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Rio de Janeiro opposes Petrobras deal

November 15, 2010 by  
Filed under Oil News

Energi ;  The Brazilian state of Rio de Janeiro has asked the nation’s top court to declare the unconstitutionality of state oil company’s Petrobras oil-for-shares swap with the Brazilian government.

News wires 15 November 2010 03:38 GMT

Rio de Janeiro authorities argued to the country’s Supreme Court that the operation, in which Petrobras used company shares to buy oil development rights from the government, would unfairly deny tax revenues to the state, O Globo newspaper and the Estadao news service reported.

The move could heighten a dispute over oil royalties that threatens to further delay a legal overhaul of oil laws proposed last year by President Luiz Inacio Lula da Silva as part of efforts to boost control over offshore oil reserves.

Petrobras in September issued $70 billion in shares and used some of them to buy rights to develop deep water offshore reserves, a complex operation that required congressional approval.

Rio de Janeiro authorities argued the arrangement violated the constitution by exempting Petrobras from paying a “special participation” tax on that oil. Rio said the exemption would cost it billions of dollars in lost revenues, Estadao and Globo reported.

A Petrobras spokeswoman did not immediately respond to requests for comment.

Lula’s legal overhaul, intended to give the government greater revenues from the vast crude reserves in an offshore region known as the subsalt, has been delayed by wrangling among states over how to distribute royalties from that oil.

Producer states, most notably Rio de Janeiro, are trying to maintain the lion’s share of those revenues while states without oil reserves argue they should be divided among all states.

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