Espirito Santo Oil & Natural Gas Yearbook 2021

44 3.1.1. Royalties ESPÍRITO SANTO OIL & NATURAL GAS YEARBOOK | 2021 CHAPTER 3 GOVERNMENT SHARE AND ECONOMIC IMPACTS Ranking of amounts received in Government Shares 1st: Rio de Janeiro R$9.9 billion were received by Rio de Janeiro in royalties in 2020 2nd: São Paulo R$ 1.7 billion was received by São Paulo in royalties in 2020 3rd: Espírito Santo R$ 1.1 billion was received by Espírito Santo in royalties in 2020 45 45 $ The highest amou- nts in royalties originated from the following fields OFFSHORE Jubarte R$ 1.4 bi Roncador R$ 1.0 bi ONSHORE Fazenda R$ 24.1 mi Alegre Cancã R$9.9 mi Chart 29 Revenues from royalties in Espírito Santo in constant amounts (R$ millions)** Royalties are financial compensa- tions calculated 15 by applying one of the rates outlined in a contract, ranging between 5% and 15% of the income from the producing well (quantity of oil and natural gas extracted multiplied by the reference price16). In 2020, the neighboring producing fields in the territory of Espírito Santo paid R$ 3.0 billion in royalties, 98.2% of which resulted from the offshore activity and 1.8% from the onshore activity. The largest amounts were generated by the Jubarte (R$ 1.4 billion) and Roncador 17 (R$ 1.0 bil- lion) offshore fields, Fazenda Alegre (R$24.1 million), and Cancã (R$9.9) onshore. However, that total volume is not transferred only to Espírito Santo, provided that the royalties are distributed among the States, the municipalities and the Federal Gov- ernment, taking into account criteria such as the location of the produc- ing field (onshore or offshore) and the presence of installations that handle oil and natural gas. Still, in 2020, Espírito Santo re- ceived a total of R$ 1.1 billion in royalties. Approximately R$ 523.0 million were redirected to the State Government and R$ 547.0 million to the municipalities of Espírito Santo, amounts, respec- tively, 30.1% and 24.3% lower than those recorded in 2019. With these results, Espírito Santo recorded the third largest collec- tion of royalties among all Brazilian states, third only to Rio de Janeiro (R$9.9 billion) and São Paulo (R$1.7 billion), and accounted for 4.7 % of the total received by the Federal Government. The municipalities in Espírito San- to that received the most royalties in 2020 were: Presidente Kenne- $ The composition of Roy- alties payments made in Espírito Santo was the following: R$ 523 million were redirected to the State Government R$ 547 million were redirected to the Municipalities of Espírito Santo 2,500 2,250 2,000 1,750 1,500 1,250 1,000 750 500 250 0 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013 2014 2015 2016 2017 2018 2019 2020 Municipality of ES (*) Amounts with deflation according to the IPCA index (accumulated from Jan-Dec). Source: ANP | Prepared by: Ideies/Findes Estate of ES ing fields with high production of oil and natural gas and having fa- cilities for serving offshore activ- ity. Among them, Linhares is the only municipality with both on- shore and offshore activities. share of the royalties in their total revenues collected were: Presidente Kennedy (32.5%); Marataízes (26.7%) and Itapemirim (19.6%). Except for Linhares, these municipalities have the highest dependence on resourc- es from the royalties in the composi- dy (14.1%), Marataízes (14.2%), Linhares (12.8%) and Itapemirim (12.2%). Together they concen- trated 53.8% of the total of these municipal revenues (chart 29). This high value of shares is ex- plained by the fact that they are municipalities with areas border- The municipalities with the highest tion of their revenues (chart 31). 15. For more details on how the amount payable in royalties is calculated, see the box in chapter 3 of the 2019 Yearbook of the Oil Industry of Espíri- to Santo: https://portaldaindustria-es.com.br/ system/repositories/files/000/000/577/original/ Anuario_Petroleo-ES_2019_port.pdf?1588180009 16. The reference price of oil is calculated on a monthly basis by ANP, according to the monthly average of Brent-type oil, in US Dollars per barrel. The reference price for natural gas is calculated monthly by the sum of the products of the volu- metric fractions of NG. 17. The Roncador field also borders the State of Rio de Janeiro. Therefore, its royalties are also destined to the State Government of Rio de Janei- ro, and municipalities of Rio de Janeiro.

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