On January 15, 2018, the new Petrobras Bids and Agreements Regulation ("New Regulation"), was published. The issuance of the New Regulation was made through a power granted by the "New State Companies Law" (Law No. 13,303/2016), and also by the revocation of the old Regulation of the Simplified Bidding Procedure, in respect of which, the New State Companies Law provided that Petrobras should comply with its provisions until June 30, 2018.

The revocation of the Regulation of the Simplified Bidding Procedure by the New State Companies Law had, as background, the allegations regarding the lack of transparency of the divestment process conducted by Petrobras. The use of letters of invitation  was criticized, with allegations that it benefited only a few companies in the oil industry, but also criticisms were made concerning the lack of communication to the market of business opportunities, and the lack of objective criteria in the selection of potential buyers (amongst other issues).

The above arguments were also examined by the Court of Auditors of the Federative Government ("TCU"). On March 29, 2010, the TCU determined that Petrobras should restart the process of divesting certain assets, implementing new standards of transparency and publicity.

In general terms, the New Regulation sets out the rules to be followed by Petrobras and the participants of the bids in all phases of the bidding process, from the preparation phase to the publication of results, and the means of challenging and presenting possible appeals.

The means of bidding may be by auction, whether open, closed or a combination of the two. Offers should be analyzed according to the following criteria: (i) lowest price, (ii) highest discount, (iii) best combination of technical solution and price, (iv) best technical solution, (v) best artistic content, (vii) highest economic return, and (viii) best disposal of transferred assets.

After identifying the offer or proposal that obtained first place in the auction stage, Petrobras should negotiate more favorable conditions with the winner, in order to achieve a budget equal to, or less than, the budget previously estimated by Petrobras.

Nevertheless, negotiations should be carried out with the other bidders, when the winning price, even after negotiation, remains above the budget estimated by Petrobras. In the event that an amount equal to, or lower than, the estimated budget for the contract is not obtained, the bid should be revoked by Petrobras.

Petrobras is authorized to undertake direct contracting without the need for prior bidding in cases of non-applicability (Article 28, §3, of Law 13,303/2016), exemption (Article 29), or unenforceability (Article 30). In accordance with this, activities related to the commercialization of products derived from the exploration and production of hydrocarbons, natural gas and its derivatives, and chemical products, and for the import, export and exchange of these products, and their transportation, processing and storage are all exempt from complying with the bidding procedure.

It is also interesting to note the case of unenforceability listed in article 28, paragraph 3, II, of Law 13,303/2016, which deals with the unenforceability of bidding in cases of "strategic partnership". In these cases, if a partner's choice is associated with particular characteristics, and linked to defined and specific business opportunities, this may justify a view that it is impossible to carry out a competitive procedure, and Petrobras would be authorized to implement direct contracting.

Prior to contracting, Petrobras must require that the parties undergo an integrity investigation, for the purposes of risk analysis under Brazilian and international law, and in particular under the Foreign Corrupt Practices Act (FCPA) and the UK Bribery Act (UKBA).

The implementation of the New Regulation by Petrobras will be phased and will follow a defined schedule up to May 15, 2018.

The procedures and agreements initiated under the scope of the company's old contracting policy shall continue to follow the previously established internal rules.

With the New Regulation, over time, a standardization and simplification of the of the Petrobras bidding procedures is expected to occur, especially those regarding the sale of assets, in order to make the process more attractive for the company and participants in the bids.