Brazil to redirect foreign investments into sub-salt oil finds

RIO DE JANEIRO, Sept. 21 (UPI) -- Brazil is considering stopping capital investment into foreign oil projects and concentrating instead on developing its own huge offshore sub-salt deposits, officials said.

Questions about how Brazil can finance its ambitious five-year hydrocarbon development program have been raised since President Luiz Inacio Lula da Silva and Petrobras officials put a figure on it -- $174.4 billion, to be spent between now and 2013.

With the third quarter of 2009 almost over, Petrobras officials have not yet revealed how much of that sum they have actually invested into developing the finds, and where they intend to raise the total investment required in developing the deepwater sub-salt oil and gas reserves off the Brazilian shoreline.

Petrobras Chief Executive Officer Jose Sergio Gabrielli said the state-controlled oil company will curtail its overseas investments to redirect the funds into domestic exploration and exploitation of newly found hydrocarbon reserves, the Brazilian Estado news agency said.

MercoPress said Gabrielli told investors during a presentation that Petrobas' "international investments are frozen because the volume of opportunities in Brazil is so large."

Gabrielli said the company would maintain its $174.4 billion strategic plan for 2009-2013.

It was not clear if Petrobras will redirect all of about $15.9 billion it announced earlier as investment in international operations. Industry analysts said a total freeze on Brazilian investments in oil ventures abroad could cause significant disruptions in the global oil and gas exploration and production sectors.

The Petrobras announcement appeared driven in part by the discovery of a very large sub-salt deposit in the Santos Basin BM-S-9 block, off the country's southeastern coast, that is being worked by Petrobras, the U.K. BG Group and Repsol.

The Abare Oeste field is adjacent to the Carioca, Guara and Iguacu fields, where crude oil discoveries were announced earlier.

Brazil has revised its oil development strategies as discoveries of sub-salt deposits have multiplied. Initially, Petrobras debated whether to start a new company to take care of operations in the new fields. More recently, President Lula da Silva has taken the congressional route to introduce new regulations and increase state control of the energy industry.

The new regulations before Congress would allow the government to increase its stake in Petrobras and make the company the sole operator of the sub-salt fields.

Gabrielli said Brazil has the world's largest potential reserves and aims to become a major global supplier.

The oil finds have already engendered rhetoric in the media that Brazil is poised to become Latin America's superpower. That rhetoric has been reinforced by Brazil's reported bids for large weapons purchases in Europe.

An Ernst & Young study cited in the Brazil media designated Petrobras as the world's eighth-biggest global company in market value, currently about $164.8 billion. The company made a dramatic recovery after the 2008 global financial crisis, largely because of its huge oil discoveries. It was among the Top 10 companies that appreciated the most in the first half of this year.