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Article
8May2013

ResearchandDevelopmentintheOil&GasIndustryinBrazil
Asexplorationandproduction(E&P)activitiesadvanceintheoil&gasindustry,thehostcountriesarechallengedto
createnew,beneficialandefficientregulationsthatwillensurethedevelopmentofastronglocalindustry.Also,the
continuingdemandforinnovationandtheincreasingtechnologicalchallengesfacedbythesectormakeitclearthat
fosteringnationalinvestmentsinresearchanddevelopment(R&D)isvitaltobuildinglocalindustry.Establishingalegal
obligationtoinvestinR&Dhasproventobeacrucialtoolforencouragingastrongnationaldevelopmentpolicy,which
helpsboostsocialandeconomicindicators.
Takingintoaccountthenumerouslocalcontentobligationsimposedbydevelopingcountriesintheoil&gasindustry,the
R&Dinvestmentobliga
tionseemstobeoneofthecleverestandmostefficientstrategiesinalongtermpublicpolicy.
InvestmentsinR&Dcan:(i)fomentthedevelop
mentofanationaltechnologicalindustry;(ii)enabletheincreaseof
competitivenessofthecountryintheglobalmarket;(iii)indirectlyordirectlyresultinimprovedtechnicalandupperlevel
education;and(iv)enablethecreationofpartnershipsbetweengovernmententitiesandprivateinvestors,especiallyin
devel
opingcountries.
CurrentR&DStructureintheConcessionRegime
IntheBrazilianConcessionContractregime(ConcessionRegime),theR&Dinvestmentobligationderivesfroma
combinationoflegalandcontractualaspects.Inactualterms,accordingtothePetroleumLawandFederalDecree2,705,
ifproductionofoilornaturalgasinacertainfieldreachesaspecifiedvolumeofproduc
tion,theconcessionaireshallpay
anadditionalfinancialcompensationtothegovernmentthisiscalledSpecialParticipation.Insuchcases,the
ConcessionContractalsorequirestheconcessionairestoinvestanamountequalto1percentofthefieldsgross
productionincomeinR&Dprojects.ThisobligationisalsoestablishedbytheNationalAgencyofPetroleum,NaturalGas
andBiofuels(ANP)inResolutionNo.33/2005(ANPResolution),whichprovidesdetailedguidanceontheperformanceof
theR&Dexpenditures,includingmodelsofstandardreportstobeusedbytheconcessionaireswhenevidencingtheir
R&DinvestmentstoANP.
Uptoonehalfofthat1percentR&Dexpendituremaybedirectedtodevelopmentactivitiesintheconces
sionairesown
facilitiesorthoseofitsaffiliates,whenlocatedinBrazil,ormaybecontracteddirectlywithnationalcompanies,
regardlessofwhetherthoseactivitiesareinvolvedwithorarerelatedtotheoperationsundertheConcessionContract.
Theremainingexpendituremustbeinvestedininstitu
tionspreviouslyaccreditedbytheANP(ApprovedInstitutions).The
mainpurposeofthisR&Dinvest
mentrequirementistoprotectandchanneltheinvestmentstoinstitutionswithhigh
expertise,operationalcapabilityandtechnologicalstandards.
InthecurrentBrazilianE&Pscenario,approxi
mately17concessionariesoperatebigproduction/revenueoilfieldsthat
exceedthespecifiedproduc
tionvolume,resultingintheirobligationtopaytheSpecialParticipationandinvestinR&D
projects.AccordingtotheANP,theR&DobligationresultedinthecontributionofaroundUS$500milliontothecountrys
researchanddevelopmentsectorlastyear.Additionally,sincetheR&DclausewasintroducedintheConcessionContract
(in1998),morethanUS$3.3billionhasbeeninvestedinR&Dprojectsrelatedtotheoilandgasindustry.Theagency
projectsthatforthenext10years,morethanUS$10billionwillbeinjectedtosupporttheexpansionoftheindustryin
thecountry,reachingU$2billionperyearin2017.
Giventhissuccess,theANPhasdecidedtorevisethecurrentR&DclauseapplicabletotheConcessionRegime.Thenew
clause,whichistobeincludedinthefutureConcessionContractsofthe11thbidround(expectedtohappeninMay
2013),isesti
matedtoprovidetheANPwithmoredecisionmakingpoweroninvestmentallocation.Themainpurposeof
thereviewistorespondtotheagencysdevelop
mentprioritiesbycreatingacommitteethatwillberesponsiblefor
generatinganannuallistofinvest
mentpriorities.
Oneexpectationforthenewclauseisthatupto20percentoftheR&Damountmaybedesignatedtofundresearch
initiativesotherthantechnologicalR&Dprojects.Thiswouldsignificantlyexpandtherangeofinvestmentopportunities
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toincludeotherareasrelevanttotheoil&gasindustry,includingBusinessManagementandEconomics.
TheFutureofR&DandthePreSaltDiscoveries
BecauseoftherecentoildiscoveriesinthepresaltlayerintheCampos,SantosandEspritoSantooffshorebasins,the
BraziliangovernmenthasdecidedtoadoptanewregimetogoverntheE&PactivitiesinBrazil,togetherwiththecurrent
ConcessionRegime.Theproductionsharingregime,createdbythePreSaltLawin2010,willapplyexclusivelyforthe
E&Pactivitiestobedevel
opedinthepresaltandstrategicareas(PSARegime),whiletheConcessionRegime(governed
bythePetroleumLaw)willcontinuetobeappli
cableforalltheotherareas(onshoreandoffshore),whichrepresent98
percentoftheBraziliansedi
mentarybasin,accordingtoANP.
UnliketheConcessionContract,thePSARegimedoesnotexpresslydetermineanypercentageforinvestmentsinR&D.In
thePSARegime,asdeter
minedbythePreSaltLaw,thefinancialcompensationsduebytheconcessionarieswillbe(i)the
signaturebonusand(ii)theroyalties.
ThePreSaltLawalsocreatedthesocalledSocialFund,whichwillbenefitfromthefollowingresources:(i)aportionof
thesignaturebonus,(ii)theroyaltiesduetothegovernment,(iii)therevenuesderivingfromthesaleofthe
governmentsshareofoilprofit,(iv)theroyaltiesandspecialparticipationrevenuesduetothegovernmentregarding
presaltareasthathavealreadybeengrantedundertheConcessionRegime,(v)thefundsfinancialearningsand(vi)
otherresourcesallocatedtothefundinaccordancewiththePreSaltLaw.Moreover,theSocialFundwillserveasa
reserveofresourcesforthegovernmentsoilrev
enuesarisingoutoftheproductionsharingcontracts,andisalso
supposedtoworkasastrate
gicfund,meaningthatthegovernmentwillallocateitsresourcesforthedevelopmentof
socialandregionalprogramsrelatedtoareassuchaseduca
tion,culture,sports,publichealth,scienceandtechnology,
environmentandclimatechange.
Themaincriticism,however,ofthisnewlegalframeworkadoptedbythePSARegimevisvistheinvestmentsinR&Dis
thattheoilmoneywillbeallocateddirectlybythegovernmentthroughtheSocialFund.Thatmeansthatscienceand
technologywillnowcompetewithotherinitiatives,suchaspublichealthandeducation.Moreover,becausethealloca

