The Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) launched a public consultation on a draft resolution to reduce the applied royalty rate for Small and Medium Enterprises (SMEs). Its goals are to increase the attractiveness of smaller scale oil fields and to lower the economic impact on SMEs of sudden drops in oil prices.

Public Consultation and Audience n. 19/2020 from the Brazilian National Agency of Petroleum, Natural Gas and Biofuels (ANP) seeks to survey the public opinion on the reduction of the royalty obligations for Small and Medium Enterprises (SMEs).

The draft resolution (article 9) proposed reducing the royalty applied rate to 5% for small enterprises and to 7.5% for medium enterprises, according to the ANP definition of company sizes provided by ANP Resolution n. 32/2014. Those reductions aim at lowering the economic impact of sudden drops in oil prices, which could be more harmful to companies of smaller scale.

The new resolution is aligned to the directives of the Nacional Council of Energy Policy (CNPE, in the Portuguese acronym), whose CNPE Resolution n. 4/2020 requested ANP to adopt measures in order to reduce royalty obligations for oil fields operated by SMEs, as a matter of national energy policy.

The public hearing is scheduled to March 3, 2021.

Contributions can be submitted to this e-mail address using this form until February 2, 2021. A subscription form to the public hearing (“Formulário de Inscrição para a Audiência Pública”), the draft resolution and more information are available here (in Portuguese).

According to ANP, since there are 60 oil fields operated by small enterprises, and 32 by medium-size companies, the loss of revenue from oil royalties is estimated to be 0.18%, which would be compensated by longer oil field lifecycles. Another anticipated benefit is the increase in economic attractiveness for oil fields of smaller scale, contributing to the attraction of new investments and the diversification of industry players.