1. Round Table: Unitization Contracts in Brazil Owen Anderson (U of Oklahoma) Andrew Derman (Thompson & Knight LLP) Lucía Quesada (Torcuato di Tella U) James Smith (SMU)

2. Brief historical background Law 9,478 (1997) set up the concession system for exploration and oil production in Brazil and created the Oil and Natural Gas Regulatory Agency (ANP). In 2007 Petrobras reported oil discovery in the deepwater pre-salt layer that could be ranked as one the biggest and most important globally in the several decades. Law 12,351 (2010) was provided for the exploration and production of oil, natural gas and other hydrocarbon fluids, under the production-sharing regime in the pre- salt and strategic areas, and amended provisions of Law 9,478.

3. The concession model and unitization Law 9,478 (article 27) made the unitization process binding when a field is extended to adjoining blocks and operated by different concessionaires. During the term of Law 9,478, the unitization process was also regulated by the concession contract. These contracts had specific rules for the areas subjected to unitization and played an important role to correct some issues created by the law: The object of unitization: oil or gas common reservoir; The absence of a specific regulation on the unitization process when the accumulation oil stretched to blocks that have not been yet tendered; The potential litigation due to the law determination if parties do not reach an agreement within the time period specified by the ANP, the regulator would determine how the rights and obligations should be shared between the blocks; The uncertainty about the settlement mechanism if the parties did not accept the determination of ownership rights and obligations established by the ANP.

4. The production-sharing model and unitization Some factors in the production-sharing model may influence the unitization process: Petrobras is the sole operator of all blocks under the new regime, being assured a 30% minimum participation share in the consortium; Petrobras, alone or jointly with the auction winner, should be a joint venture with a public company called PPSA (Pré-Sal Petróleo S.A.), representative of the Brazilian Government interests in the production-sharing contracts. In addition to the changes related to the introduction of the production-sharing model in the pre-salt and strategic areas, Law 12,351 (Chapter IV) specifically addresses the above issues of the unitization process raised in the concession case.

5. Questions Hybrid contracts: What should be the adaptations of the unitization regulation to mitigate the cost of the hybrid contract regime? Governance: How the governance of the Brazilian production- sharing contract can affect the unitization process? Uncertainty: These new deepwater oil discovers imply an increase in the exploration and production uncertainty. Is this bad or good news for unitization? Is there any possible change in the unitization regulation to deal with this new uncertainty? Regulation: What should be the role of ANP in this new scenario? What are the instruments of the regulator?