Tax tangle arises as Brazil starts importing U.S. condensate

Petrobras’ move to start buying processed U.S. condensate will help output at its domestic refining network, but the purchases have exposed a wrinkle in Brazilian law that could allow the state-run company to import the light oil duty-free, tax lawyers and traders said.

Typically, condensate is considered a very light form of crude found in oil or natural gas wells and in raw form is not taxable in Brazil.

But condensate arriving from the United States could be subject to Brazil’s CIDE levy because it has been partially processed, they said.

The concept of lightly processed condensate is peculiar to the United States. It arose last year as a way for U.S. producers to have it classified as a refined product to circumvent a decades-old ban on domestic crude exports. With U.S. condensates shipments now hitting the export market, they are causing headaches for bookkeepers in the United States and Brazil.

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