RIO DE JANEIRO--Brazilian President Dilma Rousseff said Thursday
that she views oil-industry requirements to use locally produced
equipment and services as well as a more state-controlled
regulatory scheme for key drilling areas as central to her energy
strategy, damping investors" hopes for an overhaul.
Experts say both policies have deterred private investment in
Brazil's energy sector and proven burdensome for state-run Petróleo
Brasileiro SA. Rules demanding high levels of local content in the
sector have contributed to delays and cost overruns for everything
from drill rigs to refinery projects. And so-called
production-sharing agreements, part of a regulatory framework
Brazil adopted in 2010, allow tighter government control than an
alternative model of concessions that is more friendly to
investment.
Both Brazil's energy minister and Petrobras" top executive have
signaled in recent weeks they would favor loosening the
regulations, which Ms. Rousseff's Workers" Party adopted in the
wake of massive oil discoveries off the Brazilian coast in the past
decade. But Ms. Rousseff suggested she isn't open to major
changes.
"The local-content policy is not something that can be shunned,"
Ms. Rousseff said in a speech at a Brazilian shipyard as a
brand-new oil tanker was setting off on its maiden voyage. "The
local-content policy in my government is the center of a policy of
recuperation of this country's investment capacity."
Ms. Rousseff said she also plans to continue allowing oil
companies to compete for concessions only in high-risk blocks. In
areas known to possess large volumes of high-quality petroleum, the
production-sharing agreements--requiring Petrobras to be the sole
operator--will be used.
"No one can sanely think that it's a heavy burden for a company
to have privileged access where there's oil, a lot of it, and of
high quality," Ms. Rousseff said. "And that's what happens with
Petrobras, in the case of the production-sharing model, from this
government's viewpoint."
The firm has become the world's most indebted oil major in
recent years as massive spending on fuel subsidies and expansion
projects drained its cash. Petrobras has banned some two dozen of
its biggest local suppliers from new contracts because of their
alleged involvement in a huge corruption scandal being investigated
by Brazilian prosecutors.
Chief Executive Aldemir Bendine said in a hearing at Brazil's
Senate last month that any new well in the areas where Petrobras
operates under production-sharing agreements would stress the
company's finances due to a requirement that it hold a 30% minimum
stake. Energy Minister Eduardo Braga, seeking to drum up enthusiasm
at a recent oil conference in Houston, acknowledged the need to
"fine-tune" local-content rules.
Brazil's Energy Ministry didn't respond to a request for comment
Thursday.
Write to Paul Kiernan at paul.kiernan@wsj.com
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