R&D Compulsory 1% Investment Clause

Institutions’ accreditation recognized by ANP

1% Investment Clause

A clause in the concession contracts for exploration and production of oil and gas establishes that concessionaire companies must invest in R&D the value equal to 1% of gross revenue generated by high profitability or high production volume fields (those which pay for the so call special participation).

The clause establishes the following criteria to resources application: Up to 50% of the total can be invested in R&D in concessionaire company’s own facilities or in its affiliated, or in national companies.

At least, 50% of the obligation value must have to be invested in R&D institutions accredited by ANP.

Inspection

ANP monitors the implementation of the 1% clause to check amount of resources invested (quantitative analysis) and adequacy of expenditure (qualitative analysis) in relation to the technological development goals and creating new products and processes for the oil, natural gas and biofuels segment.

In Brazil, since 1998, the ANP includes compulsory investments in Research & Development (R&D) clause in concession contracts. ANP firm such contracts on behalf of the union, with the winning companies in explanatory blocks biddings.

Accreditation of Research Centers

Accreditation is the recognition by ANP that an institution operates in an area of interest to oil & gas and biofuels industries, with recognized competence and technological capability, and it provides the infrastructure and operational conditions for implementing the proposed research and development activities.

Only research institutions accredited by ANP can receive investment from E&P concessionaire companies. The ANP Resolution No. 34/2005 and ANP Technical Regulation No. 6/2005 establish the criteria for this accreditation.

More information can be found on the ANP website (www.anp. gov.br) by clicking the menu on the right, in Investimentos em P&D (R&D Investments). The site is in Portuguese only.