Page last updated at 20:32 GMT, Monday, 31 August 2009 21:32 UK

Brazil unveils oil rules changes

Oil extracted from Brazil's offshore industry
Might oil hold the key to tackling Brazil's poverty?

Brazil has unveiled plans to bring more state control to its oil industry and take advantage of offshore reserves.

President Luiz Inacio Lula da Silva has proposed switching to a system which would see the government own a part of all oil produced.

Currently, companies bid to win the rights to explore for oil in blocks.

President Lula said the rules, if approved by congress, would see a "new Independence Day" for Brazil, helping tackle poverty and fund education.

It is thought Brazil's reservoirs of oil could see it become a producer nation to rival some Opec countries such as Venezuela within a decade.

However the location of the oil, about 500km (311 miles) off its south-eastern coast, means huge investment will be needed.

Gary Duffy
"Brazil is a developing nation that faces enormous challenges and any windfall from the recent significant oil and gas finds off the Brazilian coast is undoubtedly welcome.

President Lula has called it a passport for the future - an opportunity to be seized in terms of combating poverty and investing much needed funds in education.

Part of the task is to ensure that the government secures a bigger share of the profits without alienating foreign companies who could play an important part in extracting this oil and gas.

The Brazilian government says the state run oil company Petrobras is a globally respected partner and that its new profit sharing model still offers excellent investment opportunities.

That is important, as the oil and gas lies deep between the ocean, and under a thick layer of rock and salt, and will not be cheap to extract. So partners with big pockets will be very useful."

National oil firm Petrobras said it would be the sole operator of the new subsalt fields - and would have a minimum 30% stake in consortiums set up to drill for the oil in the fields - which were found in 2007 and are estimated to contain 50 billion barrels of oil.

There have been suggestions that the changes to rules will see foreign firms getting reduced access to Brazil's oil industry.


President Lula will present his plan to congress later, saying he wants to use income from the oil to tackle poverty and propel Brazil to developed status.

Brazil's discovery of new reserves was "a passport to the future," if handled properly, he said.

"We don't have the right to take the money we're going to get with this oil and waste it," he said in his weekly radio address.

"What we want... is to use this oil to make Brazil a wealthier country, to make it more developed."

The country is currently self-sufficient in oil - producing enough to meet its consumption needs.

Environmentalists have expressed worries that Brazil - seen as a forward-thinking nation - will take a big leap backward to focus on crude oil.

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