February 20, 2020 / News
PRIO gets first royalty reduction authorization from ANP
The National Petroleum Agency (ANP) approved, at a board meeting on Thursday (20), the first request for a reduction in the royalty rate in its history, in an important step to boost the niche of companies that invent in mature fields and contain the decline in production in the Campos Basin.
The regulatory agency responded to a request from PRIO for the Octopus Field.
PRIO was a pioneer in submitting a request to the ANP to reduce this rate from 10% to 5% – which has a constitutional basis.
Sensitive to the need to promote the revitalization of mature fields to lengthen the economic life and maximize the production of these assets, the regulatory agency issued a rule in 2018 that systematized the conditions to enable the decrease of the percentage.
“The ANP has done exceptional work to promote and stimulate a very important niche market, the independent oil companies that operate in mature fields. This segment is vital for the sector as a whole, because it acts to extend the economic life of assets that no longer make sense for the major companies, which are always recycling their portfolios and looking for bigger fields. It is even more important in Brazil, where the focus of the majors is mainly on pre-salt assets – which are highly productive, but need heavy investments,” says Nelson Queiroz Tanure, CEO of PRIO.
The ANP’s measure directly benefits mature fields, i.e., those that have been in activity for 25 years or more and/or have production equal to or greater than 70% of their proven reserves. This is the case of Campo de Polvo, whose production rights have been fully owned by PRIO since 2015.
The agency’s decision allows other assets to use the mechanism, including our Frade field, for which we have a revitalization campaign scheduled for 2021.
The reduction in royalties affects the incremental production of declining fields, especially in the Campos Basin, whose production is shrinking year by year because of lower investments in the revitalization of its fields and the natural depreciation of wells.
This directly affects the collection of royalties, especially from Rio de Janeiro’s municipalities.
“We at PRIO raised a flag with the participation of all our employees, the ANP embraced this cause and now many people will reap the rewards: the companies and the cities, which may have a more constant collection of royalties over the years, with the greater economic life of the fields. It is a benefit for society as a whole, because the companies will invest more, generate jobs and income,” says the CEO of PRIO.