Unconventional Resource Innovations To Brazil Round 12 Concession Contract

Author:Mr Alexandre Chequer, Leonardo P. Costa, Victor Galante and Bruno Belchior
Profession:Tauil & Chequer

Keywords: ANP, Brazil Round 12, concession contract, unconventional resources

With the expectation that the areas offered in the Brazil Round 12 may result in the discovery of reservoirs of unconventional resources, the National Agency of Petroleum, Natural Gas and Biofuels ("ANP") has introduced relevant innovations to the Concession Contract.

The bidding round, which will be held by ANP on November 28 and 29, will offer exclusively areas in onshore basins with high potential for natural gas from conventional and unconventional sources.

The main innovation of the Concession Contract in this regard is the concessionaire's option to enter into the so-called Extended Exploratory Period if there is a discovery of unconventional resources. This new exploratory period will apply exclusively to the concession areas with evidence of unconventional resources, and may have a maximum duration of six years, divided into three Extended Exploratory Periods of up to two years each.

The commencement of such extension is subject to the fulfillment of the following conditions:

ANP's certification of the discovery of unconventional resources. Approval of an Unconventional Resource Exploration and Appraisal Plan, which shall contain the description and planning of all exploratory activities to be performed by the concessionaire. The plan must contain the drilling of at least two wells in each Extended Exploratory Period in the case of new frontier basins, or one well in the case of mature basins. The Unconventional Resource Exploration and Appraisal Plan must be prepared based on specific instructions provided in an annex to the Concession Contract and delivered within one hundred and twenty days counted as from the ANP certification of the discovery. The Exploration Phase will be automatically suspended until ANP's decision regarding the referred plan is reached. Submission of a financial guarantee in the amount equivalent to the cost of the exploratory wells and activities committed to each of the Extended Exploratory Periods. Obtaining, before ANP, a new legal, technical and financial qualification specific to the exploration and production of unconventional resources. This qualification requires a minimum net equity equivalent to three times the net equity applied for qualification as Operator C, fixed at R$3.8 million, as well as the filing of a technical summary attesting a minimum experience of five years in unconventional resource exploration...

To continue reading