Brazil Just Opened First-Ever Access To Its Reserves by Dave Forest
Around the world, governments continue to loosen their hold on oil and gas reserves.
Just look at a slew of developments this week. Such as Russia finalizing a privatization plan for state producer Bashneft — which will see fellow Russian E&P Rosneft buy the government’s 50.8% stake for $5.3 billion.
Brazil
That plan is a little murky in terms of private-sector involvement. Given that Rosneft itself is majority owned by the Russian government.
But another major spot in the oil and gas world is clearly opening for unprecedented private involvement.
Offshore Brazil.
Late last week, Brazil’s House of Representatives took a major step toward privatizing oil and gas development. By voting 292-to-101 to approve the removal of requirements that state firm Petrobras must participate in high-impact pre-salt oil projects.
Up until now, Petrobras by law was required to be a participating partner in all pre-salt blocks. Guaranteeing that the Brazilian government would own an interest in each and every field.
But lawmakers have now recognized this stipulation as a critical barrier to investment. And have voted to remove it, in order to speed exploration and development of new fields in the country.
That’s a major boon for private E&Ps. Who will be allowed to pursue pre-salt fields alone for the first time ever — representing a major opportunity in a play that’s yielded some of the largest discoveries in the world of late.
And the private sector is already putting this sentiment into action. With developers of the massive Libra oil field — including Shell, Total, CNPC and CNOOC — reported last week to be proceeding with a new tender for a floating production platform.
These players actually put the tender out last year — but at the time were hampered by rules requiring “local content commitments” in the bidding.
But those requirements have now reportedly been removed — allowing Shell and partners to proceed on a straight-up basis. Which should speed development of Libra’s 8 billion barrels of crude.
All of which suggests that a new face is emerging to Brazil’s petroleum sector. Watch for existing projects to move ahead quicker here — and for renewed interest from the private sector in upcoming bid rounds for new pre-salt blocks.
Here’s to letting ’em loose,
Dave Forest
