Business opportunities of large scale are flourishing again within the oil & gas sector in Brazil, driven by the upstream - exploration and production ("E&P").

Brazil is distinguished within the oil & gas industry. The country is blessed with favorable geology, and since the introduction of the concession regime by the end of the 90's Brazil provides the industry with stable rules and harmony with the best practices of the global oil & gas industry.

Official figures show that there is yet a long run of business to be developed. And it is within that perspective that an industry demanded calendar of oil & gas public bids was recently announced for 2017 onwards, under both legal regimes effective in Brazil – concession and production sharing. The coming one is the 14th concession round ("14th round").

The industry is of the view that the 14th round should set both the return of larger E&P bids in Brazil and an agenda of annual auctions (onshore, offshore, mature, new areas, concession and profit sharing type).¹

The effects of those bids will certainly echo in the mid and downstream, therefore it is a great opportunity also for suppliers, contractors and lenders.

In this issue, we present some of the main particulars of the 14th round, scheduled for September 2017 and which is the first of the large rounds of this new momentum of the industry.

What is on offer

287 blocks in the offshore basins of Sergipe-Alagoas, Espírito Santo, Campos, Santos and Pelotas and in the onshore basins of Parnaíba, Paraná, Potiguar, Recôncavo, Sergipe-Alagoas and Espírito Santo, amounting to a 122,622.40 km² area.

What the terms are

In spite of having a concession model that has been from time to time updated to keep harmonized with the best practices of the oil & gas industry, the government has recognized that lower international oil prices and local bottlenecks should be addressed rapid and efficiently in preparation for the return of the bid rounds.

Accordingly, the regulatory and contractual resulting efforts for the 14th round are remarkable.

We highlight two key changes: local content rules and contractual revision.

Local content requirements were substantially reduced and stand now as follows:
"    Offshore: exploration 18%, stationary production units 25%, well construction 25% and collection and disposal system 40%
"    Onshore: exploration 50% and production 50%

Those new targets aim to recognize (1) the capital intensity of earlier phases, when the operations are still distant from monetization, and (2) the reality of the local supply industry.

Moreover, local content will no longer be evaluated line by line, but globally – as it should be at the end of the day. And it is no longer a bid criteria - a source of many problems for both the operators and the regulators on previous rounds and contracts. Bid criteria will be the signing bonus (80%) and work program (20%).

With more flexibility, the operators have more room for negotiation with their suppliers, for financial planning, etc.

There will be a single exploration phase (which means better planning and cost control). Procedures throughout the exploration phase were adjusted accordingly and the operators should now have much more room to plan their decisions on possible extensions, suspensions or (hopefully) move onto development and production.

Fiscal terms were also changed so that the royalties for mature and new frontiers recognize their inherent operational risks.

Overall, the bid documentation process, which was already well known but cumbersome, has been softened. For example, the bid rules acknowledge the effects of the Hague Apostille Convention that took effect in Brazil on August 14th, 2016 in order to simplify the legalization of documents between the signatory countries/Member States.

Last but not least, the required net worth for non-operators was reduced to a fraction of the requirement for the operators, in a move that should have appeal with investment funds, a trend amongst various infrastructure sectors in Brazil. It started successfully and more significantly in the power sector years ago and was more recently seen in other infrastructure sectors as well.

Next steps – target dates

ANP (National Petroleum, Natural Gas and Bio-fuel Agency) is currently holding public hearings on the bid process (including the bid protocol) and draft concession contract, and for now it has scheduled the public auction session for September 27th.

Disclosure of final bid documents is expected for July 20th.

In order to participate in the auction, potential bidders must observe two other deadlines: registration of the bidding company until August 8th (condition for obtaining the relevant data package), and submitting the bid bonds until September 12th.


Notwithstanding the merits of the changes already made and those that may come out of the public hearings, the process towards the auction is thorough and encompasses other important areas of law such as tax and environmental. Thus, the sooner adjustments start to be made the better.

Our Oil & Gas team has industry expertise and is constantly mapping potential business opportunities, studying and getting involved on legal and regulatory discussions. We have broad experience in oil & gas matters and transactions and in complementary areas of law, as well as on the liaison with the relevant authorities.

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.