* Bill shares out Brazil's oil wealth to all states
* Rousseff pressed by oil-producing states to veto bill
* Rio de Janeiro says it won't be able to pay for Games
BRASILIA, Nov 7 Brazilian President Dilma
Rousseff is under pressure to veto an oil royalty bill that will
slash the revenues of Rio de Janeiro state and put the 2016
Olympics and the 2014 World Cup in peril, according to the
The bill passed by Congress on Tuesday cuts royalty payments
to governments where about 80 percent of the country's oil and
natural gas is produced and shares it out more equally among
Brazil's 27 states and more than 5,500 municipalities. It also
redirects royalties to a national fund for social programs.
Rio de Janeiro and Espirito Santo states, which have been
experiencing an oil-led boom, stand to lose most. Rio alone will
lose about $2 billion in 2013 and forgo $39 billion in revenue
by 2020, the state development secretariat said.
"This bill will cause the financial collapse of the state of
Rio de Janeiro," Governor Sergio Cabral warned in Brasilia on
Wednesday. "It's totally unfeasible. The state would have to
close its doors. There would be no Olympics, no World Cup, no
payments for retirees and pensioners."
Cabral said he was confident Rousseff will veto the bill
because it would modify existing oil exploration and production
contracts between companies and the government, a move she has
Rousseff has not decided yet whether to sign or veto the
bill, a member of her cabinet told reporters. She has 15 days to
study the bill and decide.
The bill was passed a year ago by the Senate but held up in
the Chamber of Deputies by opposition from Rousseff and the
three oil producing states. It cleared Congress on Wednesday
with the overwhelming backing of states that produce no oil.
The legislation has been in the works since 2007 when Brazil
discovered some of the world's most promising oil reserves in a
deep-water region now known as the "subsalt".
The New York-state-sized area off Brazil's coast near Rio de
Janeiro and Sao Paulo may contain as much as 100 billion barrels
of oil and natural gas equivalent according the Brazilian
Petroleum Institute at the State University of Rio de Janeiro.
That's enough to supply all U.S. oil needs for more than 14
One reason for Rousseff to veto the bill is that the Rio de
Janeiro state government will almost certainly go to the
country's Supreme Court to contest the legality of altering
A drawn out legal battle would create legal risks for the
oil industry and hinder plans to hold Brazil's first oil rights
auctions in more than four years in 2013, delaying the oil
bonanza expected from the untapped "subsalt" reserves.
Brazil is counting on that wealth to continue the policies
of Rousseff's ruling Workers' Party to reduce poverty and raise
the standard of living in the world's sixth-largest economy.
The emerging market nation is also looking to the windfall
to modernize its dilapidated infrastructure that has become a
serious obstacle to its growth and development.
Congested airports, insufficient public transport and delays
to soccer stadium upgrades have raised concerns about Brazil's
ability to hold the 2014 World Cup soccer tournament and the
Olympics in the city of Rio de Janeiro two years later.
Reducing the state's royalties would make it hard to pay for
the Games, its leading role in the World Cup - the final will be
played in Rio's famed Maracanã stadium - and security measures
that have curbed the city's notorious violence, Cabral warned.