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This excerpt taken from the PBR 20-F filed May 22, 2009. Current
Regulatory Framework
Under Brazilian law, the Brazilian government owns all crude oil
and natural gas reserves in Brazil. Between 1953 and 1997, the
Brazilian government held a monopoly over the
research, exploration, production, refining and transportation
of crude oil and oil products in Brazil and its continental
shelf, with the exception that companies that were engaged in
refining and distribution in 1953 were permitted to continue
those activities. We were the Brazilian government’s
exclusive agent for exploiting its monopoly, including the
importation and exportation of crude oil and oil products.
In 1995, as part of a comprehensive reform of the oil and gas
regulatory system, the Brazilian Congress amended the Brazilian
Constitution to authorize the Brazilian government to contract
with any state or privately-owned company to carry out
activities related to the upstream and downstream segments of
the oil and gas sector. This amendment led to the enactment of
the Oil Law, which provided for the establishment of a new
regulatory framework, ended our exclusive agency and allowed
competition in all aspects of the oil and gas industry in
Brazil. Since that time, we have been operating in an
environment of gradual deregulation and increasing competition.
The Oil Law also created an independent regulatory agency, the
ANP. The ANP’s function is to regulate the oil, natural gas
and renewable fuels industry in Brazil and to create a
competitive environment in the oil and gas sector. Its principal
responsibilities include regulating concession terms for
upstream development and awarding new exploration concessions.
The Oil Law granted us the exclusive right to exploit crude oil
reserves in each of our producing fields for 27 years from
the date when they were declared commercially profitable. This
initial
27-year
period for production can be extended, at the request of the
concessionaire and subject to approval from the ANP. The Oil Law
also established a procedural framework for us to claim
exclusive exploratory rights for a period of up to three years,
later extended to five years, to areas where we could
demonstrate that we had “established prospects” prior
to the enactment of the Oil Law. In order to perfect our claim
to explore and develop these areas, we had to demonstrate that
we had the financial capacity to carry out these activities,
either alone or through other cooperative arrangements.
In March 2009, the Brazilian Congress enacted a law regulating
activities in the gas industry, including transport and
commercialization. The Gas Law created a
Table of Contents
concession regime for the construction and operation of new
pipelines to transport natural gas, while maintaining an
authorization regime for pipelines subject to international
agreements. According to the Gas Law, after a certain
exclusivity period, operators will be required to grant access
to transport pipelines and maritime terminals, except LNG
terminals, to third parties in order to maximize utilization of
capacity. Authorizations previously issued by the ANP for
natural gas transport will remain valid for 30 years from
the date of publication of the Gas Law, and initial carriers
were granted exclusivity in these pipelines for 10 years.
The ANP will issue regulations governing third-party access and
carrier compensation if no agreement is reached between the
parties.
The Gas Law also authorized certain consumers, which can
purchase natural gas on the open market or obtain their own
supplies of natural gas, to construct distribution facilities
and pipelines for their own use in the event local gas
distributors controlled by the states, which have monopoly over
local gas distribution, do not meet their distribution needs.
These consumers are required to delegate the operation and
maintenance of the facilities and pipelines to local gas
distributors, but they are not required to sign gas supply
agreements with the local gas distributors.
See Item 5. “Operating and Financial Review and
Prospects—Liquidity and Capital
Resources—Petrobras” for a discussion of the
regulations governing our budget and strategic planning process.
Since Brazil is not a member of OPEC, neither Brazil nor we are
bound by OPEC guidelines. However, to the extent that OPEC
influences international crude oil prices, our prices are
affected, as our prices are linked to international crude oil
prices. We have been invited to attend OPEC meetings as an
observer.
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