Geopolítica da energia: lições e tendências no setor The future of oil production in the South Hemisphere

Rio de Janeiro, March, 2016

The future of oil production in the South Hemisphere Oil – Reserves and Production

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South-America Africa Australasia

Colombia Oil Reserves: 2,4Bbbl Production: 990kbbl/d

Brazil Oil Reserves: 16,2Bbbl Production: 2,300kbbl/d

Argentina Oil Reserves: 2,3Bbbl Production: 629kbbl/d

Peru Oil Reserves: 1,6Bbbl Production: 110kbbl/d

Ecuador Oil Reserves: 8,8Bbbl Production: 556kbbl/d

Angola Oil Reserves: 12,7Bbbl Production: 1,712kbbl/d

Gabon Oil Reserves: 2,0Bbbl Production: 236kbbl/d

Rep. Demo. Congo Oil Reserves: 1,6Bbbl Production: 281kbbl/d

Guinee Equatorial Oil Reserves: 1,1Bbbl Production: 281kbbl/d

Indonesia Oil Reserves: 3,7Bbbl Production: 666kbbl/d

Australia Oil Reserves: 4,0Bbbl Production: 448kbbl/d

Source: BP Statistical Review, 2015

The Equator

•  Due to oil new reserves discovery needs in the world, Brazil is to play a key role – mainly

due to pre-salt discoveries.

•  However, there are challenges that need to be addressed in order to guarantee that these resources will be translated into effectiveness of this new role.

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Circunstancial challenges

Geopolitical challenges

Structural challenges

Breakdown of main

challenges

Lack of skilled labor; local content compliance; complex tax system, high capital costs, environmental restrictions

International oil prices volatility, Brazil economic scenario and Petrobras’ political turmoil

C o m p e t i t i o n f o r f o r e i g n investment in E&P in Latin America…”We are not alone!”.

Main challenges - Brazil Oil – Reserves and Production

Geopolitical aspects

Main challenges

•  The economic crisis and difficulty to finance NOCs are driving the implementation of market-oriented energy policies in Latin America. These changes encourage private investment and create regulatory and market mechanisms attractive to the private sector.

ü  Mexico: energy reform - deregulation of the Mexican oil and gas market may intensify competition for the resources of oil companies and redesign the industry's investment flow

ü  Argentina: new hydrocarbon law (2014)

ü  Colombia: attractive tax policy, regular offer of exploration areas and efforts to increase the security of the oil venture

ü  Brazil... once pioneer now walking against the regional trend?

•  On the other hand, Angola's government appointed a team to help reorganize the oil sector and state firm Sonangol in order to became more attractive to investments.

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1990 2000 2010

wave of liberalism wave of populism new wave of pragmatism

The global changes in the oil and gas upstream industry offer opportunities for substantial growth in South America, as well as in Africa, if the political and regulatory process is better aligned with the business needs of the industry to make then attractive places for direct investment.

Final Remarks

ü  Brazil is in a fortunate position concerning the future development of oil reserves and production.

ü  Globally speaking, investments in E&P tend to decrease as a consequence of price volatility and high costs of several exploratory frontiers.

ü  Internally, Petrobras’ trying times reinforce the importance of investments coming from other companies to keep industry dynamics.

ü  The competition for investment in Latin Amica tends to increase with more pragmatic oil and gas policies by several countries.

ü  Thus, investments in Brazil will be compared with the potential return and the risk of alternative options.

ü  This adds both market and political pressure on Brazil to continue its progress in reform, transparency, and potential return on capital invested.

ü  It is indispensable to create an attractive market environment to catch the foreign investment Brazil needs to achieve and sustain its desired global competitive oil and gas position.

The future of oil production in the South Hemisphere

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