Rodolfo Saboia - General Director ANP
- Communication and Institutional Relations Superintendency (SCI)
- People Knowledge Management Superintendency (SGP)
- Administrative Management and Acquisition Superintendency (SGA)
- Financial and Budget Management Superintendency (SFO)
- Information Technology Superintendency (STI)
- Credit Management Office (NGC)
- General Director's Office (GAB)
- Head Office (EDF)
Symone Christine de Santana Araújo – Director 1
- Technical Data Superintendency (SDT)
- Distribution and Logistics Superintendency (SDL)
- Technological Research and Development Superintendency (SPD)
- Operational Safety and Environment Superintendency (SSM)
Daniel Maia Vieira – Director 2
- Biofuels and Product Quality Superintendency (SBQ)
- Development and Production Superintendency (SDP)
- Supply Inspection Superintendency (SFI)
- Research and Technological Analysis Center (CPT)
- Regional Units for Supervision of Supply (NRFs)
- Oil and Natural Gas Production Metering Supervision Center (NFP)
Fernando Moura – Director 3
- Antitrust Superintendency (SDC)
- Infrastructure and Movement Superintendency (SIM)
- Geological and Economic Assessment Superintendency (SAG)
- Exploration Superintendency (SEP)
Claudio Jorge Martins de Souza – Director 4
- Bidding Promotion Superintendency (SPL)
- Local Content superintendency (SCL)
- Government Participation Superintendency (SPG)
- Fuel Production Superintendency (SPC).
The Brazilian regulatory framework applicable to the oil and gas industry is mainly issued by the following governmental bodies: (i) the National Agency for Petroleum, Natural Gas and Biofuels (ANP); (ii) the Ministry of Mines and Energy (MME); and (iii) the National Council for Energy Policy (CNPE). Below there is a description of the functions of each of these bodies. Non-compliance with the regulations from the bodies above may result in infraction notices and administrative proceedings, after which fines can be applied to the non-compliant company.
- MME: is a body of the Federal Executive Power with jurisdiction over matters relating to mineral and energy resources, use of hydraulic energy, mining, petroleum, fuel, and electric power, including nuclear and renewable energies. MME is responsible for issuing policies and guidelines, performing analysis, granting authorisations, among other activities.
- CNPE: is a council created by Law 9,478/1997 (Petroleum Law), which is chaired by the Minister of Mines and Energy and advises the President of the Republic in the development of policies and guidelines on energy matters. CNPE’s scope includes: (i) proposal of energy policies guaranteeing the supply of energy in Brazil; (ii) decision on energy areas that require further investments; (iii) definition of areas to be offered by ANP through bid proceedings; (iv) guidelines for international trade activities by private companies; and (v) definition of strategies to be followed by other governmental bodies for economic and technological development of the energy sector.
- ANP: is a regulatory agency created by the Petroleum Law for the specific purpose of contracting, auditing and regulating the activities of exploration, production, refining, sale and transport of oil and its derivatives in Brazil. This chapter will focus on the ANP’s role as the main government body regulating the oil and gas industry. ANP issues regulations that must be complied with by oil companies and service providers operating in Brazil. There are various licences, authorisations, permits and registration from the ANP that are required for companies to perform hydrocarbon-related activities in the country (eg, for the activities of refining, processing, treatment, transportation, storage and packaging of oil, natural gas, biogas, biomethane and biofuels). Among ANP’s duties we refer to: (i) stimulation to innovation and research to increase competition in the sector; (ii) performance of national policies; (iii) delimitation, analysis and offering of areas for oil and gas exploration through bid proceedings; (iv) granting of exploration and production rights by means of concession contracts or production sharing contracts; and (v) inspection of regulates entities and application of administrative fines after due administrative proceedings.
Reporting and disclosure obligations
There are many reporting and disclosure obligations towards the ANP by companies holding exploration and production rights in Brazil. We have listed a few submissions considered the most relevant in everyday activities, which we recommend special attention from international companies acting in Brazil:
Monetary sanctions and recent behaviour
Federal Law No. 9,847/1999 is the main law governing rules on inspection and monetary sanctions applicable to companies performing activities related to the national fuel supply, including O&G activities. ANP regulations also provide for monetary sanctions. The regulations on this matter are constantly updated, especially considering the specificities of the energy industry, which is ever changing in line with global transformations.
Federal Law No. 9,847/1999
Federal Law No. 9,847/1999 establishes administrative sanctions to be applied by ANP against regulated players in default of their obligations. Once an infraction is identified, the ANP issues a notice of infraction indicating which provisions of the law were breached. The specific sanction and its amount depend on the breach. The breaching company may provide its defence by means of the administrative proceeding. The final decision on the sanction must consider the following aspects:
- severity of the infraction;
- potential consequences;
- company’s financial capacity; and
- advantage gained by the company as a result of the breach.
Below follows a list of the main monetary sanctions provided under this law, along with the minimum and maximum amounts. The amounts are reduced by 30% if the breaching company expressly waives the right to appeal the decision rendered in the administrative proceeding.
