vmd presentation

52
São Paulo | Rio de Janeiro Brasília | Curitiba | Porto Alegre | Recife Belo Horizonte | Campo Grande London Lisbon | Shanghai | Miami | Buenos Aires | Beijing | Johannesburg |New Delhi Opportunities and Challenges in the Opportunities and Challenges in the Oil Market in Brazil – some legal Oil Market in Brazil – some legal aspects aspects

Upload: noronha-noad

Post on 07-Nov-2014

551 views

Category:

Documents


1 download

DESCRIPTION

 

TRANSCRIPT

Page 1: Vmd presentation

São Paulo | Rio de Janeiro Brasília | Curitiba | Porto Alegre | Recife

Belo Horizonte | Campo Grande

LondonLisbon | Shanghai | Miami | Buenos Aires | Beijing | Johannesburg |New Delhi

Opportunities and Challenges in the Oil Opportunities and Challenges in the Oil Market in Brazil – some legal aspectsMarket in Brazil – some legal aspects

Vera Dantas Aberdeen 11 October 2012

Page 2: Vmd presentation
Page 3: Vmd presentation

PRESENTATION TOPICSPRESENTATION TOPICS

1. Recent History of Brazilian Oil Industry

2. Petrobras’s Investments 3. Legal Framework of the Oil Sector in

Brazil4. Local Content Requirements 5. Establishing a presence in Brazil6. Becoming a Supplier to Petrobras

Page 4: Vmd presentation

2005 – Brazil produces 1.85 million barrels a

day Petrobras : 1.684 mbpd

2006 – Brazil achieves self-sufficiency in oil

1.1. RECENT HISTORY OF THE BRAZILIAN OIL RECENT HISTORY OF THE BRAZILIAN OIL INDUSTRYINDUSTRY

Page 5: Vmd presentation

1.1. RECENT HISTORY OF THE RECENT HISTORY OF THE BRAZILIAN OIL INDUSTRYBRAZILIAN OIL INDUSTRY

8 November 2007 – Discovery of Tupi

oilfield, located in the offshore Santos

Basin, with estimated 8 billion of barrels

of oil was announced.

Page 6: Vmd presentation

“All this and oil too.God may indeed be Brazilian after all”15 November 2007

And Scottish too! Great Opportunity for ScottishCompanies with subsea technology and know-

how.

Page 7: Vmd presentation

1.1. RECENT HISTORY OF THE RECENT HISTORY OF THE BRAZILIAN OIL INDUSTRY – cont.BRAZILIAN OIL INDUSTRY – cont.

2008 – Discovery of Carioca oilfield with

estimated 70 billion barrels of oil. Discovery

puts Brazil's oil reserves among the world's

largest.

2008 – Last Bidding Round under the

concession regime takes place.

Page 8: Vmd presentation

1.1. RECENT HISTORY OF THE RECENT HISTORY OF THE BRAZILIAN OIL INDUSTRY – cont.BRAZILIAN OIL INDUSTRY – cont.

2010 – New regulatory regime is

approved

April 2011 – 11th Round authorised by

the National Council of Energy Policy

by Congress.

Page 9: Vmd presentation

1.1. RECENT HISTORY OF THE BRAZILIAN OIL RECENT HISTORY OF THE BRAZILIAN OIL INDUSTRY – cont.INDUSTRY – cont.

18 September 2012 – the Minister of

Mines and Energy Edison Lobão announces

that the 11th Round for exploration blocks

will take place in May 2013 subject to

royalties division law between States

being approved by Congress.

19 September – first bidding round for

the Pre-Salt area is announced by Minister

Lobão (also subject to royalties approval).

