Brazil royalties bill underlines urgency for new regulations, says analyst

Brazilian oil consultancy A&P has called on the federal government to accelerate plans for an overhaul of the country's offshore safety laws. In an exclusive interview with BNamericas, A&P chief executive Arthur Pimentel said investors were not alone in fearing potentially crippling financial consequences of an offshore accident. According to Pimentel, the government's new oil royalties bill fails to address the question of legal responsibility among states for future accidents. The bill, which decrees the inclusion of all 26 states and the federal district in the redistribution of Brazil's oil wealth, is expected to be ratified by congress in January. "The government needs to implement clear guidelines with a national regulatory framework that makes all states responsible," Pimentel said. "Under current laws it is the jurisdiction of Rio de Janeiro, Espírito Santo and São Paulo. If revenue from oil and gas wealth is shared across the country, then responsibility for offshore safety - and the associated costs involved - should be too." Calls for tighter regulations have been widespread since Chevron's (NYSE: CVX) 3,600b Frade field oil spill in November 2011. The US oil company is facing billion-dollar lawsuits from prosecutors and several executives have been barred from leaving the country. The episode prompted Brazil's mining and energy ministry to launch an environmental assessment program (AAAS) designed to study a raft of new regulatory proposals. Among them are improved training of personnel, stricter equipment checks and emergency response plans. Chevron and rig operator Transocean (NYSE: RIG) have also accepted a proposal from sector regulator ANP to change offshore safety and operating procedures in an agreement dubbed "change of accord."