- lack of authorisation: Performance of activities related to oil, biofuels, national fuel supply, National Fuel Stock System and Annual Strategic Fuel Stock Plan, without prior registration or authorisation required by the applicable legislation – subject to fine from 50,000 to 200,000 reais;
- deviation from the description of authorisation: Import, export or commercialisation of oil, natural gas, derivatives and biofuels in a quantity or specification different from what was authorised, as well as giving the product an unauthorised or different destination from what was provided for in the applicable legislation – subject to a fine between 20,000 reais and 5,000 reais;
- non-compliance with requirements for construction and operation of O&G facilities: Construction or operation of oil and gas facilities and equipment in breach of the applicable legislation – subject to a fine between 5,000 reais and 2 million reais; and
- non-submission of the monthly report: Default in submitting monthly reports in the form and within the deadline established in the legislation – subject to a fine from 20,000 to 1 million reais.
Local Content: ANP Resolution 19/2013 and ANP Resolution 726/2018
O&G companies operating in Brazil must comply with minimum local content obligations required under the Petroleum law and ANP’s regulations. The local content obligations consist of minimum percentages of local goods or services that must necessarily be hired by those companies. This is a means to encourage the development of the Brazilian industry. The compliance with local content obligations is evidenced by local content certificates, which are issued by certifying bodies accredited by the ANP (organismos de certificação). ANP Resolution 19/2013 (RANP 19) regulates the certification by such entities, and provides the local content calculation formulas for each type of asset and service.
ANP Resolution 726/2018 (RANP 726) establishes the minimum local content percentages that should apply to the O&G companies under concession contracts or production sharing contracts. For example, the following percentages have been applied to existing concession contracts:
- for the exploration phase – 18%; and
- for the development phase in regard to: (i) well construction - 25%, (ii) stationary production unit engineering – 40%; (iii) stationary production unit machinery and equipment – 40%; (iv) stationary production unit construction, integration and installation – 40%.
Currently, there is no local content obligation for the production phase.
RANP 726 also provides for fines applicable to companies if they do not comply with the minimum percentages of local content provided for in their contracts, as follows:
- 40% of the non-performed local content investment value, if more than 35% of the local content investment commitment is accomplished; and
- from 40% to 75% of the non-performed local content investment value, if less than 35% of the local content investment commitment is accomplished.
Other ANP fines
ANP Ordinance 234/2003 provides for monetary sanctions for breach of provisions from concession contracts, tender notices, and assignment of rights under concession contracts. The applicable fines vary from 25,000 to 1 million reais.
Non-monetary sanctioning powers and behaviour
Federal Law No. 9,847/1999
Federal Law No. 9,847/1999 also provides for non-monetary sanctions as follows:
- seizure of goods and product apprehension;
- loss of seized products;
- cancellation of the product’s registration with ANP;
- suspension of product supply;
- temporary suspension, total or partial, of O&G facility;
- cancellation of the registration of the O&G facility; and
- revocation of authorisation for performance of activities related to the oil, natural gas and biofuels industry.
Non-monetary sanctions may be applied in along with monetary sanctions. For example, the ANP may revoke an authorisation for five years if, among other hypotheses, a company commits fraud with the purpose of unduly receiving amounts, and has already been punished twice with the sanction of suspension of the registration of its facility.
Other ANP regulations
ANP Ordinance 234/2003 establishes non-monetary sanctions for breach of the provisions from concession contracts, tender notices, and assignment of rights under concession contracts. The regulation repeats most of the non-monetary sanctions from Law No. 9,847/1999, adding the following sanctions: termination of the concession contract; and temporary suspension of the right to participate in future bidding rounds and to contract with ANP for a period of five years. There is no ANP regulation on non-monetary sanctions for breach of provisions related to the production sharing regime. Nonetheless, the most recent versions of the tender protocol of both the concession and production sharing bid rounds provide for sanctions similar to those established under ANP Ordinance 234/2003.
Recent and upcoming developments
Our team has been closely following the development of ANP’s regulations throughout 2021–2022. Below we describe some of the most important ANP regulatory updates of the year.
Code of Adjustment of Conduct for Local Content Fines
ANP published Resolution 848/2022 in December 2022, which provides the rules and procedures for the replacement of local content fines with (i) new investments in local content or (ii) local content surplus in other concession contracts, by a defaulting concessionaire. The replacement is made by means of the execution of a conduct adjustment agreement (TAC) with ANP. Once a TAC is entered into, if not complied with it shall subject the defaulting concessionaire to a fine of 50% of the TAC amount plus the non-complied-with investment commitment. The purpose of ANP Resolution 848/21 is to preserve local content investments, instead of applying fines, since fines do not encourage nor foster the acquisition of local goods or the procurement of local services.
Third-party access to waterway terminals and other infrastructures
ANP published Resolution 881/2022 in July 2022, which regulates the access by interested third parties to waterway terminals for handling of oil, derivatives and biofuels, in return for a certain remuneration. Such access shall be granted on non-discriminatory terms between other carriers, including the owner-operator. The access must comprise the loading and unloading systems, the port pipelines integrating the terminal, the product storage systems, and other complementary systems of the terminal. The resolution establishes that the operator must monitor available capacity and transfer it to other interested parties aiming to maximise the use of the facilities. It is forbidden to grant any kind of preference to third parties interested in using the infrastructure, with the exception of the proprietary handler.
