INVESTMENTS BRAZIL OIL & GAS BAC LEVEL: INTERMEDIATE. LOCATION: London, UK. DATE: February Course Leaders: OVERVIEW:

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1 LEVEL: INTERMEDIATE BAC ACCREDITED BRAZIL OIL & GAS INVESTMENTS DATE: February 2013 LOCATION: London, UK Course Leaders: Prof. Gustavo Kaercher Associate Professor of Law School of the University of Brasília (UnB) and Coordinator of the Natural Resources Law Study Group (GERN/UnB) Fabriccio Steindorfer Union Lawyer at the Legal Department of the Ministry of Energy and Mines (MME) and member of the Work Group in charge of preparing the new legal pre-salt framework (GT/MME) Humberto Quintas Legal Vice President and Director of BP Energy Brasil OVERVIEW: Since the pre-salt findings, Brazil has gone through a huge transformation with companies from around the globe looking to invest into the country and analysing the potential of future projects related to oil & gas. However, together with the business opportunities there are still many commercial, technical and legal challenges to establish a successful project. Most of the projects in the pre-salt require enormous investment and the most cutting edge technology in order to overcome these geological challenges. From a legal perspective the country is moving towards a new type of government contract which will change the relationship between the investors, the government and the national oil company, Petrobras. The two day workshop covers the main legal aspects of investment in Brazil providing participants with: A comprehensive overview of the country's legal transformation Challenges and opportunities Analysis of the commercial and technical business opportunities for investors DEVELOPED IN COLLABORATION WITH: BY ATTENDING THIS COURSE YOU WILL: Create the right Brazilian business plan to achieve your commercial objectives Learn the strategic and investment challenges faced in Brazil to stay ahead of your competition Understand all the legal requirements to successfully invest in the Brazilian oil & gas industry Develop positive negotiating habits for negotiations planning, control and manage implementation of your oil & gas project in Brazil Assess the contract implications in future oil & gas projects in Brazil WHO SHOULD ATTEND: E&P legal professionals interested in E&P activities in Brazil Business development managers Commercial managers Investment bankers Legal counsels Service providers Negotiators

2 THE CONTEXT: PHASE OF E&P REGULATION IN BRAZIL AND RELEVANT CONSTITUTIONAL PROVISIONS Mineral legal discipline in colonial and imperial times; setting the principles: Regalia and Crown property A crack in the tradition: The accession regime in the First Republic ( ) and its consequences for mineral law The return to the regalian system: Public property and concessionary regime ( ) PETROBRAS MONOPOLY ( ) First period strict monopoly Second period: (partial) flexibilisation through service contracts with risk clauses The beginning of offshore activities BRAZIL 1988 CONSTITUTION Principles of the "economic order" under the Brazilian Constitution Specific provisions on oil and gas: Oil as a natural resource: Public property in situ E&P activities: Original text and 1995 Constitutional Amendment Constitutional status of E&P activities: Public economic activities ( federal monopolies ), the execution of which can be delegated to private and/or public companies Federative questions: Ability to: - Regulate - Supervise - Collect taxes and royalties Other provisions: Guarantee of supply of petroleum-based products in the national territory; environmental provisions etc. FEDERAL LAW #9.478/97 A new institutional arrangement: The Presidency National Council for Energy Policy - CNPE Ministry of Mines & Energy - MME National Agency of Oil, Natural Gas & Biofuels ANP Petrobras The new system: concession regime (tax and royalties) Petrobras' role in this new legal framework and the bidding rounds conducted by ANP until 2007 Oil industry in Brazil today (upstream) THE PRE-SALT DISCOVERY AND CNPE'S SUBSEQUENT DECISION: NEW RULES FOR A NEW SCENARIO The guidelines set forth by the President of the Republic and CNPE (Resolution 06/07) Final Result: Three new laws and two new contract models Law #12.276/10 - Petrobras' capitalisation and exclusive E&P rights in certain pre-salt areas (Petrobras E&P contract named "cessão onerosa") Law #12.304/10 and #12.351/10 - production sharing contract The regime applicable to pre-salt areas already auctioned: concession contracts under Law #9.478/97 Pending issues: royalties and some fiscal terms; what contract should we expect? Training for the competitive edge

3 BRAZIL OIL & GAS INVESTMENTS BRAZILIAN PRODUCTION SHARING CONTRACT LAW #12.351/10 - OUTLINES SET FORTH BY LAW #12.351/10 GENERAL TRENDS Broad discretion to the executive for drafting the contract The reinforcement of the attributions of the federal executive branch through the attributions in this new scenario of: Presidency CNPE MME and PPSA ANP The reinforcement of Petrobras role as a NOC and private participation in PSC BEFORE THE CONTRACT PSC s domain: Pre-salt areas Strategic zones Criteria for defining them and CNPE s role Preliminary decisions regarding the PSC (interaction between CNPE, MME and ANP): Pace of contracting Selection of areas and blocks Access to the contract: Petrobras' direct appointment by CNPE or bidding rounds - Discretional decision Public bid: ANP, CNPE and MME s interactions in building the public bid Public bid procedure Evaluation criteria Bid Notice and its elements: Financial guarantee Signature bonus Petrobras minimum participation in the consortium Minimum percentage for the Federal Government s profit oil Minimum local content etc. Provisions on (foreign) competitors and consortiums (including joint participation) CONTRACT BASIC ELEMENTS PSC legal definitions Production sharing Cost oil Profit oil Operator Contractor General principle on risk allocation and general fiscal terms (items that must be provided for in the contract): Costs and risks borne by the contractor Signature bonus Royalties Cost recovery and production sharing General liability principle CNPE s and MME s attributions in shaping the PSC, in particular, the latitude of economic parameters: Minimum percentage for the Federal Government s profit oil Petrobras minimum participation in the consortium Limits Deadlines, criteria and conditions for the calculation of: - Appropriation by the contractor of the cost oil - The production volume corresponding to the royalties owed, etc ANP s capacities regarding the PSC, in particular: Analysis and approval of exploration Evaluation and development plans for production Annual work and production programmes referring to production sharing contracts Regulation and general oversight of E&P activities PSC parties: Federal Union (represented by MME) Pré-Sal Petróleo S.A. - PPSA (Law #12.304/10) - PPSA legal status - PPSA structure - PPSA attributions under the PSC - Other provisions Petrobras: - Compulsory shareholder (patrimonial rights and duties) - Operator (legal attributions - minimum) IOC PSC consortium: general legal guidelines (consortium contract and associate s liability) Consortium Operating Committee: legal (minimum) attributions and legal structure PSC main content: Phases and maximum terms PSC minimum content Unitisation guidelines Commercialisation of government s oil Great organisation, ensuring smooth course interaction Carlos Izquierdo Torres, Legal Counsel, STATOIL

4 FABRICCIO STEINDORFER Fabriccio Steindorfer has a degree in Law by the Federal University of Ceará (1995) and a Masters in Law (Law & Development) by the same institution. He also has a PhD in Education from the University of Brasília (UnB). He s a Lawyer of the Federal Union working as a Legal Counsel at the Ministry of Energy & Mines of Brazil. His focus is in Commercial and Admnistrative Law mainly in bankrupcys, maritime law, social law, international private law and bidding rounds. He s taught at several Universities across Brazil, namely Fortaleza, Brasília and Recife. Fabriccio is also the author of the book Bidding in a Mixed Economy Society. HUMBERTO QUINTAS Humberto is Legal Vice President and Director of BP Energy Brasil. He has a degree in Portuguese, English and Law by the Pontíficia Universidade Católica, Rio de Janeiro. He started his activities in the industry of oil & gas in 2001 as a lawyer in the Exploration & Production Division of Esso, where he stayed for 4 years. In 2005 he joined the E&P division of IBP - Instituto Brasileiro do Petróleo e Gás, as a specialist lawyer. In 2006 he began his new role as Legal Director at Devon Energy Brazil, a place which he occupied until 2011, when BP acquired the company. Humberto was also Chairman of IBP s Legal Committee in , he s an international member of the American Bar Association, member of the Association of International Petroleum Negotiators (AIPN) and member of the Sub-comittee of Oil and Infrasctructure of the Brazilian Bar Association (OAB-RJ). Humberto Quintas is a professor at IBP and author of the book The History of Oil - in Brazil and the World. GUSTAVO KAERCHER Gustavo Kaercher is Professor Doctor of Constitutional & Administrative Law of the University of Brasília focusing on Regulatory Law. He has extensive experience in Constitutional Law, Economic & Administrative Law and Regulatory Law. He s also part of the Group of Regulatory Law at the University of Brasília and he coordinates the study group in Mineral Resources Law elaborating studies in power, mining and petroleum. Gustavo has been recently ranked second amongst Brazilian private energy lawyers. He also developed projects in different areas of legislation in power, petroleum, natural gas and mining.

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