UPDATE 1-Brazil Congress takes up proposed new oil laws

(Updates with beginning of debate)

BRASILIA, Oct 27 (Reuters) - Brazil's Congress on Tuesday began debating the government's proposal to overhaul oil laws governing vast new offshore reserves that could turn the country into a major oil exporter.

At stake is one of the country's largest industrial development projects ever, requiring an estimated $400 billion to develop vast new subsalt oil fields.

Committees in the Chamber of Deputies, the lower house of Congress, began debating several of the measures President Luiz Inacio Lula da Silva proposed in August to boost state control over the sector, though a final vote may not happen for months.

The proposals include opening an oil fund for revenues from the deep-sea fields, creating a new state agency to administer oil contracts and capitalizing state oil company Petrobras (PBR.N)(PETR4.SA) with new oil fields held by the state.

Lula also wants to change the existing concession system to a production-sharing model, requiring that Petrobras operate and hold a minimum 30 percent stake in all new projects in the offshore subsalt province.

Bills are passed by simple majority in the 18-member committees, as well as on the floor.

Michel Temer, head of the Chamber, has pledged to begin voting the four bills in the plenary on Nov. 10. If approved, they would go to the Senate, where the government has a narrower majority than in the Chamber. If amended by the Senate, they would have to return to the Chamber for a final vote.

If Congress fails to pass the bills by late May, the government proposal risks being sidelined by soccer's World Cup and campaigning before October 2010 general elections.

Henrique Eduardo Alves, who is sponsoring the bill on the new contracts that will govern exploration and production, included a proposal on distribution of oil royalties between producer states and municipalities.

This is one of the most controversial aspects of the overall proposal and could potentially hold up its approval.

For additional information on production sharing systems please click on [ID:N27250952]. For details on the capitalization proposal, please click [ID:nN15306577] (Reporting Fernando Exman, Natuza Nery, Ana Paula Paiva and Maria Carolina Marcello; Writing by Raymond Colitt; Editing by Brian Ellsworth and Christian Wiessner)