Address by President Dilma Rousseff on the Libra Oil Field Auction
Delivered on Brazilian national radio and television networks
21 October 2013
Today, Brazil has taken a major step forward: large-scale exploration of the Pre-salt layer is beginning to become a reality. And we have now ensured our future generations will have an unprecedented wealth of resources for education and healthcare in our country.
This tremendous wealth, previously dormant in the depths of our seas, now discovered, begins to awaken. It awakens bringing more resources, more jobs, more technology, more sovereignty, and, above all, a better future for Brazil and all Brazilians.
The success of the auction for the Libra Field - which is the first mega-field of the Pre-salt layer auctioned under the production sharing model - will allow the creation of a partnership between Petrobras, Shell, Total and the Chinese companies CNPC and CNOOC. These are large, strong companies that will now be able to explore an estimated 8 to 12 billion barrels of oil and 120 billion cubic meters of natural gas over the next 35 years.
Just to give you an idea of what this means, Brazil's entire production in 2013 is expected to be close to 2.1 million barrels of oil per day. The Libra field alone will reach, at its peak, 1.4 million barrels of oil per day. In other words, Libra alone has the potential to represent 67 percent of Brazil's oil production.
However, there are even more impressive and important figures for the Brazilian people. Please pay close attention to what I am about to explain. Over the next 35 years, Libra will pay the following amounts to the Brazilian State: first, R$ 270 billion in royalties; second, R$ 736 billion of "minimum profit-oil" given for the government to sell under the production sharing model; third, R$ 15 billion paid as a signing bonus for the contract. This adds up to the tremendous amount of more than R$ 1 trillion. I repeat: over R$ 1 trillion.
Under the law we have approved in Congress, most of these proceeds will be invested in education and healthcare. That's because the entire proceeds from royalties and half the minimum profit-oil proceeds will become part of the Social Fund (to the amount of R$ 736 billion), 75 percent of which will be invested in education and 25 percent in healthcare.
But the direct social benefits of exploring Libra do not stop there. The remaining income from the Social Fund, in the amount of R$ 368 billion, will be mandatorily invested in the fight against poverty and in development projects in the areas of culture, sports, science and technology, the environment and mitigation of and adaptation to climate change.
My dear friends,
The proper investment of these resources will be enough to allow Libra proceeds to create a small, beneficial and transformative revolution in our country over the next years. But there are still many other benefits that this mega-oilfield will bring us. The policy we outlined requires that the pre-salt oil platforms have a high degree of domestically manufactured infrastructure.
Twelve to eighteen super-platforms will be required for the Libra field alone, and besides these, all other production equipment, such as pipelines, production lines, support boats and subsea equipment will also be manufactured in Brazil. This will generate millions of jobs and contribute to the industrial and technological development of our industrial park and our shipbuilding equipment manufacturing industry, as well as the service providers that work with them. Not to mention that the volume of oil produced will dramatically raise our exports and thus increase the surplus on our balance of trade.
The steps for enabling exploration of the Pre-salt have, so far, accumulated great victories. Future steps will undoubtedly bring new challenges; but I'm certain Brazil will rise to the occasion.
Besides the technological victory of the discovery of these giant deposits by Petrobras, the production sharing model also means that we have produced a great achievement for Brazil. With it, we are ensuring a fair balance between the interests of the Brazilian State and the profits of Petrobras and partner companies. It is a partnership where everyone wins.
As a result of the auction, 85 percent of all income to be produced in the Libra field will belong to the Brazilian government and to Petrobras. This is quite different from privatization. The private partner companies will also benefit. The significant profits they will make from the exploration of this resource are consistent with the risk they assume and the investments they are making in our country. And so it should be. The oil companies are partners seeking to invest in our country, generating jobs and income and, of course, profiting from their investments. Brazil is - and will remain to be - a country open to investment, domestic or foreign, which respects contracts and preserves its sovereignty.
For all these reasons, the Libra auction represents a milestone in the history of Brazil, and its success will certainly be repeated in future Pre-salt auctions. We have begun to transform a finite source of wealth, which is oil, into a treasure that is indestructible: high-quality education. We are transforming the Pre-salt into our passport to a future society that is fairer and that better distributes its income.
The gavel strike that settled the Libra auction today was also our knock on the door to a great future, a door that is now open for us, our children and our grandchildren.
May God continue to bless Brazil.
Thank you and good night.