Petrobras Probe Delayed; Pre-Salt Rules to Be Announced in August

Petrobras Probe Delayed

The formal opening of an investigation (CPI) into Petrobras in the Senate expected on Tuesday (30 June) was delayed once again. Party leaders from pro-government and opposition parties had agreed to install the probe on 30 June, but the accord broke down. Allied parties blamed the opposition for the renewed impasse after they formed a new CPI into the National Department for Transport Infrastructure. The escalation of a crisis in the Senate, however, and mounting pressure on Senate president José Sarney to step down, has virtually brought all its normal work to a halt this week. There are indications that the government and opposition will try and reach a new accord, but if they do not Sarney is able to appoint the members of the commission himself in order to allow it to start work.

Earlier delays had been blamed on disagreements between the two largest parties belonging to the governing coalition over who should lead the congressional probe (see Brazil: 27 May 2009: Allied Parties Attempt to Secure Control over Probe into Brazilian State Oil Company).

Pre-Salt Rules for August

Minister of Energy and Mines Edison Lobão announced earlier this week that the government plans to submit proposals for a new regulatory regime for exploration in the pre-salt layer to Congress in early August, marked "urgent", with the aim of completing the passage of the new legislation by the end of the year.

Although the details remain vague, reports in the local press and comments by various ministers indicate that proposals under discussion could include the creation of:

• a new state company, known as Petrosal, to administer blocks in the pre-salt layer that have yet to be awarded, along the lines of the Norwegian model (this proposal is known to have the personal backing of Lobão);
• a parallel licensing regime that would see the award of production-sharing contracts (PSCs) for blocks in the pre-salt layer not already under concession, alongside the maintenance of the existing concession contract model for blocks that have already been awarded; and
• a new tax on production to finance a new social fund administered by the federal government.

There is also a possibility that Petrosal would be able to award some new pre-salt blocks without tenders, as part of the unitisation of pre-salt fields that are believed to extend into areas not already under concession. This fits with suggestions by the government that Petrobras will get "special treatment", although a proposal to increase the state's stake in Petrobras in return for awarding it new blocks maybe too difficult to implement, despite Haroldo Lima, the head of the oil regulator the ANP, defending this proposal. Lima reportedly said last month that he would like the government's share of capital stock to rise from 32.2% to 60%.

Outlook and Implications

It does appear that the inter-ministerial committee created last July to discuss possible rule changes for pre-salt exploration is nearing the final definition of proposals for submission to President Luiz Inácio Lula da Silva for review. The energy and mines minister may well be rather optimistic, however, regarding the time it will take to secure the approval of the new legal framework, especially considering how long it took to get a far less politically sensitive new Gas Law through Congress. The risk is that if the process drags through into an election year it may not even be completed before President Lula's term expires at the end of 2010. Ultimately, how easy it is to get the legislation through will depend on how controversial the proposals are and on the political climate in Congress in the remaining months of the year. In this context an urgent resolution of the current crisis in the Senate is required—but without creating a rupture between President Lula's Worker's Party (PT) and its main ally the centrist Brazilian Democratic Movement Party (PMDB).