Revenues from Pre-Salt Oil Reserves in Brazil to Stay with Govt.

BRASILIA (Dow Jones Newswires), August 20, 2008

Revenues from Brazil's recently discovered pre-salt oil reserves will remain with the government and will be used to bolster public finances, Brazilian Finance Minister Guido Mantega said Wednesday.

Speaking in a nationally broadcast radio interview, Mantega said the government may eventually direct the revenues toward a planned sovereign wealth fund, or may create a separate fund exclusively to receive pre-salt revenues.

"I'm not sure whether they will go to this (sovereign fund) or to another," he said. "What's certain is that the proposed fund under examination in congress is prepared to receive revenues from the pre-salt reserves."

Brazil's government has proposed the creation of a sovereign wealth fund of between $10 billion and $20 billion to receive surplus revenues from Brazilian exports, however, the model for the fund must still be approved by the country's congress.

Mantega is scheduled to meet with Brazilian lower house speaker Arlindo Chinaglia Wednesday to discuss the approval of the fund.

Brazil last year unveiled the discovery of offshore oil reserves estimated at between 5 billion and 8 billion barrels in a pre-salt geological region oil off the country's southeastern coast. The area is seen going into production after 2010.

Following the discovery, the government canceled planned auctions of oil concession blocks near the area and government officials have recently discussed changing local oil exploration rules to allow exclusive management of the newfound reserves by the public sector.

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