Weekly Report - 18 March 2010 (WR-10-11)

The lower chamber of congress approved a new regime last week whereby the bulk of royalties from the production of Brazil's offshore oil would be split equally between all states and municipalities in the country. This would lead to huge revenue losses for the three main producer states of Espirito Santo, Rio de Janeiro and São Paulo. Significantly, the new regime went against the royalty regime proposed by the government, implying President Lula da Silva is in for a tough ride to approve a new regulatory framework for the country's vast offshore hydrocarbons sector before the congressional recess in July - when the presidential campaign starts for real.