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Deco m m issio n in g Ta x A sp ects in
Lig h t o f th e Do m estic Leg isla tio n a n d
th e Fo r eig n Ex p er ien ce
W hat are the expectations on how
decommissioning will evolve in Brazil
Rio – September, 2016
Fa b io Ga sp a r
Tax Manager
1 Date Month 2016 FooterCopyright of Shell International
DEFIN ITIO N S A N D CA UTIO N A RY N O TE
Reserves: Our use of the term “ reserves” in this presentation means SEC proved oil and gas reserves. Resources: Our use of the term “ resources” in this presentation includes quantities of oil and gas not yet classified as SEC proved oil and gas reserves. Resources are consistent with the Society of Petroleum Engineers 2P and 2C definitions.
Organic: Our use of the term Organic includes SEC proved oil and gas reserves excluding changes resulting from acquisitions, divestments and year-average pricing impact.
Shales: Our use of the term ‘shales’ refers to tight, shale and coal bed methane oil and gas acreage. The companies in which Royal Dutch Shell plc directly and indirectly owns investments are separate legal entities. In this presentation “ Shell” , “ Shell group” and “ Royal Dutch Shell” are sometimes used for convenience where references are made to Royal Dutch Shell plc and its subsidiaries in general. Likewise, the words “ we” , “ us” and “ our” are also used to refer to subsidiaries in general or to those who work for them. These expressions are also used where no useful purpose is served by identifying the particular company or companies. ‘‘Subsidiaries’’, “ Shell subsidiaries” and “ Shell companies” as used in this presentation refer to companies over which Royal Dutch Shell plc either directly or indirectly has control. Entities and unincorporated arrangements over which Shell has joint control are generally referred to “ joint ventures” and “ joint operations” respectively. Entities over which Shell has significant influence but neither control nor joint control are referred to as “ associates” . The term “ Shell interest” is used for convenience to indicate the direct and/ or indirect ownership interest held by Shell in a venture, partnership or company, after exclusion of all third-party interest.
This presentation contains forward-looking statements concerning the financial condition, results of operations and businesses of Royal Dutch Shell. All statements other than statements of historical fact are, or may be deemed to be, forward-looking statements. Forward-looking statements are statements of future expectations that are based on management’s current expectations and assumptions and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in these statements. Forward-looking statements include, among other things, statements concerning the potential exposure of Royal Dutch Shell to market risks and statements expressing management’s expectations, beliefs, estimates, forecasts, projections and assumptions. These forward-looking statements are identified by their use of terms and phrases such as ‘‘anticipate’’, ‘‘believe’’, ‘‘could’’, ‘‘estimate’’, ‘‘expect’’, ‘‘goals’’, ‘‘intend’’, ‘‘may’’, ‘‘objectives’’, ‘‘outlook’’, ‘‘plan’’, ‘‘probably’’, ‘‘project’’, ‘‘risks’’, “ schedule” , ‘‘seek’’, ‘‘should’’, ‘‘target’’, ‘‘will’’ and similar terms and phrases. There are a number of factors that could affect the future operations of Royal Dutch Shell and could cause those results to differ materially from those expressed in the forward-looking statements included in this presentation, including (without limitation): (a) price fluctuations in crude oil and natural gas; (b) changes in demand for Shell’s products; (c) currency fluctuations; (d) drilling and production results; (e) reserves estimates; (f) loss of market share and industry competition; (g) environmental and physical risks; (h) risks associated with
the identification of suitable potential acquisition properties and targets, and successful negotiation and completion of such transactions; (i) the risk of doing business in developing countries and countries subject to international sanctions; (j) legislative, fiscal and regulatory developments including regulatory measures addressing climate change; (k) economic and financial market conditions in various countries and regions; (l) political risks, including the risks of expropriation and renegotiation of the terms of contracts with governmental entities, delays or advancements in the approval of projects and delays in the reimbursement for shared costs; and (m) changes in trading conditions. All forward-looking statements contained in this presentation are expressly qualified in their entirety by the cautionary statements contained or referred to in this section. Readers should not place undue reliance on forward-looking statements. Additional risk factors that may affect future results are contained in Royal Dutch Shell’s 20-F for the year ended December 31, 2015 (available at www.shell.com/ investor and www.sec.gov ). These risk factors also expressly qualify all forward looking statements contained in this presentation and should be considered by the reader. Each forward-looking statement speaks only as of the date of this presentation, 26 May 2016. Neither Royal Dutch Shell plc nor any of its subsidiaries undertake any obligation to publicly update or revise any forward-looking statement as a result of new information, future events or other information. In light of these risks, results could differ materially from those stated, implied or inferred from the forward-looking statements contained in this presentation.
