On July 1st, 2013, the Brazilian Agency of Petroleum, Natural Gas and Biofuels ("ANP") published the rules detailing the procedures for the bidding round of blocks located in the Pre-Salt polygon and strategic areas for exploration and production of oil and natural gas under the production sharing regime.

The rules divide the bidding into 7 phases:

(i) Publication of Preliminary Tender Protocol: ANP submits the previous version of the tender protocol to analysis and suggestions from the general public;

(ii) Public Hearing: hearing in which the blocks to be offered will be officially informed and a public debate about the Preliminary Tender Protocol takes place;

(iii) Publication of the Tender Protocol: to occur at least 45 days before the date of submission of offers;

(iv) Qualification: up to 15 days after the publication of the Tender Protocol, bidders shall submit documents for technical, financial and legal qualification, meeting minimum standards set forth in the Tender Protocol. ANP may use a record of companies, in order to accelerate the qualification procedure. Foreign companies shall submit documentation evidencing regular operation in accordance with the laws of their countries, in addition to a commitment to incorporate a company under Brazilian laws in case they win the bidding;

(v) Submission of Offers and Bidding Judgment: qualified companies that submitted the bid guarantees (to be delivered at least 10 days before the bidding) may submit offers to be ranked according to the highest amount of profit oil offered to the Brazilian Government, subject to a minimum percentage to be fixed by the National Council of Energy Policy ("CNPE") and informed in the Tender Protocol;

(vi) Award of Contract and Bidding Approval: ANP'S Board of Directors shall ratify the results verified by the Special Bidding Committee;

(vii) Signature of Production Sharing Contract: after the publication of results, the winners will be notified to sign the contract with the Brazilian Ministry of Mines and Energy, according to the deadline set forth in the Tender Protocol.

In order to sign the contract, the winning bidder must enter into a consortium contract with Pré-sal Petróleo S.A. and Petrobras, and must indicate the latter as the sole operator of the block.  Petrobras will hold a minimum participation in blocks tendered, not lower than 30%, as established by CNPE and informed in the Tender Protocol. Still before the signing of the contract, the winning bidder must provide a financial guarantee in the amount of the minimum exploratory program, and demonstrate the payment of the signature bonus (both set forth in Tender Protocol).

The first bidding round of Pre-Salt areas under the production sharing regime should take place in October, in Rio de Janeiro. The only area to be offered will be Libra, with expectations of reservoirs containing 8 – 12 billion barrels of recoverable oil.

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.