RIO DE JANEIRO - Brazil's second-highest court granted state-run oil company Petroleo Brasileiro an injunction late Friday that suspends an outstanding tax bill, ensuring supplies of crude oil and fuels to Latin America's largest economy won't be interrupted.
The latest decision, part of a flurry of legal maneuvers over the past 24 hours, restores an important tax certificate that Petrobras needed to carry out imports and exports of crude oil and other products such as gasoline and diesel. The tax certificate shows that the company does not have any outstanding tax obligations with the country's tax authority.
Earlier Friday and Thursday, the same court and a lower appeals court had both rejected Petrobras appeals of the tax dispute, which involves income-tax payments related leases for offshore oil platforms. Local tax authorities said last year that Petrobras owed 7.4 billion Brazilian reais ($3.45 billion) in back taxes, although the company estimated possible losses related to the dispute at BRL4.78 billion.
The size of the tax bill in question "is sufficient to demonstrate that its immediate requirement to pay displays the potential to damage the normal activities of the company," Judge Benedito Goncalves said.
Petrobras had earlier pledged to restore the tax certificate in a "brief amount of time" and sought to calm concerns about potential fuel shortages by saying that Brazil was not at risk for a disruption in crude oil or fuel supplies. The tax dispute upset investors, however, who fled the company's shares. Petrobras ended trading Friday down 3.9% at BRL18.06.
The loss of the tax certificate, however briefly, temporarily made 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. Brazil's new production-sharing regime requires that Petrobras to hold a 30% operator stake in the area to be sold.
Analysts and oil industry consultants said that the issue would be resolved quickly. While the government would not allow crude oil and fuel supplies to be disrupted, the case showed a lack of communication between government institutions and state-run entities.
"The government, regulators and state companies don't talk to each other. How could they let an issue of this kind of weight be pushed to the brink?" noted Adriano Pires, director at the Brazilian Infrastructure Center consulting group. "It also shows that Petrobras should have dealt with this tax issue more quickly."
Petrobras typically holds up to 60 days worth of crude oil stocks at its refineries, but the stocks of fuels and other products are kept much tighter at about a week, Mr. Pires said. With inflation on the upswing and growing protests over recent increases to public bus fares in Rio de Janeiro and Sao Paulo, Mr. Pires said "the government is not going to let there be a shortage of gasoline" in Brazil.
The dispute involves Petrobras's fight against 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.
Copyright (c) 2012 Dow Jones & Company, Inc.
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