The provision included at the last minute and without the necessary debate with the productive sector represents a serious barrier to the viability of projects, having been established without any further in-depth technical study. This new framework suppresses the powers and prerogatives of the MME, ANP and CNPE to set local content rates according to the characteristics of each project, in line with international practice, which could even constitute a possible breach of international trade agreements to which Brazil is a signatory, opening the way for challenges at the WTO and other forums.

Changing the rules without proper debate with the sectors involved represents a clear deterioration in the national business environment for investments in the oil and gas sector. The immediate effect of such is the potential loss of attractiveness for the ANP’s next auctions of exploratory areas, hindering the development of future projects in Brazil.

Since May 2, IBP has set up a crisis room with its member companies to map out the impacts, the contingency and mutual support measures and to organize the daily communication of the scenario to the competent bodies.

In this regard, the Institute participates in the meetings of the Situation Rooms, coordinated by the MME, which brings together the other agencies and entities involved in dealing with the situation, to ensure speed in the actions needed to maintain supply.

The state of public calamity affects transportation logistics throughout the region and alters the consumption structure of the various fuels in the different locations, with impacts on the schedule of the operating units. The operations of the local refineries and distribution bases are continuing with their contingencies, intending to serve customers, provide essential services to the population and support victim rescue actions, which are being carried out by the public security and civil defense forces.

At this point, IBP and its member companies are reinforcing our commitment to making the necessary efforts by continually reviewing our operations and logistics and by working together with public entities and other private agents to deal with the crisis.

IBP produces a daily bulletin showing the evolution of the impacts of the rains on operations and logistics flows and the measures being taken by companies and competent agencies.

Click here to access the bulletin.

The fuel distribution, import, and resale sectors – represented by the entities Abicom, Brasilcom, IBP, Instituto Combustível Legal, Fecombustíveis and SindTRR – welcomed the decision of the State of Amapá, through Declaratory Act No. 2024.000010/SEFAZ, which repeals the Declaratory Acts approving Special Regimes for compliance with ICMS obligations. Fifteen (15) Special Regimes were repealed at once.

As stated in the Declaratory Act itself, the repeal originated at the 44th COMSEFAZ Board Meeting and the 192nd CONFAZ Board Meeting, where the fuel sector and the federated units, directly impacted by the tax advantages granted in the aforementioned regimes, brought consistent data and arguments to the forum to support the discussions and subsequent deliberation.

In this regard, the state of Amapá acknowledged the need for the “internal tax legislation to comply with Complementary Laws No. 192/22 and No. 194/22, as well as ICMS Agreements No. 199/22 and No. 15/23”.

Although the repeal is an important step towards tackling the current problem, the sector believes that it is necessary to vote for and pass at the CONFAZ meeting on April 25 the proposed changes to ICMS Agreement No. 85/09 – which standardizes procedures for collecting ICMS upon the entry of foreign goods or merchandise into the country – and ICMS Agreement No. 143/02 – which provides for the fulfillment of tax obligations by the depositary established in a customs enclosure.

According to the sector, the problem will be tackled once and for all, and possible anti-competitive and harmful conduct to the economic order will be inhibited with the repeal of the regimes carried out by the State of Amapá and the passing of the changes proposed and debated in COMSEFAZ.

The organizations believe that this is an important step towards maintaining tax transparency and the suitability of a sector that is of vital importance to the Brazilian economy, and which ensures the daily and regular supply of fuel to all the states of the Federation.

In 2023 alone, the Brazilian oil and gas industry paid BRL 92.2 billion (BRL 53.6 billion in Royalties and BRL 38.6 billion in Special Participation Taxes), according to ANP data. These are important financial resources that help the federal, state, and municipal governments meet their fiscal targets and develop public policies.

The O&G sector was responsible for 10% of Brazil’s industrial GDP in 2020, according to the most recent data from CNI. In addition, exports of oil and oil-derived products have generated a surplus of US$ 80 billion over the last four years (2020-2023) in the country’s trade balance, making it the second most important export item.

Between 2022 and 2031, the sector will invest US$ 183 billion in exploration and production projects and should sustain an average of 445,000 jobs per year in the segment until 2031. In the same period, the exploration and production segment is expected to raise more than BRL 3 trillion (around USD 620 billion) in taxes and government participation. The tax burden in the sector is extremely high – around 70% – which leads to a large collection of general taxes, royalties, and special participation taxes. Even so, governments keep increasing the tax burden.

The Control, Monitoring and Inspection of Oil and Gas Exploration and Production Activities Fee (TFPG) passed in December 2023 in the Rio de Janeiro State Congress, and the Selective Tax, created in the Tax Reform, bring important risks for states and society.

The new taxes will impact investment decisions by companies and potential investors, affecting the attractiveness of the oil and gas sector in Brazil and damaging the country’s competitiveness compared to other regions in the world bidding for capital in oil and gas projects.

New taxes on oil and gas exploration, production, and marketing activities, in addition to having an impact on drawing investments, also affect legal certainty and the confidence of agents and investors in the Brazilian market, with negative impacts on the industry in the medium and long term.

IBP and its members believe that the sustainable and continuous development of the Brazilian oil and gas industry depends on a business environment that values the stability of rules, dialogue between public and private agents, and actions that continue to draw investment into the sector.