protocol and Draft Concession Contracts

On July 1, 2024, Brazil’s National Agency of Petroleum, Natural Gas and Biofuels (ANP) initiated Public Consultation No. 02/2024 to receive contributions on the draft of the tender protocol for the Permanent Offer under the Concession Regime (OPC), as well as the respective draft concession contracts for exploratory blocks and for areas with marginal accumulations.

The revised documents, as well as instructions for the submission of comments, are available under Public Consultation No. 02/2024 until August 14, 2024 and can be accessed through this link. The input received will be discussed at the public hearing scheduled for September 3, 2024.

Following the consultation and public hearing, final versions of the documents will be submitted to the ANP's Board of Directors for approval. Once approved, the tender protocol and the contracts will be sent to the Federal Court of Accounts (TCU) for review. The ANP estimates that the final versions of the documents will be made available in early 2025.

See below the main changes:

Reduction of the minimum signature bonus for blocks in mature and new frontier onshore basins

The values of the minimum signature bonus for blocks in mature and new frontier onshore basins was set at BRL 50,000, corresponding to a significant reduction compared to the previous cycle, in which minimum values ranged from BRL 50,000 to BRL 670,000.

Local Content Rules

The new local content percentages to be applied in the next OPC cycle have been updated, as established by CNPE Resolution No. 11/2023:

ENVIRONMENT	EXPLORATION PHASE	DEVELOPMENT PHASE
Onshore	50%	50%
Offshore	30% (previously 18%)	30% for Well Construction (previously 25%)   40% for Collection and Offloading Systems   25% for the Stationary Production Unit
Areas with Marginal Accumulation	None	None

Also in accordance with CNPE Resolution No. 11/2023, the option was created to transfer local content surpluses between contracts with the same local content rules, albeit with different percentages. This transfer is restricted to contracts in which at least one of the concessionaires is a party, and cannot calculated together with other surplus transfer mechanisms. This transfer mechanism cannot be applied to the well construction of offshore blocks.

Exclusion of the Participation Fee

The draft tender protocol excluded the obligation to pay the participation fee for participation in the OPC cycles and to access the sample of technical data of each sector. The draft tender protocol only maintains the access fee to the technical data package, which is optional and not linked to registration.

Presentation of a Bid Guarantee Without a Declaration of Interest

The draft tender protocol allows a bidder to present a bid guarantee without a declaration of interest. In this case, the bidder may only submit offers in a consortium with a bidder that has submitted a declaration of interest.

Inclusion of forecasts related to the reduction of greenhouse gas emissions

The draft concession contract establishes—with regard to the safety of operations and environmental control—that the concessionaire must (i) minimize the flaring of natural gas and seek routine zero flaring; and (ii) adopt practices and technologies to reduce greenhouse gas emissions and the carbon intensity of activities.

The concessionaire must present alternatives in the Development Plan, also considering the reduction of the carbon intensity of the asset's life cycle.

Possibility of reopening the public session for blocks not auctioned

Immediately after bidding all the blocks in the sequence provided for in the tender protocol, the Special Bidding Commission (CEL) will grant 15 minutes for the bidders to submit a Request for Reopening of the public session for the blocks that have not received an offer.

The Request for Reopening of the public session may only be submitted by bidders who:

a) have submitted a Declaration of Interest for the requested sector(s);
b) have submitted an offer in the public session for at least one block of the relevant sector(s); and
c) have a bid guarantee balance in the minimum amount associated with each sector

After analyzing the applications, CEL will announce the sectors on offer at the reopening, as well as the deadline for preparing proposals. A single deadline will be established for bidders to go to the bidding area—carrying the envelopes of all sectors for which they intend to submit an offer—at the reopening of the public session. The ANP will enforce the bid guarantee of the bidder that submitted a Request for Reopening of the public session, but did not submit a valid proposal.