Bill Authorizing the Sale of Union Sharing Contracts in Oil Production May Release Obligations from PPSA

The Obligations And Rights Of PPSA In The Production Of Oil From The Brazilian Pre-Salt Can Be Diluted With The Approval Of The Bill That Authorizes The Sale Of The Union Sharing Contracts To The Private Market.

On Friday, (07/22), the Bill 1.583/2022, authored by the Executive Branch, was being processed in the House of Representatives, which aims to authorize the sale of the Union’s sharing contracts in the production of oil from the pre-salt to the private sector. However, the Bill may remove some of the obligations of Pré-Sal Petróleo S.A. (PPSA), the company that oversees and manages the exploration of the Union’s resource.

Sale Of Union Sharing Contracts In The Production Of Oil In The Brazilian Pre-Salt Aims To Overcome PPSA’s Administrative Issues And Ensure Revenue

The Bill currently being processed in the House of Representatives intends to grant the Union the necessary authorization for the sharing contracts of pre-salt oil to be sold to the private sector. The main objective of the bill, according to the Executive Branch’s requirements, is to seek alternatives for the early monetization of the production of the Sharing Contracts, allowing the Union to receive in advance the surplus from the production of oil in the pre-salt.

Furthermore, this would also be an interesting move to reduce and overcome logistical, administrative, and operational issues faced by PPSA in its control of resource production, as well as mitigate inherent risks related to the commodity marketing business itself.

The Bill aims to enable the substitution of the company in the consortia sharing the production contracts for the companies that purchase the Union’s share.

Thus, the reading of Bill 1.583 allows for the interpretation that the winner of the bidding would have compulsory entry into the respective Sharing Contract, which would consequently cause the Union to cease to be liable for breach of obligations by the assignee.

This would necessitate a change in the very sharing regime of pre-salt oil, thereby transferring to the private agent the contractual position of PPSA in the Sharing Contracts, as well as the responsibilities and obligations assigned to it.

PPSA Would Have Rights And Obligations Reduced And Transferred To The Private Sector With The Approval Of The Bill For The Sale Of The Union Sharing Contracts

Among the main responsibilities of PPSA as the representative of the Union in the sharing regime of pre-salt oil in Brazil are the technical evaluation services of the Evaluation, Discovery, and Production Plans, as well as monitoring the execution of activities to ensure the best exploration of the resource.

Thus, in addition to ceding the right to the surplus of the Union’s pre-salt oil to the private sector, the Bill would also transfer part of the rights and obligations of PPSA to the winner of the bidding process.

Therefore, the work of PPSA in the financial management and control of the resource production in Brazil would be handed over to third parties, going against its purpose and functions assigned by Law 12.304/2010. Furthermore, the company that won the bidding for the sale of the sharing contracts would also assume the prerogatives legally assigned to the public company (PPSA), such as the appointment of members of the Operational Committee of the Sharing Contracts consortia.

For this reason, the Bill becomes highly acceptable for the early collection of the Union’s rights in the production of fuel but should provide the option for the legislator to retain or not certain responsibilities of PPSA, so that there is no transfer of obligations and rights.