The Brazilian government is desperately trying to attract foreign companies to develop its complex and potentially lucrative pre-salt oil fields. On Oct. 5, the lower house of parliament approved a regulatory change lifting the requirement that state-owned energy firm Petroleo Brasileiro (Petrobras) act as the primary operator in every pre-salt oil field. The legislation, which the Senate had already passed, sailed through the Chamber of Deputies by a 292-to-101 vote. Now, Petrobras will no longer have to meet a minimum participation requirement of 30 percent, though it will still be able to choose to take charge of pre-salt fields if it so desires. The lower house will discuss a few other details of the legislation next week, and if no changes are made, it will be sent to President Michel Temer for ratification.
Temer's administration has been advocating this regulatory reform for some time. Brazil is mired in economic recession, and its gross domestic product is expected to drop by another 3.3 percent this year. An influx of foreign capital and added energy revenue would provide some much-needed relief for the cash-strapped government in Brasilia. Moreover, Petrobras' new upper management — put in place after a corruption probe into the company forced the removal of its former executives — favors the legislation far more than its predecessor did. After all, Petrobras plans to scale back its investments in an effort to balance its books; it has little capacity to invest in projects as pricy as pre-salt oil fields. In fact, the company has already begun selling off some of its biggest assets, including oil fields, a natural gas distribution company and a fuel-producing subsidiary. In the face of Petrobras' financial troubles, the Brazilian Energy Ministry has admitted that it needs to find foreign partners to help the company develop and operate Brazil's pre-salt fields.
Of course, the newest bill is also notable for reasons other than the openness it introduces into the Brazilian energy sector. It is the first in a series of economic reforms Temer has been promoting that the parliament has agreed to back, and by a wide margin at that. This could indicate that the administration might be able to rally support behind its other reforms as well — a piece of good news for Temer, who plans to introduce more controversial reforms in labor and pensions over the next six months that will be much harder to push through congress.