Petrobras put in charge of huge new Brazilian oil fields

BRAZILIAN OIL major Petrobras is to be put in charge of developing huge recently-discovered oil reserves lying off the southeastern coast of the South American nation.

The move is a blow to foreign companies who had been hoping for greater participation in what is the oil industry’s most exciting new frontier, but still leaves open the door for their involvement in developing the reserves.

In announcing the framework for the reserve’s development, President Luiz Inacio Lula da Silva said yesterday that Petrobras, listed on the São Paulo and New York stock exchanges, but with a majority of the voting stock controlled by the government, would be the sole operator of all new blocks to be licensed in the new “pre-salt” reserves, so called after the thick layer of subterranean salt under which the oil lies.

The deep-lying offshore reserves are estimated to hold anywhere between 50 and 150 billion barrels of oil, the tapping of which is set to transform Brazil into one of the world’s major oil producers within the next decade.

As well as being sole operator of all new pre-salt fields, the government has decided that Petrobras must have a minimum participation of 30 per cent in all pre-salt projects, reducing foreign companies to financial backing of projects operated by Petrobras or else working as contractors for it.

The government says it also reserves the right to award pre-salt projects to Petrobras alone, excluding foreign oil companies altogether.

Under the new rules the Brazilian state will remain owner of all oil lifted from the reserves. Companies contracted to develop fields in the pre-salt region will be paid with a share of the oil they produce.

Speaking in a radio address yesterday, President Lula called the new regulatory framework “a new independence day” for Brazil, and said the oil would go towards financing social projects. “What we want to do is use this oil to make Brazil a wealthier and more developed country.”

In order to raise the funds to undertake the privileged role assigned to it by the government, Petrobras is preparing a share issue that Romero Juca, the government’s leader in the senate, said would look to raise $50 billion. The government is ready to inject this amount into the company, a move that could boost its shareholding to about 70 per cent.

The cash would also potentially see Petrobras, already the fourth largest listed oil company in the world, edge closer to being the largest.

This year it announced a $175 billion investment plan, which at its heart had the development of existing blocks it holds in the pre-salt region.