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Brazil's licensed pre-salt oil may be worth $5 tril: senator
RIO DE JANEIRO
Petroleumworld.com, Sept 29, 2008Concession blocks that Brazil has auctioned since 1998 may hold 50 billion recoverable barrels of oil in their pre-salt strata, giving them a potential market value of more than $5 trillion, Senator Aloizio Mercadante said Thursday during a Sao Paulo forum hosted by the Estado media company.
According to a report by government news outlet Agencia Brasil, Mercadante -- who is the head of the Senate Economic Committee and a key member of the government's Workers' Party (PT) -- said the high value of new oil finds should prompt Brazil to boost field taxes and royalties on pre-salt oil.
For pre-salt acreage that has not yet been auctioned, Mercadante said the government should control the acreage, moving from the concession system in place since 1998 to a production-sharing scheme in which companies are contracted to tap fields under government control.
Like many Brazilian officials, Mercadante supports a new regulatory regime to give the state broader control over the country's growing oil riches. A panel of government ministers charged with recommending these changes to President Luiz Inacio Lula da Silva is slated to deliver a report as early as next week.
Changing the 1997 Oil Law that opened Brazil's oil industry to competition could be a lengthy process, as any reforms are subject to debate in Congress. Former Brazilian President Fernando Henrique Cardoso, who also participated in the forum on Thursday, warned that too much state control over oil could thwart Brazil's ability to attract billions of dollars in private investments for its pre-salt developments.
Cardoso said that opening up the oil sector to private competition, which occurred during his presidency in 1998, helped to usher in new investments and made Petrobras more competitive, prompting the recent round of pre-salt discoveries.
So far, Petrobras and its partners have said they hold between 8 billion-12 billion barrels of recoverable oil in the BM-S-11 block, but several other promising pre-salt blocks are undergoing drilling and should net many more barrels.
The pre-salt oil may require up to $600 billion to develop over the next few decades, according to a recent report by UBS analysts.
Neither the government nor Petrobras, the state-controlled oil company, has indicated how the developments will be funded.
Story from Platts
Platts 26 09 08Copyright© 2008 respective author or news agency. All rights reserved.
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