Brazil has announced plans to shift its current handling of oil contracts, moving towards more state control in the oil industry after determining its offshore reserves could rival those of OPEC countries within a decade.
Many believe the state’s involvement in the oil industry could be a means of handling the country’s poverty problems and eventually push the nation to developed status.
Under the current system oil companies bid for rights to explore for oil in blocks but President Luiz Inacio Lula da Silva has proposed a new system that would give Brazil ownership of part of all the oil produced. A change to the current system would reduce the role of foreign firms and could limit their investments in the country.
Brazil owns an oil field that is estimated to contain 50 billion barrels of oil but it is located about 311 miles off its south-eastern coast and could cost a considerable investment to develop.
Lula is expected to present his plan to congress soon at which time a decision will be made.
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