"O petróleo é nosso", went the nationalist slogan that caught the mood during the creation of Petrobras, Brazil's government-controlled oil company, more than 50 years ago. Now the phrase and the nationalism are back.
President Luiz Inácio Lula da Silva used the slogan last week while giving public support to the idea of creating another national oil company, this one 100 per cent state-controlled - unlike Petrobras, which has more than 60 per cent of its mostly non-voting capital in the hands of minority investors. The new company would manage the apparently vast new discoveries of oil in pre-sal (pre-salt) fields off Brazil's coast.
Few would question that the pre-sal fields require new rules. Since Petrobras's monopoly was broken in 1997, Brazil has operated a concessions system under which oil companies, often but not only in partnership with Petrobras, buy the right to explore blocks of" Brazilian territory, mostly off shore. In return for the associated risk, they have rights over any oil they discover, paying royalties to the government. In especially productive oil fields, royalties are especially high.
The pre-sal fields, as their name suggests, are trapped beneath a layer of salt far beneath the sea-bed, under very deep water. They are among the most inaccessible oil deposits on earth. Once past the salt, however, the chances of finding oil have so far turned out to be 100 per cent. The exploratory risk appears to be close to zero.
It seems reasonable, then, that oil companies should get less reward for taking risks in blocks over the salt layer. Among the alternatives, the simplest and most obvious course is to continue selling concessions, but to charge much larger royalties, allowing oil companies a decent return on their operational investment while ensuring that the benefits of Brazil's new oil wealth go mostly to the Brazilian people.
But Lula and his advisers like the idea of a new oil company, already dubbed Petrosal. It would not be operational: it would merely own the reserves and control production. One of its attractions is that, unlike Petrobras, it would not share its revenues with (mostly foreign) minority investors.
Bizarrely, another justification for creating Petrosal is that it would not become powerful enough to present a threat to the government (as Venezuela's PDVSA became a threat to the government of Hugo Chávez in 2002).
The proposal has already stirred up a storm of opposition, even hmong government supporters. Francisco Dornelles, a pro-government senator, described the idea as "an assault on Petrobras's minority shareholders". Foreign oil companies are equally dismayed.
But the biggest danger lies in that old slogan, "The oil is ours."
Devoid of any practical application, it is rich with meaning. It means not just that nationalism, never far beneath the surface of Brazilianm politics, is rising again. It also means "The money is ours." The government has caught a whiff of oil wealth, and it is a heady scent.
There has been some reluctant recognition recently of the need for restraint in government spending to balance public accounts. It would be wrong to change course on the anticipation of windfall revenues.