BRASILIA (Dow Jones Newswires), Jun 03, 2008
Brazil's government should revise surcharges on oil production by private sector companies to increase state revenues, the director of the country's National Petroleum Agency regulatory body, Haroldo Lima, said Tuesday.
Speaking before the Brazilian Senate Economic Affairs committee, Lima said the increase of oil prices together with the recent discovery of large offshore oil reserves has made revision of taxes on oil production, known as "special participation," an urgent matter.
"The alteration in special participation could be made by presidential decree," Lima told senators on the committee. Lima said revising the rules through legislative measures would be more time consuming and complicated.
Brazil currently charges private sector oil companies a surcharge up to 40% on oil sales. Companies producing less than 2.8 million barrels quarterly are exempt from the tax, however.
Lima argued that the legislation, introduced in 1998, has become obsolete with a surge in oil prices to over $130 per barrel and the recent discovery of a vast deep-water oil reserve known as "Tupi" off the country's southeastern coast.
Speaking separately in the committee Tuesday, Sergio Gabrielli, president of the state run oil firm Petroleo Brasileiro SA (PBR), or Petrobras, said he agreed that tax rules for the sector should be revised, but said the changes should be made be made by decree.
"I defend the revision of regulation on exploration and production, but it's up to congress to make these changes," he said.
Also Tuesday, Gabrielli said he believed that oil blocks bordering the Tupi pre-salt oil area should not be put up for bidding to private sector players pending further review of the area's potential.
In November, shortly following the discovery of the area, Brazil pulled 41 blocks from near the Tupi from bidding in its annual oil auction.
According to some estimates, the area could contain up to 8 billion barrels of oil equivalent. Petrobras recently said it would begin long-term production tests in Tupi starting in 2009.
Copyright (c) 2008 Dow Jones & Company, Inc.
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