Unitization In Brazil

Author:Mr João Almeida and Priscila Park

The unitization in Brazil follows the basic principles of unitizations in the international oil and gas industry. In terms of specific regulations, it is adapted to the Brazilian regime which today involves concession, production sharing and the onerous assignment to Petrobras.

The unitization as in any other country applies to the situations that a reservoir extends the boundaries of a contracted block. The goal is to regulate the participation of the parties form the different contracted blocks or between the parties from one block and the Government in case the reservoir extends to an area not yet granted to an oil company. The concept is that the parties would be entitled to a fair interest of the reservoir considering the original participation in the blocks involved in the unitization. The main goal is to prevent predatory field production and optimize costs and results.

In Brazil, the unitization is regulated and supervised by the National Petroleum Agency ("ANP"), having the authority to approve the contracts and to impose the terms and conditions if the parties do not reach an agreement. The Federal Law 12,351/2010 and ANP Resolution 25/2013 are the legal framework of the unitization in Brazil. They define the main requirements of the unitization contract, the rules for the non-contracted areas, local content, government take among many other rules.

Although the agreement needs to be approved by ANP, the parties are entitled to freely negotiate its terms under certain requirements of the legislation. The definition of the parties vary depending on the location of the reservoir. If it is located on a contracted area with different companies or consortiums, the companies or consortiums therein located must execute a unitization agreement. This is the ordinary situation which the oil companies define the conditions of the agreement.

A different situation can happen with contracted areas of the same company or consortium with identical composition and percentages of participation with a reservoir crossing both areas, such company or consortium shall execute a Commitment Term of Unitization of Production. Such document is necessary as the different areas have different agreements and obligations. Therefore, it is necessary to define the participations, the rules of local content and the government take.

A third situation involving a non-contracted area is also possible and it has been happening in different cases in Brazil. If a...

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