Petrobras divestment plan and new national Gas Law lay groundwork for billions of dollars in investment in Brazilian oil and LNG terminal and natural gas infrastructure over next five years
A “huge transformation” in the oil and gas sector in Brazil will see state-run Petrobras sell half its refinery capacity, all of its onshore and shallow water fields and even some offshore post-salt concessions. This divestment, in combination with a new national gas law, will create fertile ground for billions of dollars of investment, said the country’s head of its leading oil regulatory body.
“We’re going through unprecedented transformation in the oil and gas market in Brazil – in every sense,” said ANP director general Rodolfo Saboia. Mr Saboia said with these new investments in mature fields, development of pre-salt fields, offshore blocks in the exploratory phase, and a calendar of new auctions, “Brazil is ready to take a leading position in the sector. This is what we expect to be happening in the years to come.” The divestment by Petrobras is expected to make it a “more competitive and open market, better for consumers,” he added.
Mr Saboia made his comments about the Brazilian offshore oil and gas market during an OTC-produced streamed presentation and interview, “The Oil and Gas Industry in Brazil: Investment Opportunities,” in June.
Bucking a Covid-induced global downturn in the energy sector in 2020, Brazil enjoyed a 5% increase in oil production last year, in part thanks to the implementation of the IMO 0.50% global sulphur cap, which increased demand for pre-salt oil.
The oil’s low-sulphur content and attractive development environment positions the Brazil oil and gas sector for growth as vaccinations increase in the US and Europe, and the price of oil rebounds, said Mr Saboia. He noted that 15 new offshore production, storage and offloading units (FPSOs) will start operations in Brazil by 2025.
As the world’s 10th largest producer of crude oil, Brazil has 93 E&P companies active in the sector, producing 3M barrels of oil and 131M m3 of gas daily, with 12Bn barrels of proven oil reserves and 337Bn m3 of proven gas reserves.
Driven by investment of US$50Bn between 2021-2025, Brazil climbed to become the world’s fifth largest oil producer, topping 5M barrels of oil per day by 2030.
“We are going through unprecedented transformation in the oil and gas market in Brazil”
The Covid-19 pandemic impacted E&P activities around the globe, not just in Brazil, and accelerated discussions around the clean energy transition. This has “reinforced the sense of urgency of exploring our resources,” said Mr Saboia, noting that in “net-zero scenarios there will be a drastic drop in oil demand and less capital available for investments in oil and gas – with least competitive countries being highly impacted.”
It is anticipated that Brl6.5Bn (US$1.25Bn) will be invested in offshore Brazil in 2021, including the drilling of 19 offshore wells in exploratory blocks.
“In Brazil, we want to attract the right players for each environment – the right assets in the right hands,” Mr Saboia said.
The energy transition is not only impacting oil demand, but also how it is produced. Decarbonisation of offshore drilling has emerged as one of the top priorities in the sector. Seadrill is employing FS Marine+ technology on its 6th generation drill ship West Saturn to reduce CO2 and greenhouse gas emissions for its deployment in the Bacalhau field in Brazil. Partners in Bacalhau are: Equinor, ExxonMobil, Petrogal Brasil and Pré-sal Petróleo SA. Fuelsave says its FS Marine+ optimises combustion through the dynamic injection of hydrogen, oxygen, water and methanol. By making combustion more efficient, the system significantly reduces fuel consumption and harmful emissions, such as CO2, NOx and black carbon. Emissions of CO2 are expected to be cut by 10-15%, and NOx by 30-80%.
Brazil’s new gas law
“The energy transition is a challenge for the whole world … especially in the energy sector and in the oil and gas industry,” said Mr Saboia. However, he sees natural gas “playing a special role” in the transition for “some decades into the future.”
Enacted in April, Brazil’s new Gas Law ensures that LNG will have a relevant role in the national market because of its the competitive pricing and flexibility of supply, while creating opportunities for local vessel operators, port and terminal developers. Brazil has five LNG terminals and expects four others to be built.
Through its Towage division, Brazilian maritime and logistics provider Wilson Sons, for example, has carried out more than 25 special operations supporting gas carriers and floating storage and regasification units (FSRU), FPSOs and drilling rigs.
“Today we have a fleet of 80 tugs, the largest in Brazil, spread across the Brazilian coast,” said Wilson Sons’ Towage division commercial director Elísio Dourado. He noted that four of the vessels in the fleet are high-powered escort tugs, and another six of this class are under construction at the company’s shipyard in Guarujá (SP).
Wilson Sons counts among its customers Celse (Centrais Elétricas de Sergipe), which operates the Port of Sergipe Thermoelectric Power Plant (TPP). With 1.5 GW of installed capacity, the Sergipe TPP is supplied by a regasification terminal, capable of storing up to 170,000 m3 of LNG and regasifying up to 21M m3 of gas per day. The Sergipe project is the first Brazilian privately-backed LNG-to-power development.
A 50-50 joint venture between Golar Power and EBrasil, Celse charters the FSRU Golar Nanook under a 26-year contract for the terminal.
Wilson Sons’ tugboats operate in ship-to-ship operations to supply the terminal. “These are highly complex operations and require a high level of security, with adequate planning and training,” said Celse LNG terminal operations manager Lucas Buranelli.
LNG terminals are seen in Brazil as an alternative for monetising pre-salt gas. Data from the Brazilian Petroleum Institute (IBP) show that the new Gas Law can generate investments of up to Brl17.1Bn (US$3.3Bn) for the construction of natural gas processing units and LNG terminals.
Other opportunities are emerging from small-scale LNG, which allows the energy demands of the interior of the country to be met where there are no gas pipelines to carry the fuel. “Currently, gas reaches a very restricted territory, but with new measures for the sector and greater investment in infrastructure for its flow, it will be possible to transport LNG in larger volumes at competitive prices,” noted Mr Buranelli. “It is an alternative to firewood, coal, gasoline, diesel and heavy oil. Natural gas has a significant role in the diversification of the Brazilian energy matrix and is key to the transition to a low-carbon economy,” he pointed out.
Mr Saboia summed up, saying: “Different countries will take different paths in the energy transition.” This means that some countries will rely more on fossil fuels in the years ahead. “I believe that rich countries can do the energy transition in a way that developing countries might not be able to. Oil will still have a future. By 2050, we will have around 10Bn people in the world, and that will demand a lot of energy,” he concluded.