Government Expects to Raise R$ 400 Billion from Sale of Union Oil Sharing Contracts Governing Pre-Salt Exploration, According to New Bill

Aiming for the Private Sector Initiative Regarding the Exploration of the Pre-Salt, the Government Now Awaits the Sale of the Union’s Oil Sharing Contracts with the New Bill Submitted to the National Congress for Changes in the Oil and Gas Sector.

According to the new bill submitted to the National Congress on Thursday (09/06), the Federal Government expects to raise R$ 400 billion from the sale of the Union’s oil sharing contracts. Thus, the contracts governing the exploration of the pre-salt in Brazil would be controlled by the private sector with the commercialization of the Union’s shares.

New Bill from the Bolsonaro Administration Provides for the Sale of the Union’s Oil Sharing Contracts Regarding Pre-Salt Exploration to the Private Sector

Submitted this week and awaiting a vote in the National Congress, the current bill from the Bolsonaro Administration for the oil and gas sector anticipates a revenue of R$ 400 billion from the sale of the Union’s oil sharing contracts. This model category governs the exploration contracts of the pre-salt layer, which concentrates the majority of national oil and gas production and could be handed over to the private sector if the bill is approved.

Although the government knows there will still be some hurdles to put this sale into practice, it now awaits the voting of the bill in the Chamber and the Senate to move it forward. The text of the bill for the sale of the Union’s oil sharing contracts also includes the initiative for the privatization of Petrobras and is yet another move by the government to adopt liberalism in the oil and gas sector in Brazil.

Currently, a large part of the revenue from the Union’s oil sharing contracts regarding pre-salt exploration goes to the Pre-Salt Social Fund, and the money is primarily allocated to health and education. However, the current text from the government circulating in the National Congress stipulates that the amounts are not to be allocated to the fund and may be assigned to the public budget through the budget legislative process approved by Congress.

Now, the Ministry of Economy and Minister Paulo Guedes await the votes, which do not yet have scheduled dates to take place.

Paulo Guedes Managed to Advance a New Bill for the Sale of Pre-Salt Exploration Sharing Contracts with the Change in Leadership of the MME

One of the main hurdles for Paulo Guedes’ administration to carry forward the bill for the sale of the Union’s oil sharing contracts was the leadership of the Ministry of Mines and Energy, which disagreed with the concession for pre-salt exploration. Thus, with the recent change in leadership of the Ministry, the Minister of Economy secured the necessary opening to advance the initiative.

Currently, companies such as Petrobras, Shell, Total, CNPC, CNOOC, Ecopetrol, Repsol, Equinor, Exxon, Petrogal, and BP have active sharing contracts for pre-salt oil exploration.

If the bill is approved by the National Congress, the Union will be authorized to sell its share in the current sharing contracts, leaving the control of this regime under the private sector.

Finally, the main justification from the Bolsonaro government is that the private sector would be able to deal adequately with instability in the oil and gas sector and that the management of production would be more efficient: “The fact is that the Union does not have the same conditions to bear the risks of the business as the private sector, nor to sell oil and natural gas with the same degree of efficiency as the private sector,” argues the government.