In order to keep our clients informed about the current landscape of the main energy and natural resources sectors in Brazil, we have prepared the Energy Newsletter, a monthly bulletin with the main news of the energy market.
This information channel is the result of the collaboration between our “Oil & Gas” and “Energy” teams.
The newsletter was designed within the context of the energy transition that is being targeted in Brazil, and drafted as a complete source of information about the dynamic Brazilian energy market within the oil, natural gas, electricity and renewable energy sectors.
Enjoy reading!
This newsletter is for informative purposes only and does not constitute legal advice for any specific operation or business. For more information, please contact our team of lawyers.
Oil and Gas
Procedure for Supply Facilities Authorization modernized
On May 19, 2023, the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (“ANP”) modified the authorization procedure for the operation of supply facilities. Aiming to expedite approvals, the procedure will no longer be carried out through the Electronic Information System (“SEI”), but rather through the electronic form available on the ANP’s website.
This change is expected to enable approval within two working days after the form is submitted, consequently processing about 80% of the requests that are pending approval on the SEI. Agents that requested approval through the SEI will also be allowed to fill out the forms on the ANP’s website, in order to fast-track the authorization.
The documents required to fill out the authorization form are:
- Corporate Taxpayer Registration Number (CNPJ) of the facility owner.
- Technical Responsibility Annotation (ART) of the responsible engineer.
- Environmental Operation License (LO).
NEWS
Proved reserves in Brazil increase by 12%
On May 02, 2023, the ANP published data regarding the increase in proved reserves in Brazil.
According to data from the Annual Resources and Reserves Report (BAR), which inform the quantity of economically recoverable oil or natural gas, 2022 saw a 12.2% increase in proved oil reserves (1P), a 9.7% increase in the volume relating to the sum of proved and probable reserves (2P) and a 11.1% in the sum of proved, probable and possible reserves (3P), in comparison to 2021.
In absolute numbers, 2.27 barrels were appropriated for each oil barrel that was produced. Regarding natural gas, there was a 7.3%, 5.2%, and 4.9% increase, respectively, in comparison to 2021.
Click here to access the ANP’s release.
ANP publishes data on O&G production in March
On May 05, 2023, the ANP published the Monthly Newsletter of Oil and Natural Gas Production for March, 2023. Oil production decreased 4.5% compared to February and increased 4.5% compared to March 2022. In turn, natural gas production decreased 5.5% compared to February 2023 and increased 3% compared to March 2022.
The ANP attributes such decrease to scheduled shutdowns in certain production units, and ensures that these shutdowns are in compliance with the industry and that they result in long-term increase in production.
Click here to access the ANP’s release.
Public Hearing on the review of E&P Operational Safety Regulation
On May 16, 2023, the ANP held a public hearing to review the operational safety regulatory framework for oil and natural gas exploration and production (E&P) facilities.
ANP aims to consolidate five resolutions into a single regulation. The draft resolution also was subject to a public consultation for 120 days, and 933 contributions were received. In addition to simplifying the administrative tasks by reducing the litigation of proceedings, documents, and other demands, the new regulation enables the operationalization and inspection of rules and management practices. Prior to publication, the consolidated text will be subject to legal analysis by the Federal Attorney’s Office, together with the ANP, and approval by the Collegiate Board of the ANP.
Interdiction of Bahia Terra cluster lifted
On May 19, 2023, the ANP lifted the interdiction of 38 facilities of the Bahia Terra Complex. As a result, about 32% of the onshore production of oil and natural gas in Bahia has resumed.
Operations had been suspended in December 2022 for safety purposes, but were progressively resumed as Petrobras complied with the conditions set by the ANP.
ANP publishes industry diagnosis
On May 25, 2023, the ANP published the Competitive Diagnosis of the Brazilian natural gas Industry (Joint Technical Note No. 2/2023), which proposes a Gas Release program.
In order to develop a concentration reduction program, the ANP executive board also decided to carry out a regulatory impact analysis (AIR) on the matter, which will be included in the ANP’s Regulatory Agenda.
Joint Technical Note No. 2/2023 presents a diagnosis on the competition, considering the current structure of the Brazilian natural gas industry, as well as an analysis on the market behavior in the several links of the industry. The ANP claims that it will take the diagnosis into consideration to develop and implement programs aimed at decentralizing the supply of natural gas and consequently foster competition.
