Oil and gas licensing: which are necessary and how to apply!

The licensing of oil and gas activities plays a fundamental role in defining the general conditions of operations related to the most diverse sectors. They set out environmental control measures, assist in specifying possible impacts on the economic activity of a region and, as a consequence, bring transparency to society — which comes to know the risks and benefits of licensed activities.

To understand more about the topic, we interviewed Raphael Neves Moura, Superintendent of Operational Safety and Environment at the National Agency for Petroleum, Natural Gas and Biofuels, and Carlos Henrique Abreu Mendes, Executive Manager of HSE and Operations at IBP, the Brazilian Institute of Petroleum, Gas and Biofuels. Keep reading!

What are the challenges faced by the industries?

To work with oil and the gas market in Brazil, it is necessary, first of all, that companies start or keep their governance processes up to date. This is just one of the points optimized by licensing.

In this regard, Raphael Moura highlights two major challenges today: structural and operational.

The first, of structural nature, is associated with the offer of blocks in areas of new frontiers, such as the Equatorial Margin. “The repeated discoveries of some companies should transform Guyana, one of the poorest countries in Latin America, into an oil power”, he says. “If used well, this wealth can contribute a lot to the socioeconomic development of the region”, adds Moura. 

The same would be true for Brazil and, in particular, for the northern region of the country: where the exploration of blocks on the Brazilian equatorial margin, bidded more than 7 years ago, continues at a standstill. “The great challenge, in a region of our borders, is to obtain data and studies consistent enough so that the licensing process can establish safeguards for environmental protection, in order to keep the risks under control, especially that of loss of containment (leaks), in addition to providing response infrastructure that can minimize the consequences of accidents”, he adds.   

The second challenge, of operational nature, considers that Petrobras’ divestment has brought new companies to Brazil, to operate mature fields. “In this sense, when transferring license ownership, it is important to define new parameters for monitoring the assets, which have been in operation for a long time, and to optimize the response to emergencies, which must be shared”, explains Moura. 

He also indicates that, in known areas, standardized licensing, with well-defined parameters (by sector, region or ecosystem) for offshore projects, can greatly facilitate the work of the licensing agency and provide predictability to the investments made.

Regulatory legal certainty

On the part of Carlos Henrique Abreu Mendes, the great challenge of regulatory legal security is also observed. Its application must overcome weaknesses and shortcomings, in addition to promoting the achievement of strategic objectives of the sector in Brazil. This must be done through the sustainable use of natural resources and by improving the protection of ecosystems.

Social and environmental responsibility

Finally, there is the challenge of social and environmental responsibility. However, this issue can be adapted and overcome by working together with technological developments, which “allows the application of methodologies for environmental monitoring and risk management that reduce the possibility of accidents”, comments Raphael Moura. Accompanied by the generation of wealth and jobs of a labor-intensive industry, these methodologies culminate in economic, environmental and social benefits when respect is widespread.

What types of oil and gas licensing is needed?

Understanding more about the types of licensing required to work with oil and gas allows us to understand how it is possible, in fact, to overcome challenges internally. The first, whose importance is imperative, is the environmental. Environmental licensing has been mandatory throughout the national territory since 1981, according to Federal Law 6,938/81.

In short, organizations that deal with activities that are effectively or potentially polluting must observe and pay attention to these points. Carlos Henrique Abreu Mendes also points out that companies that remain in operation without the Environmental License may suffer sanctions provided for by law. This includes punishments ranging from warnings and fines to embargoes and temporary or even permanent stoppage of activities.

Land-sea transition zone or marine environment

Locations that have a land-sea transition zone or a marine environment must follow the MMA Ordinance 422/2010, responsibility of IBAMA. The specialist also talks about the regulatory advances dealt with in the Ordinance for various activities, such as:

• the use of official sedimentary basin diagnostics or other regional studies;
• the implementation of regional environmental programs shared between companies;
• the integrated licensing of drilling activities in the form of polygons;
• the disciplining of the Long Term Test — TLD;
• the establishment of an administrative process for equipment, technologies and supplies;
• a single environmental process for projects in the same region.

Licenses must be requested at IBAMA and are standardized by it. The Activity Characterization Form – FCA must be filled out, in which the main elements that characterize the activity or project and its location are described. According to Mendes, after this step, “it is still necessary to forward the specific License Application Form”. They are licenses for:

• seismic survey — LPS;
• operation, for well drilling — LO;
• previous — LP;
• installation — LI;
• expansion or implementation of offshore oil and natural gas production and flow projects;
• implementation of Long Term Test — TLD.

Onshore activities

Onshore activities are supported by state environmental agencies. They are responsible for establishing specific requirements for issuing licenses. However, “they follow CONAMA Resolution 1/86, in addition to CONAMA Resolution 237/97, and Complementary Law 140/11”, says Mendes. It is necessary to have three different options — one for each stage. They are the Previous License (LP), Installation License (LI) and Operation License (LI). Their acquisition are made through the specific rules of each body.

Why oil and gas licensing is needed?

It is essential that companies are concerned with the proper licensing of oil and gas. After all, as seen, it impacts on environmental and social issues, on the safety of employees — since it is, for example, capable of preventing oil spills — and on the transparency of activities before society.

“To be acceptable to society, any project needs to conduct its business based on principles of social and environmental responsibility”, explains Raphael Neves Moura.

The process also directly optimizes the environmental governance of the business and meets compliance needs. Carlos Henrique Abreu Mendes points out that licensing is important in terms of identification, planning and evaluation of each activity or project. It becomes able to:

• better know the location for the development of its activities;
• define measures that reduce or eliminate impacts;
• direct government;
• have in hand the proper authorization to start activities, taking into account the conditions of each license.

What types of industries can obtain these oil and gas licenses?

With proper licenses in hand, several industries are legally able to carry out their activities. Some examples include the asphalt, paper and cellulose plants, electrical, electronic and communications material, leather and hides, chemicals, textiles, clothing, footwear and fabric and tobacco artifacts.

Oil and gas licenses are necessary to preserve the environment, contemplate social and economic well-being, direct companies and industries and benefit several other operational points. By understanding which ones are needed and how to apply for them, it becomes simpler to guarantee such advantages.

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