Energy Newsletter | No 11 – June 2023

ANP amends hydrocarbon import resolution

On June 22, 2023, the Brazilian National Petroleum Agency (“ANP”) approved the amendment of Article No. 16 of ANP Resolution No. 777/2019, so as to expressly allow the import of liquid hydrocarbon streams intended for fuel formulation by international trade agents (importers).

The ANP has also reinforced that such currents should only be traded by importers with other agents authorized by the ANP.

Read in full – ANP Article

Minimum Exploratory Program: ANP will carry out prior consultation on PEM compliance outside the area under contract

On June 22, 2023, a prior consultation on the draft Regulatory Impact Analysis (“RIA”) Report was approved.

The measure was introduced due to the need to relax and clarify the rules that address the possibility of compliance with the Minimum Exploratory Program (“PEM”) outside the concession area.

Such relaxation seeks to raise investments and encourage exploratory activities, in order to expand geological knowledge, hoping to provide new discoveries.

According to the RIA report, the full development of this initiative will depend on the issuance of an effective resolution establishing the criteria and requirements for use and applicability so that the PEM can be carried out outside the concession area.

Read in full – ANP Article

NEWS

Oil and Gas Production in April

On June 02, 2023, the ANP published the Monthly Newsletter of Oil and Natural Gas Production for April 2023, which allows the consultation of data in traditional publications of pdf files, and interactively, through Business Intelligence (BI) technology.

Consultation through the interactive BI tool, showed an increase of 0.8% in oil production and 2.2% in gas production, both in comparison with March 2023. Compared to April 2022, the rise is even more expressive, amounting to 4.7% and 3.4% in oil and gas production, respectively.

Read in full – ANP Article

New model of guarantee insurance for decommissioning

On June 07, 2023, the ANP approved the amendment to the guarantee insurance model used in the decommissioning operations of oil and gas exploration and production facilities, in reference to ANP Resolution No. 854/2021.

The amendment seeks to ensure compliance with the new regulations of the Superintendence of Private Insurance (“Susep”). The measure was necessary due to the repeal of Susep Circular No. 477/2013, on January 01, 2023, which regulated the draft guarantees approved by the ANP. After its validity expired, the instrument became regulated by Susep Circular No. 662/2022, which determined the need for amendment. The new model for financial guarantees was published to allow the issuance of new insurance policies in accordance with current Susep regulations.

The ANP has also determined:

1. a deadline extension for the submission of decommissioning financial guarantees by 90 days, with a new deadline by October 02, 2023; and
2. the holding of a public consultation and hearing on the amendments to this section of ANP Resolution No. 854/2021, in order to allow interested parties to contribute with improvements to the regulation.

Read in full – ANP Article

Compressed gas: ANP will hold public consultation and hearing

On June 07, 2023, the Collegiate Board of ANP approved the Regulatory Impact Analysis Report and the holding of public consultations and hearings in order to draft the resolution that will replace ANP Resolution No. 41/2007.

This is an ANP initiative that seeks to adapt the regulation to the current landscape of the gas sector, specifically regarding the activities of packaging and handling of compressed natural gas (“CNG”) in bulk by alternative modes to the pipeline, addressed in the resolution mentioned above.

The draft aims to correct regulatory gaps, address technical requirements for CNG facilities, update operational safety aspects, in addition to aligning the substitute text with the terms provided for in the New Gas Law (Law No. 14,134/2021), in addition to referring CNG trading issues to ANP Resolution No. 52/2015, which already regulates the matter.

Read in full – ANP Article

Revision of rules on quality control of imported fuels

On June 07, 2023, the ANP approved the holding of a public consultation and hearing to revise ANP Resolution No. 680/2017, which establishes the quality control obligations for imported fuels.

The purpose of this revision is to adapt the resolution to the new reality of the market under the strict control of the ANP, without prejudice to the quality of imported fuels.

The revision of ANP Resolution No. 680/2017 seeks to address topics such as:

• Expansion of the products regulated by the import quality control rule, including asphalts, which are added to the current scope: biodiesel, ethanol, cooking gas (LPG), automotive gasoline, aviation gasoline, diesel oil, fuel oil, aviation kerosene (QAV), alternative aviation kerosene and green diesel.
• Establishment of quality control rules for products imported by land, considering the lack of laboratory infrastructure at dry borders.
• Alignment of regulations included in ANP Resolutions No. 680, of 2017, and No. 859, of 2021, which provide for the requirements for accreditation of quality inspection companies, in charge of controlling imported products.

