Privatization of Albacora Leste Field Sparks Controversy and Pre-Salt Exploration in Espírito Santo Faces Criticism From Expert

One of the Most Controversial Operations Involving the Brazilian Pre-Salt, the Privatization of the Albacora Leste Field, Has Been Subject to Criticism and Questions Regarding Its Legality and Economic Impacts.

The recent privatization of the Albacora Leste field, one of Brazil’s main pre-salt reservoirs, is generating controversy and attracting criticism. Francismar Cunha, a PhD in Geography from the Federal University of Espírito Santo (UFES), recently published an article explaining why the sale of this field represents a true challenge to the interests of Petrobras and the Brazilian State, as well as opening a dangerous precedent in the national oil industry.

Privatization Sets Precedent for Companies to Operate in the Pre-Salt Without Following Current Legislation

According to the specialist’s study, the private company Prio will become the first oil company to explore the pre-salt under the so-called concession regime, even without the legal qualifications to do so.

This can be seen as a “shortcut” for private companies to access the pre-salt, which is currently restricted by law. This opening of precedent is considered dangerous and questions the existing legislation on the subject.

The article titled “The Contradictions of the Fourth Phase of the Oil Industry in Brazil: The Case of the Privatization of the Albacora Leste Field and Prio’s Access to the Pre-Salt” highlights that this is not the first time the privatization of the field has been subject to allegations.

The Union of Oil Workers of Espírito Santo (Sindipetro-ES) had already pointed out that the sale of 90% of the block for US$ 1.658 billion, completed in 2023, was an unfavorable deal for Petrobras, considering the block’s potential.

Furthermore, Cunha emphasizes that the sale of the Albacora Leste field seems to violate the sharing regime law that regulates pre-salt contracts post-2010.

According to this legislation, any oil company wishing to explore the pre-salt must go through a qualification process by the National Agency of Petroleum (ANP) and participate in bidding rounds under the sharing regime.

However, this requirement did not occur in the case of the sale to Prio.

The privatization of the Albacora Leste field allowed Prio to explore and produce in the pre-salt without the necessary qualification, operating under the Concession regime.

This contradicts the modality intended for the exploration of fields in the pre-salt polygon, which should be the Sharing, to protect national interests in exploration.

Sale of the Albacora Leste Field Contradicts the Sharing Regime Law and Harms Petrobras and the Brazilian State

In light of this scenario, Francismar Cunha argues that the sale of the field should be reviewed, as it seems to be based on “abusive interpretations or, even, the denial of the current regulations.”

He argues that this operation accelerates the dismemberment of Petrobras and allows the questionable entry of new agents into the Brazilian oil industry, especially in the pre-salt.

To understand the legal complexity created by this privatization, it is important to grasp the two formats provided by law for oil exploration in Brazil: the Concession Regime and the Sharing Regime.

While the first assigns the risk of investing in a block and finding or not finding oil or natural gas to the company, the second involves the State receiving a part of the future production from interested companies in consortium.

In the specific case of the pre-salt, where the risks are lower, the law determines that the modality for exploration is Sharing, aiming to preserve national interests.

However, the sale of the Albacora Leste field allowed Prio to explore under the Concession regime, disregarding the requirement for Sharing.

This discussion promises to continue in the legal and political realms, as it involves sensitive issues regarding the exploration of natural resources and the participation of private companies in strategic areas of the country.

It remains to be seen how this controversy will unfold and whether there will be a review of the privatization of the Albacora Leste field, as suggested by the Geography expert.