Brazil: Tax hike in Rio de Janeiro could reduce oil companies' remaining value by 75%

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Report summary

Rio de Janeiro has approved two new taxes on oil and gas production set to become effective in April 2016 and apply to all fields in the state, which accounts for 70% of Brazil's production. Regulations required for their implementation have not been approved yet, creating uncertainty as to how and when they would come into effect. If these taxes are implemented, upstream companies would lose over US$150 billion of the value remaining in Rio de Janeiro's current fields and future developments. This represents a 77% drop, severely threatening the viability of new investments in the E&P sector. US$110 billion relate to increased government take. This short-sighted initiative would plummet private investment, reducing future tax collection and increasing unemployment levels. We do not expect these taxes to be implemented given their impact, but they signal that Brazil's economic woes might put at risk its excellent record of contract sanctity.

What's included

This report contains

  • Document

    Brazil: Tax hike in Rio de Janeiro could reduce oil companies' remaining value by 75%

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Table of contents

  • Government take would double in 2016
    • Unit operating expenditures in Rio de Janeiro State
  • Earlier field abandonment would leave 300 mmboe in the ground
  • US$153 billion of value lost by E&P companies
  • Petrobras the most impacted
  • Conclusion
  • Appendix

Tables and charts

This report includes 6 images and tables including:


  • Government take in Rio de Janeiro state fields from current and future developments
  • Rio de Janeiro reserves made uneconomic by new taxes
  • Remaining NPV10 as of 2016 for top 20 fields in Rio de Janeiro by value
  • Reduction in remaining NPV10 as of 2016 by company
  • Average for 2016 in select fields
  • Average for all Rio de Janeiro fields 2015-2025

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