Brazil: Unitization In Brazil

Last Updated: 17 November 2015
Article by Joao Almeida and Priscila Park

The unitization in Brazil follows the basic principles of unitizations in the international oil and gas industry. In terms of specific regulations, it is adapted to the Brazilian regime which today involves concession, production sharing and the onerous assignment to Petrobras.

The unitization as in any other country applies to the situations that a reservoir extends the boundaries of a contracted block. The goal is to regulate the participation of the parties form the different contracted blocks or between the parties from one block and the Government in case the reservoir extends to an area not yet granted to an oil company. The concept is that the parties would be entitled to a fair interest of the reservoir considering the original participation in the blocks involved in the unitization. The main goal is to prevent predatory field production and optimize costs and results.

In Brazil, the unitization is regulated and supervised by the National Petroleum Agency ("ANP"), having the authority to approve the contracts and to impose the terms and conditions if the parties do not reach an agreement.  The Federal Law 12,351/2010 and ANP Resolution 25/2013 are the legal framework of the unitization in Brazil. They define the main requirements of the unitization contract, the rules for the non-contracted areas, local content, government take among many other rules.

Although the agreement needs to be approved by ANP, the parties are entitled to freely negotiate its terms under certain requirements of the legislation. The definition of the parties vary depending on the location of the reservoir. If it is located on a contracted area with different companies or consortiums, the companies or consortiums therein located must execute a unitization agreement. This is the ordinary situation which the oil companies define the conditions of the agreement.

A different situation can happen with contracted areas of the same company or consortium with identical composition and percentages of participation with a reservoir crossing both areas, such company or consortium shall execute a Commitment Term of Unitization of Production. Such document is necessary as the different areas have different agreements and obligations. Therefore, it is necessary to define the participations, the rules of local content and the government take.

A third situation involving a non-contracted area is also possible and it has been happening in different cases in Brazil. If a reservoir is located in a contracted area and extends to a non-contracted area, the Brazilian Government will be the party of the unitization agreement. This does not prevent the area to be offered in a bid round, but the future holder of the rights of the area (concession or production sharing agreement) will be subject to such agreement. In this case after definition of the future concessionaire or contracted party, the unitization agreement may be adjusted.

The unitization of non-contracted areas will also vary depending of the location of the reservoir. If the shared reservoir is located in the pre-salt area or in strategic area and extends to a non-contracted area, the Brazilian Government will be represented by Brazilian Pre-salt Public Company - PPSA[1] ("PPSA"). Otherwise, if not located in such areas, the government will be represented by ANP.

An interesting situation can happen because of the recent change of the legislation in Brazil creating the production sharing regime. Some areas of the pre-salt were granted before the new legislation under the concession regime and there could be an unitization of an area under the concession regime and another under production sharing regime. It is also possible the execution of the PPSA unitization agreement with a party holder of a concession in the pre-salt. In such situations the unitization agreement will also have to deal with the differences of the regimes, government take etc.

The expenses of the parties should be proportional to the interest the parties would have in the reservoir subject to unitization. Although the parties could set different terms in the agreement, that is unlikely to be agreed by parties. In case of a unitization with a non-contracted area, the Government would also be responsible for its interest in the expenses. However, the legislation sets forth that the Government should not make any disbursement to pay the costs for its interest, being its share of costs of production and investments in the development phase deducted from the amount to which is entitled in the production of the shared reservoir. Such deduction shall not exceed the amount equivalent to 20% of the monthly production of the shared reservoir. Although, the rationale of upstream in Brazil is that the Government should not make investments, this rule could turn an economic viable reservoir into non-viable. It is not just the carrying aspect, but mainly the limitation on the deduction which makes this rule over protective in favor of the Government.

The redetermination is another important topic of unitization. This is one of the requirements of the law and it is a standard of the industry to have limitations and rules for the request of redetermination by one of the parties. Besides the rules of the agreement, ANP may request a redetermination is made when technically justifiable. This is another provision criticized for situations of unitization in non-contracted areas. Such rule could be used by Government to request redeterminations above the limits provided for in the agreement. 

Local content which is one of the main concerns of the oil companies in Brazil also has some specific rules in case of unitization. In the exploration phase, the parties shall comply with the commitments of local content following the provisions in the agreements that govern the contracted areas that contains the shared reservoir, subject to individualized inspections. In the stage of development of the production phase, the local content shall comply with the proportionality, calculated based on the consideration between the original volume of equivalent oil of the areas subject of unitization; and  the respective commitments of local content defined in the agreements that govern the contracted areas that contains the shared reservoir. For the non-contracted areas it shall be considered the local content commitments of the contracted areas.

