Brazil's President Lula to Decide on Pre-Salt In 2009

RIO DE JANEIRO (Dow Jones Newswires), July 10, 2008

Brazilian President Luiz Inacio Lula da Silva will likely make a decision next year on a new model to develop the country's promising pre-salt layer oil deposits, the Valor Economico business daily reported Thursday.

Quoting an unnamed government minister, Valor reported that Lula wants to first know whether state-run energy giant Petroleo Brasileiro (PBR) discovered "various lakes or a sea of petroleum" that runs down Brazil's coast from Espirito Santo state to Santa Catarina state.

Lula wants to decide on the new model in 2009, but may have to wait until 2010 for further research and testing on the deposits to be completed, Valor reported.

An internal debate about how to handle development of Brazil's newfound oil reserves has raged since last November, when Petrobras estimated recoverable reserves at its massive Tupi field could be as much as 8 billion barrels of oil equivalent, or BOE.

Mines and Energy Minister Edison Lobao has suggested the creation of a second, state-owned company that would be responsible for managing the pre-salt deposits. The company would set production quotas for the region, hiring major oil companies as third-party service providers to handle drilling and output.

Petrobras CEO Jose Sergio Gabrielli, however, wants to leave responsibility for exploration and development in the hands of Petrobras.

Development of the pre-salt reserves is expected to be pricey and complicated, with the reservoirs under 2,000 meters of water and a further 5,000 meters below sand, rocks and salt.  

Copyright (c) 2008 Dow Jones & Company, Inc.

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