Page 10: Vmd presentation

1.1. RECENT HISTORY OF THE RECENT HISTORY OF THE BRAZILIAN OIL INDUSTRY – cont.BRAZILIAN OIL INDUSTRY – cont.

PRODUCTION TARGETS REAL PRODUCTION

2008 : 2050 (2008- 2012) 1.855 mbpd

2009 : 2050 (2009- 2013) 1.971 mbpd 2010 : 2100 (2010 -2014) 2.004 mbpd 2011 : 2100 (2011- 2015) 2.022 mbpd

Petrobras Oil Production – Targets and Real Production millions of barrels per day

Page 11: Vmd presentation

2. PETROBRAS’S INVESTMENTS- cont. Petrobras Investment Plan, as announced on

14 June 2012 1 : Petrobras will invest US$ 236.5 billion until

2016

US$ 131.6 billion in Exploration & Production: Production : US$ 89.9 billion (68.31%) Exploration : US$ 25.4 billion (19.30 %) Support and infrastructure : 16.3 billion

(12.3%)1- Petrobras Road Show: www.petrobras.com.br/pt/quem-somos/estrategia-corporativaPlano de Negócios e Gestão 2012-2016

Page 12: Vmd presentation

2020 : Petrobras plans to double production by 2020 from the present 2 million bpd to 5.43 million/day in 2021.

Impact of such investments will be felt in the whole chain of suppliers of equipment and services that form the Oil Industry.

2. PETROBRAS’S INVESTMENTS- cont.

Page 13: Vmd presentation

2. PETROBRAS’S INVESTMENTS- cont.

Petrobras needs “38 stationary units, 5 new core drills, 49 Promef vessels and train approximately 200,000 professionals...”

“It is like building a new company” – Graças Foster, Petrobras’s President (2)

(2)Revista Veja,20 September

2012

Page 14: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL3.1 Quick Overview :

Petrobras was created in 1953 as a State company and has maintained the monopoly of all oil industry activities until 1995.

Constitutional Amendment number 9, of 9 November 1995: the Union may hire State or private companies to perform oil industry activities.

Page 15: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL - cont.

Accordingly: ownership of natural resources has been retained by constitutional provision; likewise, monopoly of exploration & production remained of the State, but private companies were allowed to exercise such activities in Brazil.

1997 : the Petroleum Law (number 9478, of 6 August 1997) was passed, establishing the legal framework for the exploration of oil and gas in the country.

Page 16: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL - cont.

With pre-salt discoveries, the legal framework has substantially changed again with Law 12351, of 22 December 2010, which amended the Petroleum Law and introduced the production sharing agreement regime for exploration and production in Brazil.

It also altered the roles of the government agencies, created Brazil’s sovereign oil fund and the Pre-Salt State Company – PPSA.

Page 17: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL - cont.

3.2 Governmental Agencies

MME – Ministry of Mines and Energy CNPE –National Council of Energy

Policy (created by Law 9478/97) ANP – National Agency of Petroleum,

Natural Gas and Biofuels

Page 18: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL - cont.

MME :responsible for implementing Brazil’s energy policy and establishing the guidelines for the industry.proposes to the CNPE, after consultation to the ANP, the blocks to be explored under the concession or the production sharing regimes.

Page 19: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL - cont.

CNPE : proposes to the President when the bidding rounds

will take place; the blocks that will be offered under the concession or the production sharing regime (Article 2, VIII, Petroleum Law) – before, it the ANP decided on that.

likewise, the CNPE proposes to the President of the Republic the cases in which Petrobras will be contracted directly for a given area under the production sharing agreement regime and which blocks will go to auctions, also under a PSA regime (Article 9, II and III new Law). The ANP suggests, the CNPE proposes to the President, who ultimately decides.

Page 20: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL - cont.

ANP : remains the industry’s regulator and

supervisor. promotes the bidding rounds (subject to

CNPE’s authorisation, as seen), issuing invitations to bid both for the exploration and production of oil under a) PSAs (Article 11, III); and under b) concessions agreements (Article 8, IV and 36).

Page 21: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL - cont.

New regulatory structure – concession, authorisation and PSA regimes :

E & P : Activity will be exercised, through concession, authorization or under the production sharing regime – PSA (Article 5 of Law 9478, as modified in December 2010).

