Skip to main content

Legal Update

Brazil: Resolution on Reduction of Royalties for Mature Fields Published

28 September 2018
Tauil & Chequer Legal Update

On September 24, 2018, Resolution No. 749/2018 ("Resolution") of the National Agency for Petroleum, Natural Gas and biofuels ("ANP") was published in the Official Gazette, regulating the procedure for the reduction of royalties up to 5% on incremental production of mature fields.

The Resolution establishes that only mature fields will be eligible to obtain the reduction of royalties on incremental production, upon request of the operator and proof of the economic benefit to federal entities. For the purposes of the Resolution, a mature field constitutes one with 25 years or more of production or that has accumulated production equal to or greater than 70% of the volume expected to be produced, considering the proven reserves.

Operators interested in receiving the incentive must submit a request to the ANP, accompanied by a revised version of the Development Plan, containing:

  • description of projects supporting the incremental production forecast;
  • detailed schedule of activities and investments;
  • detailed estimate of investments and operational costs;
  • estimate of recoverable volumes and projections of oil and natural gas production associated with projects;
  • detailed cash flow on activities and investments with regard to   the incremental production of oil and natural gas; and
  • evidence of economic benefit to federal entities in the application for the incentive, including extension of the field’s life, incremental recovery factor, additional governmental participations.

The ANP will examine requests to obtain the incentive together with the revised Development Plan within 180 days, calculated from the date of the request.

Once the reduction and the respective Development Plan are approved, the concession contracts relating to the fields pending request will be changed by means of an amendment containing the production curve reference and the granted royalties rate.

The Resolution also provides for the different criteria for determining the rates of royalties reduction for mature fields of small and large production.  The reduction of royalties will be applied from the month following the completion of the first activity set out in the Development Plan, and upon the incremental production effectively carried out.

Authors

  • Bruno Triani Belchior
    T +55 21 2127 4205
  • André Lemos
    Associate
    T +55 21 2127 1632
  • Livia Seabra V. de Lima
    T +55 21 2127 4298
  • Henrique Rojas
    T +55 21 2127 4208
  • Isabella Vieira Mendonça
    T +55 21 2127-4289
  • Patricia Pereira Winter
    T +55 21 2127 4233
  • Tiago do Monte Macêdo
    Special Counsel
    T +55 61 3221 4366
The Build a Report feature requires the use of cookies to function properly. Cookies are small text files that are placed on your computer by websites that you visit. They are widely used in order to make websites work, or work more efficiently. If you do not accept cookies, this function will not work. For more information please see our Privacy Policy

You have no pages selected. Please select pages to email then resubmit.