Read in full – ANP Article

Disclosure of data in E&P incidents

On June 14, 2023, the ANP included in the Open Data Program information on incidents related to the exploration and production of oil and gas carried out within two years of the program’s publication date.

The ANP receives such data through the Incident Module (SISO-incidents) of the Integrated Operational Security System. The disclosure of this data is a way to spread important information for the assessment and studies of the industry, in order to avoid further incidents.

Read in full – ANP Article

Public hearing discusses criteria for setting the reference price of oil

On June 21, 2023, the ANP held a public hearing to revise ANP Resolution No. 874/2022, which establishes the criteria for setting the reference price of oil, adopted by the ANP through the calculation of royalties and special participation due to the Federal Government, states and municipalities.

The initiative was based on the possibility of setting more competitive oil reference prices compared to those currently adopted by the international market. The proposed revision was motivated by the change in the maritime fuels specification within the scope of the International Maritime Organization (IMO), which determined new maximum limits for the sulfur content of products.

During the opening phase of the public hearing, the importance of the amounts (a) collected as a result of government participation and (b) distributed to states, municipalities and the Federal Government was emphasized.

Read in full – ANP Article

Extension of deadlines for compliance with RD&I investments

On June 23, 2023, the ANP extended the deadlines for compliance with the investment obligations resulting from the Research, Development and Innovation (“RD&I”) clauses of contracts for oil and gas exploration and production relating to the reference year of 2022.

According to Resolution No. 918/2023, investment obligations in RD&I must be met during the period between January 01 of the reference year and June 30 of the following year. However, due to the Covid-19 pandemic, the deadlines for the reference years 2020 and 2021 were extended by 90 and 45 days, respectively.

Returning to the usual deadlines would reduce the investment period for 2022 by 45 days. Given that logistics, productive activity and other important areas for society had not yet been fully reestablished, the ANP opted to extend these deadlines in favor of full compliance with the obligations.

See below the new deadlines for compliance with these obligations, in accordance with ANP Resolution No. 926/2023:

• August 15, 2023: deadline for oil companies to carry out investments to meet their contractual RD&I obligations for the reference year of 2022; and for applying the Balance of Unapplied Resources (“SRN”) calculated on August 15, 2022.
• September 15, 2023: deadline established for the collection, to the National Treasury, of resources from the assignment for consideration contract, not applied in the reference period.
• November 15, 2023: deadline for submission of the Annual Consolidated Report (“RCA”) for the reference year of 2022.

Read in full – ANP Article

ANP releases consolidated national data for 2022

On June 30, 2023, the ANP published consolidated data on the development of the oil, natural gas and biofuels sector in Brazil in 2022.

In 2022, the ANP promoted two cycles of the Open Acreage Offering of Blocks and Areas for Exploration and Production of Oil and Natural Gas, which were the 3rd Cycle of the Open Acreage of Concession (“OPC”) and the 1st Cycle of the Open Acreage Production Sharing Offering (“OPP”).

• The volume of obligations inherent to concession, sharing and assignment for consideration contracts regarding investments in RD&I was BRL 4.4 billion, representing an increase of 45.8% compared to 2021. Government participations generated an increase of 52% in comparison to 2021, involving BRL 118.6 billion.
• Total reserves increased by 10.6% compared to the previous year, while proven oil reserves increased by 11.5%.
• Regarding the domestic production, there was a growth of 4%, reaching the mark of 3 million barrels/day, and the pre-salt was accountable for about 76% of Brazil’s production.
• As for exports and imports, the figures amounted to 1.3 million barrels/day and 275 thousand barrels/day, respectively.
• As for natural gas, 2022 registered an increase in the number of total reserves, reaching 587.9 billion cubic meters (m3), an increase of 4.5%.. Proven reserves reached 406.5 billion m3, an increase of 6.6% compared to the previous year.
• Gas production increased by 3.1%, reaching 137.9 million m3/day, where 71.6% of domestic production comes from the pre-salt. The increase in natural gas production remains consolidated, as this was the 13th consecutive year to record a rise.
• While biodiesel production dropped by 7.6% compared to 2021, ethanol production increased by 2.5%, reaching the historic mark of 30.7 billion liters.
• Hydrated ethanol registered a lower price competitiveness compared to gasoline C, which resulted in a 7.5% drop in sales of this fuel in 2022.
• As for oil products, production increased by 6.7%, reflecting 84% of installed refining capacity.
• Sales by distributors increased by 3.9%, and aviation kerosene was the highlight of sales, registering an increase of 35.9%.

