PREVIEW-Lower fuel prices, tax to hurt Petrobras Q3 net

* June reduction in fuels likely hampered Q3 revenue

* Higher oil helped offset effects of tax, local fuels

By Brian Ellsworth and Denise Luna

RIO DE JANEIRO, Nov 12 (Reuters) - Brazil's state oil
company Petrobras's third-quarter profit will slump 9.2 percent
quarter-on-quarter, analysts polled by Reuters said, driven by
a reduction in diesel and gasoline prices and a tax provision.

Petrobras (PETR4.SA)(PBR.N) will post net profit of 7.02
billion reais, or around $4.10 billion, compared to 7.73
billion reais in the previous quarter, according to the average
estimate of seven analysts polled by Reuters.

Petrobras is scheduled to release third-quarter earnings on
Friday after markets close.

A reduction in government-controlled fuel prices combined
with a 2.06 billion real provision to settle a tax dispute with
the government will more than offset the benefit of a 15
percent rise in international oil prices in the quarter,
analysts said.

Petrobras said in October it settled a dispute with the
federal government and the state of Rio de Janeiro over taxes
on production in the Marlim field, though the company expects
the net effect on earnings to be 1.36 billion reais due to the
associated tax benefit.

"We believe operational margins will fall with respect to
the previous quarter, as a result of the price adjustment in
diesel and gasoline (and) the increase in imports to meet
domestic demand," said Nelson Rodrigues of Banco do Brasil
Investimentos in a research note.

The government, which sets fuel prices in Brazil, in June
cut the price that Petrobras receives for sales in the country
-- a key driver of revenues -- but absorbed the difference
with a tax increase to boost state revenues.

The estimates show a 35 percent drop in profits compared to
the same quarter a year earlier, when oil prices hit their peak
near $150 per barrel before the financial crisis took hold.

Petrobras production in Brazil hit a new record in
September as it boosted output in some wells and brought new
production online.

Brazil's real currency rallied around 11 pct during the
quarter, but the effect on Petrobras is difficult to project
because the company is both an importer and exporter and has
assets both in Brazil and abroad.

The company hopes to turn Brazil into a major energy
exporter by developing subsalt reserves discovered in 2007 that
are believed to contain billions of barrels of crude.

It intends to invest $174 billion through 2013 as part of
broad plan that includes developing the little-explored Santos
Basin that holds the massive Tupi field.

New subsalt exploration has been halted as the government
prepares an overhaul of existing oil legislation expected to
boost Petrobras' role in offshore development and give the
state a greater percentage of revenues.

The following table is in billions of reais.

F'CAST 2009 2009 2008 CHANGE

3RD QTR 2ND QTR 3RD QTR QTR VS QTR
Revenues 46.756 44.605 67.460 4.8 pct
Ebidta 16.241 17.513 15.680 -7.3 pct
Profit 7.023 7.734 10.852 -9.2 pct

($1= 1.723 reais)