Claudio A. Pinho

From the U.S. to Brazil: Contrasts in Offshore Energy

Legal Frameworks

Lone Star Corporate College –Woodlands, TX – April 27th., 2012

Claudio A. Pinho

Changing US Geopolitics

Claudio A. Pinho

Oil & Gas cultural differences US/Brazil• The oil&gas history was created in common law

countries which the contract is the key instrument

• When you sign a contract in Brazil is a key issue to check which laws will apply to the contract

• In civil law countries you should look to the legal provisions before, over and beyond any contracts

• If you signed with Petrobras will be an adhesion contract with no negotiation

• How the US insurance company will analyze a liability clause on adhesion contracts under Brazilian law• Brazilian FTC (CADE) does not really enforce antitrust law in oil&gas market

Claudio A. Pinho

1988 Constitution and its Provisions

The natural resources all belong to the Federal Government

the continental shelf the exclusive economic zone the territorial sea the mineral resources including those of the subsoil

The economic order establishes the principle of free competition.

Claudio A. Pinho

Oil & Gas Legal Basis before Pre-Salt

Amendment # 6 (Aug. 1995) – Revoked article 171 which gives the Brazilian Companies some privileges.Amendment # 9 (Nov. 1995) – Changed the article 177 to break the Petrobras monopoly and allow competition.Law # 9.478/97 [Brazilian Oil Law] (1997) – Created ANP (National Petroleum Agency) and the rules for bid and contracting (concession model)

Direct Action of Unconstitutionality (ADIN # 3.273) (2011) – Brazilian Supreme Court declares Brazilian Oil Law constitutional, and declares that oil & gas exploration can only happen in a competitive marketplace.

Claudio A. Pinho

Pre-Salt Bills

Federal Government sends 3 bills to Brazilian Congress to create the Pre-salt legal framework:

1) Regulatory pre-salt law (changing the contracts to Production Share Agreement – PSA and defines thepre-salt area);2) A bill to create a state company called PPSA (Pré-Sal Petróleo S/A) to work as the National Oil Company – NOC in pre-salt contracts;

3) Capitalization of Petrobras and onerous transfer of rights.

Claudio A. Pinho

NOC FOC

COSTS

60% 40%

Production Sharing Agreement of Pre-Salt

Claudio A. Pinho

FOC

COSTS

60% 40%

30% Petrobras 70% Consortium

NOC

1st bill => Law # 12.351/10

Production Sharing Agreement of Pre-Salt

Claudio A. Pinho

PPSA FOC

COSTS

60% 40%

30% Petrobras 70% Consortium

2nd bill => Law # 12.276/10

Production Sharing Agreement of Pre-Salt

Claudio A. Pinho

PPSA FOC

COSTS

60% 40%

30% Petrobras 70% Consortium

5 Billi

on Barre

ls

3rd bill => Law # 12.304/10

Production Sharing Agreement of Pre-Salt

Claudio A. Pinho

Pre-salt Perimeter

• Does the onerous transfers of rights is a regulatory framework itself?

• Petrobras answers “yes” and the industry accepted that idea.

Claudio A. Pinho

Risks and Opportunities

• With the new Director, Magda Chambriard, ANP could return to its regulatory role

• The Civil Office does not agree with the Petrobras approach but only and amendment in the law could save the pre-salt legal framework

• A bill of National Contingency Plan is almost ready to be filed (PNC – Plano National de Contingência) with new liability standards

• Brazil could lost advantage over African countries e the new discoveries regarding African pre-salt

Claudio A. Pinho

Energy Tribune December 1st, 2011

Claudio A. Pinho

McClatchy – March 8th, 2012McClatchy March 8th, 2012

Claudio A. Pinho

Pre-Salt - Part. 1-3 - Claudio A. Pinho

Pre-Salt - The new Oil Regulation in Brazil -

Manhattan Connection

Other pre-salt references

Claudio A. Pinho

@ClaudioAPinho

Thank you!

This presentation is posted at www.slideshare.net/capinho