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Shell’s Odum Says Brazil Oil Rules to Lure Spending

By Carlos Caminada and Jeb Blount

June 9 (Bloomberg) — Royal Dutch Shell Plc, Europe’s largest oil producer, is “confident” Brazil will establish rules that will attract exploration and production investments to the country’s so-called pre-salt area, an executive said.

The Hague-based Shell, which has invested $2.8 billion in crude exploration and production in Brazil since 1998, will hold off on spending plans for the pre-salt area until rules are clear, said Marvin Odum, head of the company’s oil and exploration for the Americas.

Brazil’s pre-salt region runs about 800 kilometers (500 miles) along Brazil’s coast near Rio de Janeiro and Sao Paulo. Brazil’s oil regulator says the area may have as much as 100 billion barrels of oil. That’s enough to supply all U.S. needs for about 13 years.

“My confidence is very high,” Odum said today in an interview in Sao Paulo. “Brazil has been in the business for a long time.”

Auctions of rights to explore for oil in the pre-salt region have been halted since November 2007 when Petroleo Brasileiro SA, Brazil’s state-controlled oil company, BG Group Plc and Galp Energia SGPS SA announced the Tupi discovery. The largest oil find in the Americas since Mexico’s Cantarell in 1976, it holds 5 billion to 8 billion barrels of oil.

Since then a committee of Brazilian government ministers and the chief executive officer of Petrobras have been reviewing changes to Brazil’s oil rules, including auction rights, to give the government more control and revenue.

Respecting Contracts

The regulations, which Brazil aims to approve later this year, must ensure existing and future contracts are respected in order to entice investments, Odum said.

Brazil’s President Luiz Inacio Lula da Silva has said that any new rules won’t alter existing exploration and production contracts already sold to Brazilian and foreign oil companies.

Pre-salt oil and gas sits more than 200 kilometers from the Brazilian coast, in waters more than 2,000 meters (6,560 feet) deep and beneath another 5,000 meters of sub-sea rock and salt.

To contact the reporters on this story: Carlos Caminada in Sao Paulo at[email protected]Jeb Blount in Rio de Janeiro at[email protected]

Last Updated: June 9, 2009 14:23 EDT 

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