In 1997, the monopoly of state-controlled Petróleo Brasileiro SA

(“Petrobras”) for oil and gas exploration and production activities

ended, and it became possible for other companies to receive

concessions for such activities through a public bidding process.1

Since that time, the Brazilian upstream oil and gas market has

experienced a boom,2 more than doubling its daily production.3

Major oil reserves in ultra-deep offshore fields (over 5000 feet4)—the

so-called pre-salt reserves—are expected to make Brazil one of the

leading oil producers in the world.

 

 

In 2010, these developments triggered legislative changes,5 subjecting

the then recently discovered pre-salt reserves to profit-sharing

agreements with the National Petroleum, Gas and Biofuel Agency

(“ANP”). As described below, there have been thirteen bidding

rounds for concession regime and one bidding round for PSA regime

(which is specific for pre-salt areas), for upstream fields and blocks,

and all of the bid documents have included arbitration clauses. This

was a natural development, as arbitration has been the usual means of

settlement of disputes worldwide in the oil and gas sector.6 However,

as will be examined below, the arbitrability of some disputes with the

ANP remains controversial and unsettled.

 

 

This article will analyze the main issues under Brazilian law and

practice regarding arbitration of upstream oil and gas disputes,

including (i) the legal framework applicable to the oil and gas

industry; (ii) an analysis of the arbitration clauses in existing oil and

gas concession and profit sharing agreements; (iii) the arbitrability of

oil and gas disputes; and (iv) the use of arbitration in other contracts

used in the upstream oil and gas industry.

 

 

 

 

Until 1995, oil and gas exploration and production could only be

carried out by a government owned company—Petrobras.

 

 

However, following the Brazilian government’s trend generally to

transfer to private parties certain public services and economic

activities, on November 10, 1995 Constitutional Amendment No. 9

(the “Constitutional Amendment”) entered into force, allowing the

Brazilian government to delegate oil and gas upstream activities to

private parties. Such amendment was regulated by Law 9.478/97 (the
“Petroleum Law”), enacted on August 6, 1997, which created ANP.