CNODC’s Development of the World’s Largest Deepwater Field in Brazil

Sidley Austin advised China National Oil and Gas Exploration and Development Company on the deal.

China National Oil and Gas Exploration and Development Company Ltd. (CNODC) announced its participation, through its Brazilian subsidiary, in the development and production of the Búzios field in the Santos Basin pre-salt of Brazil, the largest discovered deepwater field in the world.

The consortium, consisting of Petróleo Brasileiro S.A. – Petrobras, CNODC Brasil Petróleo e Gás Ltda., and CNOOC Petroleum Brasil Ltda. acquired the Production Sharing Contract (the Búzios PSC) for the surplus volume of the Búzios field from the Transfer of Rights Agreement previously awarded to Petrobras. The acquisition was through Brazil’s first Transfer of Rights surplus bidding round, which was indicated by Wood Mackenzie as the largest offering of discovered oil reserves since Iraq opened up its oil fields in 2009. The signature bonus payable by the consortium is approximately US$17 billion, in addition to a compensation amount of approximately US$29 billion payable by the consortium to Petrobras as assignee under the Transfer of Rights Agreement.

As CNODC’s international counsel, we leveraged Sidley’s strong international oil and gas experience and relentlessly pursued innovative solutions to navigate the client through the legal intricacies presented by this unprecedented project. We negotiated a suite of complex project agreements, including the first co-participation agreement in Brazilian history, to regulate the coexistence of the Transfer of Rights Agreement and the Búzios PSC.

The co-participation agreement became effective as of September 1, 2021, marking the milestone for the Búzios PSC consortium to start extracting oil from the Búzios field. There are currently four FPSOs operating in Buzios and up to a total of 12 floating platforms are expected to be installed by the end of the decade, potentially taking output to 2 million b/d.

Tao Lan (Beijing, Picture), Brian Bradshaw (Houston), and Gloria Wang (Beijing) are leading the Sidley team. The Sidley team also includes Jeremy Chase (Singapore), Jason Menzies (London), and Laurence Wilcock (London).

 

Involved fees earner: Brian Bradshaw – Sidley Austin LLP; Jeremy Chase – Sidley Austin LLP; Tao Lan – Sidley Austin LLP; Jason Menzies – Sidley Austin LLP; Gloria Wang – Sidley Austin LLP; Laurence Wilcock – Sidley Austin LLP;

Law Firms: Sidley Austin LLP;

Clients: China National Oil and Gas Exploration and Development Company;

Author: Martina Bellini