Drop in price impacted royalty revenue throughout Brazil, even so, values are impressive
The year 2023 was remarkable for the oil and gas sector in Brazil, not only due to the distribution of oil royalties that reached billion-dollar figures, but also due to the volatility in the price of oil that directly impacted municipal revenues.
The city of Maricá, in Rio de Janeiro, emerged as the great national champion, receiving the largest share of this vital resource and taking the position that belonged to city of Macaé, previously preferred by companies but which ended up being left behind due to lack of investment in infrastructure. This article aims to analyze the oil royalties scenario in 2023, discuss the implications of the drop in oil prices and explore projections for 2024.
Non-oil producing municipalities also want their share of royalties. Watch the report below:
Distribution of Oil Royalties to Municipalities
In 2023, the total royalties paid by the oil and gas industry in Brazil were R$53,6 billion, representing a decrease of 9,2% compared to the previous year.
Of these, Brazilian municipalities received R$18,15 billion, with Maricá receiving the most significant share of R$2,4 billion, which represents 13% of the total distributed. This amount highlights the importance of oil exploration for the local economy.
Do you know which municipalities received oil royalties in 2023? See the list
| City | Royalties Received (R$) |
|---|---|
| Maricá (RJ) | 2.408.774.084,07 |
| Saquarema (RJ) | 1.724.233.648,74 |
| Macaé (RJ) | 1.298.067.220,27 |
| Niteroi (RJ) | 962.401.773,78 |
| Campos dos Goytacazes (RJ) | 697.700.070,87 |
| Araruama (RJ) | 427.700.028,36 |
| Arraial do Cabo (RJ) | 419.067.124,28 |
| Cabo Frio (RJ) | 339.275.941,55 |
| Rio de Janeiro - RJ) | 306.950.521,88 |
| Ilhabela (SP) | 303.369.233,07 |
Impact of the Fall in Oil Prices
The international price of a barrel of oil has experienced a significant drop, going from an average of US$100 in the previous year to US$82 in 2023. This decline has had a direct effect on the country's total revenue from oil royalties.
Experts from the Brazilian Infrastructure Center (CBIE) and the Pontifical Catholic University (PUC) of Rio de Janeiro point to price volatility and the reduction in volume produced as crucial factors for this result.
Pre-Salt Exploration and the Future of Royalties
The exploration of new pre-salt fields has been a source of optimism for the increase in national oil production, mainly for the state of Espírito Santo, which is hopeful about this collection. Municipalities such as Araruama and Cabo Frio advanced in the ranking due to the exploration of these more productive fields.
The expectation for 2024 is mixed, with forecasts pointing to stability in royalty collection, depending on external factors such as the price of the commodity and production volume.
Projections for 2024 and Beyond
Estimates for royalty distribution in 2024 remain uncertain, subject to external and internal pressures in the oil market. The potential exploration of the Equatorial Margin and the exploratory campaign in the Foz do Amazonas basin are events that could significantly influence the oil royalties scenario in Brazil.
The year 2023 was challenging for the oil and gas sector in Brazil, with the drop in oil prices negatively affecting royalty revenues. However, Maricá's leadership as the largest beneficiary of these resources highlights the strategic importance of oil exploration. The future of oil royalties in Brazil depends on a series of factors, including international prices, exploration policies and discoveries of new productive fields.
