Petrobras announces surplus volume contract at transfer of rights area

Source:Petrobras

Petrobras announces surplus volume contract at transfer of rights area Petrobras announces that the CNPE (National Energy Policy Council) has approved to directly contract Petrobras to produce the volume that exceeds what has been contracted under the transfer of rights agreement at four pre-salt areas - Búzios, Entorno de Iara, Florim and Nordeste de Tupi.

On June 24, 2014, at its 28th meeting, the CNPE approved Resolution No. 1/2014, which recommends the direct contracting of Petrobras for the production of oil, natural gas and fluid hydrocarbons, under the production sharing regime, of the volumes exceeding the limits specified under the transfer of rights agreement and/or that are negotiated during the review process provided for in this agreement, for the areas of Búzios, Entorno de Iara, Florim and Nordeste de Tupi. The Production Sharing agreement for these four areas will have duration of 35 years.

The mentioned resolution covers volumes exceeding the 5 billion barrels of oil equivalent contracted under the transfer of rights agreement and establishes parameters that include:

(i) signing of production sharing agreements for the surplus volumes to come into effect as of the date of first oil produced under the transfer of rights regime, for each one of the four areas;
(ii) payment of a R$ 2 billion signature bonus in 2014 to the Federal Government;
(iii) anticipation of part of the profit oil to be paid according to the following distribution: R$ 2,0 billion in 2015, R$ 3,0 billion in 2016, R$ 4,0 billion in 2017 and R$ 4,0 billion in 2018;
(iv) percentage of the profit oil to be paid to the Federal Government: 47,42% in Búzios, 48,53% in Entorno de Iara, 46,53% in Florim and 47,62% in Nordeste de Tupi.

Petrobras considers that the parameters approved by the CNPE will give to this project (surplus of the transfer of rights) the same conditions of attractiveness that are expected from Libra field.

Estimates made by ANP indicates that these 4 areas may contain additional volumes between 9.8 and 15.2 billion barrels of oil equivalent, according to the table below, published in the cited resolution:

Source: Data presented at the CNPE meeting of June 24th, 2014

Estimates of recoverable oil volumes, costs, investments and the timetable of production systems arising out of the surplus volumes will be disclosed as production sharing agreements are signed and activities under this regime get underway, alongside projects being developed under the transfer of rights. Planning of the development of the 5 billion barrels of oil equivalent contracted under the transfer of rights and/or the review process provided for in the transfer of rights agreement will not be changed.

The actions related to this decision of the CNPE will be initiated with the Ministry of Mines and Energy and the National Petroleum, Natural Gas and Biofuels Agency (ANP), after the approval of the Company´s management, aiming at signing the production sharing agreements for the surplus volumes of the transfer of rights.

This contracting is an opportunity for Petrobras to secure the sustainability of its production in line with the 2030 Strategic Plan and consistent with the underlying principles of the 2014-2018 Business and Management Plan, with a focus on capital discipline, integrated portfolio management and priority for upstream projects in Brazil.

The commitments assumed by Petrobras in this project for the period of the 2014-2018 Business and Management Plan, besides not materially impacting its results and financials, will also contribute to increase, in the 2030 Strategic Plan horizon, the return on capital of the Company, as it substantially expands the participation of upstream in its investment portfolio.

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