Ministry of Mines and Energy publishes new ordinance to frame priority investment projects in the natural gas and biofuels sector

On December 10, 2024, the Ministry of Mines and Energy (“MME”) published GM/MME Normative Ordinance No. 93, establishing the criteria and supplementary conditions for the framing, approval (if applicable) and supervision of investment projects considered as a priority in the natural gas and biofuels sector.

These projects are under the competence of the National Secretariat of Oil, Natural Gas, and Biofuels of the Ministry of Mines and Energy, which is responsible for issuing the securities addressed in Article 2 of Law No. 12,431, of June 24, 2011, and Law No. 14,801, of January 09, 2024.

Normative Ordinance 93 aims to facilitate the issuance of incentivized debentures and infrastructure debentures, thus fostering the development of essential projects aimed at driving economic growth and updating Brazil’s energy infrastructure.

The premises of Normative Ordinance 93 apply to the following subsectors of the energy sector:

• Exploration, development, production of dry and associated natural gas, flow, transfer and transport, treatment and processing, underground storage, compression, liquefaction, and regasification of natural gas;
• Production of biofuels and biogas;
• Production of synthetic low-carbon intensity fuels;
• Capture, storage, handling, and use of carbon dioxide; and
• Pipelines for transporting fuels, including biofuels and synthetic low-carbon intensity fuels.

Normative Ordinance 93 also highlights that supplementary actions and interventions aimed at reducing or mitigating greenhouse gas emissions (GHG) – within the scope of infrastructure projects – can be considered as part of investment projects, even if these actions and interventions are not the object of the instruments involving concessions, permissions, authorizations, or leases.

With the new regulation, GM/MME Ordinance No. 252, of June 17, 2019, and GM/MME Ordinance No. 348, of September 10, 2019, have been repealed – whose provisions were outdated in light of the regulatory changes introduced by Presidential Decree No. 11,964, of March 26, 2024. 

Main highlights of Normative Ordinance 93 

Main changes to the new ordinance in light of the repealed ordinances                                                                                                                               

In addition to the change in the general approval regime (from prior approval to automatic approval, with some exceptions) and the eligible projects (excluding projects in the oil segment and including projects for the capture, storage, handling, and use of CO), the main changes implemented by the new ordinance refer to the: 

• Express acceptance of supplementary actions and interventions aimed at reducing or mitigating GHG emissions as part of the investment project, in line with the provisions of Decree 11,964; 

• Simplification of the documents to be submitted to the National Secretariat for Oil, Natural Gas, and Biofuels (“SPG”), by excluding certain documents to be submitted by the issuer; 

• Extension of the deadline for supplementing information by the issuer, from 20 to 30 days; 

• De-characterization of delay in implementing the project as a reason for it to be considered as not implemented; 

• Express possibility of issuing incentivized debentures and infrastructure debentures for the same project; and 

• Definition of the obligations to monitor the project implementation by the National Agency for Oil, Natural Gas, and Biofuels (“ANP”) and the SPG.

Framing criteria 

Framing regulations applicable to issuers:

In line with the provisions of Decree 11,964, Normative Ordinance 93 establishes that the issuer of securities must be the legal entity that owns the project or its parent company, highlighting that:

• The issuer must be a stock company and the project holder must be a special-purpose company, concessionaire, permissionaire, authorizer, or lessee.
• In the event of extinction or revocation of such administrative acts, the projects will be deprioritized.

Framing regulations for priority projects:

The infrastructure investment projects considered as a priority – without prior ministerial approval – are the ones that, on the date of submission of the application for registration of the public offering of securities:

• Meet the criteria of the applicable regulation and legislation; and
• Belong to the priority energy subsectors, as provided for in Article 4 of Normative Ordinance 93.

These requirements are provided for in Decree 11,964, including the exploration, development, and production of natural gas as well as the production of biofuels and biogas, except for their agricultural phase.

In contrast with the provisions of Decree 11,964, Normative Ordinance 93 introduces the option of considering priority projects as those allocated to the provision of local piped gas services, upon prior approval of the SPG, as described further on.

Mandatory ministerial approval of projects 

Procedure for prior ministerial approval:

All the events provided for in Article 4 of Normative Ordinance 93 will be exempted from ministerial approval, upon submission of the prior registration form to the SPG. The exemption, however, does not apply to the provision of local piped gas and public services owned by sub-national entities. In these cases, analyzing documents and publishing the decree approving the projects will be carried out through a simplified procedure, by verifying the description of the corresponding project, its holder’s institutional requirements, and project compliance with the federal sector’s guidelines and plans.

It will also be necessary to submit the declaration of authenticity of the project duly executed by a State representative granting authority, in conjunction with the prior registration form. As for the prior approval process, priority will be given to projects that have significant environmental or social benefits, certified by a specific external assessment report for this type of issuance, or whose simplified procedure includes a specific advisory opinion – in the event that the project covers repeated matters.

The steps of the framing procedure are summarized at the end of this client alert.

Financial amounts raised

Limit on the amounts raised:

Incentivized securities and infrastructure debentures can be issued for the same project, provided that the sum of the amounts collected does not exceed the limit of the amount equivalent to the project’s capital expenditure. According to Decree 11,964, the funds raised must be allocated for future payment or reimbursement of expenses involving projects, and the total amount collected for the same project – based on the tax incentives described here – cannot exceed the capital expenses needed for its implementation.

Monitoring priority projects

Assigning competence to supervise priority projects:

The ANP is competent to monitor the implementation of infrastructure projects without prior ministerial approval, as provided for in Normative Ordinance 93, except for the aspects relating to financial execution.

The SGP will exclusively supervise and monitor projects requiring prior ministerial approval, except for aspects relating to their financial execution.

The holders of projects approved as priorities – in line with GM/MME Ordinance No. 252, of June 17, 2019 (repealed by Normative Ordinance 93) and that have been the subject of issuance of incentivized debentures – must submit and keep all necessary information for monitoring and supervision purposes up-to-date, in compliance with Normative Ordinance 93 and Decree No. 11,964.

Impact and Expectations of Normative Ordinance 93

The publication of Normative Ordinance 93 is a significant step towards raising private investments in energy infrastructure. The measure has been expected since the publication of Decree 11,964 in March 2024, which assigned the competence to sectoral ministries to establish supplementary conditions for framing priority projects.

This new regulation is expected to increase the efficiency and transparency of the financing processes for infrastructure projects, thus contributing to improving the energy sector in Brazil, including alternative energy sources.

For more information on Decree 11,964  Law No. 12,431,  Law No. 14,801 , and  Law No. 11,478 – which created the Equity Investment Fund (“FIP”) for investments in infrastructure and Research, Development, and Innovation (“RD&I”) with tax incentives for its shareholders, access the client alerts prepared by our experts:

• Law establishes infrastructure debentures with tax incentives

• Regulation refines fundraising for Investment Projects in Infrastructure and RD&I

• Ministry of Transport publishes regulatory ordinance for issuing incentivized and infrastructure debentures

• Ministry of Ports and Airports publishes regulatory ordinance for issuing incentivized and infrastructure debentures

• Federal Revenue clarifies doubts about infrastructure debentures

Access Normative Ordinance 93 here

Demarest’s Public and Regulatory Law, Investment Funds and Asset Management, Infrastructure and Project Finance, Oil and Gas, and Capital Markets teams are monitoring the updates of priority sectors, including highways and railways, and remain available to provide any additional clarifications as may be necessary.