Brazilian president urges Petrobras to invest overseas

Brazil's President Luiz Inacio Lula da Silva, on a state visit to Turkey, said his country's state-operated Petroleo Brazileiro SA (Petrobras) should not hesitate to invest in overseas oil and gas projects.

Eric Watkins
OGJ Oil Diplomacy Editor

LOS ANGELES, May 21 -- Brazil's President Luiz Inacio Lula da Silva, on a state visit to Turkey, said his country's state-operated Petroleo Brazileiro SA (Petrobras) should not hesitate to invest in overseas oil and gas projects.

The Brazilian president's remarks came as the country's oil and gas regulator, the Agencia Nacional do Petroleo (ANP), aiming to step up discoveries at home, denied a Petrobras request for extensions on its concessions in the pre-salt layer.

"[Overseas investments] will help the company have more access to sources of oil," Lula said in Turkey, adding, "Gasoline prices, which are already cheap in Brazil, could become even cheaper [with more overseas exploration]."

Underscoring the chances of his country making discoveries, the Brazilian president even said that "God wants Petrobras to find oil."

Petrobras activity
During Lula's visit, Petrobras was expected to sign an exploration deal worked out earlier this year with the Turkish Petroleum Corp (TPAO), for a 50% stake in blocks 3920 (Kirklareli) and 3922 (Sinop) in the Black Sea.

The Brazilian firm began oil production activities in Turkey in February 2006, and completed seismic studies in late 2008. Now, it is poised to begin drilling two exploratory wells.

Petrobras expects the Leiv Eriksson rig to arrive in Turkish waters by yearend, with drilling operations set to begin in the Sinop offshore block during the first quarter of 2010.

Petrobras's international director, speaking on the sidelines of a conference in Istanbul, estimated the firm's investments in the Black Sea as totaling $300 million over the next 2 years.

"We are planning investments of $300 million in exploration activities in the Black Sea in 2009 and 2010. This is the cost of the two wells," Zelada said.

Coinciding with Lula's statement about the importance of overseas investments, the ANP said its board had denied Petrobras an extension on subsalt exploration deadlines for Blocks BM-S-8, BM-S-11, and BM-S-21.

Each of the blocks has discovery evaluation plans approved by the ANP under which Petrobras and its partners must drill further wells to evaluate their discoveries.

However, Petrobras said that the shortage of drillships on the market means the current deadline is too short for all of the concessions to be evaluated.

ANP said the following deadlines must be kept: BM-S-9 (Carioca well on November 11, 2011 and the Guará well on December 31, 2012); BM-S-10 (the Parati well on May 31, 2011); BM-S-11 (the Tupi well on December 31, 2010); and BM-S-21 (the Caramba well on December 31, 2012).

In the case of BM-S-8, evaluation can take place to 2010 but the ANP has granted two years for drilling a contiguous well.

The ruling means that Petrobras will step up its operations, going so far as to include contracting services abroad, according to Jose Formigli, the company's subsalt exploration director.

The blocks, which lie in 2,000 m of water and as much as an additional 5,000 m under sand, rocks, and salt, include some of the most promising subsalt oil finds, including the Tupi discovery.

Vital presalt layer
Brazil's Mines and Energy Minister Edison Lobao underlined the importance of the presalt layer to Brazil's future by saying that the region's massive oil discoveries would be enough to "secure the country's energy self-sufficiency for another half a century."

For Royal Dutch Shell PLC, Brazil's subsalt oil and gas reserves are a priority but investment in them will depend on the regulatory model to be drawn up by the government, according to Shell Brasil Chief Executive Officer Vasco Dias.

"It's natural that in the face of subsalt discoveries the government gains a bit of time to see whether the current system is the best for the country," Dias told the state news agency.

Dias said that Shell has three subsalt concessions in Brazil, and it defends current legislation "with minor adjustments."

"I have no reason to believe that the government will take any type of stance that will discourage private companies from investing," he said.

Speeding up investment into the area will depend on the conditions offered, Dias said, noting that there are competing oil projects in Russia, Africa, and other locales around the world.

The Brazilian government, under instructions from Lula, has been considering possible changes to the country's investment laws that could work against the interests of international oil companies due to the ease of discovering oil and gas in the presalt layer.

Lobao, who favors legal changes that would give priority to investment by Petrobras, underlined the ease of discovery in the presalt layer earlier this week.

"Whenever a drill is placed anywhere in the world, there's a chance that nothing will be found," he said. "There's no such risk in subsalt, it's just a matter of launching the hook and catching the fish," the minister said.

Meanwhile, Petrobras gas and energy director Maria das Gracas Foster said the firm will announce the results of studies into how to ship gas extracted from offshore subsalt finds by 2011.

She said that Petrobras had to decide whether to develop projects alone or with partners, adding that its initial idea is to liquefy the gas offshore on a platform.

Contact Eric Watkins at

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