ANP runs rule over exploration extension plans

Brazil’s National Petroleum Agency goes public for talks on move for 11th and 12th rounds

Brazil’s National Petroleum Agency (ANP) has declared a period of public consultation on a proposal to grant an across-the-board two-year extension for concessions granted in Brazil’s 11th and 12th licensing rounds, both held in 2013.

A few extensions have already been granted on a case-by-case basis, covering acreage located mainly in the northern equatorial margin region.

Operators in frontier areas such as the Foz de Amazonas and Barreirinhas basin have faced long and unforeseen delays in obtaining environmental permits for seismic acquisition.

The decision to analyse an across-the-board extension was taken by the policy panel (CNPE) of Brazil’s Mines & Energy Ministry and requests that the ANP, as Brazil’s hydrocarbons regulator, submits the question to analysis.

The proposed measure overtly recognises that the sharp fall in oil prices hit the economics of many projects.

The ANP’s remit to study the extension was based on the pragmatic premise that Brazilian policy should be concerned to keep projects in place and avoid relinquishments.

The resolution referred to the need to keep investments flowing and avoid triggering guarantee clauses on the concessions, generating extra expense for operators.

The 11th licensing round, held in 2013, was considered a success, with 289 concessions awarded but the 12th round, held just seven months later, was more affected by the declining price trend.

The CNPE resolution recognised that the great majority of operators were behind with their exploration programmes.

In the case of onshore blocks from the 11th round, where first phase exploration is approaching deadline, only 37% of minimum exploration commitments have been met so far, the ANP stated.

For offshore concessions, where the first phase of exploration expires in mid-2018, only 5% of commitments have been met so far.

On 61% of the blocks in question, the operators are considered to be facing significant difficulties in meeting their obligations.

The ANP had already received 30 requests for extensions on concessions awarded in the 11th and 12th rounds. The resolution recognised that operators on blocks of all sizes had fallen so far behind with their first-phase commitments that denying extensions would trigger a “huge number of relinquishments of concession contracts still in the exploration phase”.

Extensions were made conditional on applicants being in full compliance with their other contractual obligations in Brazil, including royalties and presenting new guarantees.

The ANP will hold a public hearing on the concession extensions on 3 April.

In an unrelated move, Brazil’s Petrobras has officially relinquished two more offshore areas. They are Campos basin concession C-M-333 (Block BM-C-28), and ES-M-413 (Block BM-ES-26) in the Espírito Santo basin. Petrobras had drilled two wells on C-M-33, and three wells on ES-M-413.

The company has offloaded most of its exploration acreage in the Campos basin, and the two areas retained already have discoveries.

One of these is Basilisco on Block BM-C-35, and the other is on C-M-401 (Block BM-C-36). The appraisal phases for these areas run to 2019 and 2021 respectively.