(Adds comment on Brazil oil legislation, newspaper report)
By Jeb Blount and Marta Nogueira
RIO DE JANEIRO Feb 15 (Reuters) - Royal Dutch Shell, Europe's largest oil company, expects to make robustinvestments in Brazil's offshore, hoping to quadruple oil andgas output there by the end of the decade, its chief executiveofficer said on Monday.
CEO Ben Van Beurden spoke in Brazil shortly after Shell's$52 billion takeover of rival BG Group Plc, approved inlate January, took effect.
He said Brazil will be a key area for the Anglo-Dutchcompany as it focuses its expanded operations in liquefiednatural gas (LNG) and deepwater oil production.
"We believe in the strong fundamentals of Brazil and thefundamentals of its geology," Van Beurden told reporters in Riode Janeiro. "We will be looking at a substantial part of ourproduction from Brazil."
By adding BG's large Brazilian offshore assets, Shell'slocal output rose six-fold to about 240,000 barrels of oil andnatural gas equivalent a day (boepd), or 13 percent of its totalof 1.8 million boepd.
A quadrupling of its Brazilian output would boost productionto nearly 1 million boepd by 2020. Shell is already Brazil's No.2 producer after state-led Petroleo Brasileiro SA, orPetrobras.
In December, Shell and BG had 7.6 percent of Brazil's totaloutput of just over 3 million barrels a day.
The BG takeover also makes Shell the world's largest traderof LNG. While it sells LNG to Petrobras for the Brazilianmarket, Van Beurden and his Brazilian deputy, Andre Araujo,declined to say if they want to buy Petrobras' natural gasassets, some of which are for sale.
Brazil's importance to Shell is expected to increase as itmoves ahead with giant subsalt projects such as Libra, which itis developing with Petrobras, France's Total SA,China's CNOOC, and CNPC.
Subsalt refers to large hydrocarbon resources trapped deepbeneath the seabed by a layer of mineral salts. Libra may holdas much as 12 billion barrels of recoverable oil, according toBrazil's government.
Shell faces serious challenges in Brazil. Oil prices haveplunged since the BG deal was announced a year ago. Petrobras,Shell's principal partner in the country, is in seriousfinancial and legal difficulty after the price drop and amassive price-fixing, bribery and kickback scandal.
Van Beurden, though, said subsalt areas should be able tobreak even at oil prices forecast for this year, without sayingwhat those prices might be.
He said the difficulties facing the country's oil industrymight be eased with more flexible rules for Petrobras' statutoryrole in the development of new subsalt projects. The lawrequires Petrobras to own and finance 30 percent of any newsubsalt project. It also requires that Petrobras manage all newdevelopments as operator.
Petrobras' debt, though, has forced it to cut back, puttingthe development of new subsalt projects, including those withShell, in doubt.
"Brazil might benefit from being a bit more flexible onthis," he said, adding that opening up the subsalt area to morecompanies could attract capital and create jobs.
The Valor Economico newspaper reported on Monday thatPresident Dilma Rousseff may be open to changing the law thatgives Petrobras so much control of the subsalt.
The 2010 law was one of her most high-profile legislativevictories and a key part of her efforts to boost state controlof the oil industry.. (Reporting by Jeb Blount and Marta Nogueira, additionalreporting by Caroline Stauffer in Sao Paulo.; Writing by JebBlount; Editing by David Goodman and Jeffrey Benkoe)
