March 28, 2017 / 8:01 PM / 2 years ago

Brazil to start oil sales from production sharing contracts: executive

SAO PAULO (Reuters) - Brazil will start to sell oil and natural gas from production sharing contracts with oil companies around September, the head of the state firm managing these contracts, Ibsen Flores, told Reuters on Tuesday.

Flores, the president of Brazil’s state-controlled company Pré-sal Petróleo SA (PPSA), said companies working through the relatively new contracts are expected to start giving the government its cut of the oil production around September.

Production sharing contracts were introduced during the leftist governments of Luiz Inacio Lula da Silva and Dilma Rousseff, as Brazil sought to gain a larger share of the profits companies derive from pumping oil out of the high-yield subsalt layer.

It is going to be the first time that Brazil’s government operates directly in the oil market. All its previous contracts were based on royalty payments.

“It is a new market that opens up,” Flores said, adding that he has held talks with companies interested in acting as Brazil’s official oil seller. The legislation governing the new contracts establishes that the government needs to hire a company that will be in charge of selling the country’s share in the new exploration ventures.

“We’ve been looking into companies with potential to perform that task and we came to the conclusion that firms operating in oil exploration in Brazil would be best fit for it,” said the PPSA’s head.

The executive said most of the oil to be sold by the Brazilian government from September would come from the Libra subsalt area off the coast of Rio de Janeiro.

Flores said the prospect should start test production in July, pumping 30,000 barrels of oil per day. The Brazilian government is entitled to around 12,000 bpd from that contract.

Reporting by Marta Nogueira; Writing by Marcelo Teixeira; Editing by Richard Chang and David Gregorio

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