We may have used certain terms, such as resources, in this presentation that United States Securities and Exchange Commission (SEC) strictly prohibits us from including in our filings with the SEC. U.S. Investors are urged to consider closely the disclosure in our Form 20-F, File No 1-32575, available on the SEC website www.sec.gov.
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A g en d a
The Decommissioning International Experience
How can we learn from best practices?
Decommissioning in Brazil
The basic framework
Decommissioning in Brazil
Closing Remarks
3 Date Month 2016
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Th e Deco m m issio n in g In ter n a tio n a l Ex p er ien ce
How can we learn from best practices?
The Gulf of Mexico Experience – Rigs-to-Reefs
The North Sea Experience – O SPAR
Date Month 2016
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Deco m m issio n in g in Br a zil
The basic framework
The legal and tax framework
How can we bring the Brazilian industr y to a more competitive position?
Date Month 2016
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Th e leg a l a n d ta x f r a m ew o r k
Th e leg a l & co n stitu tio n a l b u ild in g b lo ck s
Social Role of the Company
CF: inciso XXII, do art. 5º; § 2º, art. 182; art. 186.
LSA: Arts. 116 e 154.
Lei nº 9.478/ 97: inciso VI, do art. 44.
Modesto Carvalhosa:
“Tem a empresa uma óbvia função social, nela sendo interessados os empregados, os fornecedores, a comunidade em
que atua e o próprio Estado, que dela retira contribuições fiscais e parafiscais. Considerando-se principalmente três as
modernas funções sociais da empresa. A primeira refere-se às condições de trabalho e às relações com seus empregados
(...) a segunda volta-se ao interesse dos consumidores (...) a terceira volta-se ao interesse dos concorrentes (...). E ainda
mais atual é a preocupação com os interesses de preservação ecológica urbana e ambiental da comunidade em que a
empresa atua.”
Constitutional right to a balanced environment:
“Art. 225. Todos têm direito ao meio ambiente ecologicamente equilibrado, bem de uso comum do povo e essencial à
sadia qualidade de vida, impondo-se ao Poder Público e à coletividade o dever de defendê-lo e preservá- lo para as
presentes e futuras gerações“
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Th e leg a l a n d ta x f r a m ew o r k
Th e leg a l & en v ir o n m en t b u ild in g b lo ck s
Environment regulation of artificial reefs
IN IBAMA nº 22/ 2009
“Art. 1º. (…) III - Recife artificial a estrutura construída ou composta de materiais de origem natural ou antropogênica,
inerte e não poluente, disposta intencionalmente em meio subaquático em contato direto com o substrato, capaz de alterar
significativamente, de forma planejada, o relevo dos fundos naturais ou influenciar processos físicos, biológicos,
geoquímicos e socioeconômicos, de acordo com interesses nacionais, regionais e locais.”
Decomissioning plan to be proposed to IBAMA / other organisms to be heard
Specific treatment for O il Rigs:
“Art. 10. Fica proibida a instalação de recifes artificiais em locais que ameacem, em sua área de influência direta, a
integridade de formações recifais e demais habitats protegidos por legislação específica.
(…)
§
3°. N o caso de embarcações e plataformas offshore, deverá ser apresentado ao IBAMA plano logístico de
descomissionamento, abrangendo todo tratamento realizado para adequação à finalidade proposta, com a retirada de
cantos vivos e a remoção total de substâncias e materiais potencialmente poluentes (óleos e combustíveis, asbestos, PCBs,
tintas anti-incrustantes, materiais que possam flutuar e representar risco, plásticos, vidros, baterias, anticongelantes,
lâmpadas com mercúrio etc), em conformidade com as N ormas da Autoridade Marítima para Atividade de Inspeção
N aval.”
