Brazil Upstream Fiscal and Regulatory Report - Petrobras Scandal Opens Prospect of Reduced Regulation but also Creates Uncertainty


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Brazil Upstream Fiscal and Regulatory Report - Petrobras Scandal Opens Prospect of Reduced Regulation but also Creates Uncertainty

Summary

Brazil Upstream Fiscal and Regulatory Report - Petrobras Scandal Opens Prospect of Reduced Regulation but also Creates Uncertainty, presents the essential information relating to the terms which govern investment into Brazils upstream oil and gas sector. The report sets out in detail the contractual framework under which firms must operate in the industry, clearly defining factors affecting profitability and quantifying the states take from hydrocarbon production. Considering political, economic and industry specific variables, the report also analyses future trends for Brazils upstream oil and gas investment climate.

Scope

- Overview of current fiscal terms governing upstream oil and gas operations in Brazil
- Assessment of the current fiscal regimes state take and attractiveness to investors
- Charts illustrating the regime structure, and legal and institutional frameworks
- Detail on legal framework and governing bodies administering the industry
- Levels of upfront payments and taxation applicable to oil and gas production
- Information on application of fiscal and regulatory terms to specific licenses
- Outlook on future of fiscal and regulatory terms in Brazil

Reasons to buy

- Understand the complex regulations and contractual requirements applicable to Brazils upstream oil and gas sector
- Evaluate factors determining profit levels in the industry
- Identify potential regulatory issues facing investors in the countrys upstream sector
- Utilize considered insight on future trends to inform decision-making
1 Table of Contents
1 Table of Contents 1
1.1 List of Tables 2
1.2 List of Figures 2
2 Regime Overview 3
3 State Take Assessment 6
4 Key Fiscal Terms - Concession Agreement 7
4.1 Signature Bonus 7
4.2 Royalty 7
4.3 Rental Fees 8
4.4 Landowner Fees 10
4.5 Special Participation 10
4.6 Corporate Income Tax 13
4.6.1 IRPJ and CSLL 13
4.6.2 Deductions and Depreciation 13
4.7 Other Taxes 14
4.7.1 COFINS and PIS/PASEP 14
4.7.2 Customs and Excise Duties 14
4.7.3 Goods and Services Tax 14
4.7.4 Withholding Tax 14
4.8 Tax Incentives 14
4.8.1 Regional Income Tax Reductions 14
4.8.2 REPETRO 15
4.9 Research, Development and Innovation Expenditure 15
4.10 Environmental Levy (Rio de Janeiro) 15
5 Key Fiscal Terms - Production Sharing Agreement 16
5.1 Signature Bonus 16
5.2 Royalty 16
5.3 Cost Recovery 16
5.3.1 Cost Recovery Limit 16
5.3.2 Recoverable Costs 16
5.4 Profit-Sharing 16
5.5 Taxation 17
5.6 Research, Development and Innovation Expenditure 17
5.7 Petrobras Participation 17
6 Regulation and Licensing 18
6.1 Legal Framework 18
6.1.1 Governing Law 18
6.1.2 Contract Type 18
6.1.3 Title to Hydrocarbons 18
6.2 Institutional Framework 19
6.2.1 Licensing Authority 19
6.2.2 Regulatory Agency 19
6.2.3 National Oil Company 19
6.3 Licensing Process - Concession Rounds 20
6.3.1 Qualifications 20
6.3.2 Participation Fee 20
6.3.3 Bidding 21
6.4 Licensing Process - 1st Pre-Salt Round 21
6.5 License Terms - Concession Agreement 22
6.5.1 Duration 22
6.5.2 Relinquishment 22
6.5.3 Minimum Work Obligations 22
6.5.4 Participation 23
6.6 License Terms - 1st Pre-Salt Round 23
6.6.1 Duration 23
6.6.2 Minimum Work Obligations 23
6.7 Local Content 23
6.7.1 Rounds 7-13 23
6.7.2 Rounds 5 and 6 30
6.7.3 Rounds 1-4 30
6.7.4 1st Pre-Salt Round 31
7 Outlook 32
8 Contact Information 33

1.1 List of Tables
Table 1: Summary 3
Table 2: Brazil, Average Winning Signature Bonus Bid (BRL million) by Round, 2016 7
Table 3: Brazil, Reduced Royalty Rates (%), Selected Onshore and Offshore Fields, 2016 7
Table 4: Brazil, Rental Fees - 13th Concession Round, 2015 9
Table 5: Brazil, Special Participation Rates: Onshore Areas, Rivers, Lakes, Fluvial or Lake islands 11
Table 6: Brazil, Special Participation Rates: Continental Shelf - Seabed Depth 400m 12
Table 7: Brazil, Special Participation Rates: Continental Shelf - Seabed Depth > 400m 13
Table 8: Brazil PSA, Government Share of Profit Oil, 1st Round (Libra) 17
Table 9: Brazil, Operator Qualifications, 2013 20
Table 10: Brazil, Participation Fees - 13th Concession Round, 2015 21
Table 11: Brazil, Consortium Participation, Libra Block PSA, 2013 22
Table 12: Brazil, Exploratory Phases - 12th Concession Round, 2013 22
Table 13: Brazil, Average Local Content (%), Exploration and Production Periods, Rounds 1, 2, 3, 4, 5, 6, 7, 9, 10, 11, 12 23
Table 14: Brazil, Minimum and Maximum Overall Local Content (%), Offshore and Onshore Blocks, Concession Rounds 7-13 24
Table 15: Brazil, Minimum Local Content (%) of Items and Subitems, Offshore Blocks 100m, Rounds 7, 8, 9, 11 and 13 25
Table 16: Brazil, Minimum Local Content (%) of Items and Subitems, Offshore Blocks < 100m, Rounds 7, 8, 9, 11 and 13 27
Table 17: Brazil, Minimum Local Content (%) of Items and Subitems, Onshore Blocks, Rounds 7-13 29
Table 18: Brazil, Minimum Local Content (%), Concession Rounds 5 and 6 30
Table 19: Brazil, Local Content Incentives, Uplift Factors to Increase Percentage Share of Local Content, Concession Rounds 1-4 30
Table 20: Brazil, Libra Block Local Content Requirements, 2013 31

1.2 List of Figures
Figure 1: Regime Flow Chart 4
Figure 2: Regime Flow Chart 5
Figure 3: Brazil, Indicative NPV10/boe, IRR and State Take Comparison - Internal, 2016 6
Figure 4: Brazil, Indicative NPV10/boe, IRR and State Take Comparison - Resource Peer Group, 2016 6
Figure 5: Brazil, Legal Framework 18
Figure 6: Brazil, Institutional Framework 19