Open

Coming up

Don't miss

Replay


LATEST SHOWS

DEBATE

Back to Square One?

Read more

DEBATE

Israel-Gaza: Back to Square One?

Read more

DEBATE

Israel-Gaza conflict: 72-hour ceasefire deal sets stage for Cairo talks

Read more

WEB NEWS

Web users divided over Darren Wilson

Read more

FOCUS

Spain's El Hierro to become world's first self-powered island

Read more

IN THE PAPERS

A bellwether for what not to do

Read more

ENCORE!

Luc Besson back in action with Scarlett Johansson in 'Lucy'

Read more

FOCUS

Israel's minorities and military service

Read more

MIDDLE EAST MATTERS

Iraq: Kurdish forces fight to protect Yazidis

Read more

  • France’s ex-PM Juppé sets up presidential clash with Sarkozy

    Read more

  • France’s Hollande says global security ‘worst since 2001’

    Read more

  • Interactive: Relive the Liberation of Paris in WWII

    Read more

  • Brutal IS beheading video sparks social media pushback

    Read more

  • France urges Iran, others in region, to join fight against IS

    Read more

  • A new view on Normandy landings, 70 years on

    Read more

  • Video: Dozens arrested despite smaller protests in Ferguson

    Read more

  • Dozens killed as landslides strike Japan’s Hiroshima

    Read more

  • Suspected Ebola cases in Austria, new drug raises hopes

    Read more

  • WWII anniversary highlights best - and worst - of Paris police

    Read more

  • Headscarf at the beach sparks French MEP’s fury

    Read more

  • Video: Life in under-siege Donetsk

    Read more

  • Racism, riots and police violence: USA under scrutiny

    Read more

  • ‘Let it be’: Londoners sick of Abbey Road tourists

    Read more

Business

Brazil to tighten control over offshore oil reserves

Video by Mark BURLEIGH

Text by NEWS WIRES

Latest update : 2009-09-01

Brazil unveiled Monday, a plan to increase its control on huge offshore oil reserves. This involves giving its state-owned company Petrobras sole operating rights, much to the disappointment of foreign oil companies.

AFP - Brazil unveiled plans Monday to boost state control of recently discovered offshore oil fields by giving its oil company Petrobras sole operating rights and a minimum 30 percent stake in any joint ventures.

The leading role for Petrobras is part of an overhaul of rules for the vast, untapped subsalt fields, superseding a concession system that already applies elsewhere in the country.

Brazil believes the oil finds could turn it into one of the world's top 10 oil exporting nations.

President Luiz Inacio Lula da Silva said in his weekly radio broadcast that the reform "represents a new Independence Day for Brazil."

Formally presenting the changes in a televised ceremony in Brasilia on Monday, he called the fossil fuel reserves "a passport to the future".

The offshore reserves are estimated to contain between 14 billion and 50 billion barrels of oil. Petrobras announced the discovery of the first big field, Tupi, in late 2007.

If confirmed, that could more than double the country's proven reserves and propel Brazil into the same oil production ranks as OPEC countries within a decade.

Lula's rules changes are designed to allocate many of the billions of dollars in anticipated oil revenue to develop science and technology and education, and reduce poverty.

First though, the draft laws will have to pass through Brazil's Congress. That could prove tricky as political jockeying intensifies ahead of October 2010 presidential, legislative and gubernatorial elections.

Lula said that by strengthening Petrobras, which is 55 percent government-owned, Brazil will "become a big nation" among the main oil exporting countries of the world.

His energy minister, Edison Lobao, said the government's proposal will also see the creation of a new company called Petrosal to manage the contracts for the offshore reserves.

Petrobras said in stockmarket documents filed on Monday that Petrosal would have veto rights over development of the fields.

Foreign oil companies, which had been kept in the dark about the rules overhaul, are concerned that their potential revenues from the offshore fields could be significantly reduced, making investment less attractive.

The oil reserves are located 500 kilometers (300 miles) off Brazil's southeast coast, and up to seven kilometers deep, including under rock and a troublesome layer of shifting salt.

That poses big technical challenges and will require enormous investment before the fossil fuel can be safely extracted.

Under the Petrobras documents filed on Monday, the oil company would have exclusive rights over all the blocs in the offshore fields.

It could either exploit the blocs alone, but at huge cost, or it could take on foreign partners that compete by auction while keeping its mandatory 30 percent minimum stake under a production-sharing arrangement.

Brazil's oil company said it would get a 50-billion-dollar capital boost to cope with the forecast heavy slew of future investments.

That, though, will dilute minority share holdings.

Petrobras's share price slid sharply after rumors of the capital injection appeared in Brazil's financial press last week.

Its preferred stock fell a further 3.59 percent on Monday, pulling the whole Bovespa index down with it.

Date created : 2009-09-01

COMMENT(S)