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


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

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.


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  • Brazil: Tax hike in Rio de Janeiro could reduce oil companies' remaining value by 75% PDF - 279.85 KB 7 Pages, 0 Tables, 7 Figures
  • Tax hike RJ could reduce oil companies remaining value by 75pct.xls XLS - 276.00 KB

Description

This Upstream Oil and Gas Insight report highlights the key issues surrounding this topic, and draws out the key implications for those involved.

This report helps participants, suppliers and advisors understand trends, risks and issues within the upstream oil and gas industry. It gives you an expert point of view to support informed decision making.

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  • Government take would double in 2016
  • Taxes add pressure to already low operating margins
    • 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

In this report there are 7 tables or charts, including:

  • Government take would double in 2016
    • Government take in Rio de Janeiro state fields from current and future developments
  • Taxes add pressure to already low operating margins
    • Average for 2016 in select fields
    • Average for all Rio de Janeiro fields 2015-2025
  • Earlier field abandonment would leave 300 mmboe in the ground
    • Rio de Janeiro reserves made uneconomic by new taxes
  • US$153 billion of value lost by E&P companies
    • Remaining NPV10 as of 2016 for top 20 fields in Rio de Janeiro by value
  • Petrobras the most impacted
    • Reduction in remaining NPV10 as of 2016 by company
  • Conclusion
  • Appendix
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