Brazil’s stagnant economy would benefit from an investment from anywhere it can get it. Norway-based oil company Statoil already owns rights to part of a Brazilian oil bloc, but it wants more. It wants a change in the law to give the company the right to lead oil discovery and development projects. Without these changes, Statoil says it cannot move forward.
Under the current oil industry law, state-controlled oil company Petrobras must hold at least 30 percent of any of the offshore oil blocs in a region called the subsalt, Reuters explained. In any consortium of companies holding a new license in the subsalt, the law also requires that Petrobras be the operator leading the work on the subsalt bloc.
These requirements are obstacles for Statoil and potentially other oil companies interested in investing in Brazil’s oil regions. Statoil CEO Eldar Saetre recently met with Brazilian President Michel Timer to discuss the regulations. Following that meeting, Saetre told journalists that ending requirements for Petrobras participation in all subsalt blocs would be necessary for the region to attract foreign investment. Changes would also be required for Statoil to have the regulatory certainty that it needs to invest.
As it turns out, Brazil’s lawmakers are already considering possible changes to the country’s laws governing the subsalt, and Petrobras has signaled it would welcome such a change.
Statoil’s comments about Brazil’s oil industry law are significant. The company said in July that it would pay $2.5 billion to Petrobras for a 66 percent share of a prized subsalt area known as Carcara. Statoil’s participation in the Brazilian oil industry would bring to Carcara a consortium that includes Galp Energia SGPS SA from Portugal, QGEP SA from Brazil, and privately held Barra Energia do Brasil Petróleo e Gás Ltda., an entity backed by U.S. investment funds. But Statoil wants to lead this group of oil industry investors, rather than being merely a participant in work led by Petrobras.
Besides the shadow of a two-year corruption inquiry, Petrobras is currently weighed down by the largest debt load in the global oil industry, according to Reuters. The company’s circumstances put it in a weak position to lead oil and gas development efforts. With Statoil, Brazil has a willing and interested investor in its oil industry. Now it is up to lawmakers to determine whether Brazil will create the kind of regulatory environment to support the investment intentions of Statoil and potentially other players interested in the country’s oil market.
