Brazil's President Fernando Henrique Cardoso has signed into law new petroleum deregulation measures recently approved by Brazil's Congress.
The new law ends more than 4 decades of monopoly by Brazil's oil giant Petrobras SA, which now must compete with domestic and international petroleum companies (OGJ, July 28, 1997, p. 37).
From now on, Petrobras will be able to associate with any company, domestic or foreign and, if it chooses, sell assets such as refineries, oil and gas wells, pipelines, vessels, and subsidiaries.
The law also calls for full price deregulation of petroleum products within 3 years. In the interim, petroleum product prices will continue to be controlled by the economy and mines and energy ministries.
Also, during this period, the National Treasury will have to pay to Petrobras about $7.5 billion in compensation for a petroleum account that for years had subsidized oil product prices in Brazil and the fuel alcohol for automobiles program.
The new law also creates a National Petroleum Agency (ANP), charged with issuing tenders, granting concessions for domestic and foreign companies, and monitoring the activities of the sector, including establishing rights to explore for and develop oil and gas in Brazil. ANP will be headquartered in the city of Rio de Janeiro.
Petrobras status
Although Petrobras will not be privatized, all of its technical data will be made available to competing companies that are now allowed to set up subsidiaries in Brazil. ANP will transfer information to other companies after they pay Petrobras for it.
The new law establishes that all producing oil and gas fields will remain under Petrobras control, and the government will continue to retain control of the company.
On acreage where Petrobras has made commercial discoveries of oil or gas or is investing in exploration, this work is to be continued during the next 3 years.
The new law also hiked to 10% from 5% royalties to be paid for concessions.
In addition, royalties paid to states and municipalities that host oil or gas production will be increased.
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