Brazil to Propose New Tax on Newfound Offshore Oil

Dow Jones Newswires

RIO DE JANEIRO (Dow Jones Newswires), Jun. 8, 2009

The Brazilian government will propose an additional tax on crude oil produced from the country's newfound offshore deposits, the O Estado de S. Paulo newspaper reported Monday.

The tax will be part of a new regulatory regime proposed by a government panel studying possible changes to Brazil's oil laws, the report said. The proposals are expected to be unveiled on June 18.

Proceeds from the tax will go into a new social fund, and will be in addition to royalties and special participation taxes currently imposed on oil production.

The proposed changes will also include a mixture of production-sharing agreements and the concession system currently in place, the report said. Under the new system, the government will decide which offshore exploration and production blocks will be auctioned off or be covered by production-sharing deals.

A new wholly state-owned company, dubbed Petrosal, will also be created to manage the subsalt blocks currently under government control.

The majority of current concession contracts will be maintained, although exploration and production blocks that intersect with subsalt reserves could be altered, the newspaper reported. Meanwhile, the current system of royalties participation will be left alone in order to speed the law's passage through Congress.

Brazilian Mines and Energy Minister Edison Lobao said last week that the interministerial panel will complete its work on the new oil regulations by June 15. President Luiz Inacio Lula da Silva formed the working group last year, tasking it with finding ways to maximize the government's stake in the so-called subsalt oil deposits.

The new regulations will cover exploration and development of Brazil's subsalt reserves, located deep off the country's Atlantic Ocean coast. Congress would be expected to pass the legislation in about six months.  

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