One of Brazil's 1950s monoliths and its largest company by assets, Petrobras had enjoyed an iron grip on the nation's oil and gas rights since it was founded 46 years ago. All that changed when the government's watchdog National Petroleum Agency (ANP) rescinded the monopoly in 1997 and allowed foreign firms to bid for concessions to explore and produce oil in competition and partnership with Petrobras.

The key to Brazil's oil production is the Campos Basin with its 44 separate fields, named after types of fish, located off the coast of Rio de Janeiro. Together, they account for just over 75 per cent of the national output. Oil was only discovered in commercial quantities at Campos in the early 1970s -- and exploration has not stopped since.

On the basin's eastern edge in the huge deepwater Marlim field lies the flagship P-XVIII platform, fastened to the seabed by a network of anchors in stunningly clear water and surrounded by hundreds of needlefish.

Floating some 160 km (100 miles) offshore where a tilt of just five degrees will shut down production, it processes 1,00,000 barrels of oil per day (BPD) against the overall Campos output rate of more than 7,00,000 BPD."This basin has a vocation for producing oil, it never dries up," said Luiz Rodolfo Landim Machado, Petrobras' general manager for exploration and development in the Campos Basin.

"But we understand now that we have to function as a competitive company and we are on our own, the monopoly is behind us. Culturally, we have already made the transition and today we are much closer to other companies such as Shell and Exxon than to the ANP," he said. The ANP allowed Petrobras to retain almost all the concession areas it had wanted, including its Campos sedimentary areas. But it also lifted the monopoly over nearly all ofBrazil's vast sedimentary basin, most of which is unexplored and now open to development by private firms.

Petrobras now plans to modify its company charter by lifting restrictions on foreign investors, many of whom have already been signing exploration and development deals with the Rio-based state Goliath.

Analysts say the move will pave the way for an international group to buy a stake in Petrobras when the state sells its excess shares.

The government plans to sell its 34 per cent stake while retaining overall control through a 50 per cent participation plus one share. No timeframe for the sale has been formally set.

Large international oil companies have been sniffing around for a direct stake as Petrobras still controls access to much of Brazil's vast oil and natural gas reserves, estimated at 17 billion barrels in oil equivalents. Of this amount, the Campos area accounts for 14.2 billion barrels, and also 7.0 billion of the 8.8 billion barrels of Brazil's proven oil reserves.

The network ofplatforms pipe 40 per cent of their oil to a supply terminal at the nearby coastal town of Macae, from where it is pumped to the company's flagship refinery at Duque de Caxias, just outside the city of Rio de Janeiro.

Some of the crude oil is then sent to other refineries. The remaining 60 per cent output is put onto small tankers.

With the tide of change flowing through Brazil's oil sector, Petrobras will see all its extraction operations become more expensive, particularly in the prized Campos fields where Landim said newly-agreed taxes would hike costs by 40 per cent.

When the company signed 397 concession contracts last year, the government set four main tax criteria which were designed to ensure that its foreign partners had the financial and technical capacity to develop the fields. "Taxes are going up to 40 per cent here. There are countries where the tax is higher, Venezuela for example," Landim said.

"The government wants to open up the petroleum sector. But they have to take care that thesetaxes do not get so high that it acts as a deterrent to people wanting to invest here and they go to other countries," he said. When the US-based Texaco Inc., held its global board meeting in Rio last year, top executives said Brazil still lacked good competitive terms to develop its oil industry.

"There are issues that concern us," chairman and chief executive officer Peter Bijur said. "It is critically important that Brazil be competitive with the rest of the world in terms of incentives provided to attract capital." Petrobras is keen to boost the already high recovery rates at Campos, where most wells are quite deep at over 1,000 metres (3,280 feet), as part of its programme to raise domestic output. The company has declared a target of 1.5 million BPD by the end of the century, of which 1.2 million will come from Campos. National output reached 1.21 million BPD in January, a rise of 26 per cent over the same month of the previous year.

By comparison, neighbouring OPEC power Venezuela produced 2.94million BPD in February, above its agreed target of 2.85 million. Argentina's daily oil production was around 9,00,000 barrels last year and Ecuador weighed in with 3,90,000 barrels.

"The petroleum industry is always developing more sophisticated technology to get a higher recovery rate," Landim said, but added that a steady flow of oil to the surface had to be maintained if deep-drilling was to be economically viable.

"If you start to reduce production, the pressure goes down...and in the long term you have to create artificial extraction methods. So it gets uneconomical," he said.

The company is regarded as a world leader in deepwater oil production and has set numerous depth records. The most recent was in January at the basin's largest field Roncador when drilling stretched down to 1,853 metres (6,078 feet).

"Our exploration is already working at 2,000 metres (6,560 feet) and the day will come when we're producing at that level. We have all the technology to produce at that level and we have a lotof people researching it," Landim said.