[Infographic] Perspectives on the future of the oil and gas market in Brazil: what can we expect?

  • 19/11/2019
  • 10 minutes

The oil and gas market in Brazil constantly undergoes mutations. These transformations are a consequence of changes related to macroeconomic factors and are also associated with particularities of the sector, such as tendencies, negotiations, new implementations, and so on.

Taking that into consideration, we’ve prepared this post to commentate on some perspectives on the future of such a relevant market for the country. Throughout the text, we’ll discuss the challenges, the current plans, and some technological news.


What are the tendencies for the oil and gas market in Brazil?

In general terms, it can be said that it’s possible to look with optimism to this segment of our economy. After all, some aspects were fundamental for ensuring the sustainability and attractiveness of the activity in Brazil.

In order to understand more about the subject, we’ve talked to specialist Fernando Salek, CFO of Wilson Sons Group, which has more than 180 years of existence and is one of the biggest operators of port, maritime, and logistical services in Brazil.

According to him, some regulatory adjustments are preponderant to formulate a positive perspective in this sense:

  • the breach of Petrobras’ pre-salt operating monopoly;
  • the extension of the REPETRO regime;
  • the revision of local content rules.

“These factors, combined with an excellent break-even cost and with the flow-rates from the wells of Santos Basin, result in a great attractiveness for the IOCS (international oil companies), even in a scenario of a more timid recovery of the price of oil”, points out Salek.

What are the sector’s greatest challenges for the next years?

The greatest challenges for the next years manifest themselves in two distinct planes: for the E&P (exploration and production) companies and for Brazil.

“For the companies, in general terms, a great challenge is perpetuating the efficiency gains obtained during the oil crisis, maintaining cost discipline while also accelerating the allocation of capital”, highlights the CFO.

In relation to Brazil, the specialist believes that “the challenge will be guaranteeing a stable regulatory and institutional environment to provide safety for the investors who act in an industry with a long-term profile”. That is, there is a need for setting standards and offering legal guarantees in order to attract investors.

Salek goes further and points out that it’s important to “keep the rhythm of block offer rounds”. Besides that, Petrobras’ current line of administration must also be kept, “privileging the philosophy of building partnerships that possibilitate an adequate rhythm of investments and the materialization of the pre-salt value.”

In November 2017, the then-president of Petrobras, Pedro Parente, presented a speech aligned with that vision. As reported by Folha de S.Paulo, the ex-agent was already talking about “new strategies” related to the market and to renewable energy sources.

What is the market already developing?

Many people don’t know, but the pre-salt itself has been acting as a true laboratory for the use of new technology. The experience has been productive — according to Fernando, “recent applications in the subsea and drilling areas, for example, have resulted in significant cost reduction and efficiency gains”.

In the midst of these news, some risks also present themselves. It’s the case of electric motors, a growing technology that suggests a significant impact on the demand for fossil fuels in the future.

What does the sector have planned for the future?

For Fernando, “because of the changes expected on the energy grid, the sector will focus on the opportunities that present a combination of significant volume with low exploration and production costs”. Consequently, the pre-salt rises as one of the sector’s greatest attractions.

Parallel to that, another thing that catches the attention is the fact that the organizations of this segment are being repositioned as energy companies, and not only as O&G companies anymore. Salek believes that those who invested in this transition a long time ago and that knew how to competently make it will race ahead of the competition.

How do the changes impact the sector?

The most perceptible impacts, as we’ve mentioned on the previous topic, are related to renewable energy sources. Thus, as they progress and gain more space, it’s natural that there be a continuous process of increasing representation in the energy grid.

Despite that, those who think this process is predictable are mistaken, that is, it’s a challenge to try and understand how these changes will happen in practice and, from that, maximize the value of O&G. In the national scenario, this becomes even more important, considering the great volumes of oil reservations to be explored.

Technology on the oil and gas market: what can we expect in the future?

In August 2017, the Brazilian Petroleum, Gas and Biofuels Institute (IBP) organized the O&G TechWeek. It was the first Brazilian technology event focused on the oil and gas market.

According to an interview given to O Globo, Milton Costa Filho — Secretary General of IBP — said that the congress’s goal was to “put all the digital offers already available or that are coming in with a lot of strength and speed face to face with the demands and challenges of the industry”.

For Peter Kronstrøm — partner of the Copenhagen Institute for Futures Studies in Latin America and founder of Future Lounge —, artificial intelligence, which gains more and more space in other sectors, will cause beneficial changes in this market. Speaking also to O Globo, he mentioned that this kind of technology will originate “a change in the work style, which in the future will be more focused on creativity and on thinking”.

Fernando Salek understands that the sector’s growth will make specialists look for a higher quality in their partnerships and services. According to the specialist, “this will impose on the service sector a need for differentiation, demonstrating, for example, a bigger commitment to the best practices of Health, Environment and Safety (SMS), commercial agility and great operational excellence”. In order to achieve those goals, technology is, without a doubt, an indispensable ally.

“In this sense, Wilson Sons has been preparing for a long time, be it through its DNA of operational excellence and its partnership philosophy, be it because of its absolute commitment to the best practices in the area of safety. Therefore, I believe that the search for differentiated quality sets us apart”, adds the CFO.

All in all, the oil and gas market in Brazil has gone through alterations which promise to make it even tougher. As a direct consequence, you can expect more efficiency on the operations and processes, which will result in even better products for the final customer.

Brazilian gas pipelines

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