In addition, the diagnosis includes recent developments regarding the transportation and processing of gas in the Natural Gas Processing Units (UPGN), which are still not capable of ensuring healthy competition through this process of decentralization.
Click here to access the ANP’s release.
Bahia Oil & Gas: companies of the sector enter into agreement
On May 25, 2023, during the “Bahia Oil & Gas” event, an agreement was entered into at the ANP stand for the supply of natural gas relating to the Dó-Ré-Mi onshore field, in the Sergipe Basin.
The agreement was entered into between Grupo Ubuntu Ltda., the field’s operator, Centro Oeste Óleo e Gás Ltda., which constitutes a consortium with the Ubuntu Group in this field, and Petrobahia S.A., which distributes compressed natural gas (CNG) to free consumers in the region. The agreement was possible due to authorizations granted by the ANP for the sale of gas by the producing companies.
The agreement provides for the possibility of natural gas acquisition by free consumers, with the purpose of rendering local production more competitive and ensuring that production from the field remain feasible from an economic perspective.
Power +
Justice of Rio de Janeiro approves the processing of judicial restructuring of Grupo Light
On May 12, 2023, Light S.A., the holding company of Grupo Light, filed for the processing of judicial restructuring, together with two of its subsidiaries, one of which is an electricity distribution concessionaire. Grupo Light imputes much of the crisis to non-technical electricity losses, to the decrease in the payment of energy bills, and to the full return of tax credits – due to the exclusion of ICMS from the PIS/COFINS calculation basis – to consumers.
Law No. 12,767/2012 establishes that the judicial restructuring and out-of-court restructuring regimes do not apply to electric power utility concessionaires, as is the case of both subsidiaries of Grupo Light. This is one of the questions posed by the creditors within the scope of the appeal against the processing of judicial reorganization.
ANEEL informed the press that no intrasectoral obligations were suspended or postponed, and that ANEEL has been monitoring, under a special regime, the economic and financial indicators of the distributor under discussion.
Read in full – Relevant Fact of Light S.A.
Read in full – Press release published by ANEEL
ANEEL opens public consultation on amicable termination of transmission agreements executed by power generating plants
From May 11 to 22, 2023, a Public Consultation by ANEEL received contributions regarding the proposal of amicable termination of Transmission System Use Agreements (“CUSTs”).
The Public Consultation was initiated in light of several authorization grants applications submitted by power generating plants to ANEEL, in order to secure the discount on tariffs on the usage of transmission and distribution systems (“TUST/TUSD”). This is an exceptional measure to carry out the termination of contracts without applying penalties to projects under CUSTs.
ANEEL understands that there is great risk to the National Interconnected System (“SIN”) as regards power generating plants that are either operating under CUSTs that are in force or to entry into force, but whose construction has not started yet.
Read Public Consultation No. 15/2023
Read in full – ANEEL Technical Note
NEWS
ANEEL publishes normative resolution on procedures for the provision and remuneration of ancillary services
On May 04, 2023, ANEEL Normative Resolution (“REN”) No. 1,062/2023 was published, which modified certain provisions of REN No. 1,030/2022, regarding rules on the provision and remuneration of ancillary services.
Among the changes, a provision aimed at increasing the use of renewable energy sources was included to enable the Brazilian National Electric System Operator (“ONS”) – upon specific authorization – to provide for alternative products used in the provision of ancillary services within an experimental regulatory environment, the commonly named “regulatory sandboxes”.
Read REN Resolution No. 1,062/2023 in full
TCU orders CMSE regulate power generation outside the Merit Order Model
The Brazilian Federal Audit Court (“TCU”) ordered that the Electric Sector Monitoring Committee (“CMSE”) develop, within 180 days, a plan to regulate power generation outside the Merit Order Model (“GFOM”) for thermoelectric plants.
Such provision resulted from an audit procedure that evaluated the operation planning system of the electricity sector including governance, the premises used, the mathematical and computational models, as well as the impacts both on the supplying safety and electricity costs.
The TCU concluded that there is a lack of transparency in the deliberations on energy-generated by power plants that bear high generation costs (such as thermoelectric plants), although the TCU recognizes the need to contract these plants due to water shortage for energy generation by hydroelectric plants.
ONS opens public consultation on the revision of submodules regarding Micro and Mini Distributed Generation
On May 15, 2023, the ONS opened a public consultation to obtain contributions to the review of the Network Procedures regarding the 2nd representation phase of Micro and Mini Distributed Generation (“MMGD”), according to the operation and price energy chain models.
