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Final Fiscal Terms for Brazil’s 5th Production Sharing Round 2018


On 10 August 2018, the final Tender Protocol and model production sharing contracts for the 5th Production Sharing Round 2018 (5th Pre-Salt Round) were issued by the National Energy Policy Council (CNPE). This follows draft versions issued on 28 June 2018 and the CNPE publishing Resolution No. 4/2018 on the 11 May 2018 which established the technical and economic parameters for the round, as well as formally authorising the National Agency of Petroleum, Natural Gas and Biofuels (ANP) to carry out the bidding process. The 5th Pre-Salt Round will offer four areas located in the Santos and Campos Basins: Saturno, Titã, Pau-Brasil and Sudoeste de Tartaruga Verde.

5th Production Sharing Round blocks

5th Production Sharing Round blocks

The final fiscal terms that apply to the round are:

  • Signature bonuses: Saturno — R$ 3.125 billion; Titã — R$ 3.125 billion; Pau-Brasil — R$ 500 million; and Sudoeste de Tartaruga Verde — R$ 70 million.
  • A royalty rate of 15%.
  • Biddable cost recovery ceiling in a matrix comprised of daily production (five biddable tranches) and oil price (four biddable tranches).
  • Biddable state share of profit oil (after royalty and cost recovery) in tranches defined by an oil price and production matrix based on the Brent crude oil price and the average daily production of each producing well. The minimum state share of profit petroleum at a US$ 50/barrel oil price and average production of 12,000 bo/d for each producing well is dependent on block (all other oil price/production scenarios are based on pre-determined formulas for each matrix cell using the bid amount). The CNPE defined the minimum percentages of state profit oil for each block as: Saturno — 17.54% (was 9.56% in the draft version); Titã — 9.53% (was 5.80% in the draft version); Pau-Brasil – 24.82%; and Sudoeste de Tartaruga Verde — 10.01%.
  • Petrobras will only participate in the Sudoeste de Tartaruga Verde block with a 30% interest as operator.
  • The minimum mandatory local content rates are for Saturno, Titã and Pau-Brasil: (i) exploration phase — minimum global requirement of 18%; and (ii) development phase — 25% for the well construction, 40% for the collection and offloading system, and 25% for the stationary production unit. These percentages may not be waived. For the Sudoeste de Tartaruga Verde the minimum local content rates are: 55% in the exploration phase and 65% in the development phase.
  • Income tax payable.

Brazilian President Michel Temer approved the 5th Production Sharing Round in May and on 13 July the ANP disclosed that 20 companies had indicated an interest in participating including Petrobras, ExxonMobil and Total. Registration for the round closes on 24 August with bid submissions due to take place on 28 September 2018.

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