Brazil’s President Proposed New Oil Regulations to Congress

Brazil’s congress is considering a new proposal brought forth by President Luiz Inácio Lula da Silva. In the proposal, the President calls for new regulations that would give Petróleo Brasileo, or Petrobras, a greater presence and authority over what is being called “pre-salt plays”. The “pre-salt plays” are a new and possibly large source of offshore gas and oil that were recently discovered in Brazil. The new discovery has been proclaimed one of the largest current offshore discoveries in the globe.

Petrobras, a state-owned oil company, announced the President’s proposal on Monday. The new regulations, which have been circulating the industry for months, are expected to outline means to give Brazil, and therefore Brazilians, more control  over the oil and thus larger pieces of the anticipated profits. At a minimum, Petrobras will maintain control of all existing pre-salt blocks that have not yet been auctioned with at least a 30 percent holding. Other companies will then be allowed to take a smaller part in investing.

The proposal also calls for an exclusive agreement between Petrobras and the Brazilian government maintaining that the government will exclusively hire the oil and gas company on blocks in the pre-salt. Another option is for the Brazilian government to establish a new state-run oil company that would protect their interests in the wake of this new oil and natural gas discovery.

The President has submitted the proposals to the congress, and they are currently under review. The Brazilian congress is expected to announce a decision shortly. The proposed regulations have been rumored to exist for months, and the Presidents submission of such regulations has been widely anticipated by oil and gas companies since the discovery of the large offshore oil source.