Brazil's socialist government has decided not to hold an auction this year for uncontracted offshore pre-salt oil areas, Planning Minister Bruno Moretti said on Friday.
Speaking at a press conference, he said the decision led the government to remove an estimated 31 billion reais ($6.2 billion) in expected revenue from this year's fresh budget projections.
"We will return to the issue, structure the auction and it will certainly be relevant in a future fiscal year to help meet our primary balance targets," Moretti said.
The auction would have covered oil fields already in production but not yet contracted, effectively granting companies the right to profit from additional output.
Last year, a similar auction raised 7.8 billion reais for the government, falling short of initial expectations.
Moretti said the decision to postpone the auction reflected feedback from market participants, who view it as a relatively new and still evolving model.
The government also considered it "complex" to move ahead in the current environment of heightened uncertainty, said the minister, amid volatility in oil prices linked to the US-Israel conflict with Iran.
Moretti also said the country's far-left president Luiz Inacio Lula da Silva is expected to clear on Monday a previously announced gasoline subsidy aimed at cushioning consumers from the impact of the Middle East conflict, after the CEO of state-run oil giant Petrobras signaled a future fuel price increase.
The subsidy will amount to 0.44 reais per litre, at an estimated monthly cost of 1.2 billion reais to the federal government, Moretti said, adding the measure also hinges on a forthcoming Finance Ministry decree.
Under the plan, the subsidy will initially be paid directly to gasoline producers and importers through oil regulator ANP.
Asked whether the subsidy would fully offset Petrobras’ upcoming price increase, Moretti said the magnitude of any adjustment falls under the company's responsibility.
(Reporting by Marcela Ayres; Editing by Nia Williams)