Increased production, revitalization of mature fields and resilience of projects in the pre-salt should leverage regional development, renew the supply chain and change the face of Brazil. It is not about exaggerated optimism but a balance of the sector and oil, gas and energy and the lessons learned in 2020 and the opportunities and challenges for 2021 and the coming years, made by those who know the sector: the Secretary of Petroleum, Gas Natural and Biofuels from the Ministry of Mines and Energy (MME), José Mauro Ferreira Coelho, and general director of ANP, Rodolfo Saboia. They were the guests of the Chat with Destri held on February 2nd.

The 18th chat conducted by Destri Consulting's CEO, Mauro Destri, with the participation of lawyer Lais Destri, is the first in partnership with TN Petróleo/T&B Petroleum and has already been viewed by more than 250 people on Youtube (to watch, click here) with Destri 18 - YouTube). In addition to an industry 'balance sheet', participants addressed concerns about the unique moment in the face of the Covid-19 pandemic and its repercussions on the world economy and spoke of expectations regarding the future of the industry as a whole, including so-called companies independent.

"Brazil has great potential and we are going to act to develop it," said José Mauro, recalling that in ten years, the country will be producing around 5.3 million barrels / day, generating new opportunities, jobs and income. "We will be among the three or four largest oil producers and exporters in the world by 2030", added the MME secretary.

Advances in 2020

He highlighted the joint effort with the ANP and private agents to ensure maintenance of supply and LPG was not lacking in homes in the face of the pandemic, which generated challenges in the fuel and natural gas sector across the country.

Despite the challenging scenario, he stresses that there have been important advances for the sector. “First, the conclusion of the first phase of the Oil and Natural Gas Production Revitalization Program in Land Areas (Reate), with the creation of Mesa Reate in the states. The objective is to understand the challenges at the regional and state level and to act so that the local oil and gas industry develops more quickly. The Mesa Reate Rio Grande do Norte and Bahia have already been held, ”he said. On March 30 it will be the turn of the Mesa Reate Espírito Santo.

José Mauro noted that the Reate was generated with the expectation of increasing the production of oil and natural gas onshore. "Mostly in regions with low HDI, which will lead to local development, generating a chain of goods and services and changing the entire environment".

He also recalled the result of the 2nd Permanent Offer Cycle, in which 17 areas were sold, the approval of incentives for small and medium-sized oil and gas companies and the possibility of reducing up to 5% of royalties.

Finally, he highlighted the creation of the Maritime Fields Revitalization and Incentive Program (Promar), focused on mature offshore assets and which should fill the gap in fields in the post-salt region. “We have to propose incentives to increase this production, to boost local economies. If we work with private agents and state governments, we can create conditions so that these fields can be economically viable for generating jobs and income ”, he said.

José Mauro also pointed to the advances in the new natural gas market in Brazil. “Figures from 2020 show that 26 loading authorizations were given - three years ago, there were only three -, 30 marketing authorizations for natural gas and 30 import authorizations. "This shows the credibility of the design of the new natural gas market that we are building in Brazil," he said.

Resilience of the Brazilian industry

This was one of the points highlighted by the ANP director general. “Our pre-salt oil is very favorable for marine fuel. The fact that he was in high demand helped a lot. The measures to mitigate the impacts made the industry do relatively well in this period, demonstrating its resilience ”, said Saboia.

He noted that while the global economy and capital markets showed good signs of recovery at the end of 2020, the pace of recovery for the coming months remains uncertain as COVID-19 cases have increased, especially in Europe and the United States. States, which could trigger another round of lockdowns and restrictions.

“Any normalization of economic activity depends largely on how the pandemic will evolve and, more importantly, on when the COVID-19 vaccines will reach the general public. Even when the virus is controlled, economies are expected to continue to deal with the adverse impact of deteriorating fiscal balances and the effect of quiet business investment in the labor market and consumer spending in 2021, ”said Rodolfo Saboia.

