* As others cut back Shell raises its bets on Brazil
* Output may reach 1 mln barrels/day oil, gas in 2020
* Rousseff may be open to change Petrobras subsalt role
(Adds details on Brazil strategy, expected cost of Libra)
By Jeb Blount and Marta Nogueira
RIO DE JANEIRO Feb 15 Royal Dutch Shell
, Europe's largest oil company, expects to make robust
investments in Brazil's offshore resources, hoping to quadruple
oil and gas output there by the end of the decade, its chief
executive officer said on Monday.
CEO Ben van Beurden spoke in Brazil shortly after Shell's
$52 billion takeover of BG Group Plc, approved in late
January, took effect.
Thanks to BG's large portfolio of assets in Brazil and
Shell's decision to buy 20 percent of the giant Libra offshore
project in 2013, Brazil will be a key area for the Anglo-Dutch
company as it focuses on liquefied natural gas and deepwater oil
production, van Beurden said.
Shell is rushing in as other companies cut back in the face
of Brazil's worst recession in decades, and as a plunge in oil
prices and a corruption scandal at state-run Petroleo Brasileiro
SA slow local oil and gas growth.
"We believe in the strong fundamentals of Brazil and the
fundamentals of its geology," van Beurden told reporters in Rio
de Janeiro. "We will be looking at a substantial part of our
production from Brazil."
By adding BG's large Brazilian offshore assets, Shell's
local output rose six-fold to about 240,000 barrels of oil and
natural gas equivalent a day (boepd), or 13 percent of Shell's
total of 1.8 million boepd.
A quadrupling of its Brazilian output would boost production
to nearly 1 million boepd by 2020. Shell is already Brazil's No.
2 producer after Petroleo Brasileiro, known as Petrobras.
In December, Shell and BG had 7.6 percent of Brazil's total
output of just over 3 million barrels a day.
The BG takeover also makes Shell the world's largest trader
of liquefied natural gas. While it sells LNG to Petrobras for
the Brazilian market, van Beurden and his Brazilian deputy,
Andre Araujo, declined to say if they want to buy Petrobras'
natural gas assets, some of which are for sale.
Brazil's importance to Shell is expected to increase as the
company moves ahead with giant subsalt projects such as Libra,
which it is developing with Petrobras, France's Total SA
, China's CNOOC and CNPC.
Subsalt refers to large hydrocarbon resources trapped deep
beneath the seabed by a layer of mineral salts. Libra may hold
as much as 12 billion barrels of recoverable oil, according to
Brazil's government, and is expected to cost more than $40
billion to develop, with 20 percent of the project and its costs
belonging to Shell.
Shell faces serious challenges in Brazil. Oil prices have
plunged since the BG deal was announced a year ago. Petrobras,
Shell's principal partner in the country, is in serious
financial and legal difficulty after the price drop and the
massive price-fixing, bribery and kickback scandal.
Even so, van Beurden said subsalt areas should be able to
break even at oil prices forecast for this year, without saying
what those prices might be.
He said the difficulties facing the country's oil industry
might be eased with more flexible rules for Petrobras' statutory
role in the development of new subsalt projects. The law
requires Petrobras to own and finance 30 percent of any new
subsalt project. It also requires that Petrobras manage all new
developments as operator.
Petrobras' debt, though, has forced it to cut back, putting
the development of new subsalt projects, including those with
Shell, in doubt.
"Brazil might benefit from being a bit more flexible on
this," van Beurden said, adding that opening up the subsalt area
to more companies could attract capital and create jobs.
The Valor Economico newspaper reported on Monday that
President Dilma Rousseff may be open to changing the law that
gives Petrobras so much control of the subsalt.
The 2010 law was one of her most high-profile legislative
victories and a key part of her efforts to boost state control
of the oil industry.
(Reporting by Jeb Blount and Marta Nogueira Additional
reporting by Caroline Stauffer in Sao Paulo; Writing by Jeb
Blount; Editing by David Goodman, Jeffrey Benkoe and Leslie