Brazil's senate has approved a bill that lifts the obligation on Petrobras as sole operator of the country's pre-salt deep-water oilfields, creating new opportunities for foreign investors.
On Wednesday, senators voted 40 to 26 in favour of the bill, which now passes to the lower house of congress. The legislation eliminates the obligation on Brazil's state-owned oil company to carry out all pre-salt operations and hold a mandatory 30 per cent stake in any subsalt project.
"The existing model for pre-salt blocks is not very attractive to private investors, perhaps because they are forced to enter into a contract with Petrobras, or maybe because they are not allowed to be the sole operator, which could limit the exploration and production activities they can control," says Paula Costa, partner at Ulhôa Canto, Rezende e Guerra – Advogados.
The legislation is intended to help Petrobras reduce a debt burden currently estimated at around US$130 billion, although it is expected to be challenged by opposition politicians and members of President Dilma Rousseff's own party, who claim it is losing sovereignty over some of Brazil's more lucrative oil reserves.
Should the bill pass, many expect it to pave the way for more foreign oil and gas companies to invest in Brazil's lucrative pre-salt fields. Several are already staking their claim, including Anglo-Dutch oil company Shell, which has already announced plans to quadruple its oil and gas output in Brazil by 2020. This month, the company completed its US$52 billion takeover of British petroleum group, BG, handing it 10 blocks in the Barreirinhas Basin, just off the north-eastern coast of Brazil near São Luis. Shell also cancelled the sale of its South American oil assets, valued at around US$150 million, and called off the sale of its 80 per cent stakes in offshore Bijupirá and Salema oil fields to PetroRio that same month. Shell did not reply to requests for comment about whether future investments will include the pre-salt blocks.
Shell's decision to invest more heavily in Brazil bucks the global trend at a time when other oil and gas companies such as BP are downsizing some of their worldwide operations and laying off staff. "The chain of suppliers, service providers and investors involved in the oil and gas industry has faced a decrease or even stagnation in its business activities," says Ricardo Coelho, partner at Pinheiro Neto Advogados. "However, the recent devaluation of the real has opened a myriad of opportunities in the Brazilian market, which could be very attractive to private investors."