Please Note: Blog posts are not selected, edited or screened by Seeking Alpha editors.

Petroleo Brasileiro Petrobras Stock Increases As Brazil Oil Law Is Ready To Be Amended

|Includes: Petrobras - Petroleo Brasileiro S.A. (PBR)

Petrobras Shareholders rejoice as lawmakers in Brazil are likely to "correct" the country's oil law, easing capital commitments for the state-run oil producer.

On Friday, lower house president, Eduardo Cunha said, the Brazilian law that needs Petroleo Brasileiro Petrobras SA to hold a concern in projects of subsalt exploration in the country is ready to be corrected.

As per the current law, it is necessary for the oil and gas company to have at least 30% ownership stake in whole subsalt projects, including serving as an project operator. This requirement has put substantial strain on company's capex budget, making it thin. An old law did not require the company to operate or have significant amount of ownership in subsalt exploration plans.

Mr. Cunha also said, "We were wrong when we changed the oil law from a concession model to a production sharing regime. The requirement that Petrobras [hold 30% of all subsalt projects] will be corrected. As for the change in the [overall] oil regime, I don't know,"

According to Reuters, Mr. Cunha stated that a bill to get rid of the above mentioned requirement will be going to put to a vote next week in country's Senate. Mr. Cunha further said that the requirement for the company to work as an operator should be lifted.

He said, "If it were my choice, this would be eliminated too."

However, he believes the Brazil Senate to support the bill that states to remove the requirement. He said, "Changing the production sharing regime will be difficult but removing the 30% requirement, yes, that is possible,"

He has provided improved hope to the investor of Petrobras, who have been troubled by adverse developments over the last year.

Last year in March, a corruption scandal break out after the company's executives was accused of bribery, money launder, and corruption, in consent with some large construction companies.

Before the scandal erupted, Petrobras was struggling to manage its increasing debt. With more than $100 billion of long term debt, Petrobras is the largest indebted energy company in the world. Furthermore, a dramatic decline in oil prices caused the supply to surpassed oil demand in international markets, has caused more problems for the company.

Mr. Cunha's remarks that the obligation will be relaxed appear as positive news for the shareholders, as it might comfort the company to perform capital investments. It might allow the company to protect its cash flow and improve its liquidity position in the present low price situation.

Earlier last week, Aldemir Bendine, CEO of the company supports the plans to relax the requirement, reported by Bloomberg.