The ONS seeks to include the MMGD expansion, expected to be implemented in the Monthly Energy Operation Program (“PMO”), as of January 2024. Contributions must be submitted by June 04, 2023, through the SINTEGRE Portal.
ONS board approves five priority regulatory topics for 2023
The ONS board of directors approved the five regulatory topics that should be prioritized in 2023, in order to stimulate electricity sector’s transition into a 5D sectoral system, that is: digitalized, decentralized, decarbonized, democratized and diversified.
The “Top 5” regulatory topics chosen by the board were:
- Distributed energy resources – The ONS seeks to integrate distribution resources to ensure the secure operation of the SIN in a more decentralized sectoral system.
- Access to the transmission system – The ONS aims to enable a more efficient process regarding the access of renewable sources to the transmission system.
- Ancillary Services – The ONS aims to improve ancillary services in order to provide more flexibility and efficiency to the operation.
- Demand Response – In order to contribute to the reliability of the system and to establish reasonable tariffs, the ONS seeks to define availability products and structure such products’ competitive contracting.
- Operation and Price – Based on constant improvement in dispatches and price formation, the regulatory performance must take into consideration the proposals aimed at upgrading the sector.
ANEEL defines the scope of its superintendencies after organizational restructuring
On April 24, 2023, ANEEL modified its organizational structure by founding superintendencies (due to the merger of existing superintendencies), as well as by extinguishing and creating organizational units. On May 04, 2023, ANEEL issued ordinances addressing the new duties of such superintendencies.
The major superintendencies and their duties are mentioned as follows:
- Superintendence for the Regulation of Transmission and Distribution Services (“STD”): aimed at responding to requests from agents regarding the regulation of electricity transmission and distribution services; operationalizing the activities regarding the Social Electricity Tariff (“TSEE”) as well as the public lighting billing etc.
- Superintendence for the Regulation of the Generation Services and the Energy Market (“SGM”): aimed at submitting to the ONS and the Electric Energy Trading Chamber (“CCEE”), Enforceable Opinions submitted by the Brazilian Office of the Attorney General to comply with a judicial decision; approving the energy trading procedures as well as the UTE CVUs that do not have a variable cost adjustment mechanism fixed in regulated contracts, etc.
- Superintendence for the Technical Oversight of Energy Generation, Transmission and Distribution (“SFT”): aimed at establishing administrative proceedings; applying penalties in case of non-compliance with obligations of Energy Auction notices; carrying out plans with agents aimed at performance improvement; and deciding, jointly with the SCE, on liability exclusion matters.
- Superintendence for the Concession, Permission and Authorization of Energy Services (“SCE”): aimed at authorizing the exploration of energy generation projects; changing the technical characteristics of the plants and the respective restricted interest transmission facilities; transferring the ownership of authorizations of energy generation projects; etc.
Read in full – Ordinance No. 6,823/2023(STD)
Read in full – Ordinance No. 6,824/2023(SGM)
Read in full – Ordinance No. 6,825/2023(SFT)
Read in full – Ordinance No. 6,827/2023(SCE)
ANEEL publishes safety standards for hydroelectric dams
On May 10, 2023, ANEEL published REN No. 1,063/2023, which amended REN No. 846/2019, regarding penalties to agents of the sector under discussion. On May 11, 2023, REN No. 1,064/2023 was also published, providing for the criteria and safety measures regarding dams associated with hydroelectric plants supervised by ANEEL.
During ANEEL’s Board Meeting, held on May 02, 2023, director Hélvio Guerra informed that the new rules are the result of accidents that occurred in the Brumadinho and Mariana dams. For this reason, the regulation seeks to ensure more safety in the activities of hydroelectric plants.
Regarding the penalties, REN No. 846/2019 was amended by REN No. 1,063/2023 in order to provide for new types of penalties, in addition to the existing ones, applicable to breaches of dam safety, such as: construction embargoes, demolition of buildings, suspension of activities and rights-restricting sanctions.
Among the matters addressed by REN No. 1,064/2023, we highlight that dam classification criteria were drafted, as well as a safety plan (which includes inspections, action plans, and periodic reviews).
