Brazil's Temer signs off on pre-salt bill

Wednesday, November 30, 2016

Brazilian President Michel Temer has signed off on a law that lifts restrictions on private operators in ultra-deepwater oilfields.

The legislation, approved by the lower house of congress this month, removes the obligation of state-run oil firm Petrobras to hold a minimum 30% operating stake in pre-salt projects in the Santos and Campos basins.

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"This will benefit the country by allowing new investors," Temer said in a statement. "The measure will accelerate our access to these [pre-salt] riches.

"Companies that are already Petrobras' partners will have liberty to [develop pre-salt fields] more quickly."

Under the new law, Petrobras will have the right to participate – as operator or otherwise – in pre-salt areas of its choice, the government said.

See Brazil's top five pre-salt fields here

In addition to shouldering the oil industry's largest debt, Petrobras has been ravaged by a corruption scandal that has led to jail terms for several former employees and prompted major ratings agencies to downgrade the company to junk.

Located off Brazil's southeast coast, the pre-salt layer extends up to 7km below the Atlantic's surface.

According to a study by Universidade Estadual do Rio de Janeiro, the area contains recoverable reserves in excess of 176Bboe.



The new rules will be in place for Brazil's second pre-salt auction, slated for the second half of next year.

Local hydrocarbons regulator ANP has already said the auction will include so-called unitized areas that overlap existing concession boundaries.

The areas adjoin the Carcará, Sapinhoá and Tartaruga Verde fields, operated by Petrobras, plus the Gato do Mato field, operated by Shell.

According to the Brazilian Petroleum Institute the areas will require investment of US$120bn.

Brazil is also due to hold its 14th oil and gas licensing round and an auction for inactive areas in the second half of 2017.


Meanwhile, energy minister Fernando Coelho Filho said the government was working to "refine" local content laws that limit the participation of foreign firms in Brazil's oil and gas supply chain.

Industry observers have long argued that current rules make Brazil's upstream sector uncompetitive and handicap Petrobras.

"We want a sincere and open discussion about local content," Coelho Filho said. "We are looking at the opportunity that will allow the national industry to supply not only Petrobras but the best oil companies in the world ... as well as serving the interest of the [local] machinery and equipment industry."

The government currently demands 37-80% of locally sourced goods and services for oil exploration agreements, and 55-85% for development contracts.

The requirements are lower for deepwater blocks than for onshore blocks.

ALSO READ: Pre-salt opportunities in post-crisis Brazil