MercoPress. South Atlantic News Agency

Brazil considering higher taxes for new oil explorations

Petrobras CEO, Jose Sergio Gabrielli

Brazil is considering raising taxes paid by companies to explore for new oil and gas fields in the country to take into account recent big finds in the sub-salt cluster, Brazilian energy Minister Edison Lobao said on Tuesday.

The news was also confirmed by the country's government managed oil corporation Petrobras CEO, Jose Sergio Gabrielli who said the risk/return equation must be re assessed to different scenarios. The possibility of a change follows the huge find at the Tupi oil field by Brazil's government managed Petrobras announced in late 2007. Tupi, according to Petrobras has estimated recoverable light oil and gas reserves of between 5 billion and 8 billion barrels. Lobao did not specify whether the tax increase would be through a rise in royalties paid by the companies or through an increase in the government's take in the projects. "The increase could be done, but in the future" added Lobao. Brazil's most recent auctions of oil and gas exploration concessions involved record premiums, he said. "This shows that a revision could be made to improve the process and update it. Regulations are always evolving" he said. Petrobras CEO Jose Sergio Gabrielli said later at a separate event that he backed a possible change for future concessions as exploration risks have diminished after the Tupi find and other promising sub-salt discoveries deep under the ocean floor. He defended higher returns to the government. "In the world there are different kinds of regulations. Higher risk areas give higher returns for investors; lower risk areas have other models," Gabrielli said. "Personally, I think we need to analyze the change in exploration risk in the sub-salt cluster. It has to be modified," he added. Brazil has been under strong pressure to licence exploration areas in the vecinity of the Tupi field. In related news Gabrielli said that the US recession will have an impact in the world oil market and crude prices. Speaking before an Oil and Gas Forum in Rio do Janeiro Gabrielli said much would depend on how the real economy evolves, "but demand is going to drop" Furthermore investors will want to adjust their portfolios to the new reality indicated Gabrielli who forecasted "highly liquid capital" movements in search for profits because the Federal Reserve is pumping money into the system and lowering interest rates, which makes investors leave US dollar denominated assets. "We anticipate, as the recession advances, a fall in the international crude price, or at least a permanent oscillation", he said.