MIAMI, Feb. 5 (UPI) -- The Brazilian government appears eager to approve new oil legislation in the coming months in order to begin exploration of offshore oil reserves believed to hold up to 70 billion barrels.
The decision to move forward with the legislation that has been deadlocked for months likely will be prompted by the recent announcement by state-run oil company Petrobras that it will spend $174 billion on exploration by 2013, more than a 50 percent increase over the previous five years.
The Brazilian government is helpfully facilitating the investment with up to $29 billion in financing courtesy of the country's National Development Bank.
Petrobras officials were adamant about clarifying the conditions of the loan, saying the state funds were not a "bailout" of Petrobras, which has become not only a regional leader in energy, but a world player as well.
"This is not a rescue," Petrobras Chief Executive Officer Jose Sergio Gabrielli said last week. "This is very different than what is happening in other countries. This is not a bailout."
Though the Petrobras head maintains the state-run energy giant is maintaining its expansionist vision for the upcoming year, officials there last week said the company was revising its plan to hire 14,000 additional workers by 2010 to cut $4 billion in spending annually over the next two years.
The reason, according to Petrobras, is the sharp drop in oil prices from highs near the $150 a barrel mark to their current levels of around $40.
That said, Petrobras -- a world leader in offshore oil drilling -- remains keen on beginning full-scale production on parts of the Tupi oil field discovered two years ago and forecast to hold between 5 billion and 8 billion barrels.
"As one of the industry's premier deep-water players, Petrobras absolutely has the ability to profitably develop recent huge discoveries," said Michael Lewis, an analyst with PFC Energy.
Meanwhile, Brazilian President Luiz Inacio Lula da Silva appears particularly keen on passing the reformed laws before the end of this year, before his term expires in 2010.
According to Brazilian lawmakers and experts, Brasilia is hoping to create before the end of the Lula administration the new legal framework to redefine terms for producers hoping to begin production on the pre-salt offshore discoveries that made international headlines over the last couple of years and could catapult the country into the world's Top 10 oil producers.
"(President) Lula does not want to leave the decision to the next administration, and politically he is looking to plant a 'flag' on the new deep-water discoveries," reads a recent analysis of the sector by the Eurasia Consulting Group.
Lula, a longtime champion of the left whose monetary policy has been somewhat conservative during his first six years in office, said the country's oil profits should be spent revamping Brazil's educational system, particularly for the country's vast poor populace.
A former union leader, Lula said earlier this year that Brazil's recent oil fortunes would help wipe out endemic poverty once and for all -- a bold claim considering the South American country has one of the world's largest economic divides been the haves and have-nots.
However, the Brazilian leader has warned that the money must not be spent on "silly things," a direct reference to the recent frenzy of discussion among lawmakers in Brasilia on how to spend the nation's future oil fortunes. Among the recently proposed expenditures is a fleet of nuclear submarines.
But with full-scale production years away, talk of costly warships and the pricey revamping of an antiquated educational system may be premature.