Petrobras Share Sale Approved by Brazil Lower House

Petroleo Brasileiro SA’s plan to issue new shares to pay for the rights to oil deposits off Brazil’s coast was approved today in the nation’s lower house.

As part of the legislation, Brazil’s government plans to transfer the rights to as much as 5 billion barrels of oil in deepwater reserves to state-controlled Petrobras in exchange for stock. Petrobras may give the government up to $30 billion in shares and issue an additional $20 billion of stock for minority investors, Credit Suisse AG said in a Feb. 10 note to clients.

The bill will now go to a Senate committee. An urgency clause imposed by President Luiz Inacio Lula da Silva will set a 45-day deadline for a final vote in the Senate, Alexandre Padilha, Lula’s main liaison with Congress, said last week.

Rio de Janeiro-based Petrobras is spending $174.4 billion over five years to boost output and tap deposits off Brazil’s coast in the so-called pre-salt region, where the company made the biggest oil discovery in the Americas in three decades.

Petrobras Chief Executive Officer Jose Sergio Gabrielli told analysts that the “ideal” timeline for the share sale is in the second quarter, JPMorgan analysts led by Sergio Torres said Feb. 9. The government will set the price of the oil to be transferred to Petrobras.

The pre-salt area runs 800 kilometers (500 miles) along the coast from Espirito Santo to Santa Catarina states and has oil deposits beneath a layer of salt resting as deep as 3,000 meters (9,843 feet) beneath the ocean surface and another 5,000 meters below the seabed.