Brazil Senate passes key points of Lula oil reform

Brazilian senators passed a broad overhaul of the country's oil industry meant to boost state control over massive deep water reserves.

Brazil Senate passes key points of Lula oil reform

Brazilian senators passed a broad overhaul of the country's oil industry meant to boost state control over massive deep water reserves, a move its president says will win Brazil developed-nation status.

In a 44-to-5 vote with six abstentions, the Senate on Wednesday approved a plan to transfer up to 5 billion barrels of offshore reserves to state-controlled oil company Petrobras.

The move paves the way for what might be the world's largest share offering in 2010. The bill now goes for signature by President Luiz Inacio Lula da Silva.

In a separate ballot, senators also voted 38-to-31 with one abstention to pass a plan to create a production-sharing model for future oil projects that will replace the current concession system. The bill goes back to the lower house for conciliation after senators amended parts of the original text.

The approval gives Lula a key legislative victory after years of debate over how Brazil can ensure it gets a fair share of its newfound oil wealth.

Brazilians hope the massive oil reserves, buried deep beneath the ocean floor under a layer of salt in a basin known as the subsalt region, will help the world's eighth-biggest economy win the status of a developed nation and help it become a major energy exporter.

"We are gaining the necessary financial, operating and legal muscle needed to turn all this wealth into funds for development," Senator Delcidio Amaral, a government lawmaker and a former director at Petrobras, told fellow lawmakers during the ballot.

Under a production-sharing system, the government would own the oil but pay oil companies with part of the proceeds. Under the current system, companies buy concessions in an auction and own the rights to the oil they produce.

Under terms of the plan, Petrobras will be made the sole operator of new projects in that region, with a 30 percent minimum stake in those projects.

Once the lower house approves the production-sharing model bill, Brazil can resume auctions for the subsalt fields that the country suspended in 2007 after Petrobras announced their discovery, the biggest in the Americas in three decades.

Senators also approved the creation of a fund aimed at channeling money toward reducing poverty and improving the environment and an education system that lags much of the world.

Brazil's push to gain more control of its oil is part of a worldwide trend as governments seek greater control over natural resources.

Reuters

Last Mod: 10 Haziran 2010, 16:17
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