Brazilian Bolsonaro wants a concession model for pre-salt oil auctions: source

BRASILIA / RIO DE JANEIRO (Reuters) – A senior aide to Brazilian President-elect Jair Bolsonaro announced on Thursday that the new government would adopt concession contracts for lucrative auctions of pre-salt oil, raising fears that the talks do not change the diet. investment needed.

Later, however, Roberto Castello Branco, whom Bolsonaro called to run the state-run oil company Petroleo Brasileiro SA, said there was still no final decision on which contracts the new administration would propose. in the highly prized deepwater petroleum tenders.

Bolsonaro, a long-time nationalist economist and far-right legislator, changed his stance on the road to his election last month, declaring himself open to selling state assets and giving up the role of the government in the crucial sector of energy.

Investors are eager to win a larger share of the price of Brazilian oil, but the renunciation of the production-sharing auction plan, which is raising growing concerns, is also raising fears that any change would require lengthy discussions in Congress, which would raise uncertainties and lose investment.

A senior transition official, who was not allowed to speak in public, said the Bolsonaro administration would seek to change the production sharing agreement in the pre-salt fields. The source said it was considering adopting a concession model involving less interference from the state.

"This is a clear preference for us, we will move to concessions instead of sharing production," said the source, without specifying whether the new policy would require a change in the law.

The production sharing model, which was set up by the Left Labor Party (PT) and reformed by Michel Temer's center-right government, gives the state a share of the revenues.

It has proven itself at recent auctions, attracting major oil companies such as Exxon Mobil Corp, Chevron Corp, Repsol SA, Royal Dutch Shell Plc and BP Plc.

CONCESSION CONCERNS

Marcio Felix, Minister of Mines and Energy, said the best solution was to make a relatively simple adjustment to a law that would require all pre-salt blocks to show up at an event that would take place in Rio de Janeiro on Thursday. production sharing contracts.

Nevertheless, Felix said that he had suggested to the new administration that any changes come after 2020, once key auctions have taken place.

He said his main concern was that the congressional talks do not hold water and suspend the series of calls for tenders in progress, which have helped attract the much needed investments.

"If we start this discussion in Congress, for example, we risk paralyzing the auction and that's what we do not want. The risks must be well measured, "said José Mauro Coelho, director of the energy research company.

Rising oil prices and the need to replace diminishing reserves have increased the appetite of major oil companies for more expensive offshore projects, injecting money into government coffers.

NEW DIRECTION

Last month, the Valor newspaper announced that the Bolsonaro team was considering refining the production sharing model to address some of the political abuses perpetrated by previous administrations.

Petrobras was at the center of an investigation dubbed "Car Wash" that uncovered a massive and long-standing corruption system.

The government found that political parties and politically appointed leaders received more than R $ 6 billion ($ 1.58 billion) in bribes, mainly from construction companies and government corporations. engineering, in exchange for contracts won with Petrobras.

Dozens of influential businessmen and politicians, including former president Luiz Inacio Lula da Silva, were sentenced to prison terms.

The PT has led Brazil for 13 of the last 15 years and has been criticized for its economic weakness and rampant corruption. Temer took office in 2016 following the dismissal of former PT President Dilma Rousseff.