Economy

Brazil 'falling off world oil map' over failed policies -industry group

Investors are losing interest in Brazil's oil industry as the country's energy policies raise costs, reduce efficiency and increase risk, Brazil's oil industry association, the IBP, said on Monday.

Reuters
16/09/2014 14:21
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Investors are losing interest in Brazil's oil industry as the country's energy policies raise costs, reduce efficiency and increase risk, Brazil's oil industry association, the IBP, said on Monday.

 

 

Without changes Brazil will likely lose out to places such as Mexico, Iran, Iraq and Algeria where policies are becoming more open to private sector investment.

 

"I went to the three largest oil conventions in the world this year and you hardly heard Brazil's name mentioned," Milton Costa Filho, Executive Secretary of the IBP told reporters at an industry event in Rio de Janeiro. "Brazil is falling off the world oil map."

 

"That wasn't the case a few years ago," Costa Filho said. "But investors have other options now" including rising shale oil output in the United States and Arctic oil prospects in Russia and Norway.

 

The IBP announced its agenda of priorities for 2014-2015, asking the government to review policies that have strengthened state-control over the oil industry, policies it believes are hurting a sector that accounts for 12 percent of the gross domestic product of Brazil, the world's seventh largest economy.

 

Since those policies were adopted in 2008 in the wake of offshore oil strikes, Brazilian oil and natural gas output has stagnated, despite more than $200 billion of investment.

 

IBP President Joao de Luca asked the government to allow state-run oil company Petroleo Brasileiro SA to charge world prices for gasoline and diesel fuel in Brazil to stem losses on fuel imports of as much as 80 billion reais ($34 billion) in recent years.

 

The IBP also asked Brazil to reinstate regular oil-rights concession auctions. Once annual, there have only been three since 2008. This, the IBP says, has made it hard for companies to plan their Brazilian activities. Brazil on Monday said that there would be an auction in the first half of 2015.

 

Marco Antonio Martins Almeida, the top oil official at Brazil's mines and energy ministry, said the IBP's criticisms overstated the industry's problems and that rising production in coming years will resolve IBP's concerns.

 

The IBP also asked the government to allow companies other than Petrobras to operate and lead oil bidding groups in the Subsalt Polygon, an area where large oil reserves are trapped by a layer of salt far beneath the seabed. Petrobras already produces nearly 80 percent of Brazil's oil and gas.

 

"With Petrobras having to invest in exploration it doesn't have money for development," said Mauricio Figueiredo, an IBP director. "The company needs to invest in development so it can produce oil, generate cash and pay for future development."

 

The IBP also said changes to minimum national content rules would cut costs by opening the growing, but expensive, Brazilian oil services industry to competition.

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