E & P in the pre-salt layer and in strategic areas will be done exclusively under the PSA regime (Article 3, PSA Law).

“Strategic” yet to be defined by the CNPE.

Page 22: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL - cont.

Concessions: Petrobras and private companies will

be allowed to exercise E&P activities only in areas deemed “non strategic” and outside the Pre-Salt area through concessions granted by ANP, preceded by a bidding process or authorisations.

Page 23: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL – cont.Concession Agreements

ANP is a party to the Concession Agreement, representing the Union.

ANP promotes the bidding rounds for block under concession, defining the blocks.

ANP publishes the invitation to bid with a copy of the Concession Agreement.

Bidders have to meet legal, technical and financial requirements.

Concessionaires are entitled to ownership of all oil produced, but must compensate the government accordingly : signature bonus, special participation, area occupation fee, royalties (10% to 5% - the latter where extreme conditions apply – Article 47, paragraph I Petroleum Law).

Page 24: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL – cont.Authorisation to Petrobras

CNPE can propose to the President of the Republic the cases in which, considering the national interest, Petrobras will be contracted directly by the Union for the E&P of oil and natural gas under the production sharing regime – Article 12, PSA Law.

Page 25: Vmd presentation

Production Sharing Agreements - two types :

between the State and Petrobras (no tender – authorisation, as seen in the previous item) or

between the State, Petrobras and the Oil Company, preceded by tender (auction type).

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL – cont.Production Sharing Agreement

Page 26: Vmd presentation

3. LEGAL FRAMEWORK OF THE OIL SECTOR IN BRAZIL – cont.Production Sharing Agreement

Where an oil company is allowed to bid for an exploration block and wins the bid: consortium agreement between Petrobras, the bid winner and the Pre-Sal State company (Pré-Sal Petróleo S.A. – PPSA, controlled by the Brazilian Government).If hired directly, or if it wins the bid, Petrobras will enter into a consortium agreement with the Pre-Sal State company.

Page 27: Vmd presentation

Brazilian PSA

State is the owner of the resources in the ground. Petrobras will always be the operator in all blocks

under a PSA and will have at least 30% of participation in the consortium of companies that will explore the block (consortium to be formed between Petrobras and PPSA or between Petrobras, PPSA and the winner of the invitation to bid) – Articles 4 and 20 of Law 12351/2010.

Operator is “responsible for conducting and executing, directly or indirectly, all exploration (...) production and decommission activities” (article 2, VI) – challenge, as Petrobras is a public company subject to debt limits and budget restrictions.

Page 28: Vmd presentation

State does not have any of the risks involved in the E&P activities (one exception : if costs are paid from a specific fund created by law).

Costs and investments necessary to the execution of the PSA are borne by the Contracted Party. If an oil discovery is made, such costs and investments are paid back to the IOC (“cost oil”).

The rest of the oil production which becomes available (profit oil) is then shared between the State and the other companies.

Page 29: Vmd presentation

The PPSA manages the PSA and may hire Petrobras (with no prior public bidding), as an agent, for the commercialisation of its share in the profit oil. The income resulting therefrom will be paid into the Social Fund created by Law 12351/2010 for “social and regional development” through programmes and projects in the areas of education, culture, health, etc.

Further costs to oil companies exploring hydrocarbons under a PSA, including Petrobras, are royalties and signature bonuses (to be defined by the Ministry of Mines and Energy for each PSA). These will also be paid into the Social Fund.

Page 30: Vmd presentation

4. Local Content RequirementsThe Opportunity:

Pre-Salt area is located approximately 170 Km from the Brazilian coast and is on average 7 Km deep.