Read in full – ANP Article

Provisional Measure that instituted the Tax on the Export of Crude Oil not converted into law

Provisional Measure (“MP”) No. 1163/2023, which instituted the Tax on the Export of Crude Oil or Bituminous Minerals, was not converted into law, and its term of validity ended on June 28, 2023.

As a result, this tax will no longer be levied on future exports, unless another regulation is published in this regard.  On the other hand, the Direct Actions for the Declaration of Unconstitutionality (“ADIs”) 7359, 7360 and 7362 – which were filed against the MP – are likely to be dismissed for loss of purpose.

The National Congress can publish a legislative decree by September 10, 2023, to provide for the effects of the MP during its validity period. If the Congress does not publish a legislative decree (which is usually the case), the exports carried out during the period of validity of the MP will be regulated by it.

House of Representatives approves Tax Reform

On July 06, 2023, the House of Representatives approved the tax reform (substitute text to PEC 45/2019) in order to amend the Brazilian tax system and simplify taxation on consumption.

The reform results in the creation of a dual version of the Value Added Tax (“VAT”) on consumption taxes. The Federal VAT will be called Contribution on Goods and Services (“CBS”) and will replace the Social Integration Program (“PIS”) and the Contribution for the Financing Social Security (“COFINS”).

In addition, a subnational VAT will also be created, with shared authority between states and municipalities, called Goods and Services Tax (“IBS”), replacing the Tax on Circulation of Goods and Services (“ICMS”) and the Services Tax (“ISS”).  CBS and the IBS will be levied on transactions with tangible or intangible goods (including rights), or with services, and is expected to be levied on the import of goods, rights or services.

In addition to the creation of these taxes, the following provisions are also expected:

• the creation of a selective tax to replace the Tax on Industrialized Products (“IPI”) on the production, trade or import of goods and services that are harmful to health or the environment, in accordance with the legislation in force; and
• the ban on the extension of the period for enjoyment of ICMS benefits, which is guaranteed until 2032, with a proportional reduction of such benefits in the period between 2029 and 2032.

The reform also provides for the possibility of establishing specific special regimes for some sectors, such as fuels and lubricants, financial services, real estate operations, health care plans, prognostic competitions and operations contracted by direct and indirect public administration. These regimes, depending on the case and according to complementary law, can provide for changes in rates, crediting rules and calculation bases, as well as provide for collection based on revenue or billing.

After its approval by the House of Representatives, the text will be forwarded for discussion by the Federal Senate.

Minister of Mines and Energy signs ordinance allowing inclusion of natural gas liquefaction and LNG regasification projects in REIDI

On June 07, 2023, according to news released by the Ministry of Mines and Energy (“MME”), the list of beneficiaries of the Special Incentive Regime for Infrastructure Development (“REIDI”) will now cover natural gas liquefaction and liquefied natural gas (“LNG”) regasification projects.

The Minister of Mines and Energy, Alexandre Silveira, signed Ordinance No. 65/2023, which amends Ordinance No. 19/GM/MME/21 and considers the provision for the classification of natural gas processing projects in any physical state already provided for in Decree No. 6,144, of July 03, 2007, which regulated REIDI. The ordinance was published in the Federal Official Gazette of Brazil (“DOU”) on June 06, 2023.

Previously, the REIDI list only included oil, natural gas and biofuels pipelines and natural gas production and processing infrastructure. Now, minister Alexandre Silveira stated that “the initiative will be in line with the Gas to Employ Program and should increase the supply of natural gas in the country, through LNG.”

