Inquiry Into Oil Company May Hurt Brazil's Fiscal Plan

Brazil’s national oil company, Petrobras, has come under scrutiny in an investigation that threatens to complicate government efforts to wring more revenue from the deepwater oil fields that are expected to transform the country into a global energy power.

The Senate voted last week to investigate whether Petrobras had avoided tax payments and awarded illegal contracts, among other issues. The vote was sealed by senators who oppose President Luiz In
The investigation could prove an embarrassment for Mr. da Silva’s government, which is seeking to overhaul oil legislation to extract a much higher percentage of revenues from the deepwater oil fields, which are expected to hold five billion to eight billion barrels of oil and natural gas.

It could also be damaging to Dilma Rousseff, Mr. da Silva’s chief of staff and his handpicked candidate to succeed him in next year’s presidential elections, since she is also the chairwoman of the Petrobras board of directors. Ms. Rousseff’s ability to make a competitive run for president has already been questioned by some politicians and analysts because she is undergoing treatment for lymphoma, even though doctors say her chances of a full recovery are very high.

The oil discoveries in the Santos Basin, several miles below the water’s surface, are among the biggest ever made in the oil industry. The company plans to invest $111.4 billion to develop the fields through 2020, and the first commercial oil production is scheduled to begin in late 2010.

“The big question now is whether the government has enough time to complete the oil reform law before Lula is out of office” at the end of 2010, said Marcos Tavares, director of Gas Energy, an energy consulting firm based in Porto Alegre, Brazil.

New York TImes