Brazil Petrobras Sees Tighter Domestic Drilling Rules On Horizon

By Jeff Fick Of DOW JONES NEWSWIRES RIO DE JANEIRO (Dow Jones)--Brazilian state-run energy giant Petroleo Brasileiro (PBR, PETR4.BR), or Petrobras, expects fallout from the U.S. Gulf of Mexico drilling disaster to reach local shores, with local regulators tightening local regulations. "We can expect some increase in regulations and more requirements in Brazil," Chief Executive Jose Sergio Gabrielli said during a conference call Tuesday with analysts. Brazil, however, already has stiffer safety requirements in place compared with the U.S. Gulf of Mexico, Gabrielli noted. Offshore drilling safety has come under increased scrutiny around the world after a well blowout caused an explosion and fire that sank Transocean's (RIG) Deepwater Horizon rig in the Gulf of Mexico. BP (BP, BP.LN) has struggled to stop the flow of oil from the damaged well, which has caused an oil slick that has damaged shorelines along the Gulf. While the U.S. has imposed a six-month moratorium on offshore drilling in the wake of the Deepwater Horizon accident, Brazilian regulators have also started to look for shortcomings in local requirements. In May, the ANP ordered a review of safety procedures at oil companies drilling in Brazilian waters. The ANP requested information about well-control systems employed by the oil companies. The information will then be reviewed by the ANP, with some companies asked to re-evaluate their emergency plans and submit documentation of their ability to respond in case of emergency. U.S. regulators also granted permission for ANP officials to accompany the investigation of the Gulf disaster. ANP Director Magda Chambriard and coordinator of safety operations Rafael Moura are in Houston as observers. Brazilian officials have been watching developments in the Gulf of Mexico closely. More than 85% of the country's crude oil is pumped from offshore fields in Brazil's own Campos Basin. In addition, the country expects oil production to skyrocket in coming years as the so-called presalt oil fields enter operation. The presalt oil frontier is somewhat similar to the ultra-deepwater Lower Tertiary region in the Gulf of Mexico. The presalt finds were made under a thick layer of salt in the Santos Basin off the coast of Sao Paulo and Rio de Janeiro states. The oil lies under more than 2,000 meters of water and a further 5,000 meters under sand, rock and a shifting layer of salt. In the near-term, BP will likely bear the closest scrutiny from local regulators. The ANP is currently reviewing BP's proposed purchase of Brazilian offshore blocks from U.S. independent Devon Energy Corp. (DVN). The review was part of "normal approval procedures for farm-out operations," an ANP spokesman said earlier this month, but that may no longer be the case. ANP Director Haroldo Lima told local business daily Valor Economico that the agency would wait until a review of what happened at the Deepwater Horizon was ready. "We're not in a hurry," Lima said. In March, Devon sold BP assets in Brazil, Azerbaijan and the deep-water part of the Gulf of Mexico for $7 billion. While the scenario for BP appeared gloomy, Petrobras maintained a brighter outlook despite what may be looming on the horizon. "We are not expecting any material change," Gabrielli said, adding that he expected all of the company's offshore projects to move forward without any delays. -By Jeff Fick, Dow Jones Newswires; 55-21-2586-6085; jeff.fick@dowjones.com (END) Dow Jones Newswires June 22, 2010 14:18 ET (18:18 GMT)