06.10.2022

Russia-Brazil: the potential of energy cooperation

One of the priorities for the new international “centers of power”, including Russia, is a consolidation of the economic potential – both their own and their partners with synergies from this cooperation. For example, for our country extremely important economic rapprochement with the BRICS Nations, and in particular with Brazil. The potential of interaction with the state in the energy sector in the magazine “Gazprom”.

The energy balance

The energy balance of Brazil are highly diversified: in total energy consumption the share of non-renewable sources of energy (nie) accounts for about 57.5 per cent, renewable (RES) – about 42.5%. The main energy resources of Brazil are oil and its by-products – the 38.2%, biofuels – 16,8%, the energy of the water flow (hydroelectric) – 13.5% and natural gas – 11.3%.

Despite the high diversification of the energy mix, use of energy resources in Brazil is still not well-balanced: a significant limitation of natural gas consumption is due to the lack of the necessary infrastructure and regulatory aspects of the gas market. In particular, the underlying gas reserves in Brazil from associated gas deep offshore fields. Off-shore pipelines to deliver gas to the market have a limited bandwidth (about 44 million cubic metres per day). In addition, major mining projects in Brazil are oil and a significant portion of associated gas is pumped back into the reservoir for enhanced recovery.

According to the Brazilian legislation, the production and transportation are the responsibility of the Federal government, and naturally – within the competence of state governments. This prevents the formation of a common gas market of the country and the gasification of the internal regions, since each state has its own distribution company and tax regime. Serious restrictive factor of gas industry development, including in the field of gas production, is the persistence of monopoly on the gas market national oil and gas company Petrobras (in the coming years the situation may change in connection with the government’s plans to reform the gas industry).

As a result, Brazil being one of the prominent producers of natural gas in South America, is unable to meet demand through its own production of gas and has to import more than 35% of its natural gas. Mainly on a gas pipeline system from Bolivia and through regasification terminals on the Brazilian coast, the liquefied natural gas (LNG) from the United States, Trinidad and Tobago, Europe and Africa, the Middle East.

According to the plan of energy development until 2024 (2024 PDE) approved by the energy research Institute under the Ministry of mining and energy of Brazil, energy consumption in the country over the next five years will grow at least by a third. The use of nie will increase by approximately 27%, renewable energy – more than 41%. Their share in the energy mix of Brazil will not undergo major changes and amount to 54.8 per cent and 45.2%, respectively.
However, the growth of consumption of oil and oil products is planned at around 22%, which will lead to a decrease in the share of black gold in the country to 34.9%. The increased use of natural gas will exceed 38%, respectively, the share of natural gas in energy balance of Ukraine will reach 12%.

Electricity

The main energy producer and at the same time consumer of energy in Brazil speaks to the power generation sector. The total volume of installed electricity generation capacity at the beginning of 2017 amounted to 150,41 GW. The generation of the presented hydro- (hydro – 64,4%), thermal (TPP – 27.5%) and nuclear (NPP – 1.3 per cent) energy and wind (WPP) and solar (SPS) power stations (6.8 percent).

In accordance with PDE 2024 total capacity of power generation in Brazil will grow by the mid-2020s to 206 GW. By this time, the offer of electricity should reach 940,8 TVTh, while its consumption will grow annually on average by 4.7% and by the end of 2024 will be about 790,9 TVTh. Contribution of RES to total power generation capacity will increase to 84%. Including the performance of the HPP will increase to 110 GWh, and the total capacity of power plants running on biofuels, solar and wind energy and small hydropower stations will more than double. At the same time, the share of nie in the total generation will fall slightly. Although the total productivity of Brazilian thermal power plants operating on nie, will increase at least to 30 GW, while the capacity of gas power plants will grow by more than 1.5 times.

Wind energy is widely used in the North-East of the country, is used in some remote areas of Brazil not connected to the Unified energy system. Currently the cost of electricity produced by the wind farm, making it quite competitive on the Brazilian market. However, due to fierce wind farm according to the climatic conditions, the difficulties with the creation of their infrastructure wind energy is nothing more than a minor source of energy.

