Don4682

Petrobras: Brazilian Oil Takes One Step Closer to Nationalization

I am unimpressed with this article for several reasons.
(1) It fails to distinguish between existing lease holders with contracts, and unsold tracts. Brazil can do what it wants with unsold tracts not yet under contract with oil companies.
(2) It equates Brazil with Ecuador, Venezuela, and Bolivia in its policies, apparently because President Lula also uses "socialist" as part of his political description, but gives no evidence other than speculation.
(3) It ignores the practical issue that Brazil can't simply take away the drilling rights and go do it themselves. This will not be $2 a barrel lifting costs - hundreds of billions of dollars will be needed, Brazil can't fund it internally, and good luck and getting any foreign investment if you cheat the existing leaseholders. If you want to see what would happen if they tried, do a google search on "Mongolia" and "Ivanhoe" to see the ongoing soap opera over mining rights to a gold and copper deposit. The govt. wants all the money, no one will build the mine until the royalty rules are set, so the government gets nothing and nothing gets mined.

I think offshore Brazil has more regulatory risk than exists for a US Gulf of Mexico lease, although the US Congress can do windfall profits taxes, etc. so that is not risk free. But Brazil has a lot better track record (so far) of being fair to foreign investors than places like Venezuela.