UPDATE: Brazil Congress To Pass Oil Law This Year - Min
October 15 2009 - 2:15PM
Dow Jones News
Brazil's Congress should approve measures to revise laws
covering the country's oil and natural gas industry by the end of
the year, Mines and Energy Minister Edison Lobao said Thursday.
Next year, the new regulatory framework will be established and
new auctions for the exploration and development of the subsalt oil
region can be held, Lobao told journalists at the sidelines of an
event with Portuguese oil company Galp Energia SPGS SA
(GALP.LB).
The year-end timetable, however, is much more aggressive than
what analysts and government officials expect, with many estimating
approval sometime in the first half of 2010. Government officials
expect Brazil's lower house to approve the measures Nov. 10, with
Senate debate taking place over the next 45 to 60 days.
Petrobras' investor relations director, Theodore Helms, said
earlier Thursday that it was unlikely the laws would be passed
before March.
The new regulatory framework will give Brazil's government a
greater stake in offshore oil reserves in the promising subsalt oil
region, where several of the world's biggest oil finds in recent
years have been made. The government first announced its plans for
the new regime in late August.
The so-called subsalt oil discoveries were made recently under a
thick layer of salt in the Santos Basin off the coast of Sao Paulo
and Rio de Janeiro states. The oil lies under more than 2,000
meters of water and a further 5,000 meters under sand, rock and a
shifting layer of salt.
The first of the subsalt discoveries, called Tupi, was estimated
to hold recoverable reserves of between 5 billion and 8 billion
barrels of oil equivalent. That was the Western Hemisphere's
largest oil find in more than 30 years.
The new rules, however, will greatly limit the space for
international oil companies to profit from the prolific new region.
Brazil's state-oil company Petroleo Brasileiro SA (PBR), or
Petrobras, will hold an operating stake in all not-yet-licensed oil
or gas acreage in the subsalt region.
The government will also cede the rights to explore and produce
5 billion barrels of crude oil as part of a capitalization plan for
Petrobras. Lobao said that the 5 billion barrels would come from
areas surrounding current exploration concessions that need to be
"unitized" with the recent discoveries.
Guilherme Estrella, Petrobras' director of exploration and
production, said in September that several of the fields extended
beyond current concession boundaries to differing degrees. Under
the unitization process, operators of the concession and
neighboring blocks negotiate to connect up the reservoir for
production purposes, dividing the crude oil production.
"In the case that these unitized blocks were not sufficient (to
meet the 5 billion barrel requirement), we could cede other
exploration blocks to capitalize Petrobras," Lobao added.
-By Jeffrey T. Lewis, contributing to Dow Jones Newswires, and
Jeff Fick, Dow Jones Newswires; 55-21-2586-6085;
Jeff.Fick@dowjones.com
(Bernd Radowitz in Madrid and Kejal Vyas in New York contributed
to this article.)