Brazil to Decide on Oil Contract Definiton in Late 2009


Jupiter Field, Santos Basin
(Click to Enlarge)

SAO PAULO (Dow Jones Newswires), August 19, 2008

Brazil's government will decide on how to administrate potentially massive oil finds in the offshore Santos basin once more details are available at the end of 2009, said a top official at state-run oil company Petroleo Brasileiro, or Petrobras, late Monday, according to the local Estado newswire.

"Because of the extent of the discoveries made, there are indications that contracts may have to be redrawn," said Petrobras' exploration and Production Director Guilherme Estrella after an event in Rio de Janeiro.

Late last year, Petrobras and its partners announced that they had found reserves of up to eight billion barrels in the presalt layer of the Tupi field of the Santos basin. Then, Haroldo Lima, head of the Brazilian Oil Agency, or ANP, added to interest when he said the broad pre-salt area could contain some 30 billion barrels of oil.

Petrobras also found oil in the nearby Carioca, Guara and Bem-Te-Vi fields, which led government officials to speculate that the reserves are connected along the pre-salt layer of the Santos basin.

"By the end of 2009, we will have clearer analysis, at least in relation with to the Tupi field," said Estrella.

"There are indications that the reserves will be jointly administered with the government in some way," he said.

A government committee is discussing a proposal to create a separate government company to administrate the pre-salt reserves in the Santos basin.

Petrobras leads the exploring group for all the blocks being explored in the region, while six other firms have stakes in them. They are BG, Galp, Repsol, Shell, ExxonMobil and Hess Corp.

If reserves go beyond the blocks exploited, the government can change the contract to include other partners.

Estrella noted that the other partner would most probably be a government company or agency.

"However, the law doesn't lay out how the government would implement this change," he said.

Following the Tupi discovery, the government withdrew other presalt blocks from upcoming oil rights exploration auctions. 

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

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