Solar energy in Brazil is in its infancy, while uncompetitive due to high cost. However, the Brazilian government plans to take measures to encourage wider use of solar energy, so the total amount of generating capacity of SES should reach 7 GW.

At the beginning of 2017, the total capacity of VES and SES were approximately 10,204 GW, and WES had more of 99.2% of that capacity. Despite the very minor role of VES and SES in the total volume of electricity production in Brazil, namely, solar and wind generation shown in the last years the highest growth rates.

As for nuclear energy, today Brazil has only one nuclear power plant with two operating reactors with a total capacity of 2 GW. The commissioning of the third unit with a capacity of 1 GW is constantly postponed. Plans for the construction of 7-9 new nuclear power plants are considered, but the decision is still pending. The commissioning of other nuclear power plants in the foreseeable future is not expected.

A key role in ensuring the Brazilian electricity plays hydropower. In the near future, the planned construction of hydroelectric power station 38. However, only four of them include the creation of reservoirs with high dams. The rest of the power plant (so-called run-of-river) for energy production will use the natural flow of the water. This is due to the need for compliance with environmental legislation that does not allow flooding of large land areas. So in the dry season of the Brazilian hydropower is forced to rely primarily on existing hydropower plants with reservoirs, which leads to a decrease in the level of water in them and the instability of the whole power system. To prevent this, the government was forced increasingly to use the TPP.

Power system

Thermal power industry in Brazil began to actively develop only in the late 1990s, when because of drought, compounded by a sharp increase in the consumption of electricity, the energy system of the country, relying to an even greater extent than now, on hydropower, has not coped with the load. Then the government was forced to resort to rolling blackouts. To prevent the recurrence of such a situation in Brazil has developed and implemented a programme for the construction of a number of TES with their integration into the Unified energy system of the country.

As fuel for thermal power plants, total capacity of which amounted at the beginning of 2017-th order 43,276 GW, predominantly uses biomass (14,2 GW), natural gas (13 GW), oil and petroleum products (up 10.3 GW) and coal (the 3.6 GW).

Capacity of thermal power plants and today are seen mainly as a backup – to meet the rapidly growing demand for electricity in periods of peak consumption. With this in mind, the contracts for the supply of electricity that each TPP signed with the National operator of the power systems of Brazil, ONS, provide for the payment of a certain amount of electricity, even if the TPP it actually worked out. Thus, we guarantee the availability of spare capacity in the power system, which can be started at any time as the need arises. In accordance with PDE 2024 capacity of thermal power plants for nie will increase by more than 10 GW (about 4 GW of capacity must be commissioned before 2019, the remaining 6 GW until 2024).

It should be borne in mind that in Brazil do not apply prescriptive methods of construction and input of new power capacities and the targets until 2024 are approximate. The government “orders” a new capacity of power plants in the respective tenders, setting ceiling prices for “new energy” depending on the type of fuel. Tenders are held two to three times a year, they are the power that needs to be entered after three years (“the tender A-3”) or five years (“the tender A-5”). In case the price is unprofitable for energy companies, they have the right to refuse participation in the tender. Then the order is transferred to the next year.

In addition, inherent in the PDE 2024 new thermal power plant capacity are based on the assumption that the basic needs of the country’s electricity will be provided by hydroelectric plants, and TES will be involved in the minimum acceptable amounts of its capacity. These minimum amounts stipulated for thermal power plants fuel oil diesel (these fuels are the most expensive) in the amount of 1-2% of capacity, gas – 30%, coal – 40%. The rest of their capacity in the planning into account just not accepted.

To generate electricity due to high cost and environmental parameters will remain limited the use of petroleum products, mainly fuel oil and diesel. TES on these fuels operate mainly in remote areas of the country that are not connected to the Unified energy system. In the short term capacity of thermal power plants on fuel oil will remain virtually unchanged. While TPP on natural gas is considered as the most rapid and reliable reserve capacity of power generation.

In practice, this means that, while maintaining the trend of recent years, when hydropower cannot be used at full capacity due to low water level in the reservoirs of the power plants on gas will play an increasingly important role in ensuring the stable operation of the entire power of the country. Require the connection of gas power plants for power generation for most of the year or even year-round, as well as the commissioning of new capacities of thermal power station on gas, which will cause a further increase in demand for natural gas.

