On April 24, 2019, the Ministry of Mines and Energy – MME (“MME”) published Ordinance No. 213/2019 ("Ordinance"), establishing the guidelines to calculate the compensation owed to Petróleo Brasileiro SA - Petrobras ("Petrobras") under the bidding round for the surplus volume in addition to the contracted amount under the Transfer of Rights regime ("Bidding Round"). The compensation aims to reimburse Petrobras for the investments made as operator in the Búzios, Atapu, Itapu and Sepia areas under the Transfer of Rights regime ("Compensation").

The Ordinance complements CNPE Resolution No. 02/2019 (as per our Legal Update), which established the guidelines of the Bidding Round, to be held under the production sharing regime.

Pursuant to CNPE Resolution No. 02/2019, in addition to the production-sharing agreement, the winning bidders of the Bidding Round must enter into a Co-participation Agreement with Petrobras, which will establish the percentage of the new party in the ownership of the existing assets in each of the areas offered, in proportion to its participating interest in the co-participated deposit, in exchange for the Compensation payment.

The rules for the calculation of the Compensation encompassed in the Ordinance comprise 10 commercial and economic parameters, including reference prices for oil and natural gas, unit cost metrics and factors impacting cash flow. For reference only, we have prepared an English translation of the Ordinance.

Petrobras has not yet officially exercised its preferential right for the areas to be offered in the bidding round. The deadline for doing so will come into effect in the second half of May.