Resolution No. 806/2020 of the ANP (National Agency of Petroleum, Natural Gas and Biofuels) establishes new procedures for the control and reduction of flaring and losses of oil and natural gas in exploration and production (E&P) activities.

The new regulation replaces ANP Ordinance No. 249, which has been in effect since 2000 and is therefore out of date vis-à-vis the operational reality of natural gas flaring in Brazil in a highly technological field such as the petroleum industry. For this very reason, the ANP had already been adopting complementary norms in response to the constant challenges in the sector. Since 2002, the ANP has signed consent orders with the operators of the fields responsible for the largest volumes of natural gas flaring in order to define targets for use of the input and associated plans for reducing flaring volumes.

The recent changes regarding natural gas in the national and international scenario have significantly contributed to the ANP's revision of this ordinance, which were obviously outdated.

Internationally, natural gas has been seen for years as an oil by-product. Its low sales value, coupled with the complex logistics of disposal, discouraged producers from monetizing it. However, as a fossil fuel with very low carbon emissions, natural gas has recently gained prominence in the transition to a renewable energy grid and in the reduction of greenhouse gases.

In Brazil, the product began to gain protagonism for a number of factors, such as the discovery of pre-salt deposits with large gas reserves, its growing use as a raw material in thermoelectric power generation (especially as of 2013, with the worsening of the water crisis and the impact on hydroelectric energy generation), Petrobras' decision to leave the activities of the natural gas exploration chain, the interest of market agents in the sector, Brazil's ratification of the Paris Agreement, and the CNPE Resolutions[1], which expressly mentioned the need to reduce natural gas flaring in E&P activities.

In this context, the ANP inserted in its regulatory agenda the revision of the regulations applicable to natural gas flaring and started to collect contributions from regulated agents. The result was the new resolution published this year, among which the following points are highlighted:

  • The ANP shall annually approve the forecasts for flaring and associated natural gas losses, together with the Annual Production Programs (PAP) approvals and define the quantities that shall not be subject to the payment of royalties;

  • The volumes of flaring and losses of natural gas are not subject to the payment of royalties for reasons of security and/or proven operational necessity;

  • The flaring or loss of non-associated natural gas and the flaring of oil are prohibited;

  • The limits for ordinary flaring have been redefined;

  • The flaring or loss of non-associated natural gas may exceptionally be authorized for safety, emergency, testing, or well cleaning reasons; and

  • The flaring of oil may exceptionally be authorized for emergency reasons or in well tests with a total free flow time of up to 72 hours.

Resolution 806 also establishes that operators of the activities covered by the standard will have 180 days, as of its publication on January 17, 2020, to implement the necessary adjustments related to maritime production units and fully comply with the provisions contained therein.

At a moment when companies are currently pulling off their process of adaptation to the new design of the sector that is being revealed in Brazil, it is essential to eliminate regulatory gaps such as this. In this sense, the ANP has demonstrated its commitment to the development of the Brazilian oil and natural gas industry.

[1] CNPE Resolution No. 17/2017 and CNPE Resolution No. 16/2019.