For example, in 2013 the consumption of gas by thermal power plants had almost reached the level at which the PDE plan 2024 was supposed to go only by 2024. The Ministry of mining and energy of Brazil believe that the preservation of these trends, the share of gas in power generation in the country could rise to the mid-2020s, up from 8.6% to more than 15-20%. In this regard, in Brazil, there is the task of creating the necessary economic conditions for the construction of new gas-fired power plants with the supply of these raw materials. Existing thermal power plant on gas, given the lack of gas production in the country, supplied mainly by imports of LNG. Today in Brazil, implemented two projects involving the construction of gas power plants with a capacity of 1.5 GW and 1.28 GWh with a simultaneous construction of two new terminals for reception, storage and regasification of LNG. Thus, the growing demand of electricity for gas can be satisfied primarily by increasing LNG imports.

With this in mind, the Brazilian government is taking steps to improve the competitiveness of thermal power plants, planning to use imported LNG to generate electricity. However, you need to understand that while the significance of gas generation increases dramatically, mainly in dry periods and rainy – on the contrary, is reduced to almost zero. However, no viable alternative to the development of gas power plants to create a balanced system of energy supply and enhance energy security of Brazil does not exist.

Now most electricity in the Brazilian power system to produce a biomass TPP, but they are not able to solve the pressing problems of the energy sector of Brazil, neither in the short nor in the longer term. Brazil is one of the largest producers of biofuel, primarily using sugar cane. Ethanol, the main product of its processing, is used as a fuel for road transport, and waste from processing sugar cane (along with other waste of agricultural production), biomass as a fuel for thermal power plants. In the country’s energy balance the share of biomass accounts for over 16% of the electricity consumption (including the use of ethanol transport).

In accordance with PDE 2024 installed capacity of thermal power plants on biomass will rise to the mid-2020s at least to 18 GW. However, the use of biofuels in electricity generation depends on many factors, including climatic, seasonal and economic conditions. In this regard, a biomass TPP, unlike gas-fired power plants, cannot guarantee stability of Brazil in the event of problems in the hydropower industry.

The prospects for increasing coal consumption in the Brazilian electricity sector are not even considered, since its use (both domestic and imported) for electricity generation remains on the verge of profitability.

Accordingly, today the most promising source of energy for the Brazilian electric power industry is natural gas. Generally speaking about fuel and energy sector of Brazil, then the great expectations are associated not only with gas but with oil. First of all, because the country has substantial untapped oil and gas potential, which it intends to use.

Hydrocarbon resources

Brazil has a large proven reserves of oil and significant, by the standards of Latin America, natural gas, and significant potential for their future expansion. Thus, at the beginning of 2017, the proved oil reserves of the country amounted to 1.8 billion tonnes, which provided Brazil a second place on this indicator in Latin America after Venezuela. And proven natural gas reserves of 400 billion cubic meters, which is the same figure as Argentina and Peru, which share with Brazil the second place in terms of proven reserves of natural gas in Latin America. Again, after Venezuela. In geological terms, Brazil remains a very poorly known country. The area of the Brazilian oil and gas basins is about 2.8 million square kilometres, more or less only studied 336,7 thousand square miles, or only 12%.

Oddly enough, while it only creates certain difficulties for the Brazilian government plans to stimulate exploration and production of hydrocarbons. Especially on land. Major national and international oil and gas company interest to tender for the rights to exploration and development of underexplored areas of subsoil due to the increased risks of investing in such projects.

In accordance with PDE 2024 proven oil reserves by the mid-2020s is expected to grow at least three times and be at least 5 billion tons And the replacement rate of oil reserves, according to the plans, will annually exceed the unit. Proven reserves of natural gas are expected to increase at least to 1.72 trillion cubic meters.

The total investment for exploration and production of oil and gas until the mid-2020s is defined in the range of 350-375 billion. However, with changes in hydrocarbon prices, these plans are likely to be seriously adjusted. At least in your business plan for 2017-2021 state-controlled Petrobras priority selected exploration and production of hydrocarbons in Brazil mainly for offshore, the most well-studied fields. In the coming years, Petrobras intends to invest in its projects in the order of 74,4 billion dollars, of which 82% will be used for exploration and development of already discovered reserves.

