How the production sharing agreement works in Brazil
For the areas located in the pre-salt polygon and other considered strategic, the CNPE decides if bidding rounds will be held or if Petrobras will be directly hired, in order to preserve the national interest and achieve other energy policy objectives. In both cases, contracts are signed under the regime of production sharing.
If it decides to conduct the bidding round, CNPE first offers Petrobras the preference to be the operator of the blocks to be contracted. When Petrobras expresses the interest of acting as the operator, it must inform in which areas it wants to exercise this right, indicating its participation in the consortium, which cannot be less than 30%.
The blocks and the technical and economic parameters of the production sharing agreement are defined by CNPE and the bidding round promoted by the ANP. The Ministry of Mines and Energy (MME) is responsible for establishing the guidelines to be observed by the ANP for the promotion of the bidding round and for the drafting of bidding documents and contracts, later approved by the ministry.
In the bidding rounds under the regime of production sharing, the winning company is the one that offers the Brazilian State the largest share of oil and natural gas (that is, the largest profit oil share).
The consortia that explore the pre-salt are composed by the Pré-sal Petróleo S.A. (PPSA), representing the Federal Union, and the winning companies of the bid. The contracts are signed by the MME, on behalf of the Federal Government.
The 1st Production Sharing Bidding Round took place in 2013 and offered the Libra area, sold to the consortium formed by Petrobras, Shell, Total, CNPC and CNOOC. The percentage of exceeding oil for the Federal Union was 41.65%.