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Brazil may change oil rules, but not for October auction: minister

Tuesday, May 5, 2015 - 07:18
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Brazil's government is discussing changes to its oil regulations but any new rules will not be in place before an October auction of exploration and production concessions, the country's energy minister Eduardo Braga said on Monday.

[HOUSTON] Brazil's government is discussing changes to its oil regulations but any new rules will not be in place before an October auction of exploration and production concessions, the country's energy minister Eduardo Braga said on Monday.

A growing number of Brazilian politicians, as well as the chief executive of state-run Petroleo Brasileiro SA, have said stringent national content rules are saddling Brazil's oil industry with higher costs.

They have also criticised a 2010 law requiring Petrobras, as the company is known, to be the operator and own a minimum 30 per cent stake in all new exploration and development in an offshore region known as the Subsalt Polygon. This may burden Petrobras with costs and responsibilities that its finances, battered by a corruption scandal, poor planning and falling oil prices, may not be able to handle.

"We need to adjust policies because the economy is so dynamic," Mr Braga told reporters at the Offshore Technology Conference in Houston. "The local content requirement will continue ... maybe we can raise it in some cases but lower it in others, though not for this bid."

Brazil plans to sell 269 areas in October under a nearly 20-year-old concession system, the ministry said. It will be the 13th round of such auctions since they began in the late 1990s.

Under that system, winners own any oil produced if they meet minimum investment and content rules, follow local environmental and other legislation, and pay a royalty on each barrel of output. The government hopes to raise as much as 2.5 billion reais (US$809 million) from the sale.

The October auction will not offer areas in the Subsalt Polygon, a region stretching along Brazil's coast near Rio de Janeiro with large offshore resources trapped beneath a layer of salt far below the seabed.

The subsalt rights are sold under a production-sharing system. The winner is the group that gives the state the largest share of oil produced to sell on its own account. Petrobras must also take part as a financial partner and operator.

Changes to subsalt rules won't be considered until next year when the government decides if it wants to hold its second such round in 2016 or 2017, Braga said. "Opportunities in Brazil are big," Mr Braga said. "The industry needs to cut costs and you cut costs with big production areas, which Brazil has."

REUTERS

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