Brazil Court Denies Petrobras Injunction in Tax Dispute

RIO DE JANEIRO - Brazil's second-highest court denied late Thursday a request by state-run oil company Petroleo Brasileiro, or Petrobras, for an injunction in a dispute over tax payments for offshore oil-platform leases.

The ruling temporarily makes Petrobras ineligible to participate in government tenders, including the upcoming auction of Brazil's first presalt oil and natural gas exploration acreage set for Oct. 22 in Rio de Janeiro, because the company now has an outstanding debt with local tax authorities, a court official said. Brazil's new production-sharing regime, however, requires Petrobras to hold a 30% operator stake in the area to be sold.

The outstanding tax obligation also means Petrobras isn't allowed to carry out import or export operations, but Petrobras said Friday it would restore the necessary tax certificate in a "brief amount of time."

Petrobras "assures that there is no risk of disruptions to oil or product supplies or operations," the company said in a statement.

The court ruled that the injunction couldn't be granted before a lower court had ruled on Petrobras's appeal of a tax case brought last year by Brazil's Internal Revenue Service for unpaid taxes between January 1999 and December 2002. The tax authority sanctioned the company for not deducting income taxes for lease payments on offshore oil platforms made to companies operating in countries with more favorable tax rates.

Petrobras said it was taking "all necessary measures" to appeal the decision. In November, Petrobras said that possible losses related to the dispute were estimated at 4.78 billion Brazilian reais ($2.24 billion).

Gerald Jeffris in Brasilia contributed to this report.

Copyright (c) 2012 Dow Jones & Company, Inc.

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