• Categories
  • Archives

Sweeping Changes in Brazil on How Oil Riches Are Spread

Brazilian oil Brazil is set to unveil today, August 31st, a sweeping reform of regulations covering the oil and natural gas industries. The regulatory framework will delineate how recently discovered offshore sub-salt oil deposits should be developed, who will develop them and who will reap the rewards.

The reform is part of Brazilian President Luiz Inácio Lula da Silva's effort to use the newfound oil wealth to ease the country's poverty, improve its education system and promote technological research.

Lula is expected to forward the measures to Congress on Tuesday, asking for quick approval to speed up development of the oil deposits. But with elections on the horizon next year, the political infighting has already started.

Doubts about how royalties from the promising sub salt oil deposits will be distributed have cast a pall over Monday's grand ceremony, set to take place at a convention hall in Brasilia. The governors of Rio de Janeiro and Sao Paulo states haven't yet confirmed their presence because of the dispute.

Currently, states closest to oil fields receive the lion's share of royalties and special participation taxes, generating billions of Brazilian reais in revenue each year. However Lula wants the royalties from the subsalt discoveries more evenly distributed.

On Friday evening, Energy Minister Edison Lobão told reporters in Brasilia that talks with key governors Friday on the issue of royalties "were inconclusive." However, he expressed confidence that further talks over the weekend will resolve the issue.

Earlier this week, Lobão reinforced the government's interest in systematically developing offshore oil reserves, saying efforts will continue "based on the conviction that the sub-salt region has large concentrations of oil."

The sub-salt discoveries lie under more than 2,000 meters of water and a further 5,000 meters of sand, rock and a shifting layer of salt. In 2007, government managed Petrobras, shocked the world with the announcement of the Tupi discovery, the Western Hemisphere's largest oil find in more than 30 years.

The Lula da Silva administration then withdrew exploration and production blocks from planned concession auctions, a process that will likely be restarted with the new regulations albeit in a less-favorable manner to foreign oil companies.

Brazil's government will auction off currently unlicensed E&P blocks under production-sharing agreements, with winners selected on the basis of how much oil they will grant the government. Winners will also pay a bonus upon signing the contracts, earmarked for a social investment fund that will focus on education, science, technology and the poor.

In an effort to appease Petrobras and its government allies, the company will be given operator status for all the blocks – plus a minimum stake of about 30% in each block. Petrobras also will serve as the commercial outlet for the government's oil take, refining the crude oil at several planned refineries for sale both here and abroad.

A new state-owned company, Petrosal will be created to manage the government's precious assets. Petrosal could eventually overshadow Petrobras, according to some analysts.

However, quick approval of the legislation is unlikely. It took more than a year for the measures to be hammered out by an internal government panel, and politicians are expected to capitalize on the national debate sparked by the new regulations.

Newsroom

Tags:

  • Show Comments (0)

Your email address will not be published. Required fields are marked *

comment *

  • name *

  • email *

  • website *

This site uses Akismet to reduce spam. Learn how your comment data is processed.

Ads

You May Also Like

Portugal’s Axentel Wants to Make Sugar in Brazil to Sell to the Arabs

The Portuguese company Axentel, acting with telecommunication services and foodstuff exports, is studying the ...

Mergers and Acquisitions Fall 21% in Brazil

There were a total of 66 mergers and acquisitions in Brazil, in July, according ...

Brazil Opens Microbe Bank to the World

Hundreds of bacteria, fungi and yeast species, mostly collected from the wilds of Brazil, ...

Brazilian Boy, 8, Survives 8 Days in Hole Eating Leaves and Mud

An eight-year old Brazilian boy ate leaves and mud and drank rainwater to survive ...

U.S.A. Calendar

THURSDAY 1 BERKELEY, CAL. 8:30 PM – Adriana & Carlos Oliveira at Nino’s THURSDAY ...

Brazil’s Submarino Widens Its Internet Reach Acquiring Ingresso.com

Brazilian Internet retailer Submarino S.A. announced the acquisition of 100% of the stock capital ...

Mauritania’s Ore Travels on Brazilian Wheels

For the last ten years, the National Mines Company (SNIN) of Mauritania, has been ...

A PC in Every Desk

Brazilian government approved last month a project for producing a cheap personal computer for ...

Stalking  Stokowski

There has been a revival of Noel Rosa’s life and work. But who is ...

How I Taught English in Brazil And Survived to Tell the Story: Lesson 2

More often than not, the sharp-eyed professor is forced to improvise a tailor-made solution ...