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Brazil govt mulls bigger stake in Petrobras-source
RIO DE JANEIRO
Petroleumworld.com, Aug 28, 2008In a debate over how to raise the state's share in Brazil's newfound oil reserves, the government is considering raising its stake in the state-run oil company Petrobras , a source with direct knowledge of talks told Reuters on Wednesday.
A debate is unfolding on how to raise Brazil's revenue in future oil production, which the government wants to use for social programs, after evidence began to mount in late 2007 that a subsalt band off the coast could contain 40 billion to 80 billion barrels of light oil and natural gas.
"This is an idea being considered for the subsalt -- an investment, not of cash, but of national assets (to raise the government stake)," said a source close to the talks who did not want to be named.
"The government could use (rights to future oil) as an asset against investments in Petrobras," the source added.
Petrobras is a publicly traded company on the Sao Paulo Stock Exchange and has depository receipts on the New York Stock Exchange, but the Brazilian government holds control through a majority of the company's voting shares.
The plan is likely to dilute minority shareholders' stake in Petrobras, said Felipe Cunha, an analyst at investment bank Banco Brascan.
"Investing barrels of oil in the company seems to favor the majority shareholder to the detriment of the minority holder, who can only invest cash," he said.
A government commission appointed by President Luiz Inacio Lula da Silva is expected to yield recommendations in a couple of months on how to regulate Brazil's future oil wealth in light of the larger-than-expected reserves.
The source said that Petrobras Chief Executive Jose Sergio Gabrielli has pitched the idea to the commission, in which the government could raise its stake in the company using rights to future oil as collateral rather than cash, which might be hard to come by given federal fiscal constraints.
About 20-25 percent of the subsalt blocks are already in the hands of Petrobras and partners including Galp, ExxonMobil Corp , Amerada Hess, BG Grou Repsol and Shell . These concessions should be unaffected by any future changes to regulatory framework.
Rights to the remaining subsalt blocks that have not been auctioned are owned by the government.
"In the future, when it is confirmed (there is oil in the fields not under concession), it will have a value, so it can be put to Petrobras as a capital investment -- an exchange whereby the government will get Petrobras shares in exchange for it having rights to oil reserves," said the source.
Last week, Gabrielli said the company is studying, but not planning, a share offer to fund future development of its subsalt finds. He also said the company may raise its debt to revenue levels to 25-30 percent from about 17 percent now.
Story reporting by Denise Luna; writing by Reese Ewing from Reuters
Reuters 27 08 08
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