Brazil's 8th Oil Auction Suspended Until Petroleum Laws Change

RIO DE JANEIRO (Dow Jones Newswires), Feb. 2, 2009

No decision will be made on restarting Brazil's suspended eighth-round oil and natural gas concession auction until likely changes are made to the country's petroleum laws, Brazil's National Energy Policy Board said Monday.

The regulator, known as CNPE, made the pronouncement in a resolution published in Brazil's Federal Register.

The eighth-round auction was suspended in November 2006 after a local court granted an injunction stopping the sale. Before the auction was halted, 38 of the 284 oil and gas exploration and production blocks up for bid were auctioned off.

The auction drew intense interest because it included blocks close to promising subsalt oil reserves.

A government panel studying possible changes to Brazil's oil legislation was expected to meet later this week, then submit proposals for possible changes to President Luiz Inacio Lula da Silva on Wednesday, Mines and Energy Minister Edison Lobao said last week. A decision by President Lula was then expected in 30 days, Lobao said.

The proposals are expected to give Brazil's government a greater stake in oil and natural gas production, especially in the subsalt area. Government officials, however, have said that previous contracts would be maintained.

Under consideration is the creation of a second state oil company that would manage development of the reserves, as well as production-sharing agreements such as used in Norway.  

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