Walker and Almada: Decree brings more security to the pre-salt exploration  

Legal certainty in the procedure of oil assets rights assignment is a great contribution.

The Decree No. 9.355 aims to detail governance rules, transparence and good market practices applicable to the exploration rights assignment, improvement and production of oil, natural gas and other fluid hydrocarbons by Petrobras and its subsidiaries. The Decree provides for the rules applicable to the concession contracts assignment (Law No. 9.478/97) and to the rights assignment and obligations related to the production sharing contracts, in pre-salt areas. (Law No. 12.351/2010).

The Law No. 9.478/1997 (Art. 29, Art. 61, caput and paragraph 1, Art. 63) deals with the assignment contract transference in a generic way, in which it must be preserved the object and the contractual conditions, since the new concessionaire answer the technical, economical and judicial requirements established by the National Pretroleum Agency (ANP).

The Law No. 12.351/2010, that regulates the pre-salt exploration, also provides the necessity of previous and express authorization of the Ministry of Mines and Energy, in consultation with ANP, for the assignment of rights and obligations related to the production sharing contract. Other conditions must also be observed, such as: (i) the preservation of the contractual object and its conditions; (ii) compliance with technical, economical and judicial requirements; and (iii) compliance with the exercise of the right of first refusal of the other members of the consortium, in proportion to their participation in the consortium. It is worth mentioning that Petrobras will only be able to yield the participation in the production sharing contracts in which it has obtained as winner of the bidding in the auction modality.

The intentions of the procedure regulated by the Decree No. 9355/2018 are to encourage the adoption of the governance methods that ensure the realization of the Petrobras’ corporate purpose, check impersonality to the management of its exploration and production portfolio, guarantee the quality and integrity of the decision-making process related to the assignment of rights and allow the acquisition of the best economic-financial return to Petrobras. These purposes are relevant mainly in face of the possibility of assignment of the pre-salt sharing agreements.

Nowadays, seven contracts are in force on a production sharing basis, in which the first one was signed in December 2013 – Libra Contract – and the other ones in January 2017, resulting from the 2nd and 3rd Bidding Round. The rights assignment procedures already completed before the Decree publication date, or whose definitive contracts have already been signed, won’t be subject to the provisions of the Decree.

The Decree establishes seven phases of the rights assignment process: (i) preparation; (ii) consultation of interest; (iii) presentation of preliminary proposals – moment at which the definition of the rights assignment object occurs; (iv) presentation of firm proposals (v) negotiation; (vi) result; and (vii) signature of the legal instruments. It is also planned the application of penalties to be defined in the proposal, in case of withdrawal of the best ranked participant.

The great contribution made by the Decree in the scope of the concession and sharing agreements is the increase of legal certainty in the assignment procedure. The description of the phases and the content of each one guarantees greater predictability, without eliminating the necessity of assignment approval by the public institutions, such as the National Petroleum Agency and the Ministry of Mines and Energy, as the case may be. The Decree, by seeking the acquisition of the best economic-financial return to Petrobras, through the increase of legal certainty, governance rules and transparency, benefits jointly the investors and the other members of the exploration consortia.

Priscila Benelli Walker 
Renato de Mello Almada
Chiarottino e Nicoletti