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The Pre-Salt Oil Reserves in Brazil: To What Extent Is It Really Necessary to Adopt a Production Sharing Agreement System?

1 May 2009
by Marcelo Romanelli de Oliveira

Brazil’s pre-salt area became public in November 2007 when Petrobras
made one of the most important announcements in its history: the discovery of a large oil reservoir in the Tupi field. Tupi was the first discovery in the pre-salt area which according to estimates could take Brazil to a select group of countries with substantial oil and natural gas reserves. Some authorities have suggested the adoption of Production Sharing Agreements (“PSA”) with the creation of a special state-owned company to capture a larger share of the prospective revenues from the pre-salt reserves as opposed to the current concession system based on the royalty/tax model.

This paper aims to introduce the Brazilian fiscal/regulatory framework for oil and gas activities emphasizing its success over the last ten years. This paper will also analyze and compare both regimes from a fiscal perspective in order to answer whether it is really necessary to adopt a new regulatory framework based on the PSA for the pre-salt area in Brazil.

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The Pre-Salt Oil Reserves in Brazil

References:

• The Oil, Gas & Energy Law Intelligence Journal