ANP published resolution on decommissioning of oil and natural gas exploration and production facilities

On April 27, 2020, the Brazilian National Oil and Gas Agency (“ANP”) published Resolution No. 817/2020 (“Resolution”), which will come into force on May 4, 2020. It provides for the decommissioning of oil and natural gas exploration and production facilities, the procedure for relinquishing areas to the ANP (and inclusion of such areas in the open acreage process), the sale of assets and assets reversible to the government at the end of the concession.  

According to the ANP, for the decommissioning alone, the new Resolution is expected to result in at least R$ 26 billion in investments over the next five years. The resources will be invested in hiring services for abandonment of wells, removal of equipment and recovery of areas, among others.

Standardization of procedures

Although it is not a joint resolution, the Resolution is the result of a multidisciplinary working group involving representatives of the ANP, the Federal Environmental Authority (“Ibama”) and the Brazilian Navy. As a result, the Resolution sought to standardize the procedures adopted by these governmental bodies in relation to decommissioning in the oil and natural gas industry. In this sense, the companies shall submit a single Installation Decommissioning Plan (PDI) before the ANP, Brazilian Navy and Ibama which, according to ANP, shall provide greater legal certainty and expedite the process.

Inclusion of onshore areas under concession in production phase in bidding process

The new resolution allows the ANP to promote include in bidding process (under the open acreage process) onshore areas under concession that are close to being relinquished (i.e. as from twenty-four (24) months prior to the estimated final date of production). The idea is to enable the transition of operators without interrupting the production.

The onshore area under concession subject to the bidding process will be offered during a twelve-months period, during which the current concessionaire shall continue to have the right to request the assignment of the area to a third party, in a farm-out process. In this case, once the assignment is requested and approved, the offer of the area will be withdrawn by the ANP from the open acreage process.

Decommissioning in the context of farm-in transactions
The Resolution provides that in a farm-out process the Parties shall agree on which facilities shall be decommissioned by the assignor and which will be transferred to the assignee.

The assignor, when responsible for the decommissioning, shall submit an updated version of the PDI for the ANP’s approval and enter into a deed of commitment with the ANP when the assignment is approved.

Sale of assets and government reversible assets

According to the new Resolution, the sale of wells for any purposes not related to oil and natural gas exploration and production activities is not authorized.

ANP shall decide on which assets will be reversible to the government at the time of the approval of the PDI and at the time of inclusion of the onshore area under concession in the open acreage process. In case of unsuccessful bidding of the onshore area under concession or if the respective area has not been included in the open acreage process, the concessionaire shall proceed with the decommissioning of the reversible assets. The Resolution provides that the following assets cannot be considered as reversible assets: (i) shared facilities, unless all agreements related to them are terminated simultaneously; and (ii) floating production units (FPSOs).
Environmental Aspects
According to the terms of the Resolution, the concept of decommissioning encompasses the environmentally adequate final disposal of material and waste, besides the environmental recovery of the area. The Resolution also determines, from the environmental standpoint, that activities related to decommissioning must be in line with determinations from the environmental agency in charge of the licensing activities, Federal Environmental Protection Agency (IBAMA).

The Resolution establishes that:

(i) The PDI must be submitted to ANP, within its attributions and, at the same time, to the other competent authorities;

(ii) The Installation Decommissioning Report (RDI) must be submitted to ANP only, unlike the previous wording of the draft of the rule. That way, IBAMA could request the presentation of different reports, which aim at complying with environmental aspects only, within administrative procedures in progress before the Authority.

The annex to the new Resolution provides for the Decommissioning Technical Regulation, setting forth the requirements and guidelines for the decommissioning of facilities in oil and natural gas exploration and production phases.

Click here to access the full content of the Resolution, available only in Portuguese.
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