Oil and gas sector could attract $ 225 billion in contributions by 2026, says EY

August 16, 2019

The oil and gas sector can generate investments of around US $ 225 billion over the next eight years in Brazil. If the potential for increased oil activities is confirmed, 474,000 jobs – direct and indirect – are expected to be created by 2022, doubling jobs in the sector.

The projections are from a study by Ernst & Young in collaboration with the Brazilian Institute of Petroleum (IBP) and the co-participation of the Energy Economics Group of the Federal University of Rio de Janeiro (GEE-UFRJ).

The study works with different scenarios. In the worst case scenario, if the necessary conditions to realize the potential do not materialize, investments in the sector will be smaller, due to delays in the production curve, especially the Transfer of Rights assignment and its surpluses and the Mero field, in the pre- salt from the Santos Basin. In this scenario, there would be no new bidding rounds. In this case, investments between 2019 and 2026 would total US $ 107.5 billion in the period.

In the high potential scenario, which considers the maintenance of auctions and the entry of large pre-salt projects, in addition to investments of US $ 225 billion, there would be a US $ 182.3 billion in government equity (such as royalties and equity) and US $ 109.8 billion in direct taxes (IR and CSLL).

“The balance of public accounts is one of the most important themes for the national economy. The role of the oil and gas sector as a generator of  revenues also places it as a major contributor to the country’s economic balance … Values ​​such as these place oil at the top of the list of federal tax revenues within the industrial sector ”, cites the study by EY and IBP.

From this potential perspective, oil production would jump from 2.9 million barrels per day in 2018 to 5.4 million barrels per day in 2026, from a positive scenario of proven reserves, with a focus on large projects, pre-salt such as Lula, Mero, the Transfer of Rights assignment areas in the Santos Basin, and Parque das Baleias in the Campos Basin.

In the labor market, the forecast is that by 2022 jobs in the sector will more than double to 873 thousand. The study highlights that the jobs generated provide wages, on average, 3.8 times higher than the average wage of the Brazilian industry. After three straight years of decline, jobs in the sector grew 32 percent in 2018 to 399,000 people hired.

Source: Valor

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