The lower house of Brazil's Congress has amended laws related to the nation’s oil industry which may lead to accelerated development of its vast offshore oil fields.
Under the modifications, the country’s state-controlled oil company Petroleo Brasileiro (NYSE: PBR), better known as, Petrobras will own at least 30 percent stake in any new joint exploration ventures in the offshore fields and serve as the sole operator.
The new measure replaces the old system whereby Petrobras was required to compete equally with other companies to bid on exploration and production pacts.
Congress also passed a new oil royalty distribution system under which 52.5 percent of royalties will be distributed among all of Brazil's 27 states and nearly 6,000 cities and towns. The federal government will get 40 percent and the other 7.5 percent will go to producing states and cities that currently receive 30 percent.
Oil producing states like Rio de Janeiro, Sao Paulo and Espirito Santo are upset that the new royalty agreements would mean led money for their coffers.
The contentious royalties issue may be vetoed by current President Luiz Inacio Lula da Silva and debated by the next administration of President-elect Dilma Rousseff, who formally takes office in January 2011.
It's probable that it could return to the Lower House in 2011 as a new bill that discusses in a more-equitable way the question of royalties, allowing a larger share to be distributed to producing states while at the same time allow other states to receive the benefits of production, said Petrobras CEO Jose Sergio Gabrielli.
It is believed that Brazil’s southeastern offshore oil fields hold more than 50 billion barrels of oil, but much of its is buried more than four miles under the ocean floor beneath a thick salt layer.
Petrobras has said it plans to invest $224 billion through 2014 to develop deep-water reserves off Brazil’s coast.
Petrobras, perhaps the world’s leading deepwater driller, raised $70-billion in a public offering last September.