On April 26, 2018, Decree No. 9.355/2018 was published in the Federal Official Gazette ("Decree"), establishing the special procedure for assignment of rights regarding exploration, development and production of petroleum, natural gas and other fluid hydrocarbons by Petróleo Brasileiro S.A. (“Petrobras”).

The special procedure set forth by the Decree has the objectives of: (i) encouraging the implementation of governance methods that ensure the performance of Petrobras' corporate purpose; (ii) establishing impersonality for the management of Petrobras' exploration and production portfolio; (iii) ensuring legal certainty of the assignment procedures; (iv) ensuring the quality and integrity of the decision-making process that determines the assignment of rights; and (v) allowing Petrobras to obtain the best economic and financial return, considering its being subject to compliance with the legal regime of private companies with regards to free competition.

Among the above items, the guarantee of legal certainty required by the Decree stands out – to both Petrobras and relevant investors.

The Decree structures the special assignment procedure in seven different phases, which are:

(i) preparation phase, intended for the planning of the special assignment procedure;

(ii) consultation of interest phase, in which Petrobras will verify the market interest in the intended assignment through the announcement of the opportunity;

(iii) phase for submission of preliminary proposal, in which the assignment committee may, at its discretion, request the submission of preliminary proposals from the interested parties;

(iv) phase for submission of proposals, which will be binding on the bidders involved - subject to the changes arising from the negotiation phase. The assignment committee will be responsible for sending the request for binding proposals, as appropriate: (a) to all the interested parties who have expressed their interests during the consultation of interest phase; or (b) to all bidders qualified during the phase for submission of preliminary proposal;

(v) negotiation phase, in which, after the classification of the proposals, the assignment committee may negotiate with the best-ranked bidder or with other bidders, according to the ranking order, the best and most advantageous conditions for Petrobras;

(vi) result phase, in which the assignment committee will prepare the final report and Petrobras' relevant internal competent authority will deliberate on the assignment under the terms and conditions proposed by the best-ranked bidder; and

(vii) execution of contracts phase, in which the assignment committee will call the best ranked bidder for the execution of the relevant legal instruments.

The preemptive rights of Petrobras' partners will be observed in the special assignment procedure, as well as the confidentiality related to strategic information, protected by Petrobras’ legal confidentiality, or related to the special assignment procedure itself.

In addition, although the Decree mentions that the principles of publicity and transparency will be observed, paragraph 3 of Article 5 establishes that Petrobras' relevant internal competent authority may, in exceptional cases, classify the assignment, its phases or its documents as confidential, as long as the disclosure of such information represents a risk of financial losses for Petrobras or for the object of the assignment.

It is worth noting that the Decree lists the cases in which the competitive process of the assignment procedure will not be applied, which are: (i) in the formation or modification of partnerships or consortia, when the choice for a partner is connected to specific characteristics and to defined/specific business opportunities; (ii) when it is justified to not carry out a free competition procedure as provided for in the Decree; and (iii) in the case of right to withdraw, resulting from partnership agreements.

Lastly, it should be pointed out that provisions set forth in the Decree do not apply to assignment procedures already completed before the publication of the Decree, or to assignment procedures in which the final agreements have already been signed.

For more information on this legal update, please contact EnergyPartnersTC@mayerbrown.com.