Lula wets his hands in Brazil's new oil wealth

VITORIA, Brazil, Sept 2 (Reuters) - Brazil's President Luiz Inacio Lula da Silva dipped his hands in the first oil from vast new reserves on Tuesday, symbolizing the start of what could be a new era for Latin America's largest economy.

Wearing orange overalls and a hard hat, the former union leader gave his blessing to the oil on an offshore platform as his government seeks a greater share of the wealth it hopes will propel Brazil to developed-nation status and help its poor.

State-controlled firm Petrobras (PETR4.SA)(PBR.N) shocked the oil world last year with the second-biggest oil find in 20 years.

Along with foreign oil companies that operate in Brazil, Petrobras and its shareholders are now waiting anxiously for Lula's government to decide how to change the country's oil laws.

"This is certainly a new era," Petrobras Chief Executive Jose Sergio Gabrielli told reporters after Lula's visit to the platform.

Lula flew by helicopter from the coast of Espirito Santo state to Petrobras's platform Juscelino Kubitschek P-34, named after a former president whose term was marked by economic progress.

In high spirits, Lula planted his oil-soaked hands on the back of his chief of staff Dilma Rousseff, leaving two black handprints on her overalls.

The oil that flowed on Tuesday from a depth of 1,375 meters (4,500 feet) in the Jubarte oil field marks the beginning of a test period lasting six months to a year ahead of full-scale production.

The Jubarte field is relatively small and is projected to produce about 18,000 barrels per day, but it is part of an area 800 km (500 mile) long by 200 km (125 mile) wide off Brazil's southern coast that analysts say may contain a massive 80 billion barrels of oil.

If confirmed, the find would vault Brazil into the world's top 10 oil producing countries.

The oil sits up to 7 km (4.5 miles) below sea level, beneath a thick layer of salt, making it the deepest, most technically challenging and most expensive in the world to exploit.

BIG PLANS

Petrobras is seen as one of the most adventurous and technically capable oil firms in the world.

Along with its foreign partners, Petrobras will have to invest hundreds of billions of dollars in tapping the oil over the coming years.

Lula's government, which has been boosted by an economic boom based on a surge in global demand for Brazil's commodities, is already making plans for the flood of oil revenue.

A former metalworker who grew up poor, he wants to use the money to tackle Brazil's most glaring social blemishes: endemic poverty and a shabby education system.

Critics say the government shouldn't change the formula that bred Petrobras' success and that it risks deterring the estimated $600 billion in investment needed to exploit the oil.

Some government officials advocate creating a new state company to oversee the subsalt fields, which have not yet been auctioned.

That would involve adopting a production-sharing model in which the new state firm would own the rights to the reserves but would leave production to Petrobras and foreign firms already operating in the area, such as ExxonMobil Corp (XOM.N) and Shell (RDSa.L).

Currently, Brazil auctions off the rights to oil blocks to the highest bidder and charges royalties and taxes in return.

The government may raise royalties and taxes on the subsalt blocks where Petrobras and its foreign partners already operate -- concessions that officials say will be honored. It is also studying raising its around 40 percent stake in Petrobras. (Writing by Stuart Grudgings; Editing by Todd Benson and Kieran Murray)