However, Brazil has significant reserves of unconventional gas (mainly tight gas). They are mostly concentrated in the basin of the river são Francisco, Minas Gerais, and in the Parnaiba basin in the northeast of the country. According to estimates by Wood Mackenzie, its reserves could reach about 17 trillion cubic meters, of which the category of recoverable include about 10.5 trillion. Also the prospects of discovering shale gas reserves are associated with a swimming pool, state of paraná, including the greater part of Paraguay, part of Brazil, Uruguay, Argentina and Bolivia.

However, the broad exploration of unconventional hydrocarbon resources in Brazil was conducted, and the available data for these regions are approximate and are nothing more than estimates.

Black gold

In 2016, Brazil has become the largest producer of crude oil in Latin America, having produced 136,7 million tons of black gold. This became possible thanks not only to increase the volume of production of raw materials, but also the gradual decline of oil production in Mexico and Venezuela. Almost all Brazilian oil (over 90%) is extracted on the continental shelf.

Until recently, Brazil was acting legislation, in which the development of oil resources of the pre-salt deposits on the continental shelf provides for mandatory participation of the national company Petrobras. However, she had to be the operator of the project with a share participation of at least 30%. Because of such requirements in terms of the depletion of onshore and shallow water Petrobras was forced to concentrate main efforts and resources on the implementation of highly capital-intensive, time-consuming and complicated projects in the subsalt cluster of the continental shelf. This was one of the main reasons for the deterioration in the financial position of the company and the growth of its debt.

At the same time, Petrobras is forced to invest huge funds for the full range of its tasks primarily in exploration and production of hydrocarbons. In particular, the five-year plan of the company for 2014-2018 envisaged investments in the amount of 220,6 billion. However, in 2014, amid global economic crisis in Brazil burst into a loud corruption scandal, which has been involved and the leadership of Petrobras. This plunged the country into deep political and – as a result of the economic crisis.

Therefore, in 2015 the five-year plan Petrobras was seriously adjusted towards a sharp reduction in investment and sales as core and non-core assets. In February 2016, the national Congress of Brazil has changed the law, freed from the obligation of Petrobras to be the operator for the development of projects pre-salt cluster, which should also contribute to improving the financial situation of the company in the long term.

Meanwhile, even in this situation, Petrobras has managed to increase production volumes of hydrocarbons and to maintain plans for production growth. So, by 2021-mu the company expects to increase oil production in Brazil from the current 109 million tons a year to more than 25% to almost 170 million tons per year. And the total production of hydrocarbons in the Brazilian and foreign projects Petrobras is planning to increase by at least 20%.

In General, in accordance with PDE 2024 oil production in Brazil should increase by the mid-2020s to nearly 200 million tons per year. Due to this, the country expects to become a major exporter of crude oil to the world market. Meanwhile, Brazil consumes more oil than it produces, but expects to fully meet its needs for the black gold and to export about 100 million tons of crude oil per year.

It is important to understand that the Brazilian authorities expect a significant contribution to the implementation of these plans will bring foreign investors. Because the growth of oil production should be mainly due to deepwater and ultra-deepwater pre-salt deposits on the continental shelf of Brazil. But their development will require huge financial investment. In particular, for the implementation of the Brazilian offshore projects required for installation of floating production, storage and transshipment of oil (FPSO).

These offshore platforms will be required by mid 2020-ies at least 44. However, it is possible to assume that problems with foreign investment in the oil sector will not. Today in Brazil are working almost all the world’s major oil and energy company. Key positions are occupied by the Anglo-Dutch Shell, British BP, Norwegian Statoil, French Total, Spanish Repsol, and us-based Chevron and ExxonMobil. The rapidly increasing activity of the Chinese CNPC, CNOOC and Sinopec. It cannot be excluded that in the future they will be joined by a Russian company.

