EXECUTIVE SUMMARY
April 2010
this month ’ s series :
Presalt legislation - Hail Brasilia
The four bills have all been passed in the
House and await a Senate vote in mid-
May. While their content prompts many
points worthy of reflection, the one thing
certain about the bills is the way they will
strengthen federal power and Petrobras.
Will the rising tide lift all boats?
With passage of the legislation, IOCs will
have a place at the hydrocarbon table, but
they will not be allowed to carve the golden
goose. The result for service companies
is more nuanced. The opportunities
will not go away for them, but dealing
with Petrobras as sole operator in every
consortium may push down margins.
Export potential for value added
products
The government’s plan includes measures
to increase the refining and petrochemical
capacity of Brazil, increase the value add
of its products and exports, and thereby
erase any chance of the oil curse in the
country. It will also attempt to boldly
maneuver its way into the fuel trading
market.
Natural Gas insert included
Most global oil and gas companies would
much prefer to find oil than gas, this
phenomenon is even more pronounced in
Brazil, where logistics are lacking and gas
distribution is performed under monopolistic
conditions. Generators are at a
disadvantage because energy auctions must
include the cost of transport infrastructure.
Current pipelines are principally located
along the coast, inhibiting development
further inland.
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April EIS - Brazil’s Presalt Future
Although almost two and a half years have and infrastructure problems, Brazil is at a
passed since officials announced that seminal time in its development, and oil
the massive Tupi discovery could contain and gas can be used to leverage further
5-8boe, Brazil’s oil and gas industry is industrialization in the country, as well
still digesting the news of the enormous as confronting structural problems. In
reserves that could lie within the entire addition, Petrobras is a leader in ultra
presalt layer. Some companies are already deepwater drilling worldwide and is
poised for action, while others are waiting already the second largest producer in
for the Brazilian state to come to grips with South America - almost a top ten global
the notion of being a top five oil producer producer in fact. But will the country be
by 2020. Most in the industry are aware able to muster up the strength for such a
of the Brazilian presalt miracle, but many large endeavor?
questions must still be resolved including
the extent and nature of the reserves, In this month’s Energy Intelligence report,
the fiscal regime that will be used, the the Brazilian miracle will be analyzed in
exact role of foreign companies, and the detail to better understand the effects
technology that will be used. Add to this that the presalt reserves will have on the
the end of the popular President Lula’s oil and gas industry and on the progress
eight-year reign, and you have a cocktail of being made to change the country’s fiscal
short- and long-term uncertainty. regime. A variety of opportunities will lie
ahead in the country’s presalt areas for
For all of the uncertainty, however, service providers, equipment providers,
the discovery couldn’t have had a more consultants, and even international oil
appropriate owner. In spite of its social companies (IOCs).
Crude balance of trade 2009
Average 2009 export barrel
price was US$46.40
25 1400
1200
20
Average 2009 import
barrel price was US$64.38 1000
15
800
in millions of barrels
million $US
600
10
400
200
Crude Imports
Crude Exports
Crude Imports US$
0 0
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec Crude Exports US$
*All US$ values are FOB.
Source: ANP with BNamericas analysis
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 Energy Daily Written and researched by
Michael LaGiglia

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