November 14, 2018 / 9:02 PM / a month ago

UPDATE 1-Petrobras could get about $7.9 bln from contract revision -source

(Adds details of the contract, context)

By Marcela Ayres

BRASILIA, Nov 14 (Reuters) - Brazilian oil company Petroleo Brasileiro SA could receive some 30 billion reais ($7.9 billion) from the government in a renegotiation of the “transfer of rights” oil contract, a person following the process told Reuters on Wednesday.

The money to pay state-controlled Petrobras, as the company is known, would come from a potential auction of excess oil from the “transfer of rights” area off the Brazilian coast, according to the source, part of the team working on the transition to a new government in Brazil. The person, who requested anonymity, said such an auction could raise 120 billion to 130 billion reais next year, if the necessary legislation clears Congress.

American depositary receipts for Petrobras shares added to gains on the news, rising 2.5 percent in New York.

Brazil’s Senate has fast-tracked a bill that would open the way for the auction and possibly for the payment to Petrobras.

A dispute over the oil in question dates back to 2010, when the Brazilian government granted Petrobras the right to extract 5 billion barrels of oil and gas in the offshore Santos Basin. The government received additional shares in Petrobras in return, based on oil prices at the time.

But volume of oil is now estimated to be much larger, and the cash-strapped government wants to sell the rights to extract the extra oil in the area. The choice reserves cannot be auctioned until the government and Petrobras resolve a dispute over the 2010 transaction.

Among other things, the contract stipulated that costs would be reviewed after the area was declared commercially viable in 2014, which has led to years of sparring as oil prices have fluctuated.

The Senate bill also includes a provision allowing Petrobras to cede up to a 70 percent stake in the area to other oil firms.

$1 = 3.7840 reais Reporting by Marcela Ayres Writing by Marcelo Teixeira Editing by Susan Thomas and Dan Grebler

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