FSRU operation within Brazilian jurisdictional waters – what regulations apply and how do they work?

Floating Storage Regasification Units (FSRUs) are an integral component of the LNG supply chain, offering flexible storage capacity at lower cost than onshore terminals. The operation of FSRUs within Brazilian jurisdictional waters is governed by specific regulations aimed at enhancing the country’s maritime transportation services. In this article, we consider the different regulations and how they apply to FSRUs.

Brazilian Shipping Companies – EBNs

Central to the regulatory framework is the Cabotage Act (Law 14.301/2022) (the Act), which came into force in 2022, and which seeks to diversify and expand Brazil’s fleet capacity through various incentives. To leverage these incentives, an entity must be accredited as a Brazilian Shipping Company (EBN). An EBN must be a legal entity established under Brazilian law, headquartered in Brazil, with waterway transportation as its primary corporate objective and authorised by the relevant authorities¹. Additionally, EBNs must demonstrate compliance with federal tax obligations and provide operational information to qualify for the benefits available.

The Act allows EBNs to charter foreign vessels without the need for proof of tonnage, which was a requirement under previous legislation. This change is expected to increase the availability of vessels, including FSRUs, and reduce operational costs. Under the new regime, EBNs are permitted to charter foreign vessels more freely, with the number of vessels allowed to increase annually until 2026, after which there will be no limit.

A key requirement for vessels chartered under the Act is the employment of Brazilian nationals in critical positions, including master, cabotage master, chief engineer and engine driver.

Foreign shipping companies

In the event that a company is classified as a foreign entity and not an EBN, it must adhere to the regulations issued by the Directorate of Ports and Coasts (DPC) for operations within Brazilian Jurisdictional Waters. These regulations, known as NORMAMs, govern maritime activities to ensure safety, environmental protection and compliance with international maritime standards.

NORMAM 203 outlines administrative procedures for foreign-flagged vessels operating in Brazilian Jurisdictional Waters. These vessels must obtain a Temporary Registration (TR) and a Temporary Registration Certificate (TRC). However, vessels chartered for less than thirty days every twelve months are only subject to Port State Control inspections and do not require a TR. The number of visits and operational days in Brazilian Jurisdictional Waters should therefore be monitored in order to determine the applicable requirements.

NORMAM 204 sets administrative requirements for the traffic and permanence of foreign-flagged vessels in Brazilian Jurisdictional Waters, focusing on navigation safety, safeguarding human life and pollution prevention. It also includes dispatching procedures for merchant vessels calling at or transiting through Brazilian ports, in compliance with the Navigation Safety Act (Law No. 9,537/1997).

Foreign flagged FSRUs

As with any foreign flagged vessel, foreign-flagged FSRUs must inform the Maritime Authority of their estimated time of arrival at a national port 48 hours before arrival. A report must be filed to the local Port Captaincy/Station within four hours after docking or anchoring, as well as within a maximum period of four hours after the end of any movement between ports, terminals, or anchorages. The vessel must also request authorisation for departure from the local Port Captaincy/Station, which will issue a Dispatch subject to the filing of the exit pass, Port State report, safety management certificate, updated crew list and payment of terminal fees. Finally, the vessel’s departure time must be communicated to the Maritime Authority within a maximum period of four hours after departure.

In addition, special provisions for FSRU vessels are detailed in section 1.29 of NORMAM 203. A TR is only granted upon presentation of the respective authorisations from Brazilian National Agency of Oil and Gas (ANP) and Brazilian Waterway Transport Agency (Antaq). If approved, the vessel must schedule a Technical Survey. Once completed, the Maritime Authority will issue the Declarations of Conformity for Operation in Brazilian Jurisdictional Waters and respective TRC.

LNG vessels

Finally, ANP has issued a series of regulations regarding the operation of LNG vessels. ANP conducts regular audits to verify that FSRUs comply with operational safety requirements. These audits include the evaluation of safety management systems, equipment inspections, and verifications of operational procedures. ANP also uses performance indicators, incident history and complaints to continuously monitor FSRU operations to identify and mitigate potential risks. FSRU operating companies are required to submit regular reports to ANP, detailing the safety measures adopted, incidents that occurred and corrective actions implemented. ANP also conducts on-site inspections to verify the compliance of operations with safety and environmental standards. These inspections may result in notifications of non-compliance and, in serious cases, in the partial or total suspension of operations.

Through our cooperation arrangement with Costa, Albino & Rocha Sociedade de Advogados, we are able to provide Brazilian law advice to clients on these and other issues relative to the operation of vessels in Brazil.

Footnote

1. Waterway Transport Act (Law 9,432/1997)