Web alert: Brazil's largest oil workers union federation (FUP/CUT) threats to strike against Petrobras Divestment Plan and the approval of new legislation for the exploitation of the pre-salt.

The oil workers federation held a 24-hour strike on 24 July and is planning an indefinite strike in September if there is not a positive response to its 24-hour strike. It opposes the sale of $15bn worth of assets by the end of 2016 and changes in legislation that aim to remove Petrobras’ exclusive rights to exploit the pre-salt oilfields.

The divestment plan includes the disposal of oil and gas assets, thermoelectric power plants, gas distribution assets, downstream assets and possibly part of its 36% equity stake in Braskem, a petrochemical company controlled by Odebrecht.
Petrobras’ large debt and weak financial position limit its ability to meet the legal requirement that it finances a minimum of 30% of all pre-salt projects and runs them as formal operator.

In mid-June Senator Jose Serra, former PSDB presidential candidate, submitted to the Senate Bill 131/2015 that may potentially change the Brazilian pre-salt investment scenario. Bill 131/2015 revokes Petrobras’ mandatory role as the exclusive operator and its requirement to hold a 30% participating interest on all pre-salt developments under the production sharing regime.

The current legislation regulates the exploration and production of the pre-salt oilfields under the regime of production sharing. Under this regime, in case of commercial findings, the contracted party would be reimbursed from costs incurred in the exploitative activity through results of production (cost oil). The exceeding oil and gas produced (profit oil) would be shared between the Federal Union and the contracted party. The contracted party would keep the risks of the exploitation and development activity. Petrobras is the operator for all the oil blocks contracted by the Federal Union under the regime of production sharing and participates in all the consortiums with at least 30% equity.

The first auction of a Brazilian pre-salt field, the Libra Field with estimated recoverable oil volumes of 8-12 billion barrels, in October 2013 was won by a consortium composed of Petrobras, as operator with 40%, Shell with 20%, Total 20%, CNOOC 10% and CNPJ 10%. Super-majors such as Exxon-Mobil, Chevron and BP and also major players like BG Group and Statoil did not participate in the auction.

Bill 131/2015 aims to end Petrobras’ exclusive rights to exploit the pre-salt oilfields and proposes privatising oil wells in the pre salt deep water oil fields in the Atlantic Ocean, which holds Brazil’s biggest reserves of crude oil.
More information can be found here.