Brazil's Senate approves new petroleum investment law

Brazil's Senate has finally passed the country's new petroleum investment law.

The law, passed after almost 4 months of debates, was approved without amendments on July 16. It is expected to usher in a flood of foreign investment in Brazil's petroleum sector. Brazilian-based foreign oil executives contacted by OGJ say they found the new law to their liking.

Meantime, in anticipation of the new law taking effect, state-owned petroleum giant Petroleo Brasileiro SA (Petrobras) is negotiating 149 partnership contracts with 65 domestic and international companies, Petrobras E&P Director Antonio Carlos de Agostini told OGJ.

New law

The new law establishes an inter-ministerial council, headed by the mines and energy minister, that will establish guidelines for imports and exports of petroleum and oil products.

In addition, a new regulatory body, the National Petroleum Agency (ANP), will be placed in charge of issuing tenders to grant concessions for domestic and foreign companies and will establish rights to explore for and develop oil and gas in Brazil.

Although Petrobras will not be privatized, all of its technical data will be made available to competing companies that are now allowed to set up subsidiaries in Brazil. ANP will transfer information to other companies after they pay Petrobras for it.

Sen. Jose Sarney, formerly President of Brazil, feels Petrobras will be weakened by "ambiguous phrasing" in Article 22 of the law. It determines that Petrobras will make available all its technical information about Brazil's sedimentary basins.

According to Sarney, Article 22 goes against current Brazilian President Fernando Henrique Cardoso's promise to maintain Petrobras as a state-owned company. This promise was made in 1995, after Brazil's government approved a constitutional amendment ending Petrobras's monopoly over the petroleum sector.

At the time, Cardoso guaranteed that Petrobras would maintain any areas that it is already exploiting, something the senator feels is threatened by the new law.

Contract negotiations

Chief among the contracts that Petrobras is negotiating is that involving work in giant Albacora Leste oil field in the Campos basin off Rio de Janeiro state.

The field's development is budgeted at $800 million, representing a third of the value of all contracts being negotiated with Petrobras.

Big multinational petroleum companies are interested in working in the Campos basin, Brazil's principal oil province and one responsible for about 65% of the country's domestic production of about 900,000 b/d of crude oil.

Albacora Leste lies in water depths of 800-2,000 m.

"Petrobras has already discovered oil in the area but still does not have a full evaluation of its potential," Agostini said.

Albacora Leste is located east of one of the largest fields in Campos basin, Albacora, which produces 140,000 b/d crude oil and about 73.5 MMcfd of natural gas.

Albacora has total reserves of 600 million bbl of crude oil and 385 bcf of natural gas. By yearend, the field will be producing 160,000 b/d of crude oil and 84 MMcfd of gas, Petrobras officials said.

Petrobras has received proposals for exploration and development in the Campos basin, but officials declined to give further information. Petrobras is analyzing each company's proposal and will pre-qualify firms eligible for partnerships.

Before the petroleum investment law was passed this month, final negotiations were expected to take place in September, but now petroleum specialists are optimistic that these contracts might be signed even sooner.