the state of Rio de Janeiro US$2bn a year and lead to its financial collapse,,, JR comments

New royalties bill will leave Rio de Janeiro in financial ruin..

Brazil's controversial new oil and gas royalties bill will cost the state of Rio de Janeiro US$2bn a year and lead to its financial collapse, governor Sérgio Cabral said on Wednesday.

The national congress on Tuesday approved the legislation, which decrees the gradual inclusion of each of the country's 26 states and the federal district in the redistribution of public oil and gas revenue.

Speaking before a meeting in Brasília with the country's finance ministry, Cabral was adamant President Dilma Rousseff would veto the bill.

"It's absolutely unviable - the state will shut down," Cabral said. "There will be no Olympics in 2016 or World Cup in 2014, public servants won't be paid, nor will retirees and pensioners."

"I'm at ease because the president [Rousseff] has already publicly announced that she will not sanction a law that has implications on current contracts. It's obvious that this is unconstitutional and the president will veto it."

But local media reported Rousseff cannot oppose the bill without postponing the new licensing round for pre-salt blocks planned for November next year.

Under current laws a percentage of federal oil and gas revenue is redistributed exclusively to traditional oil-producing states Rio de Janeiro, São Paulo and Espírito Santo.

The remaining 23 states and the federal district claim they have a right to the share on the grounds oil is a national resource.

In 2012 Brazil's oil and gas royalty pool will reach US$13.5bn, according to government figures.