Brazil’s CNPE Includes 11 Blocks in the Permanent Offer (Production Sharing) and Adjusts Local Content Percentages

On December 27^th, 2023, the National Energy Policy Council ("CNPE") published Resolution No. 11/2023 ("Resolution") in the Official Gazette, authorizing the offer of 11 blocks in total in the production sharing regime under the Permanent Offer System.

The Resolution also approved the technical and economic parameters for the bidding of such blocks and established guidelines for defining Local Content in the next cycles of the Permanent Offer under both concession and production sharing regimes.

The blocks to be offered include 8 Pre-salt blocks as well as Ametista, Mogno and Jaspe, which were appointed as strategic areas by the Resolution as they are located outside the Pre-salt Polygon.

Petrobras has 30 days from the publication of the Resolution to exercise its preferential rights to be the operator with a minimum 30% participating interest in each of the offered areas.

Below you will find a table with the list of blocks and their respective signature bonus and minimum profit oil set forth in the Resolution.

Only the expenses related to the activities under the respective production sharing agreement and approved by the Operating Committee will be recovered as cost oil by the contractor, observing the limit of 80% of the gross production value in each block per month during the Production Phase. Expenses over that amount will be accumulated for recovery in the subsequent years. 

 With regard to the Local Content percentages, the Resolution established the following mandatory percentages to be included in future Permanent Offer cycles under the concession and the production sharing regimes:

In comparison with the Local Content percentages established in the past Permanent Offer cycles and bidding rounds (since the 14th Bid Round in 2017), there has been an increase in the minimum percentages required for offshore blocks in the Exploration Phase (previously 18%) and in the Development Phase for well construction (previously 25%).

The Concession Contracts and Production Sharing Agreements will allow for the compliance with Local Content requirements by means of the transfer of Local Content surplus from other contracts, provided that they have the same Local Content rules (even if the relevant percentages are different). The transfer of Local Content surplus from other contracts (i) can be total or partial, (ii) cannot be combined with other mechanisms of transfer of Local Content surplus; and (iii) will be limited to the Collection and Offloading System and to the Production Unit, in case of offshore areas under development/production.

Lastly, CNPE requests the National Agency of Petroleum, Natural Gas and Biofuels (ANP) to regulate the contractual clauses that require contractors and concessionaires to give preference to Brazilian suppliers of goods and services. The regulation must aim to promote predictability for Brazilian suppliers by means of transparent and accessible schedules and detailed specifications of the goods and services to be acquired by E&P companies in the country.

We will continue to monitor the development of the Permanent Offer and keep you posted through our Legal Updates.