Brazil: Highlights On The Draft Concession Agreement For ANP Round 11

Companies interested in offering comments and suggestions on the Draft Tender Protocol and the Draft Concession Agreement for ANP Round 11 must hurry up to meet the deadline fixed for this February 4th

Willing to give you some background on the main changes introduced by ANP, we highlight below our preliminary comments:    

- "FRADE" CLAUSES: In response to the lack of clear regulation and difficulties faced by ANP on the settlement of Frade case, the Draft Concession Agreement requires from Operator (i) the maintenance of a minimum staff domiciled in Brazil, fluent in Portuguese and able to efficiently conduct the daily operations, as well as to appropriately and immediately respond to incidents; and (ii) the constant monitoring of all activities involving operational, environmental or human health risks, through a monitoring center located in Brazil. Additionally, the Concessionaire must provide unrestricted and immediate transport, food and lodging facilities to the representatives of ANP for purposes of information and data collection for operational incidents; 

- EXPLORATION PHASE: If Concessionaire completes a well as additional activity to the Minimum Exploratory Program of the First Exploratory Period, it may request to the ANP that the commitment for the Second Exploratory Period is considered fulfilled in advance;  

- LOCAL CONTENT: ANP has considerably modified the local content clause in order to clarify the cases in which the concessionaire is exempted from compliance with local content requirements and to mitigate the rules. As an example, the chartering of drilling rig will be considered in the accomplishment of the obligation, even if its local content is less than 10%. In addition, pursuant to the new draft all the requests of waiver must be made in writing and submitted to ANP during the phase in which exemption is being sought;  

- ARBITRATION: The parties may agree to settle the arbitration before an arbitration court other than the International Chamber of Commerce Arbitration, provided that the agreed arbitration court is notoriously recognized and the conditions established in the Concession Agreement for the arbitration proceedings are observed; 

- RESEARCH AND DEVELOPMENT: ANP has established a Technical Scientific Committee responsible for preparing a list of priority areas, activities and projects of interest and important subjects for the use of R&D resources to be invested by the concessionaire, pursuant to the obligation set forth in the Concession Agreement;  

- FORCE MAJEURE, ACT OF GOD AND OTHER SIMILAR CAUSES: ANP has broaden the list of events which give grounds for the nonperformance of the Concession Agreement obligations by expressly referring to other similar causes, such as factum principis (fato do príncipe), act of state (fato da administração) and unforeseen interferences; and 

- UNITIZATION: The entire clause was removed from the draft, leaving only reference to the unitization procedure provided under the Pre-Salt Law (Law No. 12,351/2010). 

The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.

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