Brazil approves oil laws, opens presalt region for development

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, Dec. 3 -- Brazil’s lower house of congress has approved long-awaited oil industry legislation granting the federal government greater control over deepwater reserves off the nation's coast.

The legislation passed this week replaces the current concession-based system with a production-sharing scheme that gives Brazil’s Petroleo Brasileiro SA (Petrobras) a minimum 30% operating stake in all new subsalt fields.

Under the legislation, Petrobras will be the operator of the fields under the production-sharing deals, but other oil companies will have the right to bid for stakes by guaranteeing the government a large percentage of oil output.

The new production-sharing agreements will not cover presalt areas previously auctioned off under the concession system. The agreements also will not affect onshore or shallow-water areas, which will be auctioned off under the current concession-based system.

The lower house also passed a separate law to even out the distribution of oil royalties among Brazil's 26 states and the federal district of Brasilia.

"The lower house cannot maintain the current distribution, in which 92.5% of royalties go to the federal government and [Rio de Janeiro and Sao Paulo] states,” said Congressmen Ibsen Pinheiro.

Reports suggest that President Luiz Inacio Lula da Silva is likely to veto the royalty measure, sending it back to congress for further debate. According to Petrobras Chief Executive Officer Jose Sergio Gabrielli, the royalty question is unlikely to be resolved until next year.

“It's probable that it could return to the lower house in 2011 as a new bill that discusses in a more-equitable way the question of royalties, allowing a larger share to be distributed to producing states while at the same time allowing other states to receive the benefits of production,” Gabrielli said over national radio.

The inclusion of the law on distribution had held up passage of the main laws for months as Brazil’s largest oil-producing states, Rio de Janeiro and Sao Paulo, said the changes would cause them to lose billions of dollars in revenue.

While Lula is expected to veto the royalty provision, he is considered likely to sign into law the measure to implement production-sharing agreements for presalt oil fields currently under government control.

Passage of the law, the last of four related pieces proposed by the Lula administration, means that Brazil can begin to step up development of the presalt oil regions, which are variously estimated to hold 50-100 billion bbl of oil.

Earlier this year, Congress passed the three other measures that Lula had proposed:

• The first created the social investment fund that will use oil revenues for education and health care initiatives.

• The second created a state-owned oil company, called Pre-Sal Petroleo SA, that will manage the government's pre-salt assets.

• The third involved a complex capitalization plan for Petrobras that granted the firm rights to produce 5 billion bbl of oil from government-held areas.

The new legislation may well improve the investment atmosphere over the 10th bidding round which took place 2 years ago. At the time, Petrobras and Royal Dutch Shell PLC were the only international oil companies to secure areas in the round.

That round saw reduced participation largely because the auction was restricted to onshore areas and excluded bidding on the potentially more-lucrative subsalt offshore areas due to the pending oil legislation (OGJ, Oct. 20, 2008, p. 29).

The government now is promoting interest in Brazil’s offshore regions with Brazilian regulator ANP last month saying that the recent Libra subsalt oil find could hold as much as 15 billion bbl of oil—a figure 2.4 billion bbl greater than the country’s existing reserves.

“The volume of recoverable oil belonging to the nation could vary from 3.7-15 billion bbl, with the most likely estimate being 7.9 billion bbl," ANP said, citing a study carried out by certification firm Gaffney, Cline & Associates (OGJ Online, Nov. 5, 2010).

According to analyst BMI, passage of the new legislation means that, “The stage is now set for a resumption of deepwater licensing in mid-2011, with the 8 billion bbl Libra field one of many bright stars in the subsalt firmament.”

Contact Eric Watkins at hippalus@yahoo.com.

Related Articles

BPC report examines 40 possible options to reform RFS

12/16/2014 The Bipartisan Policy Center issued a report outlining 40 possible options for reforming the federal Renewable Fuels Standard in an effort to move ...

Senate passes Defense bill with BLM drilling permit program provision

12/15/2014 The US Senate approved a Department of Defense appropriations bill on Dec. 13 containing a provision extending and making permanent a drilling perm...

Mitigating methane

12/15/2014

Among greenhouse gases, methane should be particularly amenable to deliberate cuts in emissions.

Falling prices may pose new test for China oil policies, speakers say

12/15/2014 China, which successfully revised its oil strategy in response to new technologies since 2008, could face fresh tests if prices stay low for a prol...

Study finds small subset of wells accounts for most methane emissions

12/15/2014 A small subset of natural gas wells are responsible for most methane emissions from US natural gas production, said a study from the University of ...

API: Producers reducing methane emissions already

12/15/2014 US oil and gas producers are reducing wellhead methane emissions already and don't need ill-conceived, overly prescriptive federal regulations, Ame...

Speakers say methane controls just part of complete climate strategy

12/15/2014 Reducing oil and gas operations' methane emissions is an essential, but far from the only, part of a comprehensive climate strategy, speakers at a ...

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected