Hydrocarbons in Latin America–Case of Brazil

EUCERS Strategy Papers, 2016

For the past years, Brazil has become an important player in the global hydrocarbon sector, particularly in the fields of oil and, to a lesser extent, natural gas. As time went by, the country’s exploration and production (E&P) sector has developed specific technologies to deal with challenges arising from deep-sea activities, which account for Brazil’s most significant oil and natural gas production, in addition to the somewhat successful government policies for biofuels. From originally being a country heavily reliant on hydrocarbon imports, Brazil has diminished its oil dependence considerably in the past decade. The country’s national oil company (NOC), Petrobras, has gained much expertise in light of continuous discoveries and many international oil companies (IOCs) have benefitted from the end of state monopoly on most hydrocarbon activities in the late 1990s. Since then, international corporations have turned to Brazil for a share of the country’s rising production of oil and natural gas in the past decades. If, on the one hand, Brazil’s status concerning E&P operations has changed considerably in absolute numbers, which can be verified by the evolution of the import/export ratio, on the other, the country’s downstream sector remains unable to process the necessary amounts of national crude oil (which is mostly heavy) in a secure and continuous manner for domestic demand, let alone carry exports of refined products in a massive scale. The constant reinvestment Petrobras (which, by and large, is responsible for most of Brazil’s hydrocarbon production) has planned for the country’s diversification in E&P operations is very much bound to both external factors – such as international oil prices and global demand – and internal ones, such as the recent corruption scandals that have affected part of the company’s management. At the same time, private companies and IOCs operating in Brazil are an increasing part of the country’s E&P sector through concession and production sharing agreement (PSA) regimes. The present-day situation of growing production and increased demand shows Brazil as an important player in the world energy realm, but it is still not clear if its status as an “energy superpower” is conclusive. Therefore, by making use of statistical data from Brazilian and international agencies, as well as sources from the legal, political and international relations field, this study seeks to present the current scenario of hydrocarbon exploration in Brazil in order to answer the following questions: 1) what is hydrocarbon security for Brazil; 2) within the hydrocarbon sector, what is the role of the socio-political environment in Brazil; 3) Is Brazil energetically independent? To answer those questions one shall first introduce a brief history of oil and gas exploration in the country (as well as biofuels, an important element in the Brazilian fuel market) along with numbers covering reserves, exploration, production and foreign trade. Secondly, the framework of Brazil’s E&P operations will be presented through what the author believes to be the most relevant legal and political events in the history of this sector. After this, the current situation of pre-salt discoveries and exploration will be presented, followed by the country’s public tenders, IOC presence and a note on the corruption scandal Petrobras currently faces. Finally, the question of whether Brazil is energetically independent when it comes to hydrocarbons shall be discussed in order to answer if both its supplydemand scenario and its current production model, coupled with the recent Petrobras scandal, allow it to safely enjoy the benefits of its E&P operations.

The recently announced discovery of potential large-scale reserves in the Brazilian so called pre-salt layer has resulted in a new legal framework for the country. In this new architecture, old and new regulation share the legal arena. Exploring this context, this paper provides an overview of the emergence and evolution of the oil and gas market in Brazil, and discusses the new legal configuration where the prevailing Concession System co-exists with the Production Sharing System and the Onerous Assignment. The conclusion pinpoints the challenges that the country faces in dealing with two energy sources-oil and gas-that will play an increasing role in Brazil's future. It also indicates that the introduction of competition also has brought new features and improvements to oil and gas industry in Brazil. Structuring a robust legal framework that will foster the necessary investments is not only a challenge for the Brazilian economy, but also one that has to be tackled by many emergent economies with newly hydrocarbon discoveries.