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Th e leg a l a n d ta x f r a m ew o r k
Th e leg a l-ta x b u ild in g b lo ck s
Compatibility with Repetro
Decommissioning
in situ
means actual equipment destruction, falling under the following
Repetro provision:
IN 1.415/ 2013
Da Extinção da Aplicação do Regime
Art. 25. A aplicação do regime de admissão temporária em Repetro extingue-se com a adoção de uma das seguintes
providências, pelo beneficiário, que deverá ser requerida dentro do prazo fixado para a permanência do bem no País:
I - reexportação, inclusive nos casos de que tratam os incisos I e II do caput do art. 2º;
II - entrega à Fazenda N acional, livre de quaisquer despesas, desde que a autoridade aduaneira concorde em recebê-lo;
III - destruição, sob controle aduaneiro, às expensas do interessado;
IV - transferência para outro regime aduaneiro especial, observado o disposto na legislação específica; e
V - despacho para consumo.
(...)
§ 3º Na hipótese de adoção da providência prevista no inciso III do caput, a extinção da aplicação do regime a bens
cuja retirada do local de sua utilização seja inviável por questões regulatórias ou ambientais poderá ser comprovada
por meio de laudo técnico que ateste a sua destruição ou inutilização.
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Th e leg a l a n d ta x f r a m ew o r k
Th e co n tr a ctu a l b u ild in g b lo ck s
Concession Agreements with ANP – Model to the 6th Bid Round
18.6 O planejamento e a execução de quaisquer O perações de desativação e abandono, inclusive
com relação a áreas, poços, estruturas, Campos, Linhas de Transferência, partes ou unidades de
instalações de superfície e subsuperfície, em terra e no mar, serão feitos de acordo com a legislação
brasileira aplicável e com as Melhores Práticas da Indústria do Petróleo, observado ainda o disposto
na Cláusula Vigésima-Primeira.
18.9 O s bens que não serão revertidos sob o parágrafo 18.8, inclusive os inservíveis, serão
removidos e descartados pelo Concessionário, por sua conta e risco, de acordo com as disposições
deste Contrato e da legislação brasileira aplicável.
21.1 O Concessionário adotará, por sua conta e risco, todas as medidas necessárias para a
conservação dos reservatórios e de outros recursos naturais, e para a proteção do ar, do solo e da
água de superfície ou de subsuperfície, sujeitando-se à legislação e regulamentação brasileiras sobre
meio ambiente e, na sua ausência ou lacuna, adotando as Melhores Práticas da Indústria do Petróleo
a respeito. Dentro desse princípio, e sem com isto limitar sua aplicação, ficará o Concessionário
obrigado, como regra geral, e tanto no que diz respeito à execução das O perações quanto à
devolução e abandono de áreas e remoção e reversão de bens, a preservar o meio ambiente e
proteger o equilíbrio do ecossistema na Área da Concessão, a evitar a ocorrência de danos e
prejuízos à fauna, à flora e aos recursos naturais, a atentar para a segurança de pessoas e animais,
a respeitar o patrimônio histórico-cultural, e a reparar ou indenizar os danos decorrentes de suas
atividades.
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Th e leg a l a n d ta x f r a m ew o r k
W h er e ca n w e im p r o v e?
Regulator y and Environmental granular regulation
Desirable to have a joint AN P/ Ibama regulation on in situ decommissioning;
Regulation to be built together with the society (e.g. Public Consultation).
Accounting provision for decommissioning and Corporate Income Tax reflex
O nly deductible at the actual expense for tax purposes, in Brazil;
Tax deduction might be useless by the end of the project;
Upstream projects are less competitive compared to a global portfolio if deductibility is not allowed.
Tax deduction makes an investment more attractive and supports development of local economic
growth and social enhancement, offering direct value for the country and society;
Imperative to change tax legislation to align with other countries on that regard (e.g. The N etherlands
and G ermany);
Alternatively, if the provision keeps undeductible the legislation could still be changed to allow for
refundable tax credits related to D&R (in the event there are no more profits to use the deductions
against at the end of the project).
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Deco m m issio n in g in Br a zil
Closing Remarks
Decommissioning in place is best practice in more mature oil producing countries
The basic constitutional, legal and regulatory framework is present – Let’s enhance it!
Repetro is compatible with
in situ
decommissioning
Corporate Income Tax legislation should be tweaked to ensure Brazil is competitive
Date Month 2016
