The end of the oil and gas monopoly occurred in Brazil in 1997 but it has not been successful and the “de facto monopoly” of Petrobras has generated distortions and prevented investments in the oil and gas sector in the last 22 years. Now the oil and gas sector in Brazil is going through deep changes. Following a divestment policy, Petrobras is finally selling assets that are not generating value to its shareholders. Some of the areas Petrobras is no longer interested are the mature fields, shallow waters and onshore fields.

In order to promote competition, Brazilian government has launched last July the New Gas Market Program (NMG), aiming at opening of the natural gas market in Brazil. The goal is to build an open, dynamic and competitive natural gas market.

Under its new management, Petrobras’ plan is to divest in the areas of natural gas, transportation, refining, and other segments. The upstream is the main focus as the profitability is much higher than in downstream. Indeed, presal projects profitability is at least 10-15%. Company is adapting its operations to live comfortably at a US$50 dollars/barrel and facing the development of alternative sources of energy.

As for the exploration fields, another good news is the current open acreage permanent auction system that the Brazilian National Petroleum, Natural Gas, and Biofuels Agency (ANP) is now promoting. The process consists in the continuous offer of relinquished marginal oil fields (or in process of devolution) and exploration blocks offered in past bid rounds that have not been awarded or which have been returned to the Agency. According to this modality, the registered bidders may present interest to any blocks or areas, as long as they present declaration of interest accompanied by bid guarantee. Applications can be submitted anytime and not just at designated bid rounds. When a company presents one or more declarations of interest, and its documents are approved, the ANP discloses a schedule for completing a bidding cycle.

On July 20, 2018, the first version of the tender protocol of the Open Acreage was published. Bidders who meet all the registration requirements established in the Tender Protocol had their application considered fit to be judged by the Bidding Special Commission (CEL). Once approved, registered bidders may show interest in any blocks or areas, provided that it has submitted an offer guarantee accompanied by a interest declaration. The schedules of the Open Acreage Cycles begin with the approval of one offer guarantee accompanied by an interest declaration presented by a bidder. When these declarations are submitted, Bidding Special Commission (CEL) announces a schedule for conducting a cycle for the submission of bids, containing all the dates to be met by companies that are already registered or by those that are not yet and want to participate in a cycle.

CEL issues the submission and payment fee dates, offer guarantee and interest declaration presentation, public session for offer presentation date, the bidders qualification, the adjudication of the bid as well as the homologation of the bid and the concession agreement celebration.

The First Cycle of Open Acreage is already underway. The Opening was on June 27, 2019 and the Deadline for submission of qualification documents (winning bidder) will occur on October 10, 2019. The process has been very successful as 47 oil companies have participated to this First Cycle, including Brazilian companies such as Petro Rio O&G Exploração e Produção de Petróleo Ltda. and Imetame Energia Ltda. and foreign such as Murphy Exploration & Production Company and Wintershall do Brasil Exploração e Produção Ltda. (full list at ANP website at http://rodadas.anp.gov.br/en/oferta-permanente/inscricao-de-licitantes)

It looks like the oil and gas sector in Brazil will now start an interesting phase with finally private companies playing an important role, not only in the exploration and production but also in the downstream area. All the blocks in all the onshore basins are included in the Open Acreage so the continuous offer of blocks will definitely promote exploration activity in onshore areas where small and medium size companies may be more efficient. The volume of activity can be considerable as Brazil has 884 blocks – 722 in 9 onshore basins and 162 blocks in 6 offshore basins. The permanent auction features 527 onshore blocks in the Espírito Santo, Potiguar, Recôncavo, Sergipe-Alagoas, Paraná, Parnaíba e Tucano basins and 73 offshore in the Campos, Ceará, Potiguar, Santos e Sergipe-Alagoas basins. The permanent offer map of areas can be found at ANP’s website: http://rodadas.anp.gov.br/arquivos/Oferta_Permanente/Mapas_blocos/OP_MAPA_GERAL.pdf

Julia Mota is founding partner of Mota Advogados (www.mlaw.com.br)