Brazil Congress quashes veto of oil royalty share-out

Brazil's Congress revived legislation that gives a greater share of the country's oil royalties to non-oil producing states, overriding a veto by President Dilma Rousseff.

The decision, announced to AFP by the general secretariat of the Congress Thursday, means royalties in existing and future contracts will be shared more evenly between oil-producing and non-producing states.

Last November, Rousseff vetoed an article in the law that provided for a more equitable sharing of royalties among the 26 states and the federal district of Brasilia.

She questioned the fact that contracts signed before the bill was approved would be affected retroactively.

The measure would cut the federal government's share from 30 to 20 percent, and that of producing states from 26 to 20 percent.

And non-producing states in turn would see their oil royalty revenues rise from seven to 21 percent by 2013, and up to 27 percent by 2020.

But Congress overrode the presidential objections in a session that began late Wednesday, with the outcome disclosed Thursday.

Three of Brazil's 26 states -- Rio de Janeiro, Sao Paulo and Espirito Santo, produce most of the country's oil. They had put intense pressure on Rousseff to veto the new share-out plan.

Rio Governor Sergio Cabral even warned the new scheme would cripple the state's finances and jeopardize the financing of the 2016 Rio summer Olympics.

Lawmakers from the three oil-producing states announced that they would appeal to the Supreme Court to declare the congressional move unconstitutional.

In the meantime, the congressional decision will go into effect as soon as it is promulgated by the president in the coming weeks.

Anticipating Congress's move, Rousseff said Tuesday that she deplored it but "will be obliged to apply the law".

Rousseff's veto was meant to maintain the previous share-out plan favoring oil-producing states for existing contracts, while establishing the new royalties distribution rules for future contracts.

Oil-producing states anticipate higher revenues from so-called "pre-salt," deep-water reserves discovered in 2007 off Rio de Janeiro state.

The huge pre-salt reserves could hold more than 100 billion barrels of high-quality recoverable crude and turn Brazil into one of the world's top exporters, according to the National Petroleum Agency.

State-run energy giant Petrobras extracts most of the two million barrels produced daily in Brazil, where other national and foreign firms such as Anglo-Dutch Shell, Norwegian Statoil and US Chevron also operate.