OREANDA-NEWS. Brazil's senate approved a bill that removes a controversial mandate for state-controlled Petrobras to hold a minimum 30pc operating stake in all sub-salt oil projects, a step that could lead to greater foreign participation in developing offshore reserves.

The bill approved late yesterday gives the company a right of first refusal for operating future sub-salt projects.

Foreign oil executives have long said that development of Brazil´s extensive sub-salt deposits would advance more quickly and efficiently if Petrobras was not imposed at the helm.

The legislation, introduced last year by senator José Serra, a member of the opposition Social Democracy Party (PSDB), passed by a vote of 40 to 26. Senators from the ruling Workers Party (PT) voted unanimously against the proposal.

"It's a project that breaks Petrobras, because without the sub-salt, it does not survive the crisis, which can be overcome quickly. The oil price goes to $80/bl and it's all settled," said senator Roberto Requião, a PT ally who voted against the bill.

Petrobras has not commented on the legislation so far, but company officials have previously expressed concern that its resources were insufficient to operate all the projects.

Brazil's petroleum law, specifically the provision preserving the 30pc operating stake for Petrobras, has been a source of debate since its adoption in 2010, a few years after the first major sub-salt discoveries offshore.

The law established a production-sharing model in sub-salt contracts, a provision that would not change under the senate-approved bill.

The bill now shifts to the lower congressional house. If approved there, the bill goes to Brazilian president Dilma Rousseff for final approval or a veto. Senior politicians say she is likely to sign the bill into law so long as the final version does not change rules directing the government's share of sub-salt royalties to education programs.

But the political and economic crisis gripping Brazil makes the final outcome difficult to predict. Allegations that top-ranking politicians, mainly from the governing coalition, took part in systemic corruption at Petrobras have eroded traditional political alliances, and fueled multiple efforts to oust Rousseff altogether.

With slim approval ratings, Rousseff relies on the support of the left-leaning faction of the PT and allied labor unions that oppose a smaller role for Petrobras in sub-salt projects.

Brazil has only carried out one auction under the production-sharing model, the 2013 offer of the 8bn-12bn Libra block. The tender attracted one bid, from a consortium comprised of Petrobras, Shell, Total, and China's state-owned CNOOC and CNPC, for the minimum terms established by the government.

Petrobras paid $6bn for its 40pc operating stake in the Santos basin giant, but a surprising lack of interest in the round raised concerns over the practicality of the rules.

Petrobras deteriorating financial profile, the result of lower oil prices and the corruption scandal, has forced the company to cut more than $100bn from planned investment spending through 2020.

Company executives and top government officials have said the firm is unlikely to have the financial capacity to participate in another sub-salt auction in coming years.

At the same time, collapsed oil prices have cast doubt on the economic viability of complex deepwater sub-salt developments.

Brazil´s sub-salt reserves are the backbone of the non-Opec country´s ambitious production growth plans. Sub-salt production set a record 767,000 b/d in 2015, a 56pc increase over 2015. Petrobras accounts for around 70pc of all sub-salt output in Brazil.

Earlier this month, Shell chief executive Ben van Beurden said the company would be ready to step into an operator role should the rules change.