United Nations Seeking Pre-salt Royalties

The United Nations is preparing itself for a serious dispute with the Brazilian government over royalties they intend to receive from Brazil for all pre-salt plays located between 370 and 648 km (200 to 350 miles) from the coast. These royalties would vary from 1% to 7% of what is explored in these areas. This area is considered to be an extension of the continental platform area belonging to Brazil and has been approved by the UN. This is something that is worrying the Brazilian government and may lead to protracted diplomatic and legal discussions. Although Brazil’s Petrobras has not yet begun to explore this area, known as the extension of Brazil’s continental platform, where Brazil should have full control of economic activities in these locations. The national O&G regulator ANP (National Petroleum Agency) has confirmed that they have data proving the existence of pre-salt reservoirs in these far off locations. According to the ANP, the pre-salt reservoirs are located in an area of approximately 542 square km, which is equivalent to 0,37% of the total that has been discovered up to now. There are however, exploration specialists and petroleum geologists that believe that this area may be much larger as the research into oil potential in the area are still ongoing and these areas have been only lightly researched. Although it is as yet unclear how these royalties would be calculated, other countries such as Canada are also worried as they also have extensions to their continental platforms with potential for O&G exploration and also exploration of other minerals. Another point which is sure to complicate matters is that some pre-salt reservoirs may begin closer than 200 miles, yet extend beyond in, making it very difficult to quantify how much would be taxed by the UN.