During the 9 August first televised presidential debate ahead of October elections most of the candidates either avoided any discussion of energy and oil issues or expressed their opposition to any further opening up of the industry to foreign investment or new sales of promising reserves.
The Partido Democrático Trabalhista’s (PDT) Ciro Gomes continued his call to restrict sales of production-sharing lease rights to consortiums that aren’t led by Petrobras. Recent legal changes provided the following: the end of the obligation that it should lead the development of all pre-salt oil projects as operator and take a minimum 30% stake in all projects; and a reduction in its rights to lead pre-salt field developments to a right of first refusal of areas coming up for offer. Gomes has also said that, if elected president, he plans to expropriate pre-salt leases sold to IOCs during the past two years, with compensation. He also promised to use Petrobras to lead development of largely ignored areas of the country.
Meanwhile Geraldo Alckmin of the Partido da Social Democracia Brasileira (PSDB) — a long-time supporter of reduced government control of Petrobras and more liberal oil investment policies — avoided discussion of what has been a key party policy issue since the late 1990s when the PSDB led the passage of legislation ending Petrobras’ E&P monopoly in Brazil.
The rising tide of oil nationalism has been sparked by the weak economy and the resulting decline in the value of the Real. This led to Petrobras raising the price of refined products such as gasoline, diesel and cooking oil to reflect rising US$ world oil prices. This in turn led to the crippling national transport strike in June and the government’s subsequent decision to end Petrobras’ right to adjust fuel prices in line with world market prices for oil and gas.
This article was taken from our Brazil Politics & Security publication. If you would like to discuss the contents of this article, or if you have any questions for our experts with regards to your business activities in Brazil, the please contact us.