MercoPress. South Atlantic News Agency

Brazil announces auctioning of new oil concessions for next May

However Congress must approve a new law on the contentious distribution of royalties among states

Brazil's Dilma Roussef has approved the auctioning of new oil concessions next year, subject to congressional approval of a new royalties law, authorities said. The 11th auction outside the pre-salt next May would involve 74 oil blocks, half at sea and half on land.

”President Dilma Rousseff today approved an 11th round of auctions of oil blocks, which is to take place in May 2013 at a date to be set by ANP (National Petroleum Agency),“ ANP said in a statement.

Energy Minister Edison Lobao made the same announcement at a press conference and added that an auction inside the huge so-called ”pre-salt“ reserves located off the country's southeast coast would be held in November 2013.

But the House of Deputies will first have to approve legislation on the contentious distribution of oil royalties, an issue that divides producing and non-producing Brazilian states.

Joao Carlos de Luca, president of the Brazilian Petroleum Institute, which groups domestic and foreign energy companies, welcomed Tuesday's announcement while attending the Rio Oil and Gas exhibition.

”It's great news,“ he told reporters. ”It was the signal we were expecting from the government for a return to normal auctions. And the government will get a positive response from oil and gas producers.“

”The government is holding talks with the House of Deputies with a view to ensuring that the bill is approved well ahead of time. We are convinced the House will pass the royalties legislation without major problems, even this year,” media reports meanwhile quoted Lobao as saying.

The new royalties’ share-out plan proposed by the government cleared the Senate but has been blocked in the House of Deputies amid divisions between non-producing and producing states.

After the huge pre-salt offshore reserves were discovered in 2007, the government decided to suspend the auctions to apply new rules in the sector.

The National Petroleum Agency estimates that those reserves, buried beneath several kilometres of ocean, bedrock and hot salt beds, could hold more than 100 billion barrels of high-quality recoverable crude and could turn Brazil into one of the world's top exporters.

Brazil hopes to boost its oil production from around two million barrels a day currently to nearly five million by 2020, largely thanks to the pre-salt reserves. Less than 10% of oil production currently originates in the pre-salt layer.