Brazilian Presidential Elections: Impact on the Country’s Oil and Gas Sector

As the October 3rd Brazilian presidential election approaches, it becomes clearer that the results will have significant implications for the country’s oil and gas sector.  The “pre-salt” oil reserves, the largest oil discovery in thirty years, have the potential to add an estimated 50 billion barrels of crude equivalent to Brazil’s proven reserves, making the country the eighth largest potential producer in the world.  The administration of President Luiz Inácio “Lula” da Silva has put together a reform package of four bills aimed at reshaping the oil and gas sector in Brazil, two of which have passed in Congress and two that were delayed until after the election due to a stalemate over state division of oil royalties.  The two leading presidential candidates, Dilma Rousseff and José Serra, have differing views on the oil sector, particularly the role of the state in managing the new oil findings.  Ruling party candidate Dilma Rousseff, a former Energy Minister and Chairwoman of Petrobras, played a direct role in developing the new regulations while she served as Lula’s Chief of Staff.  Opposition candidate José Serra is a pro-market former Governor of São Paulo who advocates a smaller role for the state in the sector, and, if elected, would be unlikely to pursue the reform package.  This article examines each candidate’s view on the proposed oil reform and its impact on IOCs participation in the pre-salt formation. 

The New Regulatory Framework for the Oil & Gas Sector

The new regulatory framework was designed by a Ministers’ Council, led by Dilma, with the aim of redefining the country’s oil policy.  The new framework significantly alters the Lei do Petróleo (law n° 9,478 from 1997) but its scope is restricted to the pre-salt formation and does not affect exploration & production (E&P) contracts already awarded.


Full article here.