Brazil's President Luiz Inancio Lula da Silva expects to send proposed changes in the country's oil laws to Congress within 2 weeks, he announced during an Aug. 1 8 speech in Rio de Janeiro state. Specifically, Lula is contemplating laws that would regulate the exploration and development of a presalt oil region offshore. Discussions include possibly setting up a new state-owned company that would manage subsalt development.

Previously, some concessions were granted to various oil companies, including ExxonMobil Corp., BG Group, Hess Corp., and Royal Dutch Shell PLC as well as Brazil's own Petroleo Brasileno SA (Petrobras) .

Shell spokeswoman Kelly op de Weegh recently told Forbes.com that Shell is willing to work with the Brazilian government under "any new framework for the presalt region of the country." She emphasized that Shell would "like to see an environment that continues to promote the competitiveness of the market, protects the transparency and stability of the rules, and respects the contracts."

Previously, Lula commissioned a task force to make recommendations on how to regulate the presalt region. Changes in the oil law are expected to need ratification by Brazil's Senate (OGJ, Apr. 13,2009, p. 20).

Petrobras being investigated

Mark Jones, chairman of Rice University's political science department, who specializes in Latin American politics, told OGJ that he believes Lula could run into snags as far as getting anything done now.

Brazil's Senate is looking into accounting practices by Petrobras. Meanwhile, legislative action in Brazil already has slowed because Senate President Jose Sarney is being investigated in a separate matter. Jones also noted that Brazil is slated for a presidential election next year.

Jones said Petrobras will need technical and financial help in developing the presalt region.

"Petrobras is a professional company. It's much less political than Pemex or PDVSA," Jones said in reference to the state-owned oil companies in Mexico and Venezuela.

Michael R. Smith, chief executive of Energyfiles, a UK-based oil and gas production, consumption, and drilling activity forecasting service, said Brazil is looking for ways to manage effective resource development during years of volatile energy prices.

Smith said he expects new stateowned Brazilian company would have little effect on international drilling contractors because any licensing company would have to hire rigs from somewhere.

Copyright PennWell Corporation Aug 24, 2009

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