Brazilian federal, state governments battle over new oil rules

August 31, 2009 - 0:0

RIO DE JANEIRO (Xinhua) -- Brazil’s new oil exploitation regulations for the pre-salt layer oil reserves have sparked friction between the federal and state governments, local press said Friday.

The new rules, to be unveiled on Monday in Brasilia, will give the federal government more control over oil exploration and foresee a more equal distribution of oil royalties among all Brazilian states.
Oil producing states will be the most affected as they currently receive a lion’s share of royalties that put billions of reais into their revenues.
In an act of protest, the governors of Rio de Janeiro state and Espirito Santo state, where most of Brazil’s oil fields are located off coasts, said they would not attend the ceremony for the announcement of the rules.
In order to settle the dispute, Brazilian President Luiz InacioLula da Silva invited the two governors for a meeting on Sunday, along with the governor of Sao Paulo state where many of pre-salt oil reserves locate along the coast as well.
Lula will forward the measures to the Congress on Tuesday for an approval. But if the three states do not agree with the rules, the federal government may have serious trouble in passing the bill in the House of Representatives, in which the three states together have almost a quarter of the seats.
Rio de Janeiro state received 6.8 billion reais (3.7 billion U.S. dollars) in royalties and other oil taxes last year.