Brazil’s Government Defends Petrobras’ Pre-Salt Monopoly

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – Although media reports have hinted that President Rousseff’s government would be willing to review Petrobras’ exclusive role in exploring the country’s pre-salt oil reserves layers, Mines and Energy Minister, Eduardo Braga, emphasized on Tuesday that the government continues to defend the maintenance of the current legislation when it comes to pre-salt layers, with the state-owned oil giant having at least thirty percent of participation in all operations.

According to Braga this will be the position defended by government allies at the Senate this week in discussions surrounding proposals to change the legislation.

“There has been a suggestion made by a group of senators which would call for an abrupt change, removing the mandatory participation of Petrobras, and there is another group of senators who support the current position; a third group tries to seek an alternative to these two positions, but there is still nothing concrete on this issue, “said the minister.

The project, presented by PSDB Senator, Jose Serra, would not require Petrobras to be the exclusive operator and have a minimum of thirty percent of all areas of the pre-salt layer.

For Serra, if the legislation is approved Petrobras will still be able to decide whether or not it wants to enter the exploration project. “It is an absurd that Petrobras is required to enter all pre-salt exploration areas, even if it is (financially) unable,” he was quoted as saying by Globo.

In as early as March 2013, Brazil’s Petrobras officially requested that regulators relax strict requirements on “local content” laws. The term refers to the use of domestic goods and services, and Petrobras had requested changes before the next bidding rounds for new oil and gas exploration concessions in May of that year, which for many marked the beginning of the exodus for major international oil and gas companies from Brazil.

According to Minister Braga the current discussions in Congress will not interfere with the additional measures to be announced in the near future to further benefit the oil and gas sector. In January the government regulatory changes which seek to reduce costs and increase the attractiveness of the sector for investors.

The persistent decline of international oil prices and the deteriorating Brazilian economy led Petrobras, the country’s giant, to announce last month that it was reducing by 25 percent, or US$32 billion, its investments until 2019.