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Brazil’s customs regime renewal raises concern for oil companies

Brazil’s customs regime renewal raises concern for oil companies

RIO DE JANEIRO: With only two months left to the 14th licensing round for areas offshore Brazil, oil companies await renewal of one of the country’s most important investment incentives.

Known as Repetro, the special customs regime issued by Brazil’s energy ministry applies to the export and import of goods used in the exploration and drilling for oil and gas reserves. The customs regime suspends federal taxes and administrative fees such as the Contribution for Renovation of the Merchant Fleet charged on the import of goods. Repetro was established in the 1990s, and it is scheduled to expire in 2020.

Brazil’s finance and energy ministers have discussed the renewal over the past months, and the CEOs of major oil companies have stressed the urgency of renewing Repetro to attract oil and gas investment ahead of the upcoming auctions.

Without the special customs regime, import duty could reach between 45% and 65% of the total investment, said Antonio Guimarães, executive secretary of E&P for the Brazilian Institute of Petroleum, Gas and Biofuels. “It means that without Repetro many projects would not be viable,” he added.

However, not having the renewal before the auction date will not jeopardize investments from oil and gas companies, according to Décio Oddone, general director for Brazil’s oil regulator ANP.