However, the development of the sector of oil production is impossible without taking into account the transportation and processing of black gold. The vast majority of oil in Brazil is extracted on the continental shelf, so the main oil pipelines in the country, and in the foreseeable future, their construction is not planned. The existing oil transportation system – 454 pipeline 7,936 thousand. their Main function – the supply of raw materials from offshore fields or port terminals to refineries (refinery). Transportation of raw materials from production platforms is carried out using specialized 53 vessels with a total tonnage of more than 4,153 million tonnes.

With regard to the processing of black gold, in Brazil there are 17 refineries, 13 of which are controlled by Petrobras and four private investors. Their total processing capacity of crude oil of about 115 million tons a year. To meet the country’s needs for petroleum products must be imported naphtha, diesel and gasoline. According to current projections, the growth in demand for oil products in Brazil, by the mid-2020s will increase by more than 25%.

However, the construction of new refineries Petrobras refused. Market demand for diesel and gasoline, the company plans to compensate for the expense of reconstruction of existing processing lines. Due to this PDE 2024 envisages increasing the refining capacity in the country to about 135 million tons per year, at a cost of around 75.5 billion dollars. However, experts believe that the failure of the construction in Brazil of a new refinery will not only solve the problem of the oil production of the country’s sovereignty, but also greatly enhance its dependence on imported naphtha, diesel and gasoline.

Gaza

According to the energy research Institute under the Ministry of mining and energy of Brazil, in 2016, the country produced more than 39 billion cubic meters of gas (about 80% of the volume of associated petroleum gas produced at the oil fields development on the shelf, the remaining 20% – natural gas extracted onshore and gas offshore fields). While consumer was supplied only about 60% of the extracted gas, the remaining gas was used for own needs of oil companies.

In Brazil by the mid-2020s, the volume of gas extraction from the subsoil is planned to increase to approximately 63 billion cubic meters (more than 52 billion will be sold to consumers, the rest is used for own needs of the mining companies). Up to 86% of the gas will be extracted simultaneously with the development of oil fields and only about 14% for gas fields.

Currently the main consumers of natural gas in Brazil are in industry, including oil refining and petrochemical industry (52% of total use), power sector (39.3 per cent), transport (6%), and residential and commercial sector (2.7 percent).
According to experts of the consulting company IHS, Markit, gas demand by the mid-2020s in Brazil will increase by almost 18%, and by the end of the next decade by 35%. The largest increase of its use is expected in industry and the power industry.

According to forecasts PDE 2024, by the mid-2020s, the demand for natural gas could reach 62 billion cubic meters per year. With this guaranteed demand, based on requests of various users of natural gas, will amount to 38 billion cubic meters. m Thus, the difference between the predicted and guaranteed demand is about 24 billion cubic meters per year. This is the amount of gas you may need to Brazil every year in case of necessary use of gas power plants by more than 30% of their installed capacity.

Such a scenario, gas demand is very likely with frequent repetition in the country’s arid cycles, when HES not cope with the provision of electricity. The replacement of significant amounts of hydroelectric generation by actively increasing the production of electricity at thermal power plants will lead to a sharp increase in natural gas consumption. It should be noted that in rainy years the situation is exactly the reverse and the demand of electricity for natural gas in fact falls to zero.

If we consider the average demand for gas that is not associated with the production of electricity, in 2024, he must be at least 29.2 billion cubic meters per year. This is due to not only growth sector of the Brazilian industry, but also, for example, gasification of transport. Now in Brazil about 1.8 million units running on natural gas (HMT) vehicle, which consumes about 2 billion cubic meters of gas per year. And this figure is steadily growing, which is primarily due to the increased cost of gasoline and diesel.

According to analysts IHS, Markit, the share of imports by country gas pipeline will be gradually reduced, and LNG to grow, and from 2022 the volume of LNG imports will exceed purchases of Bolivian gas. At the same time, the government of Brazil believe that it is not so simple, and Bolivia in the foreseeable future will remain the largest gas partner of Brazil.
The main part of the Brazilian gas transportation system (GTS) with the length of 9,244 thousand km is a unified network consisting of a variety of pipelines, which are located along the entire Pacific coast of the country. In addition, there is a gas pipeline Bolivia – Brazil (GasBol) with a length of more than 2.5 thousand km and a capacity of about 11 billion cubic meters per year.