What does all this mean for the oil and gas industry? “Global demand for oil fell by 25% in April, but has recovered sharply since then, reducing its losses to just 8%. Looking ahead, 2021 oil demand is expected to rebound strongly, but will remain lower than it was at pre-COVID-19 levels - around 4% lower in the base scenario and around 7% lower in the second wave scenario ” , he highlighted.

Global oil and liquid fuel consumption is estimated to average 92.2 million barrels per day (b / d) in 2020, and global liquid fuel consumption is expected to grow by 5.6 million b / d in 2021 and 3.3 million b / d in 2022. It also predicts that Brent crude oil prices will be on average in 2021 higher than compared to an average in 2020.

“For the upstream, we will have a panorama in which despite all the challenges faced, the O&G sector in Brazil proved to be resilient in 2020. Our oil production reached an average of 2.94 million barrels per day, while in 2019 we produced about 2.79 million barrels per day, an increase of 5.5%. The performance was possible due to the increase in production in the pre-salt. On the other hand, onshore and offshore post-salt production continue to decline and were affected by the reduction in CAPEX and the stoppage of production in some fields ”, explained the general director of ANP.

For 2021, the projections indicate a maintenance of production in Brazil, although the start of production of two platforms in the pre-salt (Mero 1 and Sépia) is expected. "It is expected to conclude the sale of numerous relevant fields in the Petrobras Divestment Plan, and to establish an upstream market with a greater diversity of agents, mainly onshore," he added.

Upstream scenario

Brazil faces the challenge of transforming the resources that nature has offered us into wealth for its society. For that, you need to have the agility and intelligence necessary to extract from them the optimal compromise between cost and attractiveness, in the eyes of investors, in the competitive international upstream market.

In 2021, considering the strategic objectives, the ANP will continue to concentrate efforts to increase competitiveness, cooperating with the Ministry in initiatives such as:

a) BidSIM - Program for the Improvement of Bids for Exploration and Production of Oil and Natural Gas, whose purpose is to increase the competitiveness and attractiveness of the areas to be offered in the bidding rounds for exploration and production of oil and natural gas.

b) PROMAR - Revitalization and Incentive Program for the Production of Maritime Fields. The program will focus on revitalizing mature offshore fields with the objective of extending their useful life, increasing the recovery factor, continuing to pay government stakes, generating jobs and maintaining the local goods and services industry.

c) REATE - Program for the Revitalization of Exploration and Production Activities for Oil and Natural Gas in Terrestrial Areas, aimed at attracting new investments and developing the terrestrial oil potential.

Special attention will continue to be given to actions that increase the competitiveness of onshore and offshore post-salt. The ANP will continue to prioritize the analysis of the new Development Plans, the claims for contractual extension and the assignments of rights due to the Petrobras Divestment Plan.

Saboia pointed out that the auction agenda cannot stop either, since less than 5% of our sedimentary area is under contract. The 17th concession round is scheduled for 2021, offering 92 blocks in the Campos, Santos, Pelotas and Potiguar basins, including new border areas beyond 200 nautical miles, which was scheduled for 10/7/2021 (public session ). It also has the possibility of auctioning the CO surplus (Atapu and Sépia). “We also expect at least one cycle of permanent supply to occur, but this depends on expressions of interest from companies. We are working to include approximately 300 more blocks on permanent offer ”, announced Saboia.

Dowstream transformation

The debaters recalled that the country produced more fuels in Brazilian refineries in 2020 than in 2019. The volume of sales of diesel oil and LPG, by the distributors, were also higher. The consumption of gasoline C fell, that of ethanol declined and that of QAV, the most affected by the pandemic, fell by around 49%.

“It is worth mentioning that, as of the 3rd quarter of 2020, the fuel market was already showing signs of a greater than expected recovery, which signals good expectations for 2021. Average demand is expected to be higher than in 2020, the depend, of course, on the recovery of the economy and on the success of the vaccination ”, emphasized Saboia.

