UPDATE 2-Lula undecided on new Brazil state oil company

Wed Aug 20, 2008 3:11pm EDT
(Recasts, adds Mantega comments, details)
By Denise Luna
SAO GONCALO DO AMARANTE, Brazil, Aug 20 (Reuters) - President Luiz Inacio Lula da Silva said on Wednesday he had not decided whether to create a new state-run oil company to manage oil production from Brazil's new subsalt reserves, dampening speculation that his government favors that option.
Since state energy company Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz)(PBR.N: Quote, Profile, Research, Stock Buzz) announced last year that it had discovered massive light oil reserves off Brazil's southern coast, talk has swirled that the government would take greater control over the oil wealth.
Energy Minister Edison Lobao and other leaders in the ruling coalition have said they favor creating a 100 percent state-owned company to manage the promising subsalt oil reserves, which probably will take years to develop.
One of Brazil's most influential newspapers, Folha de Sao Paulo, reported on Wednesday that Lula also favored creating a new state oil company, citing unnamed government sources.
But Lula, who has asked a ministerial committee to draw up proposals on how to change Brazil's petroleum law, said he remained undecided.
"No new state company exists. I am not against it, or in favor," he told reporters at a Petrobras event in northeastern Brazil. "I'm only going to receive proposals on Sept. 19. When I see them, we will make a decision that will be made known to the Brazilian public."
Petrobras shook the oil world last November when it said it had found 5 billion to 8 billion barrels of recoverable light crude in its Tupi field in the Santos basin, the largest deep-water find in history.
Other reserves thought to exist in the area -- which some analysts say could total between 50 billion and 70 billion barrels -- could vault Brazil to 10th from 17th among world oil producers.
SOME FUNDS TO BE INVESTED ABROAD
Some government officials have said they favor shifting to a production-sharing model similar to the one used by Norway to extract oil from the North Sea. That would give the government the right to sell the oil and pay companies a share. Currently, oil companies own the oil they produce and pay the government royalties and taxes.
Petrobras Chief Executive Jose Sergio Gabrielli has said he opposes the creation of rival state oil company.
But another major newspaper, O Globo, quoted unnamed company sources on Wednesday as saying Petrobras would not be opposed to a new state firm, as long as Petrobras had the rights to explore the nine "megafields" already discovered and their contiguous areas.
Government officials, including Lula, have said that the country's health and education should benefit from the oil wealth. Finance Minister Guido Mantega said on Wednesday the government also intended to invest part of the new income abroad to prevent inflation and the currency from appreciating.
"Brazil will do as other countries have done, and won't place all the dollars it receives (from the sub-salt reserves) in the country," Mantega told reporters in Brasilia.
"Part of the sub-salt (money) will go to the sovereign wealth fund," he said.
A bill creating the sovereign wealth fund, financed by Brazil's growing primary budget surplus, which could raise $7 billion this year, is making its way through Congress. (Additional reporting by Isabel Versiani in Brasilia; Writing by Stuart Grudgings; Editing by Walter Bagley)