Read REN Resolution No. 1,063/ 2023 in full
Read REN Resolution No. 1,064/ 2023 in full
Number of retailers within the CCEE increased
A retailer is a CCEE agent in charge of representing consumers and energy generating plants before the Chamber to facilitate and expand the scope of operation of such agents within the Free Energy Market.
According to the CCEE data, in 2019, only 19 retailers were members of the CCEE and, by May 2023, this number increased to 63, in addition to the other 35 membership applications under way.
Given the opening of the Free Energy Market, both the representativeness and the scope of retail agents are expected to increase.
Renewables
HIGHLIGHTS
Solar energy investments expected to surpass oil production by 2023
On May 25, 2023, a study carried out by the International Energy Agency (“IEA”) revealed that, for the first time, solar energy is expected to surpass oil production in terms of annual investments, accounting for 90% of clean energy investments in 2023 and amounting to USD 380 billion.
According to the study, about USD 2.8 trillion will be invested in energy worldwide during the year, of which USD 1.7 trillion are expected to be allocated to clean technologies, and USD 1 trillion to fossil fuels. Annual investment in clean energy is set to register an increase of 24% between 2021 and 2023, stimulated by renewable sources and electric vehicles. Within the same period, investment in fossil fuels is expected to increase by 15%.
In addition, the IEA estimates that oil and gas production costs are expected to increase by 7% in 2023, returning to the same numbers of 2019 and reaching USD 500 billion. In 2022, the military conflict in Europe pushed natural gas prices to levels that had not been reached since the past decade, and the oil and gas industry earned about USD 4 trillion.
Click here to access the ANP’s release.
Ministry of Finance opens Public Consultation on investments in the Renewable Energy Integration Program
From May 04 to May 12, 2023, the Ministry of Finance held a Public Consultation with the purpose of receiving contributions on the Investment Plan for the Renewable Energy Integration Program (REI Program), drafted by the Climate Investment Funds (CIF), with the participation of the Ministry of Mines and Energy (MME).
The program under discussion was created to support developing countries, thus increasing power generation from renewable energy sources, through technical assistance and low-cost financing of technologies and business models that simplify the use of variable renewable energy sources.
Read in full – Brazil’s Investment Plan
Ministry of Finance collects applications for implementation study of solar panels for low-income families
On May 08, 2023, the Ministry of Finance published a notice regarding applications for a consultant position, which will involve the development of a study on the implementation of photovoltaic panels in the homes of low-income families – a project that is associated with the drop in electricity tariffs.
In order to expand access to renewable energy, the study, which is scheduled to last four months – as of the execution of the contract –, is in line with the Federal Government’s ecological transition program.
Read the “Energia Hoje” article on the topic
NEWS
Green hydrogen: cooperation agreement connects solar, wind and biogas players to foster the market
On May 05, 2023, several business leaders in the renewable energy sector entered into a cooperation agreement for the development of the green hydrogen (H2R) market in Brazil. The Brazilian Agreement for Renewable Hydrogen involves the Brazilian Association of Wind Energy (ABEEólica), the Brazilian Association of Solar Photovoltaic Energy (ABSOLAR), the Brazilian Association of Biogas (ABIOGÁS), and the German-Brazilian Chamber of Commerce and Industry in Rio de Janeiro (AHK Rio).
Reportedly, the agreement establishes interests relating to the economic development of hydrogen obtained from renewable sources, as well as stimulates the cooperation and networking between important parties in the Brazilian and international markets.
The agreement aims to establish a regulatory framework, develop the renewable hydrogen application market, enable socioeconomic development through renewable hydrogen economy, foster hydrogen production from renewable sources in Brazil, disseminate renewable hydrogen opportunities to its members and Brazilian society, and increase competitiveness within the scope of the production and use of renewable hydrogen.
Click here to access the ANP’s release.
Government drafts new carbon market bill
On May 24, 2023, during a public hearing held in the Federal Senate, Aloisio de Melo, director of Mitigation Policies at the Ministry of Environment and Climate Change (MMA) stated that the government has been analyzing several initiatives within the scope of the carbon market, in order to establish the minimum legal definition in the perspective of the Executive branch.
Reportedly, the Federal Government is drafting a bill to create a regulated carbon market in Brazil, based on the cap and trade model that is already used in other jurisdictions, such as the Emissions Trading System (“ETS”) of the European Union.
The recognition of the ETS as a mandatory system and central point for market instruments is one of the agreements aimed at stimulating the transition to a low carbon economy. As a result, emission limits will be established periodically for a set of regulated entities (in this case, the industry).
