Transfer Of Rights Surplus Auction - Winners Shall Compensate Petrobras

Author:Mr Leonardo Miranda
Profession:TozziniFreire Advogados

Oil & Gas

In 2010, the Brazilian Government and Petrobras entered into an agreement by means of which Petrobras earned the right to produce up to five (5) billion barrels of oil equivalent (boe) within the Pre-Salt Area. The deal was part of a capitalization of the company.

As Petrobras operations progressed, though, it was found that there were way more than those 5 billion boe negotiated. After reaching an agreement with Petrobras to review the original terms of 2010, the government started preparations for the so-called Transfer of Rights Surplus Auction, in order to offer that substantial excess capacity of the reserves to the market. The auction is expected to be held on October 28.

Under the production-sharing agreement (PSA) system, the auction will offer the areas known as Búzios, Atapu, Itapu, and Sépia. The largest field on offer, Búzios, has a subscription bonus of BRL 68,194 billion and a minimum profit oil of 23.24%. For Sépia, the bonus is BRL 22,859 billion and minimum profit oil of 27.88%. For Atapu, bonus of BRL 13,742 billion and minimum profit oil of 26.23%. And the smallest area, Itapu, will be tendered with bonus of BRL 1,766 billion and profit oil of 18.15%.

In addition to the above features, there are other terms specifically for such coming auction, summarized. Ordinance No. 213 issued by the Ministry of Mines and Energy establishes parameters for the financial compensation owed to Petrobras for the investments made by the company in those areas that will be offered to the market. The rationale is to compensate Petrobras for the investments in the development of the area, vis-à-vis the fact that the production outcomes tend to diminish for Petrobras with the entry of new partners.

The compensation...

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