Brazil to update oil law in wake of discoveries

Brazil's ministry of mines and energy has created a new working group that will aim to update the country's existing oil law, according to a senior government official.

Jul 2nd, 2008

Eric Watkins
Senior Correspondent

LOS ANGELES, July 2 -- Brazil's ministry of mines and energy has created a new working group that will aim to update the country's existing oil law, according to a senior government official.

"This group is studying the legislation of several countries, especially those which have a monopoly, and we are going to make a proposal to change the current law," said Mines and Energy Minister Edison Lobao.

The minister said every country changes the rules whenever new discoveries are made and that "Brazil can't be different." However, he acknowledged that there are interests intent on maintaining "the status quo."

Lobao, who said the changes are in the interests of the Brazilian people, was apparently referring to criticism of the proposed changes voiced by Petrobras CEO Jose Sergio Gabrielli.

Noting that 60% of Petrobras' capital is private, while only 40% is held by the government, Lobao said Gabrielli represents a private company and, as such, is fighting for Petrobras' interests.

Lobao also gave assurances that the recently proposed creation of a new company to manage subsalt oil reserves will not result in a breach of existing contracts.

"This is an initial idea but, in my view, all contracts will have to be maintained," he said. "What we seek is a new formula."

Earlier this week, it was reported that Lobao plans to propose to President Luiz Inacio Lula da Silva the creation of a new state-run firm that would manage oil discoveries made in recent months in the subsalt layer of the Santos basin (OGJ Online, June 30, 2008).

Contact Eric Watkins at hippalus@yahoo.com.

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