Massive technological investment is required to explore oil in such depth :

“Investments demand for the Pre-Salt will be over US$ 400 billion in materials, equipment, systems and services until 2020. The information was given by the Director-General of the National Agency of Oil, Natural Gas and Befouls (ANP), Magda Cambria, during a talk at the Offshore Technology Conference (OTC), in Houston, USA, last week” – “Pré-sal demandará US$ 400 bilhões até 2020, segundo ANP”, 08 May 2012 16:05 hs - Portal Brasil, ANP (on-line)

Page 31: Vmd presentation

4. Local Content RequirementsThe Challenge:

The local content requirement is present both in the concession and in the PSA regimes as well as in the downstream contracts with Petrobras.

It is policy of the Brazilian Government.

And remember : under the PSA system, Petrobras will be the sole buyer.

Page 32: Vmd presentation

4. Local Content Requirements

In the Concession System: Local Content is imposed in the concession agreement executed between ANP and the concessionaire, who must observe a minimum percentage of participation of Brazilian companies in the supply of equipment and services under the agreement.

Page 33: Vmd presentation

Local Content Requirements– cont.

This percentage is determined in the invitation to bid and detailed in the concession agreement.

The clause in the agreement states that the concessionaires must give preference to Brazilian suppliers whenever their services or products present conditions of price, term and quality which are equivalent to those of other suppliers invited to quote.

Page 34: Vmd presentation

Local Content Requirements– cont.

PSA system – Pre-Salt and Strategic Areas

The CNPE will decide on the applicable local content requirements (upon suggestions received from the Ministry of Mines and Energy of Brazil – Article 10, III, e) from the new law).

The minimum local content requirements will be specified in the invitation to bid and in the model of agreement attached to it (Article 15, VIII of Law 12351/2010).

Page 35: Vmd presentation

Local Content Requirements– cont.

In the first rounds, the local content percentages offered by the bidders were taken into consideration for the effects of punctuation of the offers for acquisition of the blocks.

As of the Seventh Round, there were more specific requirements and a Booklet of Local Content was published.

Page 36: Vmd presentation

Local Content Requirements– cont.

In 2007 ANP created a system for the certification of Local Content .

The accredited entities measure and inform ANP the local content of goods and services hired by the concessionaires of the activities of Exploration & Production (we had no company operating under a PSA at time of writing).

ANP has four Regulations that deal with the matter.

Page 37: Vmd presentation

Local Content Requirements– Petrobras

Presently, the Local Content requirement is only regulated in the upstream sector, in the concession agreements and PSAs (new law is clear about it) and in the Local Content Certification System.

However, Petrobras, in spite of the lack of regulation of local content for the downstream segment, has been asking for the clause. The majority of contracts of construction of refinery for example include specific clauses of minimum Local Content, to be reached by the Contracted Parties.

Page 38: Vmd presentation

Planning, planning, planning...

Page 39: Vmd presentation

5. Establishing a presence in Brazil

Preliminary Considerations Setting up your own Company

Page 40: Vmd presentation

5. Establishing a presence in Brazil Preliminary considerations

Memoranda of understanding are binding in Brazil

Defaults of obligations under a proposal will be subject to indemnification of losses and damages under the general rules of the Civil Code, to which one should add court fees and legal costs.

Term Sheet must be cautiously drafted by experienced lawyers, in order not to create a binding obligation between them.

Page 41: Vmd presentation

Setting up your own company; joint ventures

Which Type of Company?

Most frequently used company structures:

"Sociedade Anônima" (S.A.) and

"Sociedade Empresária Limitada" (“Limitada”)

in both cases the participants have limited liability.

5. Establishing a presence in Brazil

Page 42: Vmd presentation

Decision process – of relevance if the investor is a minority shareholder

(a) in a Limitada – the social contract and the 75% vote rule

Decisions must be taken by majority of votes, except for the cases of alteration of the social contract or merger, consolidation or winding up of the company, in which cases it must be taken by at least 75% of the votes representing the social capital.

Be careful with quotaholders agreement!

Page 43: Vmd presentation

Decision process – of relevance if the investor is a minority shareholder

(b) in a S.A. – Shareholders Agreement

General rule applying to S.A.s : decisions are taken by the majority of voting shareholders.

