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Trends and Developments
The Brazilian energy matrix is diversified, and the importance of oil and gas is growing in the country. Oil and gas currently represent 14.74% of energy usage – still relatively low when compared with hydropower which provides 60.97% of total energy demand.
Petrobras recently announced its 2018–22 investment plan, with a new budget of approximately $74.5 billion, of which 81% is allocated to exploration and production, 18% to refining and gas and 1% to other areas.
Petrobras Divestment Plan
Petrobras’ decision to encourage the divestment of certain upstream, midstream and downstream assets has opened up new opportunities for foreign investment.
Petrobras set a goal of reaching $26.9 billion from the sale of assets between 2019–23. Until July 2019, the company had divested $13.8 billion in assets, which represented approximately 50% of its goal. These sales included: (i) 90% of its participating interest in Transportadora Associada de Gás – TAG, a natural gas pipeline company; (ii) its 50% participation in the Tartaruga Field and at Module III of the Espadarte field; (iii) its 100% participation in 34 onshore fields.; and (iv) the sale of approximately 33% of its participating interest in BR Distribuidora, a listed company in charge of Petrobas’ retail business, reducing its participation from approximately 70%, to 37.5%.
Among the ongoing divestment process that is being carried out by Petrobras, it is worth mentioning: (i) the sale of eight refineries by agreement with the Administrative Council of Economic Defense (“CADE”); (ii) the sale of its participating interest in BSBios, the country’s largest biodiesel producer company, (iii) the sale of its participating interest in Liquigás, a LPG distribution company; and (iv) the sale of certain onshore and offshore fields.
ANP Bidding Rounds
The attractiveness of Brazil’s offshore upstream rounds was improved by an increase in oil prices; Brent was quoted at $63.50 in July 2019. Petrobras, the majors, as well as domestic and international independents participated in bids promoted by the ANP in 2017–2019.
The ANP has an ongoing bid round for exploratory blocks under the concession regime (Brazil Round 16). The onerous transfer regime, created by Law No. 12,276/2010, vested Petrobras with the right to produce up to five billion barrels of equivalent oil in the open acreage located in the pre-salt, as per the contract between the federal government and Petrobras. On 23 April 2019, the National Council for Energy Policy (CNPE) authorized the ANP to hold the “Production Sharing Bidding Round” for surplus volumes exceeding the authorized five billion barrels. This bid round is scheduled for November 2019 and will offer the oil surplus of the Atapu, Búzios, Itapu and Sépia areas in the Santos Basin. Petrobras shall retain a 30% operating interest in Itapu and Búzios areas.
Last but not least, the ANP is planning two bid rounds for blocks under the concession regime (Brazil Round 17 and 18), and two bid rounds for blocks under the production sharing regime in the pre-salt layer (Brazil 7th and 8th Pre-salt Round) for the years 2020 and 2021.
In addition to the bidding rounds, the ANP announced the so-called “Permanent Offer”, which consists of the continuous offer of fields returned (or in the process of relinquishment) and exploratory blocks offered in previous tenders, which were not acquired or returned to the agency.
The Gas Market in Brazil and LNG opportunities
It is worth mentioning LNG opportunities. The size of the gas market in 2018 continued to grow, showing an increase of 1.8% when compared to 2017, totaling 40.9 billion m³. Regarding the importation of natural gas, imports amounted to approximately 8.1 billion m³, all imported from Bolivia.
Regarding the LNG market, 39.2 million barrels were produced in 2018, together with imports of approximately 2.8 billion m³ – a substantial increase when compared to 2017. The main LNG suppliers for Brazil were Trinidad and Tobago (818 million m³), the United States (730 million m³) and Nigeria (351 million m³).
Finally, the Transportadora Brasileira Gasoduto Bolívia-Brasil S.A. – TBG will announce open season for hiring capacity as a result of the expansion of the GASBOL pipeline.
ABOUT THE AUTHOR:
Paulo Valois Pires: Paulo Valois Pires began his career in 1989 as in-house counsel for Shell in Brazil. He is co-head of the Oil and Gas practice group at the firm and managing partner of the Rio de Janeiro office. Mr. Valois Pires expertly represents international and domestic clients in cross-border tenders promoted by the National Petroleum Agency (ANP) and Petrobras for the divestment of onshore and offshore blocks, as well as in complex bidding procedures for the charter of FPSOs, FSRUs and FSOs.
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