The discovery of the Presalt bounty has repositioned Brazil in the global oil and gas scenery. From an oil and gas importer, Brazil has now the potential to become a large oil producer. Nevertheless, to turn this potential into reality, Brazil will have to face important challenges to mobilize the necessary financial, technological and human resources, in a new and unfavorable external and domestic environment. After the liberalization of the Brazilian oil and gas (O&G) industry in the late 1990s, the level of investments has increased at a very fast pace until 2013. The investment dynamics during this period was characterized by the increase in the number of players in the industry, but maintaining Petrobras dominance. A new phase of the Brazilian oil and gas started after the dramatic decrease in oil and gas prices in second half of 2014. Petrobras’ severe financial crisis will give a larger role for private players in the Brazilian oil and gas sector. However, the future role of the private investors will depend very much on the attractiveness of Brazilian upstream sector. This paper analyzes the necessary measures to restore a healthy investment environment in the Brazilian O&G industry. After analyzing the barriers to the investment in the O&G industry in Brazil, we set a roadmap to increase the country’s upstream attractiveness, which includes:  Reducing the restrictions to the private investment in Presalt;  Reducing the regulatory costs associated with the diversity of contracts and fiscal regimes;  Adjusting government take to the current international O&G sector conditions;  Returning to regular E&P bidding rounds;  Improving the local content regulatory framework;  Addressing some regulatory and market barriers for private producers to access the natural gas market; and lastly,  Reducing the risk for private investors to enter the downstream sector with the introduction of competition within a transparent fuel price environment.

2007

This paper presents the results of a research conducted to measure the importance of the oil and gas complex in the Brazilian economy and in its states, henceforth called O&G.

Estudos do CEPE, 2012

The world lives a context of energetic pre-crisis, and Brazil has discovered new big reserves of the “black gold”, which led to changing the regulation framework of its exploitation in the country. This paper focuses on the last change in that framework, in 1997, and tries to evaluate its effects in the production and its links to the rest of Brazilian economy. Using data derived from the I-O matrix in the supply side, and Balance of Payments data, we try to see if there were meaningful changes in the period 1998-2007 from the period 1990-1997 in terms of the oil sector linkage to the rest of the economy, technological modernization, its relation to employment and average earnings , and its impacts in the external insertion of the country (exports and dividends balance).

2006

This paper presents the results of a research conducted to measure the importance of the oil and gas complex in the Brazilian economy and in its states.

The challenges of the 1990s were faced by the Brazilian economy with a drive towards decreasing the share of the statefs participation. The large privatization program initiated in the early 1990s set forth the basis and was strengthened with the approval of the so-called Concessions Law in 1995.1 This law, on which we shall comment further in this article, allowed a framework to attract foreign and national private capital to big projects of electric generation, telecommunication, transportation, and other projects, which were formerly under state control. In a way, this process may be viewed as a revival of the concession already encountered in Brazilian law in earlier stages.(...)

Georgetown University-Graduate School of Arts & Sciences, 2016

This dissertation analyzes the development of the Brazilian oil industry and its impact on the economic development of Brazil from the beginning of the ―Brazilian Miracle‖ (1968-1973) to the end of the Fernando Henrique Cardoso’s second term as president (1995-2002). The dissertation explores the closely intertwined nature of Brazil’s oil industry and its macroeconomic development, shedding new light on the history of Petrobras (the Brazilian state oil company), and on other key topics of Brazilian economic history, including the Debt Crisis of the 1980s and the role of neoliberalism in Brazil. The argument is that oil policy shaped the national economy and the Brazilian state in this period. Attention to the oil industry, and to Petrobras in particular, was crucial to the establishment of diplomatic and economic policy, and to conflict within the Brazilian state. Finally, this dissertation seeks to illuminate Brazil’s place in the global oil industry and how that has shaped Brazil’...

2021

When Helio Jaguaribe published his book "O nacionalismo na atualidade brasileira" (Nationalism in Brazil Today), its impact in Brazil´s developmental epistemic community was immediate. Among the nationalists who strongly advocated the 1953 Petrobras oil monopoly, the reaction was one of astonishment and outrage. In this article, it is argued that Jaguaribe did not seek to question the adequacy of the monopoly solution, but rather to frame the debate about the oil question on a more rational and pragmatic basis. Jaguaribe's pioneering contribution would be followed by a rich intellectual debate of some decades between sociologists, political scientists, and economists about the significance of the Brazilian oil issue and the importance of the foundation of Petrobras in 1953 for economic development and Brazil´s affirmation in its quest for economic and political independence. The article also shows that at various times of his career Jaguaribe would return to the oil question, emphasizing in a lucid and pragmatic way, and, above all, imbued with a developmental spirit, its challenges, and possible solutions.