Production sharing open acreage
For the first time, 11 blocks located in Brazil's strategic areas of the pre-salt polygon are being permanently offered to interested companies under the open-acreage on-demand contracting system. This is the most recent ANP bidding mechanism. The assets amount, in aggregate, up to 1.2 billion reais in signature bonuses. The offer is a result of CNPE Resolution 26/2021 published in January 2022, which authorised the inclusion of the blocks under the production-sharing regime in the open acreage. In the past, only areas under the concession regime were allowed in the open acreage system.
Fields and accumulations with marginal production or marginal economicity
ANP published Resolution 877/2022 in May 2022, which provides for the definition of marginal fields, addressing previous regulatory omissions on eligibility criteria for the fields to receive incentives for oil and gas production from marginal hydrocarbon accumulations. With the new resolution, about 302 fields will be included in the concept of marginal areas and may be subject to incentives. This regulatory milestone is in line with ANP’s goal to stimulate the continuity of production and extension of field’s life. Further regulations on the matter are expected.
According to ANP's regulatory agenda for 2022–2023, the agency will revise or create resolutions on the following subjects:
- natural gas transportation tariffs;
- monitoring of production and execution of activities in the development and production phases;
- participation of small and medium-sized companies in exploration, development and production activities;
- decommissioning execution procedures;
- monitoring of the execution of activities in the exploration phase;
- liquefied natural gas and distribution of compressed natural gas;
- natural gas transportation service;
- preparation of air bases or terminals for the determination of handling and storage facilities in public ports;
- promotion of autonomy and independence in natural gas transportation; and
- interested third-party access to natural gas essential infrastructure – such as Floating Storage Regasification Units.
The Brazilian energy sector has taken large steps towards a solid regulatory framework that offers legal certainty to investors. To further increase the attractiveness of the Brazilian energy sector, the ANP is expected to continue to improve its regulations to address the demands of industry stockholders. Among ANP’s purposes we may refer to (i) attract the right players for each sector; (ii) increase the recovery rate of the fields; (iii) increase exploratory activities; and (iv) maintain Brazil’s competitiveness to attract investments to the sector.
One of the main challenges of the O&G industry in Brazil is to adapt its regulatory framework to the opening of the gas market, as a result of the publication of the New Gas Law 14,134/2021. Besides developing its regulations, the agency is also facing the challenge of putting into practice the new guidelines for the conduct of gas transportation activity. We also foresee that in the near future ANP might face the challenge of regulating new energy ventures that may be connected to ANP’s regulatory scope (eg, carbon storage in empty oil and gas reservoirs).
Interacting with the regulator
One of the best characteristics of the Brazilian energy industry is the dialogue between market players and government bodies. One of the means the ANP uses is to dialogue with the regulated players in public consultations. Public consultation consists of popular participation in the editing of rules and public policies and in the decision-making process of the Public Administration. It is regulated by Law 9,784/1999, and the purpose is to obtain contributions from the regulated players on future regulations.
The Brazilian government also has a virtual system through which citizens may access information, pursuant to Law 12,527/2011. Such a system is referred to as Citizen Service Information – SIC, and the requests for information are mostly performed by email through the SIC portal. According to SIC official portal, the average response time of the ANP is 12 days, although Law 12,527/2011 provides for a deadline of 20 days for the authorities to respond to a request. Communications with ANP are usually held in the Portuguese language.
Notes for foreign investors
In Brazil, O&G exploration activities may be carried out under the concession or production-sharing regime through bidding rounds or open acreage cycles – in which exploratory blocks are offered according to the industry demand. Both proceedings are conducted by the ANP, following CNPE guidelines.
Below follows some of the main rules from ANP relating to bid rounds or an open acreage cycle:
- participants shall comply with the technical, economic and legal requirements established by ANP resolutions and provided for in the tender of the bid rounds, or open acreage cycles;
- national and foreign legal entities may participate individually or in a consortium, while equity funds in the condition of non-operator may only participate in a consortium – foreign companies must organise a Brazilian company headquartered in Brazil to execute the contract, but the companies may be controlled by foreign shareholders; and
- the government compensations may be (i) royalties, charged monthly; (ii) special participation for fields with large production quarterly charged, applicable only under the concession regime; (iii) signature bonuses offered by the winning bidder to be paid upon execution of the contract; (iv) retention of area annually charged, applicable only under the concession regime; and (v) profit oil which is the part of oil volume to be monthly shared with the government, applicable only to the production-sharing regime.
Other regulators it works closely with
The ANP is associated with the MME and the CNPE. Considering the environmental impact associated with the oil and gas industry, the ANP frequently works with the Institute of Environment and Renewable Natural Resources and state environmental authorities when required. The Maritime Authority (Brazilian Navy) also cooperates with the ANP concerning the safety of the marine environment and navigation.
Useful pages on the regulator website