Brazil Bill Could Reduce Petrobras Stake in Pre-Salt Oil Fields
RIO DE JANEIRO - Brazil's Congress is considering a bill that would reduce the burden placed on state-run energy giant Petroleo Brasileiro to develop pre-salt oil fields, potentially opening up the promising offshore region to greater private-sector investment.
The proposal would reverse a controversial provision of Brazil's 2010 overhaul of its oil laws, which forced Petrobras to operate and hold a 30% stake in pre-salt areas under a new production-sharing regime. The regulatory framework was aimed at giving the government a greater stake in the pre-salt area, where billions of barrels of crude oil were discovered under a thick layer of salt miles below the Atlantic Ocean.
But the mandate to develop the pre-salt places a heavy financial and resource burden on Petrobras, which already plans to spend $237 billion through 2017 to develop a healthy portfolio of oil discoveries, proponents of the bill said.
"The existing law imposes an obligation on Petrobras that the company is unable to assume," said Congressman Raul Henry. He proposed the changes after Petrobras experienced a dismal year in 2012, when stagnant crude oil production and a surge in costly fuel imports caused the company to post its worst annual earnings in eight years.
Brazil could also avoid development delays caused by forcing Petrobras to lead exploration and production in the area, analysts said. Brazil would be able to hold more frequent auctions of pre-salt oil and natural gas concessions by allowing independent local and foreign oil companies to operate the blocks, thereby boosting crude oil output more quickly.
"By removing this rule, some of the pressure is removed from Petrobras, and opportunities are created for other companies," said Ruraidh Montgomery, an analyst at oil industry consulting group Wood Mackenzie. "This should ensure that resources are developed more quickly than if Petrobras operates everything."
The first auction of a pre-salt concession will take place in October, Brazil's National Petroleum Agency, or ANP, announced last month. The auction will feature a single prospect, called Libra, that contains Brazil's largest oil discovery to date. The ANP, which drilled the Libra well in 2010, estimates the prospect holds recoverable reserves of between 8 billion and 12 billion barrels of oil equivalent, or BOE.
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