Brazil Opens Up Pre-Salt to Foreign Oil Firms
Brazil's congress voted on October 5 to allow foreign companies to operate lease blocks in its rich pre-salt offshore oil fields.
The measure passed by an overwhelming 292-101 majority. Opposition lawmakers denounced the plan as a giveaway of natural resources to foreign multinationals.
State oil firm Petrobras, which previously had an exclusive position as operator in all pre-salt lease blocks, supported the legislative change.
The Brazilian Petroleum Institute also backed the measure.
"There's no way Petrobras can handle the pre-salt requirements by itself," said Milton Costa, the Institute's secretary general, speaking to Bloomberg.
Petrobras is the most indebted company in any emerging market, with $125 billion in obligations. Its debt burden, in addition to low oil prices and a long-running corruption scandal, have hampered its ability to make new investments.
Petrobras brought in a new CEO, Pedro Parente, in early June; opening up the pre-salt to foreign operators has been a top priority for Parente, who has emphasized that it gives Petrobras more flexibility to participate or not participate in each specific development.
Oil majors, notably Royal Dutch Shell, have also supported the liberalization of Brazil’s offshore pre-salt. "Brazil might benefit from being a bit more flexible on [allowing foreign operators]," said Shell CEO Ben van Beurden in February. He suggested that opening up the pre-salt area to more companies could attract capital and create jobs.
The pre-salt currently produces over a million barrels per day, up from about 40,000 barrels per day in 2010, and estimates indicate that it could contain as much as 50 billion barrels of oil.
While it will no longer participate in every project, Petrobras continues to invest in the pre-salt region. On Tuesday, it confirmed that it will place an order for a new FPSO for its Libra field in the Santos Basin, which it expects to come online in 2020. Libra alone may contain as much as 12 billion barrels of oil.