The Superior Court of Justice (STJ) in Brazil disclosed a long-standing dispute between Petrobras and the National Agency of Petroleum, Natural Gas, and Biofuels (ANP), where the potential charge of a special participation fee against Petrobras was at issue. This tax obligation was grounded in an ANP administrative decision that consolidated several oil fields acquired by Petrobras into a single, larger field, thereby justifying the imposition of this special levy.
Instead of focusing on this specific case, this article aims to offer insights into the broader importance of clearly defining the “rules of the game.” Whether or not the special participation fee can be imposed depends on the fundamental definition of an oil field and the criteria and parameters used to determine its boundaries. The dispute between Petrobras and the ANP was largely fueled by legal and interpretative uncertainties surrounding this definition.
According to Article 6, Section XIV, of Brazil’s Petroleum Law (Law No. 9,478/1997), an oil field is defined as a “petroleum-producing area… consisting of a continuous reservoir or multiple reservoirs at variable depths, including installations and equipment used in production.” Additionally, the law specifies that a reservoir, as stated in Article 6, Section X, is a “geological configuration with specific properties, capable of storing oil or gas, either associated or unassociated.” Section XI of the same article defines a “deposit” as an “already identified reservoir or deposit ready to be put into production.” Despite their seemingly straightforward meaning, terms like “continuous reservoir” and “reservoirs at variable depths” are not explicitly defined in Law No. 9,478/1997.
Examining these legal concepts reveals that an oil field’s definition does not require it to contain only a single corresponding reservoir or deposit. In other words, an oil field can include one or multiple reservoirs, with no inherent dependency between the two concepts.
Therefore, applying this reasoning in reverse suggests that multiple reservoirs could form a single oil field, while it’s also possible for multiple fields to exist. A literal interpretation of the provisions does not lead to the conclusion that two or more reservoirs necessarily imply multiple oil fields.
From a purely legal standpoint, Article 6 of the Petroleum Law captures some core elements essential for defining an oil field: (a) the presence of a productive area that may contain (b) one or more reservoirs, even at varying depths, and (c) the inclusion of installations and equipment for production.
However, despite the fact that the legislature defined the term “oil field” in a manner consistent with that used by other entities, the parameters or criteria that the ANP or Petrobras might apply in defining its boundaries were not explicitly addressed in the law. This lack of specific criteria leads to reliance on the broader concept of an oil field, with potentially significant financial consequences reaching trillions of reais in special tax charges.
From a Law and Economics perspective, the issue of insufficient decision-making parameters—or, in other words, legal uncertainty regarding a particular matter—tends to lead to two equally adverse outcomes: (a) an increase in risky behaviors and decisions, and (b) an exaggerated optimism about the potential resolution of any conflict involving such uncertainty. In simpler terms, an uncertain environment fosters the presence of optimistic bias.
In the case of uncertainty surrounding the possible parameters that can be used to delineate an oil field, even when considering the criteria and nuances within the term’s definition, both the ANP and Petrobras find valid legal arguments to support their positions. In summary, when the law fails to set the rules of the game, it is up to each player to devise strategies for each move, and naturally, each will seek to benefit its own side.
The Society of Petroleum Engineers defines an oil field as “an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature and/or stratigraphic condition.” Furthermore, “there may be two or more reservoirs in a field that are separated vertically by intervening impermeable rock, laterally by local geologic barriers, or both.” (Free translation of the original text: “an area consisting of a single reservoir or multiple reservoirs all grouped on, or related to, the same individual geological structural feature and/or stratigraphic condition. There may be two or more reservoirs in a field that are separated vertically by intervening impermeable rock, laterally by local geologic barriers, or both.”)
Daniel Kahneman notes that “when combined, the emotional, cognitive, and social factors supporting excessive optimism are a heady brew that sometimes leads people to take risks they would avoid if they knew the odds” (Thinking, Fast and Slow, p. 328-329). In general, optimistic bias can be described as “the ability to effectively challenge recurrent catastrophic thoughts” (SELIGMAN, Martin E. P.; VERKUIL, Paul R.; KANG, Terry H. Why Lawyers Are Unhappy. Deakin Law Review, v. 10, n. 1, p. 49-66, 2005). This optimistic bias, therefore, is closely linked to overconfidence and risk-taking in decision-making. In line with this, Daniel Kahneman and Dan Lovallo point out that “optimism and the illusion of control increase risk taking in several ways” (Timid Choices and Bold Forecasts: A Cognitive Perspective on Risk Taking. Management Science, v. 39, n. 1, p. 17-31, Jan. 1993, p. 28). Optimistic people tend to make predictions about their future or a particular situation according to what they wish to see happen or believe to be socially desirable, rather than what is objectively likely (TAYLOR, Shelley E.; BROWN, Jonathon D. Illusion and Well-Being: A Social Psychological Perspective on Mental Health. Psychological Bulletin, v. 103, n. 2, p. 193-210, 1988).
