UPDATE 2-Brazil keeps oil royalty formula; Rio tax fight simmers

viernes 22 de enero de 2016 15:21 GYT

* President holds royalties steady, wins industry applause

* After royalty loss, Rio stands by new oil taxes

* Subsalt break-even cost rises to $60/bbl from $40 - economist (New throughout, adds royalty, details on tax dispute, estimate of tax impact on subsalt oil break-even costs)

By Leonardo Goy and Marta Nogueira

BRASILIA/RIO DE JANEIRO Jan 22 (Reuters) - Brazil will not change the system it uses to calculate oil and natural gas royalties paid by local producers, the government said on Friday, bringing a measure of relief to an industry hammered by plunging crude prices.

The resolution, published in the official gazette, maintains a system used to calculate minimum oil and gas prices. Those prices are used as a basis to calculate royalty payments to the government. The decision was applauded by Brazil's oil industry association IBP.

However, it will likely heighten a dispute with Rio de Janeiro state, responsible for two-thirds of Brazil's oil output and 40 percent of its natural gas. Rio has been pressing the government to update the price methodology.

The dispute has raised the perception of risk in Brazil's oil industry, adding to some investors' to opposition to Royal Dutch Shell Plc's $49 billion purchase of BG Group Plc , Brazil's No. 2 oil producer.

In December, unable to win changes from the government and facing a financial crisis, the state of Rio de Janeiro imposed taxes and fees on oil production.   Continuación...