According to the REIDI legislation, by joining the regime, companies can acquire, lease and import goods and services linked to the approved infrastructure project, suspending PIS/Pasep and Cofins or PIS/Pasep-Import and Cofins-Import. The projects must be carried out within five years, counted from the date of the legal entity’s qualification with the Department of the Federal Revenue of Brazil.

The application procedure for REIDI projects remains the same, and is initiated with the submission of an application to the ANP, as determined by Normative Ordinance No. 19/GM/MME/21. After analysis, the ANP will forward the result to the MME, which may approve the project’s REIDI classification, through the publication of a specific ordinance in the DOU. In the case of pipelines for the provision of local piped gas services, the application must be submitted directly to the National Secretariat for Petroleum, Natural Gas and Biofuels (“SNPG”) of the MME.

Read in full – MME Article

NEWS

The Research, Development and Innovation Project (“PDI”) stems from a guideline of the National Energy Policy Council (“CNPE”), which defined the agenda as a priority in Brazil’s energy transition strategy. In addition, hydrogen will play a key role in achieving the energy transition and carbon neutrality by 2050. Envisioning a future in which low-carbon hydrogen will be a reality in Brazil will also enable the development of projects with hybrid technological approaches and business models, offering additional pathways to trade hydrogen, in a competitive manner.

IEA publishes Renewable Energy Market report

On June 01, 2023, the International Energy Agency (“IEA”) published the Renewable Energy Market Update Report.

According to the report, the use of renewable energy has consistently increased across the world and is expected to register around 440GW in generation by the end of 2023.

Read in full–Report

NEWS

New operating plants amount to 4,610.20 MWA for the year

On June 12, 2023, according to news published by Brazil’s National Electricity Regulatory Agency (“ANEEL”), the Brazilian electricity matrix closed the month of May 2023 with an expansion of 4,610.20 megawatts (MW).

By May 31, ANEEL registered the launch of 144 plants into commercial operations, of which 62 were wind (2,006.9 MW), 55 solar photovoltaic (2,033.2 MW), 19 thermoelectric (476.7 MW), 5 small hydro (82.1 MW) and 3 hydro (11.4 MW). Solar and wind plants together account for 87.6% of installed capacity for the year.

Considering the month of May alone, the expansion in the matrix was 1,267.1 MW concentrated in 45 plants, 17 of which were wind (363.9 MW), 24 solar photovoltaic (789.8 MW) and 4 thermoelectric (113.4 MW).

The plants with operations initiated in 2023 are located in 19 states of the 5 Brazilian regions. In descending order, the following states have the highest results so far:

1. Bahia (1,559.7 MW)
2. Minas Gerais (1,107.8 MW)
3. Rio Grande do Norte (798.9 MW)
4. Piauí (358.9 MW).

For the month of May alone, Bahia had the largest increase, with 992.6 MW, from the start-up of Complexo Futura.

Read in full – ANEEL Article

MME holds meeting of National Hydrogen Program Steering Committee

On June 12, 2023, the MME held the 3rd Ordinary Meeting of the National Hydrogen Program Steering Committee (Coges-PNH2).

The collegiate board coordinated by the MME is made up of 11 ministries, in addition to the regulatory agencies for electricity (ANEEL) and oil, gas and biofuels (ANP), the Energy Research Company (EPE), and 5 thematic chambers for technical discussion of specific topics.

Contributions from the public consultation on the PNH2 Three-Year Work Plan 2023-2025 were also discussed. Overall, 656 contributions to the actions proposed in the plan were received from 56 institutions, mostly (73%) from the private sector. The most important considerations were linked to the general structure of the plan and to the topics related to market opening and growth and competitiveness.

Within the agenda of the meeting, several actions proposed in the plan placed for public consultation were emphasized, which are already underway. Some examples are the drafting of a bill on the legal framework for hydrogen in Brazil, the development of studies on mapping the production chain and demand, and international financing for the sector. The opening of ANEEL’s public consultation for low-carbon hydrogen Research, Development and Innovation projects was also addressed.

Read in full – MME Article

National Energy Balance highlights renewability increase of Brazilian matrix

On June 28, 2023, according to news published by the MME, Brazil increased the renewability of the Internal Energy Supply (“OIE”) and the Internal Electricity Supply (“OIEE”) between 2021 and 2022. 