OPPORTUNITIES
PETROBRAS CONTRACTING
| DESCRIPTION | CONTRIBUTION TERM | CODE / NOTES |
| PSV – Chartering of up to nine vessels | June 22, 2023 | 5:00 PM | Petronect Code No. 7004071393 |
| Chartering of a WSSV vessel; specialized technical services of chemical treatments, stimulation and related procedures, in oil wells, gas and others, lines and pipelines, as well as supply of chemical products | July 03, 2023 | 5:00 PM | Petronect Code No. 7004053453 |
| Charting of an accommodation vessel, and maritime hospitality services. | June 19, 2023 | 5:00 PM | Petronect Code No. 7004055542 |
| Acquisition of Chemicals Products for primary processing RNCE Specialties under Global Agreement | June 20, 2023 | 5:00 PM | Petronect Code No. 7004056762 |
| FPSO for SEAP- I – Charting and operation services | October 30, 2023 | 12:00 PM | Petronect Code
7004032918 |
| FPSO for SEAP-II – Charting and operation services | October 30, 2023 | 12:00 PM | Petronect Code
7004032955 |
| Chartering of one Maintenance and Safety Unit (UMS) – N16 | June 16, 2023 | 12:00 PM | Petronect Code
7004055932 |
| Chartering and Operation Services of FPSO – Albacora Revi | July 03, 2023 | 12:00 PM | Petronect Code
7003888184 |
PUBLIC CONSULTATIONS AND HEARINGS (ANP)
| DESCRIPTION | CONTRIBUTION TERM | CODE / NOTES |
| Proposal for a revision of ANP Resolution No. 874, of April 18, 2022, which establishes the criteria to set the Oil Reference Price, adopted in the calculation of government shareholdings. | June 21, 2023 (Public Hearing Date) | No. 24/2022 |
PUBLIC CONSULTATIONS (ANEEL)
| CODE | DESCRIPTION | CONTRIBUTION TERM |
| CP No. 016/2023 | Obtain contributions on the improvement of the draft concession contract that, pursuant to Decree No. 9,271/2018, will regulate the operation, by a company that arose from the privatization of Copel Generation and Transmission S.A. – Copel-GT, of the Hydroelectric Plant – UHE Governador Ney Aminthas de Barros Braga (Segredo), and of the UHE Governador José Richa (Salto Caxias), as well as to approve the changes to the draft of the concession contract that will regulate the grant of the Governador Bento Munhoz UHE. | June 15, 2023 |
| CP No. 052/2022 | Obtain contributions regarding the AIR report, which provides for access to transmission within the scope of the expansion of wind and photovoltaic generators. | June 27, 2023 |
** Please note that the deadlines in the table above are constantly changing, so the information mentioned above corresponds to deadlines published at the time of publication of this newsletter.
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June 30, 2023 – Transmission Auction held by ANEEL To be held by ANEEL. More information here. |
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July/2023 – Auction for Contracting Capacity Reserve To be held by ANEEL. |
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August/2023 – New Energy Auctions “A-4” and “A-6” To be held by ANEEL. |
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October/2023 – Auction for the Supply of Isolated Systems To be held by ANEEL. |
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November/2023 – Auction for Contracting Capacity Reserve To be held by ANEEL. |
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December/2023 – Existing Energy Auctions “A-1” and “A-2″ To be held by ANEEL. |
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July/2024 – Auction for Contracting Capacity Reserve To be held by ANEEL. |
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August/2024 – New Energy Auctions “A-4” and “A-6” To be held by ANEEL. |
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October/2024 – Auction for the Supply of Isolated Systems To be held by ANEEL. |
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November/2024 – Auction for Contracting Capacity Reserve To be held by ANEEL. |
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December/2024 – Existing Energy Auctions “A-1” and “A-2″ To be held by ANEEL. |
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July/2025 – Auction for Contracting Reserve Capacity To be held by ANEEL. |
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August/2025 – New Energy Auctions “A-4” and “A-6” To be held by ANEEL. |
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October/2025 – Auction for the Supply of Isolated Systems To be held by ANEEL. |
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November/2025 – Auction for Contracting Capacity Reserve To be held by ANEEL. |
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December/2025 – Existing Energy Auctions “A-1” and “A-2″ To be held by ANEEL. |
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