Law changes won't slow Iara oil field: Petrobras

RIO DE JANEIRO, July 14 (Reuters) - Brazil's state-run oil company Petrobras will start production in the offshore Iara field even if Congress does not approve new rules for divvying up oil fields partly owned by the state, a Petrobras official said on Tuesday.

Analysts say development of Brazil's massive sub-salt reserves could be slowed by a legislative overhaul of oil laws that would affect "unitization," the process of dividing up fields that extend beyond their original exploratory blocks.

Petrobras discovered the Iara field after exploring the BM-S-11 block that it won via auction, but part of the field lies in waters the state has not yet auctioned off.

Petrobras Sub-Salt Manager Jose Formigli said the company could begin preliminary production at Iara without the need for new legislation as long as it previously negotiated the unitization with Brazil's petroleum agency, or ANP.

"In unitization, according to the law I can advise the ANP and the ANP will temporarily represent the state to carry out that negotiation," Formigli told reporters.

Iara is the only field in Brazil's sub-salt reserve that has been officially designated for unitization, though officials have said a number of the major discoveries may have linked reserves.

Britain's BG Group (BG.L) and Portugal's Galp (GALP.LS) are Petrobras partners in the Iara field.

The government of President Luiz Inacio Lula da Silva wants to change laws governing oil reserves to ensure the government keeps its fair share of new-found wealth.

It halted new auctions for exploration almost two years ago while it prepared the changes, but still has not presented a formal proposal.