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(Adds Camargo comment, oil policy background)
By Luciano Costa
SAO PAULO, Sept 28 (Reuters) - A bill ending the requirement that Brazil's state-controlled oil company Petrobras lead all new projects in the country's Subsalt Polygon region should become law by the end of the year, the president of oil industry association IBP said on Wednesday.
Petroleo Brasileiro SA, as the company is formally known, has repeatedly said its debt and financial problems have made it impossible for it to take part in large new investments in the Polygon, an offshore region near Rio de Janeiro where several of the world's largest recent oil discoveries have been made.
If such changes are not passed there is a chance that oil rights auctions planned for next year could fail like other recent auctions, IBP President Jorge Camargo said at a conference in Sao Paulo.
"We can only know the degree of attractiveness, the participation of investors in the next auction," he said. "If there is no change, we will repeat the last auction, which was a disaster."
Brazil's Senate has passed a bill easing Petrobras' subsalt rights. It is expected to pass the country's lower legislative chamber sometime after two rounds of municipal elections slated to end on Oct. 30.
After a decade of regular auctions that opened up the country's oil sector to international investment and led to the discovery of Brazil's subsalt region in 2007 and 2008, the governments of Luiz Inacio Lula da Silva and his successor, Dilma Rousseff, moved to increase state control of the sector.
Auctions stopped for five years and Petrobras' was given increasing control of the best new areas.
But when auctions began again, interest dropped off. At the last major sale in October 2015, Brazil was able to sell only 37 of the 226 blocks for sale.
Petrobras, the country's dominant player, did not bid for any blocks.
The company was made the sole operator of all new developments in the Subsalt Polygon, which covers most of the giant discoveries in undersea reservoirs trapped deep beneath the seabed by a layer of salt. Petrobras was forced to take at least a 30 percent financial stake in all such developments.
The company, overburdened with government-mandated fuel subsidies, saddled with nearly $125 billion of debt, and discredited by a corruption scandal soon found itself unable to participate in any new subsalt development.
Ending those requirements is considered essential for the government to find the investment needed to reap the expected tax windfall from the subsalt oil and gas bonanza. (Reporting by Luciano Costa in Sao Paulo, Writing by Jeb Blount in Rio de Janeiro; Editing by Paul Simao)