Introduction
The Brazilian Senate voted on 19th October 2011 in favour of a
proposal to change the allocation of oil revenues amongst
Brazil's federal government, its 26 states and 5564
municipalities. For this to become law, it now needs to be approved
by Congress. The proposed reform will have the effect of
redistributing royalties away from the oil producing states of
São Paulo, Rio de Janeiro and Espírito Santo, in
favour of non producing states and municipalities. It is estimated
that Rio de Janeiro alone will lose US$2.42 billion in 2012 and
US$4.23 billion in 2013. While, at first sight, the internal
wrangling between states of the Brazilian Federal Republic may not
appear to be of great importance and will not, for example, affect
the level of royalties payable by oil companies, the completion of
this debate is critical for the oil and gas industry in Brazil.
Until this dispute is resolved and the accompanying legislation is
put in place, the 11th licensing
