The Minister of Mines and Energy, Edison Lobão, announced today that the president Dilma Rousseff authorized the long-expected Brazil Round 11 to be held in May 2013. Although the details about the offered areas were not disclosed, the minister anticipated that the round will have the same blocks previously announced, except for 2 which were removed due to environmental permitting issues. The round will offer a total of 172 blocks, half of which are onshore and half offshore. This will be the first time offshore blocks will be offered since the Brazil Round 9 was held at the end of 2007.

Most of these blocks are located in the equatorial cost of Brazil, a promising area that is expected to have similar potential to the huge reserves discovered in the Gulf of Guinea, West Africa.

The minister also confirmed the 1st pre-salt round for November and announced the intention of the government to hold, already in 2013, a specific round with blocks of shale gas, a natural gas source of increasingly importance which already represents a significant share of the United States production. Finally, the minister announced the definitive cancellation of the Brazil Round 8, held on 2006, but suspended due to several judicial issues.

The minister corroborated the position recently announced by the government, that the discussions in course at the Congress regarding the redistribution of royalties from contracts already executed would not affect the previously defined schedule of rounds, as it regards exclusively contracts signed in former rounds.

In this regard, it is worth mentioning that last November 30th, president Dilma vetoed the articles of the new royalties law (Law 12,734/12) which determined the redistribution of royalties from fields already under production between all states and municipalities. The intention of the vetoes was to limit the new redistribution rule solely to contracts executed after publication of the law. At the same time, the president published the Provisional Act 592/2012, which replaced the vetoed articles and also established the destination of 100% of royalties and 50% of the pre-salt social fund to investments in education. However, these measures found a strong resistance in the Congress and parliamentarians from non-producing states are now articulating a movement to overturn the presidential vetoes. If this happens, producing states already announced that they will take the case to the Supreme Court, in a process that may take several months to be concluded.

For more information about the Brazil Round 11, or any other matter regarding this Legal Update, please contact Alexandre R. Chequer, Leonardo P. Costa, Victor Galante or Bruno Belchior.