Date ArticleType
12/1/2017 Member News
Brazil Lower House Extends Oil Industry Customs Regime

November 29, 2017 / 7:36 PM

Brazil lower house extends oil industry customes regime

Reuters Staff

BRASILIA (Reuters) - Brazil’s lower house of Congress on Wednesday approved the basic text of a decree that extends for 20 years a preferential customs regime for the oil industry, a measure that has helped make Brazil attractive again to major global oil companies.

The chamber must still vote next week on several amendments to the presidential decree, but the extension of the so-called Repetro scheme is expected to move ahead to the Senate for final approval before the Dec. 15 expiry date.

The customs regime, passed by 208 votes to 184, suspends export and import duties on goods used in oil exploration and production. It has been an incentive for long-term investment in Brazil’s oil and gas industry and helped generate global interest by oil majors in this year’s oil bloc auctions.

Last month, Brazil awarded six blocks in an auction of areas in the coveted pre-salt region, where billions of barrels of oil are trapped below thousands of feet of salt in the country’s Atlantic waters.

The auction was seen as a test of whether market-friendly reforms under President Michel Temer could bring investors back to an oil industry struggling from years of government meddling and tarnished by a corruption scandal at state-run oil company Petroleo Brasileiro SA or Petrobras.

Leftist lawmakers, one after another, blasted the decree for four hours to try to block a vote, arguing that it handed over Brazil’s oil riches to foreign companies such as Royal Dutch Shell and BP Plc and deprived the treasury of tens of billions of reais in tax revenues.

They said it would sink the national shipbuilding industry that makes off-shore oil platforms. The decree’s backers said it would allow the industry to purchase cheaper equipment abroad.

According to oil industry lobby IBP, the Repetro scheme will attract $132 billion in investments over the next five years in exploration and production by giving Brazil a tax regime similar to that enjoyed by oil companies in other countries.

“It is fundamental for the recovery of the oil industry. Without Repetro there will be no oil and gas industry in Brazil,” IBP president Jorge Camargo said.

Reporting by Anthony Boadle; Additional reporting by Maria Carolina Marcello and Marta Nogueira; Editing by Sandra Maler and Grant McCool