Brazil gov vows opposition to new oil rules

The governor of Rio de Janeiro state, where most of Brazil’s oil production is located, said he opposed changes to regulations that would reduce the state’s tax revenue, a newspaper reported on Sunday, days before the country’s revamped oil rules are unveiled.

Sergio Cabral, a close ally of President Luiz Inacio Lula da Silva and whose party is the biggest in the governing coalition, told O Estado de S.Paulo newspaper it would be “unjust” to reduce the amount of oil royalties and taxes paid to producing states. One of the proposals would place control of oil royalties in the hands of the federal government.

The new rules, aimed at regulating the exploration of vast sub-salt oil reserves, will be released on August 31, the newspaper said. Oil has been found in the ultradeep sub-salt layers that stretch 800 km (497 miles) along the southeastern coast of Brazil and includes Rio de Janeiro, Sao Paulo and Espirito Santo states.

“There is nothing that would let me permit Rio to be robbed,” Cabral said in an interview with Estado. “Sao Paulo will be robbed too.”

The newspaper said Cabral met with Lula last week and discussed his concerns.

Cabral also said it would be “completely absurd” to give state-controlled Petrobras (PETR4.SA)(PBR.N) a guaranteed 30 percent minimum stake in all future oil finds in sub-salt wells. The company lacks resources to invest in developing the wells, which would cause billions of losses to states like Rio de Janeiro, he added.

Rio de Janeiro state received 6.8 billion reais ($3.7 billion) in royalties and other oil-related tax transfers from the federal government in 2008, Estado said.