In the first in the history of Brazil in terms of expanding the pipeline network for 2013-2022 (PEMAT), approved by the Ministry of mining and energy of the country, the forecast Petrobras for the supply of gas to the market power takes into account only the three new gas pipelines. They are designed for transportation on land gas produced on the continental shelf. The total throughput of this gas is about 16 billion cubic meters per year. Other projects of gas transportation c shelf on the coast does not currently exist.

Pre-existing Petrobras plans to build a floating LNG plant (FLNG) frozen due to the high cost of the project, as well as continuing uncertainty regarding the volume of gas that will be at the disposal of the company after its injection into wells to enhance oil inflow. Therefore, the possibility of additional deliveries of gas from the continental shelf to the domestic market in the next 10 years, restricted by the physical bandwidth of three offshore pipelines.

In addition, PDE 2024 and REMAT take into account in their estimations of the supply of gas production volumes isolated from the transport infrastructure fields located in the Amazon, as well as in the basins of the Parnaiba and Parecis. According REMAT, the production from these fields can reach in 2022 more than 11 billion cubic meters per year. However, plans for the construction of transport infrastructure to connect these isolated fields with the CTA of the country.

As for the GasBol, the expansion of the capacity of this pipeline is also not provided. However, the rumors of the imminent termination of the procurement by Brazil on Bolivian gas are greatly exaggerated. Of course, Brazilian consumers and gas distribution companies have expressed some doubts about the ability of Bolivia to continue to produce natural gas in sufficient volume to maintain the volume of supply after 2019, the end of the current Bolivian-Brazilian contract. However, these concerns are not reflected in the PDE 2024, which comes from the continuation of supply of Bolivian gas at least in the same volume. But imports of LNG will obviously increase.

LNG

In Brazil, 2009-2013 established infrastructure for receiving and regasification of imported LNG (mainly for the purposes of power generation), which consists of three terminal type FSRU (Pecém, Bahia/TRBA(OS) and Guanabara LNG/Rio de Janeiro) with a total capacity of 11.7 million tons per year. All of them until recently 100% owned by Petrobras. However, Petrobras during the reform following the major corruption scandal of 2014, announced the possible withdrawal from the sector of power generation, began negotiating the sale of its thermal power plant and associated two regasification terminals Pecém and Guanabara Bay LNG. And also sold 50% share in terminal Bahia French Total.

Despite this, Brazil plans to realize rather ambitious projects for the construction of new regasification capacity, which is associated, primarily, with plans of commissioning of new power plants on natural gas. Until the end of 2020-ies the government considers it necessary to increase the number of regasification terminals to seven. But now to do this will not be Petrobras, and private Brazilian companies and foreign investors.

At the port of Sergipe in the North-East of Brazil is building a floating regasification terminal with a capacity of 3.6 million tonnes per year, which will become operational in late 2020. It is designed to supply a gas power plant with capacity of 1.5 GW, which is a joint venture (JV) Golar Power (headquartered in Bermuda) and Brazilian EBrasil. A long-term contract for LNG supply concluded with the company Ocean LNG, a joint venture involving Qatar Petroleum (70%) and ExxonMobil (30%). It is assumed that the capacity of the terminal will allow you to plan in the area of its location the construction of additional facilities for gas generation.

We also discuss the construction of onshore regasification terminals in the vicinity of the port Pecem, ceará, North East Brazil, and at the port of ACU North of Rio de Janeiro. Regasification capacity of each of them will be 10 million cubic metres of gas per day. The first of these is intended to supply gas, metallurgical and other industrial enterprises in the region, and the second to ensure the construction on-site port power capacity of 1,238 GWh, which should be launched in early 2021. LNG to these terminals, it may be put to the British BP.

In addition, we consider several projects for the construction of floating regasification terminals in the North of Brazil. They are designed to supply gas to local industrial enterprises participating in the program for the relocation of its plants from fuel oil or diesel to natural gas and the planned construction of new gas power plants.

Investment climate

Regulation of activities in the fuel and energy industry of Brazil by the Ministry of mining and energy and National Agency of oil, gas and biofuels (ANP). Under the law, the mineral resources of the country are state property, the oil and gas extraction can be carried out on a concession basis or product sharing, if, in the latter case, resources are located in the pre-salt cluster of the continental shelf.

