Friday, May 29, 2009

Brazil: The Next Big Oil Opportunity?

The government of Brazil will begin selling concessions for the right to develop the "pre salt" oil reserves off the coast of Sao Paulo state as early as next year.

This is particularly important news since the country suspended the selling of concessions in 2007 when enormous oil reserves were found in Brazil's territorial waters.

Edson Labao, Brazil's mines and energy minister, has told the Financial Times ("Brazil to Open Up Vast Offshore Fields," May 29, 2009), "We will certainly be holding auctions next year. this means the oil companies can begin to prepare their treasury reserves."

The FT article put this development in more context:
"The new reserves promise to turn Brazil into an important oil exporting nation and further highlight the differences between Petobras, Brazil's publicly traded but government-controlled oil company of growing international status, and the declining fortunes of its regional rivals Pdvsa of Venezuela and Pemex of Mexico."
Before the selling of concessions begins, however, the government needs to establish a new regulatory framework for development in this area. This may be problematic bearing in mind that the country will have national elections in 2010 and the Congress may be unwilling or unable to reach agreement before then.

In any case, it is time to start saving. I have $100 I plan to bid.

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