If the Parties do not voluntarily execute the Unitization Agreement within the period established by ANP, a petition shall be submitted to ANP by the parties informing what prevented the execution of the unitization agreement and the petition shall comprise a proposal for solution. Based on these information provided by the parties and other information that ANP may request, a technical report will be prepared either by ANP itself or by third parties accepted by ANP. The report shall be submitted to ANP's Board which will define the terms for the unitization agreement to be executed by the parties.

With the increase of the offshore production over the years, unitization agreements in Brazil became more frequent and it tends to become even more frequent in the future. According to Brasil Energia Petróleo e Gás magazine[2], a research made by GEE, a group of economy and energy of the Federal University of Rio de Janeiro (UFRJ) indicates that there are 20 to 25 billion of oil barrels in fields that will require unitization of production and oil company officers estimate that 50% to 60% of the oil to be produced in the year of 2020 will come from assets of areas that will need unitization. The same article informed that PPSA expected to conclude 6 cases of unitization this year but had already identified another 19 areas that may be subject to unitization due to the extent of the reservoir to non-contracted areas in the pre-salt polygon. 16 out of these 19 cases were foreseen to start production between the years of 2014 and 2015.

[1] Pré-Sal Petróleo S.A.: Government company in charge of the management of the production sharing agreements (compulsory for the pre-salt and strategic areas).

[2] Editions of June 2nd and August 14th, 2015.

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.

To print this article, all you need is to be registered on

Click to Login as an existing user or Register so you can print this article.

Some comments from our readers…
“The articles are extremely timely and highly applicable”
“I often find critical information not available elsewhere”
“As in-house counsel, Mondaq’s service is of great value”

Related Topics
Related Articles
Up-coming Events Search
Font Size:
Mondaq on Twitter
Register for Access and our Free Biweekly Alert for
This service is completely free. Access 250,000 archived articles from 100+ countries and get a personalised email twice a week covering developments (and yes, our lawyers like to think you’ve read our Disclaimer).
Email Address
Company Name
Confirm Password
Mondaq Topics -- Select your Interests
 Law Performance
 Law Practice
 Media & IT
 Real Estate
 Wealth Mgt
Asia Pacific
European Union
Latin America
Middle East
United States
Worldwide Updates
Registration (you must scroll down to set your data preferences)

Mondaq Ltd requires you to register and provide information that personally identifies you, including your content preferences, for three primary purposes (full details of Mondaq’s use of your personal data can be found in our Privacy and Cookies Notice):

  • To allow you to personalize the Mondaq websites you are visiting to show content ("Content") relevant to your interests.
  • To enable features such as password reminder, news alerts, email a colleague, and linking from Mondaq (and its affiliate sites) to your website.
  • To produce demographic feedback for our content providers ("Contributors") who contribute Content for free for your use.

Mondaq hopes that our registered users will support us in maintaining our free to view business model by consenting to our use of your personal data as described below.

Mondaq has a "free to view" business model. Our services are paid for by Contributors in exchange for Mondaq providing them with access to information about who accesses their content. Once personal data is transferred to our Contributors they become a data controller of this personal data. They use it to measure the response that their articles are receiving, as a form of market research. They may also use it to provide Mondaq users with information about their products and services.

Details of each Contributor to which your personal data will be transferred is clearly stated within the Content that you access. For full details of how this Contributor will use your personal data, you should review the Contributor’s own Privacy Notice.

Please indicate your preference below:

Yes, I am happy to support Mondaq in maintaining its free to view business model by agreeing to allow Mondaq to share my personal data with Contributors whose Content I access
No, I do not want Mondaq to share my personal data with Contributors

Also please let us know whether you are happy to receive communications promoting products and services offered by Mondaq:

Yes, I am happy to received promotional communications from Mondaq
No, please do not send me promotional communications from Mondaq
Terms & Conditions (the Website) is owned and managed by Mondaq Ltd (Mondaq). Mondaq grants you a non-exclusive, revocable licence to access the Website and associated services, such as the Mondaq News Alerts (Services), subject to and in consideration of your compliance with the following terms and conditions of use (Terms). Your use of the Website and/or Services constitutes your agreement to the Terms. Mondaq may terminate your use of the Website and Services if you are in breach of these Terms or if Mondaq decides to terminate the licence granted hereunder for any reason whatsoever.

Use of

To Use you must be: eighteen (18) years old or over; legally capable of entering into binding contracts; and not in any way prohibited by the applicable law to enter into these Terms in the jurisdiction which you are currently located.

You may use the Website as an unregistered user, however, you are required to register as a user if you wish to read the full text of the Content or to receive the Services.

You may not modify, publish, transmit, transfer or sell, reproduce, create derivative works from, distribute, perform, link, display, or in any way exploit any of the Content, in whole or in part, except as expressly permitted in these Terms or with the prior written consent of Mondaq. You may not use electronic or other means to extract details or information from the Content. Nor shall you extract information about users or Contributors in order to offer them any services or products.