In agreements on production section (SRP) in the pre-salt cluster, the operator of the project until recently, was bound to serve Petrobras with shares of participation not less than 30%. In addition, the operating Committee for the management of such projects should be required to participate a new state oil company Pre-Sal Petróleo SA (PPSA) with the right to vote when taking decisions on matters of principle. It is a kind of “eye” of the government in all projects in the subsalt cluster of the continental shelf, referred by Brazil to the category of strategic reserves.

However, in February 2016, this provision was revised in the Brazilian Senate. In the new edition of the law Petrobras has a priority right to be the operator, but may refuse it. In case of refusal of promising oil and gas geological units can be put up for auction. These changes came into effect in 2017 after the law is signed by the President of Brazil. Work on the study of sedimentation basins of Brazil, the isolation and definition of the boundaries on their licensed blocks, which are in process of readiness exhibited for public auction (tenders), is the responsibility of the ANP. To date, the country held 14 rounds of the tender for the oil and gas basins, located outside the boundaries of the pre-salt cluster, and three tenders in the pre-salt cluster.

Concession agreements and PSAs provide for two stages of development of the license blocks and fields: exploration and production. The first stage is given three to five years with the possibility of renewal for a further three years, second – up to 35 years. According to the results of exploration, the company must make a decision about the continuation of the work or to refund the license ANP.

Pricing for oil and natural gas imports in Brazil is free, is determined by the quotations on the relevant trading platforms. However, the prices of petroleum products, primarily gasoline and diesel fuel, are regulated by the government. However, Petrobras, which was until recently a de facto monopoly in the gas sector, have a decisive influence on the formation of gas prices in the Brazilian domestic market. However, in the course of restructuring, the company announced a policy decision to limit its involvement in the gas business and has expressed its intention to be actively involved in the initiated by the government of Brazil, the process of liberalization of the gas market.

Foreign companies have equal rights to Brazilian to participate in tenders and develop oil and gas fields and be the operators of the respective projects. The main condition of their activities in the country is the creation of a Brazilian legal entity and the appointment of its Director vested with the necessary authority to carry full responsibility for the activities of that legal entity before all Brazilian authorities. In addition, both foreign and Brazilian companies must pass prequalification in ANP and to the corresponding category, allowing to work on certain fields depending on their complexity.

Legislative requirement on the localization of equipment, services and technologies, as well as high tax burden has complicated the investment climate in the Brazilian oil and gas industry. However, in recent years to increase the interest of foreign companies for oil and gas projects in Brazil the government tries to significantly liberalize the conditions for participation.

The Interest Of Gazprom Group

Gazprom is considering the intensification of its activities in Brazil as a very promising direction, if, of course, that favourable conditions will be created. In particular, the cooperation with Brazilian partners can be in the framework of technological cooperation. For example, the Group “Gazprom” can offer to the development of the General scheme for gas industry development of Brazil in the long term that this country today is extremely important.

In addition, the Russian Corporation is ready to provide partners with technology and know-how related to increase gas and oil recovery, production of small scale LNG at the junction of gas pipelines of high and low pressure design, construction and maintenance of underground gas storage (UGS) that Brazil can be very interesting, as the country plans to create the first in its history UGS. Deliveries to the Brazilian market the LNG portfolio of Gazprom Group could become a new area of cooperation, given that Petrobras intends to leave this fast-growing market, passing his gas generation in the hands of private and foreign companies.

In turn, Petrobras is objectively interested in cooperation with large foreign partners in the development of oil and gas resources on the continental shelf of Brazil. In addition, the Brazilian state company has advanced technologies and experience of development of offshore fields of hydrocarbons. The country has created companies that produce on its own technological basis (regardless of the well-known American and Western European companies) almost full set of equipment of the subsea system. They are willing to localize the production of equipment in Russia with the transfer of appropriate technologies to Russian partners.

As for the possible participation of the Group “Gazprom” in the tender for obtaining the exploration license oil and gas blocks in Brazil, in the future it may become feasible in case of receiving positive results of exploration work on the plots sold to investors in the course of already conducted competitions.

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