Brazil's Lobao Confirms Proposal to Create Subsalt Oil Firm

SAO PAULO (Dow Jones Newswires), Jul. 14, 2009

Proposed changes in Brazilian oil legislation will include the creation of a new company to manage and sell possibly massive reserves in the subsalt layer way under the sea off the local coast, said Mines and Energy Minister Edison Lobao late Monday.

Speaking to journalists in Brasilia, he said that under proposals being considered, oil extracted would belong to the new company and the oil firms selected to extract and produce oil on subsalt sites will be remunerated by that firm. The new company will channel revenues and royalties into a fund for social programs, he added.

The new company will not operate outside the subsalt regions.

The government panel studying possible changes to oil laws will present its findings to President Luiz Inacio Lula da Silva within 15 days, he said.

A draft bill would then be presented to Congress.

Back in 2007, potentially enormous oil discoveries were made 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.

In November 2007, state-run energy giant Petroleo Brasileiro SA, known as Petrobras (PBR), estimated recoverable reserves under the subsalt layer of the Tupi field were between 5 billion and 8 billion barrels of oil equivalent, or BOE. That was the largest discovery in the Americas in more than 30 years.  

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