Reform plans: Lula
Lula takes oil reform to Congress
Later today, the Brazilian government will introduce a proposal calling for significant changes in the nation's legal and regulatory framework for the exploration and development of hydrocarbon resources in the country's pre-salt fairway.
The 112,000 square kilometre pre-salt region, first found to contain oil with the Tupi discovery in 2007, is estimated to hold recoverable reserves of as much as 50 billion barrels of oil.
The proposal, scheduled to be introduced by President Luis Inacio Lula daSilva at 17.00 GMT, is expected to create a new state-controlled oil management company, adopt a production sharing model for future pre-salt contracts, may appoint Petrobras as the only operator for the still unleased blocks in the area, and implement a wealth management fund to support social and economic development in Brazil, a Reuters report said.
The proposal is not expected to change existing legal and regulatory frameworks or current concessions for the exploration and development of resources outside of the pre-salt area.
"The proposed legislation will receive a great deal of Congressional scrutiny and the ensuring debate could be protracted," Alexandre Chequer, partner in the Sao Paulo office of international law firm of Thompson & Knight, who is attending today's official announcement, told the news agency.
"The government has proposed a model that may complicate an already successful system. However, the oil and gas industry successfully works in a variety of contractual systems worldwide and will adapt to the regulatory environment," Andrew Derman, partner in the Dallas office of Thompson & Knight, told Reuters.
Thompson & Knight is representing many oil and gas companies, construction and oil field service providers doing business in Brazil.
"The development of these resources is the most important event in the oil sector in the last 20 years, requiring massive financial investments, advanced
technologies and highly skilled human resources," says Renato Bertani, chief executive of Thompson & Knight Global Energy Services and former president of Petrobras America.
"Despite these challenges, it's hoped the new regulatory framework will be attractive to investors and provide for a fair distribution of the wealth between oil companies and the Brazilian society," he added.