| RIO DE JANEIRO, June 27
RIO DE JANEIRO, June 27 A proposed change to
rules governing the auction of Brazil's giant offshore oil
fields, part of legislation rushed through Congress amid
nationwide street protests, has caught the country's oil
industry off guard, the head of industry group IBP told
reporters on Thursday.
In the pre-dawn hours of Wednesday, a bill dedicating future
oil royalties to education and healthcare passed the lower house
of Congress with a little-noticed amendment. The change set the
government's minimum share of oil from the offshore region known
as the Subsalt Polygon at 60 percent, altering rules for a
recently announced October auction.
Existing law allows the National Energy Council, with the
approval of Brazil's President, to set the minimum amount of
so-called "profit oil" that the winners of the concession will
have to give to the government in exchange for the oil
development rights, at any level it sees fit.
Profit oil is oil produced after covering a field's basic
development costs. The winner of an auction for rights in the
Polygon will be the company or group that offers the state the
largest share of this oil to sell on its own account.
"This percentage can't be fixed by law, the amendment
conspires against the idea of an auction," IBP President João
Carlos de Luca told reporters in Rio de Janeiro. He said the new
rule "runs roughshod" over auction regulations that are being
put together by Brazilian oil regulator ANP.
The amendment, also opposed by the government of President
Dilma Rousseff, passed the lower house during a flurry of
activity prompted by three weeks of huge public demonstrations
that have jolted Brazil's political elite.
While the protests began over rising bus fares, they have
swelled into a broad attack on politics as usual with a
particular focus on rampant corruption, the cost of hosting
events like the soccer World Cup and Olympics, and poor public
services such as health and education.
While the bill must pass the Senate and receive Rousseff's
approval to become law, it has caused serious concern among
members of the oil industry who believe it could complicate
future oil-rights auctions, de Luca said.
The government's oil and gas secretary Marco Antonio Martins
also criticized the amendment on Thursday for altering rules
established in 2010 under which Brazil plans to sell the giant
Libra prospect on Oct. 22.
Libra has an estimated 12 billion barrels of recoverable
reserves, making it Brazil's largest discovery ever and the
world's biggest oil prospect ever to be put up for auction,
according to the ANP.
The auction will also be Brazil's first under a production
sharing system that applies only to the Subsalt Polygon, an area
half the size of Italy that may hold as much as 100 billion
barrels of oil, according to Rio de Janeiro-State University.