OTC 2017: Brazil Embraces Change As It Gets ‘Back on Track’

OTC 2017: Brazil Embraces Change As It Gets ‘Back on Track’

Brazil, energy, otc, minister
Brazil’s Minister of Mines and Energy Fernando Coelho Filho said at OTC 2017 that the country is positioning itself to become more attractive not only for potential investors.

As the oil and gas industry claws its way back from the downturn, Brazil is positioning itself to become more attractive not only for potential investors but for the country as a whole.

This involves listening and being willing to make regulatory changes—qualities seen by Brazil’s Minister of Mines and Energy Fernando Coelho Filho as being important to attracting investors to the country.

“I think we are far away from doing everything we want, but we have started moving in that direction,” Filho told a full house gathered for a luncheon on opening day of OTC 2017. “We now have a clear calendar of dates of when the auctions will take place. … What is in our reach [and what] we are trying to do to give the stability [that] the industry needs.”

The Brazilian government’s latest efforts include offering additional licensing rounds such as for coveted presalt acreage in the prolific Campos and Santos basins—something many in the industry have been awaiting. Following OTC Brazil in October, Brazil will have its second and third presalt bid rounds—the country’s first since the 2013 presalt licensing round for the Libra Field.

The Libra Field alone is estimated to hold between 8 Bbbl and 12 Bbbl of recoverable reserves. It is one of several massive discoveries made offshore Brazil in recent years, commanding the attention of oil and gas companies worldwide. But the country and its industry still faces challenges—labor concerns that have sparked protests, economic issues and environmental licensing delays that have slowed exploration activity in parts of the country.

“Everybody here knows that Brazil has at least 10, 15, 20 points that we need to solve immediately, but we can’t face all the problems at once,” Filho said, noting a recently approved cap on government spending,  labor reform moving through the legislature and forthcoming social security reform.

In his first-ever OTC appearance in Houston, Coelho told the crowd how the government has made changes to its presalt law, unitization process and local content numbers—which he said will be good for oil and gas companies and for Brazil.

Earlier this year, Brazil dropped the requirement mandating companies to buy equipment locally by about 50% for operations and production onshore. The figure was lowered to 18% for exploration offshore and to 25% for construction of wells. Brazil also lowered the fines against oil companies that do not meet local content percentages from a 60% minimum to 40%, and from a ceiling of 100% to 75%.

It was one of several moves Brazil made in an effort to attract investment during a time of corporate spending cutbacks. Brazil also revamped its presalt law, opening up operatorship of blocks to companies other than Petrobras, and created an auctions calendar scheduling dates for about 10 licensing rounds from 2017 to 2019 for exploratory blocks and mature onshore fields.

“We do want more investments. We do want more people to come to Brazil,” Filho said. “Bid rounds like the one we are trying to host in the second semester are going to be responsible for the Brazilian economic recovery to put Brazil back on track.”

There are many places in the world with oil and gas resources, not just Brazil, he said. “We need to send the right signs.”

While Brazil’s energy ministry has made strides, Filho admitted there are many challenges ahead. Brazil is working to increase gas production as the country’s agreement with Bolivia nears its end, and the environmental ministry is working on a bill to send to Congress to speed up the environmental licensing process for oil and gas development.

The minister said he is optimistic about the years to come, especially when it comes to oil and gas. He believes the turning point for Brazil will match that of the country’s oil and gas industry.

“We are trying to put the country back on track,” Filho said. He foresees pleasant years ahead for Brazil’s economy from 2017 on as the country’s oil and gas opportunities attract.

Velda Addison can be reached at vaddision@hartenergy.com or @VeldaAddison.

Source: E&P