Brazil signs agreement with oil consortium

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Associated Press

Posted on December 2, 2013 at 3:32 PM

Updated Monday, Dec 2 at 3:36 PM

BRASILIA, Brazil (AP) — Brazil on Monday signed an agreement with a consortium of five oil companies to develop a huge offshore field under the so-called production-sharing regime that gives the federal, state and municipal governments a 75 percent stake of the oil extracted.

In October the consortium made up of Brazil's state-owned oil company Petrobras, Shell of the Netherlands, France's Total and Chinese state companies CNOOC and CNPC won the right to develop the Libra offshore field.

Located off the coast of Rio de Janeiro in the Santos Basin, Libra is a pre-salt reserve believed to hold up to 12 million barrels of recoverable oil.

"By signing this document we are establishing the basis for a more just and less unequal nation and for a period of prosperity that will benefit Brazil for many decades," President Dilma Rousseff said at the signing ceremony.

Under the production-sharing system, part of the royalties that will go the federal government will be earmarked for social programs while another part will be used to fund health and education projects by the federal, state and municipal governments.

Over the past several years, Brazil has discovered billions of barrels of oil in offshore reserves, off the southeastern coast.

Most of these fields lie more than a mile below the ocean's surface and under another 2.5 miles of earth and salt, making extraction extremely technically difficult.

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