Senate Votes to End Petrobras' Subsalt Domination


By Reuters 2016-02-24 21:15:48

Brazil's Senate has approved a bill that ends a requirement that state-run oil company Petrobras operate all new developments in an offshore region known as the Subsalt Polygon and provide at least 30 percent of investment.

The bill passed with 40 votes in favor versus 26 against. If passed by the lower house of congress and President Dilma Rousseff, the bill will overturn parts of a 2010 law seeking to increase government control of giant new offshore oil and gas resources.

The 2010 law has been criticized for limiting foreign investment in the Poligon, a region off Brazil's coast near Rio de Janeiro where large resources lie far beneath the seabed by a layer of mineral salts.

Petrobras, the world's most indebted oil company, has said it may not have the financial strength to finance exploration of such areas, putting at risk oil development and the billions in royalties the government wants.

"The only way to get the industry working again quickly is to pass this law," said Aluizio dos Santos, Mayor of Macaé, Brazil, the key offshore base for development of Brazil's offshore Campos Basin. His city has seen thousands of layoffs as Petrobras activity slows and oil prices fall.

"The requirement that Petrobras is the only operator and minimum 30 percent financial operator has turned the promise of offshore subsalt oil into a curse," he said.

Petrobras did not respond to an email request for comments.

Although previously against the legislation, Rousseff eased her opposition in recent weeks as the financial situation of Petrobras continued to deteriorate due to a massive corruption investigation and dwindling oil prices.

Senators of Roussef's Workers Party complained the government abandoned them in their vote against ending Petrobras priority in the subsalt region.

"The government changed its position... we feel abandoned in this issue that we consider strategic," said Senator Lindbergh Farias, one of the fiercest critics of the bill. "We will start a big campaign for the president to veto this bill."