Brazil should end production-sharing contract model, Petrobras CEO says

|About: Petróleo Brasileiro S.A. - ... (PBR)|By:, SA News Editor

Petrobras (PBR +1.6%) CEO Roberto Castello Branco says Brazil should end the production-sharing contract model that governs the country's pre-salt acreage, raising the possibility of a return to industry preferred concession terms.

The production-sharing regime is "not efficient" and was "established by bureaucrats for political convenience," the CEO said at an industry event in Rio de Janeiro.

Industry leaders have long argued the concession model, which relies on royalties for the government's take, offers more straightforward terms, but strong responses at four pre-salt licensing rounds since 2016 suggest any complexity in the PSC, under which an agreed percentage of profit oil is shared with state-owned marketing firm PPSA, has not deterred upstream investment.

Brazil will hold its sixth subsalt production-sharing auction on Nov. 7 and auction off rights to develop as much as 15B barrels of recoverable oil discovered by Petrobras in the transfer-of-rights areas on Nov. 6.

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