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Big Oil majors with operations in Brazil have filed an injunction against a new oil export tax that the Lula da Silva government introduced surprisingly a week ago.
The Brazilian government announced at the start of this month that it would collect taxes on crude oil exports for four months in a bid to offset the effects of an earlier decision to keep fuels tax-exempt, Reuters reported at the time.
That decision, however, was made without consulting the industry and it will increase uncertainty about future investments in Brazil’s oil and gas resources, according to Shell, one of the authors of the injunction, which spoke to Bloomberg.
Shell has been joined by the local subsidiaries of TotalEnergies, Repsol, Equinor, and Portugal’s Galp in fighting back against the government’s decision.
“This measure, which was announced with no significant consultation with the industry, brings uncertainty to new investment decisions, negatively impacting the country’s competitiveness in the upstream sector – one where Brazil carries significant geological potential,” Shell told Bloomberg.
The sentiment was recently expressed by a local oil company executive as well. Decio Oddone, chief executive of Enauta and former head of Brazil’s National Petroleum Agency, said the tax decision represents a departure from the country’s tradition of respecting contracts.
Oddone said, as quoted by Reuters, that this tradition has been essential for the success of recent oil and gas tenders, which in turn have led to an increase in oil and gas investments.
"This was fundamental for us to be able to attract that amount of investment that we attracted between 2017 and 2020, which allowed the resumption of production," he said.
Even Petrobras, the state energy major, is not a fan of the new levy. Speaking on the sidelines of CERAWeek, the company’s Jean Paul Prates said, as quoted by Bloomberg, that this was not a smart way to solve Brazil’s money problems and that Petrobras exports would suffer from it.
By Charles Kennedy for Oilprice.com
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Charles is a writer for Oilprice.com