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Petrobras: Election Uncertainty Not To Affect Brazil’s Oil Policy

Despite uncertainties over wide-open elections in October, investors in Brazil’s oil sector can expect the country to continue to pursue policies supportive of the oil and gas industry, the chief executive of Brazil’s state-controlled oil firm Petrobras, Pedro Parente, said in an interview with S&P Global Platts published on Friday.

In October, Brazil will vote to elect a new president and renew two-thirds of the Congress. There has been some concern that far-right or far-left candidates could deter investments in the Brazilian oil sector, due to uncertainties over how the new administration would view the current terms and contracts for international companies doing business in Brazil’s oil and gas industry.

Speaking to Platts, Petrobras’s Parente said that “the situation is totally unclear...We have a spectrum of candidates from far right to far left.”

“Of course a new government will have its own views on how to manage the country. I do not see that they would have different views in relation to the rule of law, especially respecting contracts -- and if that happened you will see that the Congress would not allow this,” he told Platts, alleviating some of the concerns.

Over the past couple of years, Brazil has been doing well in attracting international majors to its offshore areas, especially to its coveted pre-salt layer.

At the end of last month, ExxonMobil snapped up eight offshore exploration blocks in the latest Brazilian bid round, leading Big Oil’s aggressive move on acreage next to the pre-salt layer that resulted in a record-high signature bonus proceeds for the government.

Related: Geopolitical Risk Sends Oil Soaring

Some experts had expected that this auction and one under production sharing contracts (PSCs) scheduled for June could attract higher-than-usual bids before the October election. The deadline for parties to register their respective candidates running in the election is August 15.

The most likely leftist candidate, Ciro Ferreira Gomes, has said that he would expropriate oil assets bought by private companies if he won the election. According to Reuters, Gomes is currently behind the possible rightist candidate Jair Bolsonaro in opinion polls. Most analysts and oil executives who have spoken to Reuters said that they did not expect Brazil—or Mexico, which is also holding a presidential election this year—to fully reverse oil reforms, but many say that contract term changes or slower oil auction calendars are possible.

By Tsvetana Paraskova for Oilprice.com

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