Brazil Govt Could Seek to Speed Up Oil Law Debate

RIO DE JANEIRO (Dow Jones), Oct. 23, 2009

Brazil's government could once again force lawmakers to speed up the debate over proposals for new oil and natural gas regulations if voting on the measures is delayed, the country's mines and energy minister said Thursday.

"If the proposals aren't voted on, the government could once again resume the constitutional urgency that was initially proposed," Mines and Energy Minister Edison Lobao was quoted by the local Estado news agency as saying. Lobao made the comments at a seminar in Curitiba.

Brazil's lower house is currently debating four bills proposed in September by Brazilian President Luiz Inacio Lula da Silva that would revise the regulatory framework covering the country's oil and natural gas sectors. The measures would give the government a greater stake in recently discovered offshore oil deposits.

The lower house is expected to vote on the measures by Nov. 10, and Lobao's comment was a warning shot that the government wants the bills pushed through.

Lobao said that he met with lawmakers writing analysis reports on the bills for the lower house, telling them the government wants as few amendments to the bills as possible.

"No delays and no changes are what we expect," Lobao said. Lula would also have the ability to veto any deep changes made to the proposals, Lobao added.

The government is hoping the measures can be approved in the first half of 2010, but that will be a difficult task given the importance of the measures and the fact that 2010 is an election year. Such a high profile debate gives lawmakers--especially those in government-opposition parties--leverage in any negotiations over changes.

The new regulatory framework will give Brazil's government a greater stake in offshore oil reserves in the promising subsalt oil region, where several of the world's biggest oil finds in recent years have been made. The government first announced its plans for the new regime in late August.

The so-called subsalt oil 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 first of the subsalt discoveries, called Tupi, was estimated to hold recoverable reserves of between 5 billion and 8 billion barrels of oil equivalent. That was the Western Hemisphere's largest oil find in more than 30 years.

The new rules, however, will greatly limit the space for international oil companies to profit from the prolific new region. Brazil's state-oil company Petroleo Brasileiro SA, or Petrobras, will hold an operating stake in all not-yet-licensed oil or gas acreage in the subsalt region.

The government will also cede the rights to explore and produce 5 billion barrels of crude oil as part of a capitalization plan for Petrobras.  

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