Obligations set forth in a Shareholders Agreement can be subject to specific performance. Under its umbrella, important matters can be decided : quorum for strategic decisions; management mechanisms; board of directors may be integrated by foreign individual; corporate governance policies; right of first refusal; tag along; etc.

Page 44: Vmd presentation

5. Establishing a presence in Brazil

For your company, you will need : A local manager (who does not need to be

Brazilian, but a resident in Brazil); and an address.

Page 45: Vmd presentation

If despite Local Content requirements there is no local presence...

Services Agreement: Tax – payable at remittance Services – 25% income tax Royalties – 25% (15% income tax + 10% CIDE)

Agreement to state clearly which party is to be responsible for that payment.

Page 46: Vmd presentation

Compared to taxation of a Brazilian company…

Basic rate of income tax on corporate profits (including capital gains), as adjusted for tax purposes, is 15%, with an additional surtax of 10% on taxable profits exceeding R$ 240,000 (approximately £ 84,000) per annum.

Social Contribution on profits is 9% of taxable profits.

Top tax rate on profits is therefore 34%. There is no withholding tax on distribution of

dividends.

Page 47: Vmd presentation

5. BECOMING A SUPPLIER TO PETROBRAS

Petrobras is subject to the Simplified Bidding Process (Procedimento Licitatório Simplificado da Petrobras) established by Decree number 2745, of 24 August 1998.

Electronic procurement is widely used : Petronect. Bidders must be registered with the system in

order to receive bidding notices. In order to render services in Brazil, the foreign company must have a subsidiary in Brazil or demonstrate the existence of a contractual relationship with a Brazilian company.

Page 48: Vmd presentation

On-line system for goods and suppliers registration : through this, companies provide all the necessary information and documents as required by Petrobras :www.petrobras.com.br/CanalFornecedor

The first step to supply to Petrobras is to register. By registering, the company will demonstrate its capacity to participate of invitations to bid and contracting processes.

Once the company is registered, it will be invited for Petrobras’ international biddings.

CRCC : (Certificado de Registro no Cadastro Corporativo) registration in which supplier provides information about the company and its product : http://www.petronect.com.br/irj/portal/anonymous . Specialised companies assist foreign companies in obtaining CRCC with Petrobras (valid for one year; must be renewed after that to continue as a supplier).

5. BECOMING A SUPPLIER TO PETROBRAS – Cont.

Page 49: Vmd presentation

5. BECOMING A SUPPLIER TO

PETROBRAS – Cont. Further points to be

aware of: Legal Representative in the country is required

(power of attorney) by law. Commercial Representative is normally required

by Petrobras. Normally agreements with Petrobras are not

“negotiable”. In case of doubts or comments, these must be

presented in writing before the bid takes place. Clauses in the agreement will deal with issues

of liability.

Page 50: Vmd presentation

5. BECOMING A SUPPLIER TO

PETROBRAS – Cont.

Product and service suppliers are liable, independently of fault, for damages caused to consumers by defect in the product or in the rendering of services (Protection of Consumers Code).

Civil Code :damages due to the creditor shall comprise what the creditor has effectively lost and the “reasonable” lost profits (Article 402); damages only include “effective losses” (actually suffered) and “lost profits arising directly and immediately” from the inexecution of the obligation (Article 403).

Page 51: Vmd presentation

5. BECOMING A SUPPLIER TO PETROBRAS – Cont.

Documents issued or signed out of Brazil (such as POA or Commercial Representation Agreement required by Petrobras) must follow the rules of notarization and legalization at the Brazilian Consulate.

Instruments executed in a foreign language must be translated into Portuguese by sworn translators in Brazil for use in Brazil.

Page 52: Vmd presentation

Vera DantasVera DantasNORONHA ADVOGADOS, LondonNORONHA ADVOGADOS, London

Phone: (20) 7581-5040 Facsimile: (20) 7581-8002

vmd@noronhaadvogados.com.brwww.noronhaadvogados.com.brwww.noronhaadvogados.com.br

Thank you.Thank you.