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Brazil’s Petrobras to Issue Stocks to Raise US$ 20 Billion in the Market

Brazilian president Luiz Inácio Lula da Silva has signed the bill governing the capitalization of Brazilian energy giant Petrobras. It is the first step to establish the new regulatory framework for exploiting crude oil under the pre-salt layer of the continental seabed of Brazil. 

According to the law, capitalization will be made by issuing stocks in the market. Experts estimate the offer will bring in about US$ 20 billion.

Petrobras is currently listed in the stock markets of São Paulo, New York, Madrid and Buenos Aires, with 40% of shares owned by the Brazilian government, which is responsible for technical and commercial management.

With the approval of the law, Petrobras is authorized to exploit up to 5 billion barrels of oil in the pre-salt area without opening a bid process, although later the company will have to pay for that concession by issuing security titles to be transferred to the government and then capitalized.

The fields of oil and natural gas under the pre-salt layer are located approximately 7,000 meters below the sea level, extending for 800 km off the Brazilian coast between the Santa Catarina and Espírito Santo states, and could turn Brazil into one of the world’s top ten oil producers.

Lula also approved the most controversial part of the capitalization deal, which allows small shareholders to invest up to 30% of the Guarantee Fund for Length of Service (FGTS), a fund composed of employers’ contributions that serves as a social insurance for workers in Petrobras capitalization system.

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