Brazilian "Pre-Salt" Oil Reserve Legislation Imminent?

The Brazilian Energy Ministry confirmed Wednesday that legislation is being drafted that will set the terms for the development of the "pre-salt" oil reserve situated in the Atlantic Ocean.

As reported by the Financial Times ("Brazil Readies Oil Reserves Law," June 11, 2009), three key legislative provisions are:

A state-owned company would be established to own the reserve and grant concessions;
A system of "production sharing agreements" would be created to replace the existing system allowing companies to own the oil they discover;
Revenues generated by the government would be used for social spending projects.

The regulatory structure being considered by Brazil is patterned after a similar one put in place by Norway when the North Sea oil reserve was discovered several decades ago.

The full magnitude of the pre-salt oil reserve remains uncertain although the energy ministry has said that it is now about 50 billion barrels and may reach considerably higher. In comparison, Saudi Arabia has about 270 billion proven barrels, Venezuela about 100 billion barrels, and the U.S. about 25 billion barrels.