Jun 2, 2020
The six largest oil companies present in Brazil have a well-aligned speech regarding the needs of the country’s oil and gas sector for the future. The foreign companies Shell, Equinor, Chevron, BP, Total, in addition to Petrobras itself, are demanding more changes in the Brazilian regulatory regime to ensure that projects in the country remain competitive. After all, what the leading executives of these companies guarantee is that future investments are being disputed by other O&G projects abroad, especially in times when investors are much more selective in the face of the economic crisis. The country that offers the most competitiveness will take the resources. And in this, according to the assessment of these oil companies, Brazil is still a step behind.
The CEOs of these six companies participated in an online seminar organized by FGV Energia. The president of Petrobras, Roberto Castello Branco, recalled that Brazil has already undergone recent changes in its regulation that allowed the entry of new investments from abroad. However, according to the executive, the country still has other issues to resolve. “We are subject to a series of regulations that partially remove the attractiveness of our wealth [preventing] it from becoming the target of investments”, he criticized.
Castello Branco also said that the sharing regime is very disadvantageous from an economic point of view, in addition to offering the wrong stimulus to companies. “Instead of the company having as main objective the maximization of efficiency, one of the objectives is to increase and inflate costs to reduce taxation on profit”, he pointed out.
In this line of reasoning, the president of Shell, André Araújo, recalled that the lack of appetite for investors will result in strong competition between countries to attract investments. For him, there are two fronts that Brazil needs to evaluate and work on: the future auctions of new areas of exploration and production and the assets that have already been auctioned.
“With regard to future auctions, I have been openly positioned in favor of the single concession regime for future contracts, as is defended, by the way, by the entire oil and gas industry”. Araújo believes, however, that even with the change in concession regimes, Brazil’s contracts may remain unattractive. But he says he is happy because the Ministry of Mines and Energy is talking about changes in future auctions, making them more competitive. Regarding the assets already acquired, the president of Shell believes that the great challenge will be to move these assets to the development stage. “It is at this stage that companies really spend money,” he said.
Despite the challenges, Brazil was not overlooked by the IOCs, even in the face of the demand crisis caused by the coronavirus pandemic. Equinor’s vice president for safety and sustainability, Paulo Van Der Ven, stressed that the company’s development commitments in the country are maintained.
“Our strategy for Brazil in 2030 has not been changed. Our commitment, even with this crisis, remains unchanged. But it is very important to develop the portfolio we have and how to make it even more competitive, ”he said. “The price of commodities should remain low for a longer time. The blocks already acquired need a competitive framework to move forward ”, he added.
Another point highlighted by the executives is that there is a real internal competition between each divisions of the companies for investments in oil and gas assets. “If Brazil is not competitive, we will not be able to validate our projects within the Total group,” said the president of the oil company in Brazil, Philippe Blanchard.
The French company has two main points in its operation in ultra-deep waters in the Brazilian market, according to the executive. The first of these is innovation, which will allow for cost reduction, improvement in safety and reduction of impacts on the environment. The second factor, according to Blanchard, is simplification. “[It is necessary] to simplify the processes because, with the simplification, we will reduce the uncertainty and lower our costs. For me, competitiveness in Brazil means innovation and simplification. This will be our drive for all of our projects in Brazil, ”he declared.
BP’s president in Brazil, Adriano Bastos, stated that Brazilian competitiveness is an important factor for the business environment and that the country’s geology alone will not guarantee the success of the O&G sector. “We need to maintain Brazil’s competitiveness in the industry. My biggest competitors are not my colleagues who are talking to me [referring to the other CEOs]. They are my great project partners in Brazil. My biggest competitors are BP’s internal projects, ”he said. “My projects need to be competitive internally within the BP portfolio”, he added.
Finally, the president of Chevron in Brazil, Mariano Vela, declared that it is essential that Brazil is not only supported by its excellent geology, but that it needs advances from a regulatory point of view and that competitiveness is fundamental. “In times of scarcity, what is needed is to allocate. We will allocate the most competitive projects for our portfolio. And it is very important for us that Brazil is attractive ”.