Stock prices in Brazil's state-run energy company Petroleo Brasileiro SA (Petrobras) (NYSE: PBR) plummeted on the release of the proposal, with the company losing 3.6 percent of its market value (about $7 billion) on Aug. 31 alone (though that was mitigated by a 1.4 percent rebound on Sept. 1). Although Brasilia might not actually pass the new energy law until next year, it is clear that Brazil sees its pre-salt oil reserves as a strategic national asset that needs to be protected by the state, even at the risk of slowing the influx of foreign capital and technology that the country is trying to attract to boost the reserves' development.

The most obvious aspect of the proposed law is its (fully expected) favoritism toward Petrobras, one of the world's up-and-coming energy companies and a majority state-owned enterprise. Petrobras would operate all of Brazil's pre-salt oil development projects. The government, through the National Petroleum Agency, would have the option of awarding a contract solely to Petrobras or asking for public bids to bring in other companies to share in projects. In public bids, companies would join in production-sharing agreements with the government rather than only acquiring concessions and paying royalties on revenues, as they did previously. This is meant to ensure that Petrobras gains knowledge and experience from outsiders who may bring better technology and expertise to the table when they sign on to a production agreement. Petrobras would be guaranteed a minimum 30 percent stake in any consortium (though this does not apply to pre-existing contracts).