Brazil’s Lula meets foes to new oil plan

Brazilian President Luiz Inacio Lula da Silva agreed to some demands by three state governors who had concerns about his legislative proposal to develop large new oil deposits, the energy minister said early on Monday.
Lula’s government will unveil a legal framework on Monday to develop the massive off-shore oil deposits, which triggered euphoria and expectations of newfound wealth in Latin America’s largest country when they were announced in 2007.

The Brazilian leader met for more than five hours late on Sunday with the governors of Rio de Janeiro, Sao Paulo and Espirito Santo, the nation’s three major oil-producing states.

Lula agreed for now to keep the current distribution of royalties, Energy Minister Edison Lobao told reporters after the meeting. The three governors had opposed Lula’s plans to share future oil revenue with states that do not produce oil.

Lula also agreed not to send the oil bill to Congress on a fast-track, so as to give more time to discuss the proposal, Lobao said.

“The (fast-track) was withdrawn, but during the debate of the proposal the president can request it, if necessary,” Lobao said.

Rio de Janeiro Governor Sergio Cabral, whose state harbors many of the country’s oil companies and installations, said on Friday the government was acting like Robin Hood in proposing to redistribute oil revenue.

He added that the government also was raising false hopes that oil was a panacea for all Brazil’s troubles.

The government intends to send a single bill to Congress. According to earlier statements by Lula aides, it would increase state control over oil reserves, create a federal fund to finance health and education, and make state-run energy company Petrobras the sole operator of new oil fields, albeit in possible ventures with private firms.

It would also create a new state agency to serve as administrator of oil contracts, Lula aides said.

The three governors, including Espirito Santo state Governor Paulo Hartung, had threatened to spoil the show for Lula, who intends to present the proposal in an elaborate ceremony in the capital Brasilia.

All three will attend the presentation, Lobao said.

Lula hopes his proposal to distribute oil wealth more widely, particularly on health and education, will benefit his chief of staff and handpicked presidential candidate, Dilma Rousseff, in next year’s election.

Lula is barred from running for another term.

Rousseff, who was Lula’s energy minister from January 2003 to June 2005, has been instrumental in shaping the new oil framework and will take center stage beside Lula during the presentation ceremony.

The government still must decide if and how it would capitalize Petrobras, according to weekend newspaper reports. While Rousseff favored the move, the president’s economic team was against it, Folha de Sao Paulo newspaper reported.

Lula says Brazil needs a new energy framework to keep its fair share of riches from the subsalt area that drew global attention with the 2007 discovery of the Tupi field, one of the world’s biggest finds in a decade that opened a new frontier in petroleum exploration.

There are an estimated minimum of 50 billion barrels in the subsalt fields.