Plan to open Brazil sub-salt moves forward

OREANDA-NEWS. July 08, 2016. A special committee in Brazil's lower house of congress has approved a report in favor of relieving state-controlled Petrobras of its obligation to hold a minimum 30pc operating stake in future sub-salt projects, moving forward the push to attract more international investments to the local oil industry.

The committee had been reviewing a bill that would open operatorship of Brazil's sub-salt areas to companies other than Petrobras since it was approved by the Senate in February. The legislation will now go to a full vote in Brazil's lower house.

"Petrobras cannot do everything necessary for the oil and gas sector to recapture significant and sustainable growth," the report said.

Oil and gas industry leaders in favor of the change, which they say will help revive the country's ailing industry, expect the bill to be sent to interim president Michel Temer for approval this month.

Analysts say the final vote on the bill may only happen after the Senate concludes its impeachment trial against suspended president Dilma Rousseff, expected to happen mid-August.

The controversial 2010 provision, known as the sole operator provision, was included in an overhaul of rules governing Brazil's oil industry. The sole operator provision guaranteed Petrobras a lead role in massive sub-salt finds, but has been blamed for slowing the development of Brazil's oil industry.

Both Pedro Parente, Petrobras' recently appointed chief executive, and Fernando Coelho Filho, the recently appointed mines and energy minister, have said they support a change to the rules. The heavily indebted Petrobras has previously said it lacked the financial footing to keep pace with the investment demands of new sub-salt projects.

Oil workers unions are opposed to the change and say they will launch work actions against the proposal.

"The Brazilian people can not allow our oil to be delivered to Chevron and other multinationals," oil workers federation FUP said.

The sole operator provision has only been applied once, in the landmark 2013 auction of the 8bn-12bn bl Libra field. Petrobras took a 40pc operating stake in Libra, which is expected to start producing through an early production system in early 2017. Its partners are Shell and Total with 20pc apiece, and Chinese state-owned CNOOC and CNPC with 10pc apiece.

Shell, now Brazil's largest private oil producer following its acquisition of the UK's BG Group, has said that if the rule changes it would be interested in expanding its presence in Brazil's sub-salt.

If the bill does pass, the company may get its chance in the second quarter of 2017, when Brazil is expected to auction four sub-salt regions in a new upstream licensing round. The mines and energy ministry says the Gato do Mato, Tartaruga Mestica, Sapinhoa and Carcara fields are likely to be included in a new round now being analyzed by national energy policy council CNPE.