According to the National Energy Balance (“BEN”) Summary Report, the percentage of renewables in OIE rose from 45% in 2021 to 47.4% in 2022.

The document was released this week by EPE, which is linked to the MME. The annual publication provides the main accounting data on supply, transformation and final consumption of energy products in Brazil.

As for OIEE, the variation was from 78.1% to 87.9%. This calculation considers not only the National Interconnected System (“SIN”), but also Isolated Systems and Self-Production not injected into the grid. When considering only the SIN, the renewability of OIEE in 2022 was calculated at 92%. According to the EPE publication, the positive variation resulted from the increase in hydraulic supply in Brazil, combined with the reduction in thermoelectric generation.

The publication also provides, for the first time, the history of solar thermal energy, used for water heating in the residential, commercial and industrial sectors. It also highlights the increase in solar generation in 2022, which generated 30,126 GWh, representing an 80% increase over the previous year.

Read in full – MME Article

Share of renewables in electricity generation increases at the beginning of the year

On June 29, 2023, according to news published by the MME, the share of renewable sources in electricity generation in Brazil reached, in March 2023, the highest level since the beginning of the century.

This is highlighted by the Monthly Energy Newsletter for March, published on June 29, 2023, by the MME. According to the publication, the contribution of renewables in OIEE reached a total of 90.4% until March.

OIEE is accounted for from the portions of Centralized Generation, Distributed Generation (DG), Self-Production of Energy (“APE”), Isolated Systems and Electricity Exchange. According to the publication, the record for March was the result of favorable rainfall conditions and the sharp growth of renewables in Brazil. These factors also helped reduce the use of coal-fired, natural gas-fired and oil-fired thermoelectric plants, increasing generation renewability.

Another highlight of the March newsletter was the publication of the resolution of the National Energy Policy Council (“CNPE”), which changed the content of the mandatory biodiesel blend in diesel oil to 12% as of April; and the progressive evolution of this percentage, which should reach 15% by 2026.

This resolution also established parameters to encourage purchases of renewable fuel through the Social Biofuel Seal Program for the North, Northeast and Semi-arid Regions (Northeast and northern Minas Gerais). This program aims to reduce the emission of greenhouse gases, generate jobs and income for small producers in the regions covered, and contribute to the reduction of imports of the fossil products.

Read in full – MME Article

PETROBRAS CONTRACTING

PUBLIC CONSULTATIONS AND HEARINGS (ANP)

CALL FOR CONTRIBUTIONS (ANEEL)

PUBLIC CONSULTATIONS (ANEEL)

PUBLIC CONSULTATIONS (MME)

**Please note that the deadlines in the table above are constantly changing, so they correspond to deadlines disclosed at the time of publication of this newsletter.

WHAT’S NEXT

	July/2023 – Auction for Contracting Capacity Reserve To be held by ANEEL.
	August/2023–New Energy Auctions “A-4” and “A-6” To be held by ANEEL.
	October/2023 – Auction for the Supply of Isolated Systems To be held by ANEEL.
	November/2023 – Auction for Contracting Capacity Reserve To be held by ANEEL.
	December/2023 – Existing Energy Auctions “A-1” and “A-2″ To be held by ANEEL.
	July/2024 – Auction for Contracting Capacity Reserve To be held by ANEEL.
	August 2024–New Existing Energy Auctions “A-4” and “A-6” To be held by ANEEL.
	October/2024 – Auction for the Supply of Isolated Systems To be held by ANEEL.
	November/2024 – Auction for Contracting Capacity Reserve To be held by ANEEL.
	December/2024 – Existing Energy Auctions “A-1” and “A-2″ To be held by ANEEL.
	July/2025 – Auction for Contracting Capacity Reserve To be held by ANEEL.
	August/2025–New Energy Auctions “A-4” and “A-6” To be held by ANEEL.
	October/2025 – Auction for the Supply of Isolated Systems To be held by ANEEL.
	November/2025 – Auction for Contracting Capacity Reserve To be held by ANEEL.
	December/2025 – Existing Energy Auctions “A-1” and “A-2″ To be held by ANEEL.