Keywords: Energy, National Agency of Petroleum Natural Gas and Biofuels, ANP, royalties, Resolution No. 862, Concession Contracts and Production Sharing Agreements, Onerous Assignment Contracts,
The National Agency of Petroleum, Natural Gas and Biofuels ("ANP") adopted a new rule for royalties charged on oil and gas produced during well formation tests, pursuant to the ANP Board of Directors Resolution No. 862 dated August 13, 2014.
According to the resolution, for Concession Contracts and Production Sharing Agreements, the royalties will always be due on formation tests during the Production Phase. During the Exploration Phase, royalties will be due only in case of economic use of the production.
For Onerous Assignment Contracts (which are exclusive for Petrobras), the resolution clarifies that royalties have always been due on formation tests.
The formation test is an important instrument for analysis of the well after the drilling of a potentially productive area, which allows the evaluation of the extension and potential of the reservoir. For ANP, the need for the revision of rules resulted from an expected increase of production in the pre-salt areas, where the volumes produced during the formation tests are substantial.
The resolution also reiterates that the production from formation tests subject to payment of royalties shall be reported to ANP through monthly production reports, and that all measurement systems shall be implemented in accordance with the specific technical regulation.
The ANP Board of Directors' Resolution 862/2014 is available on the ANP website (document in Portuguese).
Originally published September 4, 2014
Visit us at Tauil & Chequer
Founded in 2001, Tauil & Chequer Advogados is a full service law firm with approximately 90 lawyers and offices in Rio de Janeiro, São Paulo and Vitória. T&C represents local and international businesses on their domestic and cross-border activities and offers clients the full range of legal services including: corporate and M&A; debt and equity capital markets; banking and finance; employment and benefits; environmental; intellectual property; litigation and dispute resolution; restructuring, bankruptcy and insolvency; tax; and real estate. The firm has a particularly strong and longstanding presence in the energy, oil and gas and infrastructure industries as well as with pension and investment funds. In December 2009, T&C entered into an agreement to operate in association with Mayer Brown LLP and become "Tauil & Chequer Advogados in association with Mayer Brown LLP."
© Copyright 2014. Tauil & Chequer Advogados, a Brazilian law partnership with which Mayer Brown is associated. All rights reserved.
This article provides information and comments on legal issues and developments of interest. The foregoing is not a comprehensive treatment of the subject matter covered and is not intended to provide legal advice. Readers should seek specific legal advice before taking any action with respect to the matters discussed herein.