He also stressed that the diesel and gasoline market performed above the best expected scenario in the EPE forecasts in the Technical Note on Impacts of COVID-19 launched in June last year. Ethanol sales volumes were below the scenarios outlined by EPE, which should launch new studies with more updated perspectives for 2021.

For all, 2021 will be the year of market transformation and the transition to an open market, with a plurality of agents. As a result of the agreement between Petrobras and CADE, Petrobras committed to divest eight of its refineries by the end of 2021, corresponding to half of its refining capacity (Refap, Rnest, Repar, Rlam, Lubnor, Regap, Reman and Six), with only five derefine assets (Reduc, Replan, Revap, Recap and RPBC).

“The role of the ANP at that time will be to work with an emphasis on guaranteeing supply and improving the regulatory framework, in line with the creation of a competitive market and able to meet the interests of the Brazilian consumer in terms of price, quality and the offer of products. So the two priority agendas are: guaranteeing supply and increasing competitiveness ”, reiterated Saboia.

Additionally, as defined by the CNPE, the ANP will have to define a new biodiesel commercialization model that should replace the current auction system. There are a series of other actions foreseen in the regulatory agenda to increase competition in the distribution and resale of liquids and LPG (as shown in the table below). There is also a forecast of publication of the new unified regulatory framework for the production of fuels, in an effort of regulatory simplification that also includes the regulation regarding the transition of the refining market.

The natural gas market was also affected by the pandemic in 2020, mainly in the second quarter. The average production of natural gas in 2020 grew by 4% compared to 2019, although the availability of gas to the market has reduced. “In 2021, there are good prospects for gas demand due to the opportunities that arise from the new gas market. An example is the reactivation of FAFENS. TAG and Proquigel signed an interruptible gas transportation service contract to supply two fertilizer factories operated by the petrochemical company, in Bahia and Sergipe. The agreement begins on January 29. Additionally, there is a forecast of higher consumption in the thermal market due to the dry season ”, concludes Saboia

Dowstream scenario

In the natural gas sector, 2021 will be the year of consolidation of the bases for the development of this market in Brazil with the greatest potential. It is expected that in 2021 the New Gas Law will be approved, which will provide investors with legal certainty to promote new business and attract investment.

The ANP's focus is to continue implementing regulatory actions that enable the opening of the gas market, in line with the Government's “Novo Mercado de Gás” initiative, which aims to promote competition, attract domestic and foreign investments and reduce prices for the final consumer of the natural gas market.

In 2020, the ANP already held a public consultation and hearing (ANP No. 18/2020), which deals with the Independence and autonomy of the Carrier (There is no competitive natural gas market without an independent carrier). Additionally, there was the Prior Consultation of the Conceptual Model of the New Natural Gas Market. The second workshop, which will deal with the balancing of the gas pipeline system, will be held on 02/10/2021; and the third workshop, which will deal with the implementation of the virtual hub, will be held in March 2021.

Finally, 2021 will also be the year to deepen ANP's actions in consolidating access to essential infrastructures, in a non-discriminatory manner, concluding the first cases already under discussion with the market and Petrobras.

At the closing of Live, Mauro Destri, who created the program for the revitalization of mature fields, materialized in PROMAR, highlighted that the activities of independent oil companies will be fundamental for the maintenance of the sea economy as a whole. “Onshore, REATE is making a major change across the circular economy around this activity. We will do this in the offshore, as PROMAR ”, stressed the consultant, who has more than 30 years and has worked in the sector.

“We are also grateful to our newest partnership signed with TN PETRÓLEO, whose support of dissemination was a critical factor for the success in the dissemination of this PAPO and of those yet to come, greatly assisting our effort to disseminate knowledge as much as possible and, reducing information asymmetry, necessary for a perfect connection between regulators, industry, students, suppliers of goods and services and organized civil society ”, concluded.