tionoffundsisdiscretionary,thereisaconcernaboutwhetherthegovernmentwillallocatetotheR&Dprojectsthe
amountofinvestmentsthatarenecessarytomeetthesectordemandsandstandards.
AlthoughthereisnoSpecialParticipationinthePSARegime,continuingtechnologicaldevelopmentrequiresthatthePSA
contractthatiscurrentlybeingdraftedbythegovernmentalsoestablishesamechanismthroughwhichthe
concessionairesareobligedtoinvestinR&D.Theadoptionofamodelsimilartothatalreadyinforceunderthe
ConcessionRegimecouldleadtomoreinvestmentsinR&Dprojects,withafocusonnewtechnologiesforthepresalt
areas,ortoresearchlinkedtothedevelop
mentofalternativeenergytechnologies,forexample.Itisknownthatthe
majoroilcompaniesarealreadyinvestinginthedevelopmentoftechnologiesrelatedtobiofuels,andthattheywillplaya
leadershiproleinthecleanenergymarketinthefuture.
Furthermore,theapplicationofmandatoryR&DinvestmentstotheconcessionairesinthePSARegimewouldenablethe
creationofmoreopportunitiesforpartnershipsbetweenpublicR&Dinstitutionsandprivateentities.Anexampleofthis
isthetechnologicalparkoftheFederalUniversityofRiodeJaneiro(UFRJ),wherePetrobrasandotherE&Pcompanies
andoilfieldserviceprovidersworktogetherwiththeresearchersoftheUFRJtodevelopnewtechnologiesrelatedtothe
oil&gasindustry.
Conclusion
ConsideringthecurrenttechnologicalchallengesfortheE&Pactivitiesinultradeepwatersandthehugeestimatesfor
theoilproductioninthepresaltlayer,thereisalottobeexpectedfromR&DinBrazilforthenextdecade.Thecountry
hasalreadystartedtoexperiencethebenefitsfromthedevelop
mentofthepetroleumindustry,butitisnecessarythat
newE&Pbidroundsareeffectivelylaunchedintheupcomingyears.Ifthathappens,thecompaniesalreadyoperatingin
thecountrywillbeabletoincreasetheirportfolios,newplayerswillfinallyhavetheopportunitytoenterthemarketand,
consequently,moreR&Dprojectswilldevelop.

Authors
BrunoTrianiBelchior
Associate
T+552121274205
bbelchior@mayerbrown.com

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