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Brazil: Oil & Gas Regulations and Policy: Recent Developments-Brazil Government Takes and the Royalties Dispute

Alexandre B. Calmon, International Mining and Oil & Gas Law, Development, and Investment (2013)

Reviewing the structure of government takes in Brazil, the status and potential impacts of the enactment of Law #12,734/13 on the Brazilian O&G industry is the purpose of this paper.

II. GOVERNMENT TAKES IN BRAZIL

Government takes were introduced in Brazil by Law #2,004/53,13 the same statute that authorized the Brazilian Government to incorporate Petrobras and set the initial guidelines for the Brazilian national O&G policy. Law #2,004/53 provided for Royalties only.

Upon the consolidation of offshore O&G production in Brazil, the Brazilian Government enacted Law #7,453/85, dealing with the obligation of paying Royalties to the States and Municipalities neighboring the production areas when O&G were produced in the continental shelf.

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Further, in its original form the Brazilian Constitution14 provided in its Article 177 that the Brazilian Government could not assign nor grant any type of participation in the exploration and production of O&G. On November 10, 1995, Constitutional Amendment #9 was enacted revising Article 177 to allow the Brazilian Government to contract private or public companies to perform the activities previously comprised within the government monopoly based on laws to be enacted. Nearly two (2) years later, the Brazilian Congress passed Law #9,748/97 (the “Petroleum Law”).

The Petroleum Law se