The ANP board approved yesterday (9/23) the publication of the resolution that will regulate the reduction of the royalty rate as an incentive to small and medium-sized companies.

This new resolution adds to the set of actions to encourage investments in E&P projects in Brazil, implemented from CNPE Resolution No. 17/2017, which established the new Oil and Natural Gas Exploration and Production Policy.

Historic

Since 2003, the National Energy Policy Council (CNPE) has established guidelines for the adoption of measures that encourage the participation of small and medium-sized companies in oil and natural gas exploration and production activities.

In 2018, the ANP Collegiate Board had already approved Resolution No. 749, which regulated the procedure for granting the royalty reduction as an incentive to incremental production in mature fields.

Article 1 of CNPE Resolution No. 04, of 06/04/2020, established that it is in the interest of the National Energy Policy that the ANP evaluate the adoption of measures aimed at reducing the royalty rate for fields granted to small businesses to up to 5% and medium-sized, classified according to the criteria established by the Agency.

Before its publication, the text underwent a period of public consultation and hearing. Additionally, to encourage social participation, a workshop was held in Dec/2020 with federal entities benefiting from royalties, the Ministry of Mines and Energy (MME) and industry members.

The expectation, with the new resolution, is that there will be an increase in economic attractiveness and continuity of production, extending the useful life of the fields, maintaining their regional socioeconomic benefits, such as the generation of jobs, income and collection of state and municipal taxes. There is also the prospect of increasing the participation of small and medium-sized companies in exploration and production activities, resulting in a greater plurality of actors in the industry.

Small and Medium Sized Businesses 

The criteria for classifying the size of a company in the oil and gas sector are provided for in ANP Resolution No. 32/2014. Currently, the list of ranked companies includes 19 small and 5 medium.

There are 113 fields owned by small and medium-sized companies, but 15 fields did not produce in 2021. The regulation of royalty reduction will be an incentive for the resumption of production from these inactive fields. In production, there are 38 fields operated by small-sized companies and 60 medium-sized ones.

The performance of these companies in Brazil is an important catalyst for regional socioeconomic development, especially in the interior of the Northeast. The royalty reduction will have a potential impact on 52 fields in RN, 30 in BA, 13 in AL, 10 in ES, 7 in SE and 1 in MA.

Other initiatives under development 

Pursuant to Article 2 of CNPE Resolution No. 4, of 06/04/2020, other initiatives to boost the attractiveness of projects and associated regional socioeconomic benefits are underway at the ANP, such as the definition and implementation of any incentives for accumulations or fields with marginal economy.