Oil, Natural Gas Royalty Reduction in Brazil: First Approval Goes to PetroRio

With its Polvo Field incremental production royalties cut from 10 percent to 5 percent, PetroRio has received the first royalty reduction under the terms of Brazil’s National Agency of Petroleum, Natural Gas and Biofuels (ANP) Resolution No. 749/2018. 

As Petrobras divests itself of mature fields, purchasers can request the extension of concession contract terms, including a reduction of royalties, by committing to new investments to increase production in these fields.

As we previously noted, only mature fields—with 25 or more years of production or having accumulated production equal to or greater than 70 percent of the volume expected to be produced, considering the proven reserves—will be eligible to obtain the reduction of royalties. 

Tauil & Chequer advised PetroRio in approving the development plan review, extending the concession contract, presenting the parent company guarantee (PCG) as a guarantee for the decommissioning activities and requesting the royalty reductions. 

We remain at your disposal for any clarification or further information.