Brazil to Send New Oil Law to Congress Soon

RIO DE JANEIRO (Dow Jones Newswires), Aug. 20, 2009

Brazil's government will send proposals to change the country's oil laws to Congress on Sept. 1, a member of President Luiz Inacio Lula da Silva's Workers' Party said Wednesday.

Sen. Ideli Salvatti told the local Estado news agency that a calendar for the proposals was divulged during a meeting with President Lula. The new measures will be unveiled to government officials and the public on Aug. 31.

The changes to Brazil's regulatory framework will be made via three separate bills. The first will create a new production-sharing regime, with private companies bidding for the right to explore and develop offshore oil reserves.

The oil produced from the deposits will belong to the government, while companies will be paid a fixed amount in oil or cash.

A second bill will create a social fund that will receive proceeds from the sale of government crude. A third bill will create a new state company to manage Brazil's so-called subsalt oil reserves, dubbed Petrosal.

The so-called subsalt discoveries were made recently under a thick layer of salt in the Santos Basin off the coast of Sao Paulo and Rio de Janeiro states. The oil lies under more than 2,000 meters of water and a further 5,000 meters under sand, rock and a shifting layer of salt.

The measures will cover concession blocks that currently remain under government control, Salvatti said. Concession contracts for blocks that were previously auctioned off, including a cluster of blocks containing the recent discoveries, will not be changed.

Remaining questions about how to distribute Brazil's newfound oil wealth were not discussed during the meeting, Salvatti said.

Last year, President Lula formed a government panel to study possible changes to Brazil's regulatory regime covering the oil and natural gas sector. The working group's proposals were forwarded to Lula in late July.

President Lula has pledged to use the subsalt oil to reduce Brazil's crushing poverty and improve the country's education system.  

Copyright (c) 2009 Dow Jones & Company, Inc.

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