Brazil reiterates no change to oil contracts

Fri Oct 10, 2008 6:25am EDT
LISBON, Oct 10 (Reuters) - Brazil will not alter existing contracts with foreign and local oil producers that have discovered huge reserves in the subsalt cluster deep under the ocean floor, Energy Minister Edison Lobao reiterated on Friday.
Speaking at a Portuguese-Brazilian business meeting in Lisbon, Lobao also hailed the presence of Portugal's Galp Energia (GALP.LS: Quote, Profile, Research, Stock Buzz) in several Santos basin blocks, calling it an important partner of Brazil's state-run oil giant Petrobras (PETR4.SA: Quote, Profile, Research, Stock Buzz)(PBR.N: Quote, Profile, Research, Stock Buzz).
"Brazil will respect all the contracts. The sanctity of the contracts will never be broken," Lobao said.
Galp has a 10 percent stake in the Tupi discovery, where Petrobras estimated recoverable reserves at up to 8 billion barrels, and in a number of other important projects like Jupiter and Iara.
Other partners in these and other subsalt blocks include Britain's BG Group (BG.L: Quote, Profile, Research, Stock Buzz), Spain's Repsol (REP.MC: Quote, Profile, Research, Stock Buzz) and ExxonMobil (XOM.N: Quote, Profile, Research, Stock Buzz) of the United States.
After the Tupi reserve announcement last November, Brazil started mulling changes to its oil law and other rules for oil exploration and production, eyeing more taxes and royalties, as well as changing the way it offers new concessions to leave high-potential blocks in state hands.
But it has repeatedly said any changes would apply only to future contracts.
Also on Friday, Galp and Petrobras signed a draft deal to set up a joint venture to produce 500,000 tonnes a year of biodiesel, with half of that amount to be produced in Portugal for distribution in Europe. The partners were yet to confirm the commercial viability of the project. (Reporting by Elisabete Tavares and Andrei Khalip; editing by James Jukwey)