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Brazil’s Senate yesterday scrapped the obligation to local state-owned giant Petrobras to act as operator of all oil and gas projects in the pre-salt deposits in the Brazilian shelf. Now, any energy company can become the operator of a project in the area.
This represents a major overhaul of Brazil’s energy legislation that began under Dilma Rousseff, but ran into serious opposition from the ruling party’s ranks. The main argument of the opponents is that a change in the rules will undermine Brazil’s control over its natural resources.
However, Petrobras has proven unable to effectively exercise control over these resources on its own, especially after it came to light that senior executives at the company were involved in a wide-scale graft scandal.
Operation “Carwash,” as the investigation of the affair is known, revealed that members of the company’s senior management were involved in graft practices along with government officials, which resulted in Petrobras bleeding cash for years.
As a result of this and bad management, Petrobras accumulated the largest debt in the global oil and gas industry, of about US$100 billion, which significantly reduced its ability to invest in new projects, especially investment-heavy ones such as the development of the pre-salt layer.
Thanks to the new legislation, Petrobras will be relieved of the obligation to buy at least 30 percent in any pre-salt production project and act as operator, which makes the situation a clear win-win. The state company will also have the right to call dibs on any field in the area it wants to develop, as long as it has the financial resources, of course.
As part of efforts to get these resources, earlier this year Petrobras sold a majority stake in the Carcara field, in the pre-salt layer, to Norway’s Statoil. The deal, worth US$2.5 billion, will see Statoil get 66 percent in the field, which has estimated reserves of between 700 million and 1.3 billion barrels of crude.
By Irina Slav for Oilprice.com
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Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.