Décio: ANP director general bullish and committed to ‘building a new competitive environment’ for gas and and oil players

Gareth Chetwynd - UPSTREAM

Rio de Janeiro: 24 Feb 2017 00:00 GMT Updated 23 Feb 2017 10:46 GMT

Brazilian authorities responsible for promoting a major licensing push are sticking to their aggressive four-round schedule for 2017, defying suggestions that delays in defining local content rules might slow progress.

With a government committee thrashing out the final details of the rules that will govern local content commitments written into future concessions and production sharing contracts in Brasilia, the head of the country’s hydrocarbons regulator, Decio Oddone, remained bullish about the events ahead.

“We are living through the greatest transformation the Brazilian oil industry has ever seen,” said the director-general of Brazil’s National Petroleum Agency (ANP). “This year we will kick-start this process with four licensing rounds, and take important steps toward building the new competitive environment for the gas industry and the downstream sector.”

The promised 2017 agenda starts with a small licensing round for a handful of mature areas, then moves on to the country’s 14th offering of exploration and production concessions since the ending of the Petrobras monopoly and the first offering, in 1999 .

This offering includes 291 blocks in nine sedimentary basins, including deep-water plays in the Campos and Sergipe-Alagoas basin, frontier areas such as the Parana onshore and Pelotas offshore, plus a range of onshore opportunites, and shallower water plays in the southern Santos basin.

Oddone dismissed suggestions that it was a daring move to include frontier areas in the current environment of lower oil prices and reduced exploration budgets.

One case in point was the Pelotas basin, where Brazil was undeterred by Total’s disappointment on the Uruguayan side of the border.

“We are hearing that prospectivity looks better on the Brazilian side, and there will be an opportunity to test this soon because Petrobras will be drilling on an older concession there,” Oddone said.

“The main point it that we want to offer a diverse range of acreage to appeal to companies with varying profiles,” he added

Oddone said he expected the 10 deep-water blocks in the Campos basin to attract keen interest.

Defining these blocks as concessions, and therefore as located outside the pre-salt polygon, raised some eyebrows in the industry.

Areas within the “strategic” pre-salt polygon can only be offered as production-sharing agreements, according to a 2010 law.

One or two analysts have wondered openly about whether an explorer finding sub-salt hydrocarbons in such areas might face uncertainty over which contractual framework would apply, but Oddone allayed such fears.

“These concessions have been defined as outside the pre-salt polygon, so the concession rules will apply even if it turns out that there is oil under the salt there,” he said.

Oddone was bullish about the fact that Brazil is shaking off the notion of pre-salt protectionism, with two major offerings planned for the second half of this year. The first will feature areas ripe for unitisation with earlier discoveries, including the unlicensed half of the giant Carcara field, where Statoil bought out Petrobras on the concession area.

Brazilian authorities have surprised some analysts by moving forward even more aggressively with plans to hold another event before the end of the year, including several more blocks in the pre-salt polygon.

Mines and Energy Ministry officials have said that the offering will include three or four areas.

The ANP has been studying its own proposals for this, and was poised to send its recommendations to the energy ministry’s policy panel (CNPE) this week.

Likely candidates include the Pau Brasil and Saturno prospects, although Oddone would not confirm if they would be among the suggested areas.

He stressed that the agency was keen on offering diverse areas, with at least one area with a riskier exploration element.

The final bidding documents for the licensing round featuring concessions is also set to be published next month, although publishing the final map of blocks on offer will await approval by the CNPE.

Since taking over as director-general in January, Oddone has given considerable priority to the objective of creating a regular and predictable licensing process to help the country embed itself more firmly into the oil companies’ investment portfolios.

“We want to make our licensing process more predictable, and how to do this is already the topic of a government study group. However, we cannot afford to wait for this, and we are already beginning studies on licensing plans for 2018 and 2019,” he said.

Oddone said the basic scenario for the longer term is likely to involve two events per year, one featuring production-sharing contracts for the pre-salt and another offering E&P concessions, although he stressed that this format was still under discussion.

The transformation of which Oddone spoke relates to the fact that state-controlled Petrobras is pulling back from midstream and downstream sectors that it has so far dominated, while looking to offload non-core upstream assets.

“Our licensing push is intended to reinforce this process and we expect to see a big increase in investments and the arrival of new players, including in the downstream and gas sectors,” he said

Oddone declined to reveal the agency’s view on the best way of including local content requirements in the concessions and production-sharing contracts soon to be offered, but he said he was confident that the inter-ministerial committee was on the verge of reaching a workable solution involving broad categories with relatively modest percentages.

“Generally, the more simple the requirement is, the easier it is to work,” Oddone said.

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