Abandonment and decommissioning activities are a normal part of the life cycle of oil and natural gas fields, work usually done when production is no longer economically feasible and output has become insufficient to sustain operating costs. Such activities may include the final interruption of the facilities' operation, the permanent abandonment and razing of wells and the removal of facilities.

Acknowledging this reality, Brazil's exploration and production (E&P) contracts establish that contractors must carry out the decommissioning activities and present abandonment guarantees to cover the estimated costs. From a regulatory perspective, the decommissioning of E&P facilities must comply with specific rules issued by different entities, such as environmental entities, the Brazilian Navy and the National Agency of Petroleum, Natural Gas and Biofuels (ANP).

Around 2015, ANP initiated discussions and additional studies on decommissioning activities in Brazil to review and standardize the framework. With the subject increasingly importantce as the number of mature fields grows in Brazil.

n 2020, ANP published Resolution No. 817/2020, which was a milestone for the energy industry, consolidating and modernizing the technical regulation for decommissioning of E&P Facilities and making ANP's analysis more dynamic.

Later, ANP published Resolution No. 854/2021, reinforcing its commitment to promote legal certainty and clarity on the obligations and deadlines for the presentation of abandonment guarantees. ANP Resolution No. 854/2021 also expressly stated the acceptance of other types of abandonment guarantees and their specific requirements.

Moreover, the Decommissioning Facility Plans submitted by contractors to ANP are publically available, in compliance with the provisions of ANP Resolution No. 817/2020, making the procedure more transparent. ANP forecasts a investment of BRL 30,92 billion from 2021 until 2025 in decomissioning activities, pursuant to ANP's Painel Dinâmico de Descomissionamento de Instalações.

Decommissioning Procedure

ANP Resolution No. 817/2020

ANP Resolution No. 817/2020 was published on April 24, 2020, and modernized the legal framework for decommissioning in Brazil by establishing the Technical Regulation for Decommissioning of Exploration and Production Facilities.

The resolution was the result of a joint effort of ANP, the Brazilian Institute for the Environment and Renewable Natural Resources (IBAMA) and the Brazilian Navy. The purpose was to include in a single instrument the provisions for decommissioning facilities, promoting legal certainty, regulatory simplification and a more efficient proceeding, even though ANP Resolution No. 817/2020 is not a joint resolution.

This resolution also regulated the decommissioning in the assignment of contracts, the inclusion of the onshore area under contract in the production phase in the permanent offer, the disposal and reversal of assets, compliance of remaining obligations in the exploration phase and relinquishment of areas in the production phase.

Pursuant to the resolution, the contractor must explore all economically and environmentally feasible development options in order to maximize the recovery of the reservoir and avoid premature decommissioning of production facilities.

In this sense, ANP Resolution No. 817/2020 provides for a detailed procedure to be followed by the contractor, including specific documents to be prepared and submitted to ANP within the applicable deadlines.

n case there are facilities to be decommissioned by assignor under an assignment proceeding, assignor will be required to submit and updated Facility Decommissioning Plan with the assignment request. A deed of decommissioning must also be executed between assignor and ANP, as well as assignee in the capacity of consenting party.

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