Brazil to invest $ 400 bn to develop offshore oil fields

Nov 13, 2008 01:00 AM

Brazil plans to invest some $ 400 bn over the next 10 years to develop new offshore fields that may contain as much as 80 bn barrels of oil, the National Petroleum Agency, or ANP, said.
The agency's director, Haroldo Lima, told a congressional committee that, now that the country is on the cusp on becoming a leading oil exporter, the current hydrocarbons law must be modified to increase the government's share in the profits.

Lima said at the hearing that companies face "practically zero" risk in exploiting the new finds located in the so-called "pre-salt" layer, some 7,000 meters (22,950 feet) from the ocean surface.
Under the current scenario of low exploration risks, high financing capacity and large fields, it is expected that there will be a hike in the royalties and the special participation tax paid by companies on highly productive wells.

In 2007, under the current concession contracts, a total of reais 7.5 bn ($ 4.24 bn) in royalties and reais 7.2 bn ($ 4.07 bn) in revenues from the special participation tax was paid into the Brazilian treasury. It is estimated that the amount from those two payments will total some $ 9 bn in 2008.
A total of 72 companies current produce oil in Brazil, 36 of which are Brazilian, Lima told the lower house's Committee on Foreign Relations and National Defence.

The enormous offshore finds have sparked renewed calls for the government to claim a bigger share in the profits so that money can be used to fight poverty and invest in technology and education. The government also is under pressure to limit the participation of international oil companies and even of Petrobras, whose shares -- even though the company is state-controlled -- are traded on the Sao Paulo, New York, Madrid and Buenos Aires stock exchanges.
The concession-contract model -- by which companies buy the rights to explore geographical blocks on land or at sea -- is the most appropriate when there is "reasonable risk for the companies," the executive said.

Lima said a new model for the oil business will be presented in December by a commission made up of representatives of various government ministries and will respond to President Luiz Inacio Lula da Silva's promise to use the newfound oil wealth to tackle poverty and social inequality.
Meanwhile, average daily crude and gas production at conventional deposits has continued to grow and is expected to total 1.9 mm bpd for 2008, up 3.74 % relative to last year, according to ANP figures. Natural gas production is forecast to come in at an average of 59 mm cm (2.08 bn cf) per day for the year, 18 % higher than in 2007.

Source / EFE News Services
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