Jeff Fick – Fox Business/Dow Jones Newswires, 03/14/2013
The threat of lawsuits by major oil-producing states Rio de Janeiro, Espirito Santo and Sao Paulo to fight the equal distribution of royalties from existing and future oil production between Brazil’s 27 states does “raise the risk” of a delay, QGEP Chief Executive Lincoln Guardado said Thursday during a conference call with analysts. The risk, however, has been diminished by recent signs that nonproducing states are willing to negotiate a deal to avoid a protracted fight in the courts.
The deal would reverse changes implemented last week when Brazil’s Congress voted to overturn a presidential veto of key portions of new oil-royalties legislation, equally distributing royalties from existing and future oil production between the country’s 27 states. Rio, Espirito Santo and Sao Paulo, however, plan to fight the changes by filing lawsuits with Brazil’s Supreme Court.
Oil companies are eagerly awaiting Brazil’s 11th-round auction of oil and natural-gas-exploration concessions, which is set for May 14-15. The last auction in Brazil was held in December 2008, and oil companies have said they are running out of areas to explore. Given the government’s desire to promote the bidding round, even if there is a delay because of a legal tussle the auction, “should still be held in the first half of 2013,” Mr. Guardado said.