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Brazil To Give Petrobras Up To 2 Billion Barrels Of Oil To Settle Contract Dispu

The Brazilian government may grant state-run oil firm Petrobras an additional 1 billion-2 billion barrels of oil to settle a long-running dispute over offshore reserves in an offshore area in Brazil’s coveted pre-salt layer, Brazilian business newspaper Valor Economico reported on Tuesday.

The so-called ‘transfer of rights’ area was assigned to Petrobras back in 2010 to extract 5 billion barrels of oil and gas based on the oil prices at the time. The complex provisions of the contract, however, included a review of the costs in the area after it was declared commercially viable in 2014. Both parties—the government and Petrobras—have claimed that they are owed billions of U.S. dollars, and the oil company has also disputed the estimates of the reserves in the area made by the country’s oil regulator, ANP.

Meanwhile, oil prices have slumped since 2014 and have been very volatile, which has further added to the diverging positions of the two sides in the dispute.

The review of the reserves has led to years of disputes, but now, according to Valor Economico, negotiations are expected to conclude by May 17.

At Petrobras’s Q1 results release last week, the company’s chief executive officer Pedro Parente said that Petrobas was making progress in its negotiations with the government over the reserves and costs dispute in the transfer-of-rights area. The parties could be able to reach an agreement by May 17, Reuters quoted Parente as saying last week.

Related: Could This Be The Next Proxy War In The Middle East?

In response to today’s media report, Petrobras said in a statement that “discussions are ongoing between Petrobras’ internal committee, responsible for negotiating the Revision of the Transfer of Rights Agreement, and the Interministerial Commission.”

To date, no final deal on the revision of the agreement has been reached, and the amounts and possible means of payment to Petrobras have not been ironed out, the company said, adding that “Facts deemed material on this subject shall be timely disclosed to the market.”

By Tsvetana Paraskova for Oilprice.com

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