In your use of the Website and/or Services you shall: comply with all applicable laws, regulations, directives and legislations which apply to your Use of the Website and/or Services in whatever country you are physically located including without limitation any and all consumer law, export control laws and regulations; provide to us true, correct and accurate information and promptly inform us in the event that any information that you have provided to us changes or becomes inaccurate; notify Mondaq immediately of any circumstances where you have reason to believe that any Intellectual Property Rights or any other rights of any third party may have been infringed; co-operate with reasonable security or other checks or requests for information made by Mondaq from time to time; and at all times be fully liable for the breach of any of these Terms by a third party using your login details to access the Website and/or Services

however, you shall not: do anything likely to impair, interfere with or damage or cause harm or distress to any persons, or the network; do anything that will infringe any Intellectual Property Rights or other rights of Mondaq or any third party; or use the Website, Services and/or Content otherwise than in accordance with these Terms; use any trade marks or service marks of Mondaq or the Contributors, or do anything which may be seen to take unfair advantage of the reputation and goodwill of Mondaq or the Contributors, or the Website, Services and/or Content.

Mondaq reserves the right, in its sole discretion, to take any action that it deems necessary and appropriate in the event it considers that there is a breach or threatened breach of the Terms.

Mondaq’s Rights and Obligations

Unless otherwise expressly set out to the contrary, nothing in these Terms shall serve to transfer from Mondaq to you, any Intellectual Property Rights owned by and/or licensed to Mondaq and all rights, title and interest in and to such Intellectual Property Rights will remain exclusively with Mondaq and/or its licensors.

Mondaq shall use its reasonable endeavours to make the Website and Services available to you at all times, but we cannot guarantee an uninterrupted and fault free service.

Mondaq reserves the right to make changes to the services and/or the Website or part thereof, from time to time, and we may add, remove, modify and/or vary any elements of features and functionalities of the Website or the services.

Mondaq also reserves the right from time to time to monitor your Use of the Website and/or services.


The Content is general information only. It is not intended to constitute legal advice or seek to be the complete and comprehensive statement of the law, nor is it intended to address your specific requirements or provide advice on which reliance should be placed. Mondaq and/or its Contributors and other suppliers make no representations about the suitability of the information contained in the Content for any purpose. All Content provided "as is" without warranty of any kind. Mondaq and/or its Contributors and other suppliers hereby exclude and disclaim all representations, warranties or guarantees with regard to the Content, including all implied warranties and conditions of merchantability, fitness for a particular purpose, title and non-infringement. To the maximum extent permitted by law, Mondaq expressly excludes all representations, warranties, obligations, and liabilities arising out of or in connection with all Content. In no event shall Mondaq and/or its respective suppliers be liable for any special, indirect or consequential damages or any damages whatsoever resulting from loss of use, data or profits, whether in an action of contract, negligence or other tortious action, arising out of or in connection with the use of the Content or performance of Mondaq’s Services.


Mondaq may alter or amend these Terms by amending them on the Website. By continuing to Use the Services and/or the Website after such amendment, you will be deemed to have accepted any amendment to these Terms.

These Terms shall be governed by and construed in accordance with the laws of England and Wales and you irrevocably submit to the exclusive jurisdiction of the courts of England and Wales to settle any dispute which may arise out of or in connection with these Terms. If you live outside the United Kingdom, English law shall apply only to the extent that English law shall not deprive you of any legal protection accorded in accordance with the law of the place where you are habitually resident ("Local Law"). In the event English law deprives you of any legal protection which is accorded to you under Local Law, then these terms shall be governed by Local Law and any dispute or claim arising out of or in connection with these Terms shall be subject to the non-exclusive jurisdiction of the courts where you are habitually resident.

You may print and keep a copy of these Terms, which form the entire agreement between you and Mondaq and supersede any other communications or advertising in respect of the Service and/or the Website.

No delay in exercising or non-exercise by you and/or Mondaq of any of its rights under or in connection with these Terms shall operate as a waiver or release of each of your or Mondaq’s right. Rather, any such waiver or release must be specifically granted in writing signed by the party granting it.

If any part of these Terms is held unenforceable, that part shall be enforced to the maximum extent permissible so as to give effect to the intent of the parties, and the Terms shall continue in full force and effect.

Mondaq shall not incur any liability to you on account of any loss or damage resulting from any delay or failure to perform all or any part of these Terms if such delay or failure is caused, in whole or in part, by events, occurrences, or causes beyond the control of Mondaq. Such events, occurrences or causes will include, without limitation, acts of God, strikes, lockouts, server and network failure, riots, acts of war, earthquakes, fire and explosions.

By clicking Register you state you have read and agree to our Terms and Conditions