Brazilian President Dilma Rousseff on Friday vetoed part of a bill that will give a greater share of royalty revenues from the country's vast oil fields to non-producing states.
Rio de Janeiro state officials had warned that without a veto, the measure would deprive Rio of $1.7 billion in 2013 alone, endangering preparations for the 2014 World Cup and the 2016 Olympics. State Gov. Sergio Cabral had threatened to appeal to Brazil's Supreme Court if the state's royalties were reduced.
The legislature's lower house in early November approved legislation for distributing oil royalties more evenly among all of Brazil's 27 states instead of favoring the country's top producers like Rio and neighboring Espirito Santo.
The vetoed part of the legislation calls for decreasing the percentage of petroleum royalties going to producing states from 26.25 percent to 20 percent. Non-producing states that now receive 7 percent are to see their share increase to 21 percent.
At a news conference to announce the veto, the president's chief of staff, Gleisi Hoffmann, said the legislation's royalty-sharing formula will be applied only to future drilling and production concessions. To change those already in operation "would breach existing contracts," Hoffmann said.
A royalty-sharing agreement was crucial for the future development of Brazil's vast offshore reserves that could hold as much as 100,000 million barrels of oil. National Petroleum Agency director Magda Chambriard recently said that until the issue was settled, new contracts to drill for oil could not be granted.
Also at the news conference, Education Minister Aloizio Mercadante said the bill mandates that 100 percent of the revenue from future concessions be used to expand and improve Brazil's educational system.