Gas Openings and Refining Require Regulatory Changes and Competitive Environment

In Downstream, Tax Reform and Legal Security Are Essential, According to Debaters on the Second Day of Rio Oil & Gas; Integration of Gas and Electricity Goes Through Flexible Thermal Plants.

Rio de Janeiro, December 3 – Brazil is experiencing a moment of opening in the downstream and natural gas sectors and sees a resurgence of onshore exploration and production activities. In all cases, these movements have as an important support the sale of Petrobras assets and require regulatory adjustments and legal security to advance. These conclusions were drawn from the debates on Wednesday (2) during Rio Oil & Gas.

In refining, Petrobras’ divestments are a transformational change in the Brazilian downstream, aligned with the energy transition towards a low-carbon economy and the adoption of new technologies. However, to create a more competitive environment, it is necessary to overcome regulatory, tax, and logistical challenges, in addition to the impacts of the Covid-19 pandemic.

Marcelo Araújo, CEO of Ipiranga, said, “the divestment and other movements will profoundly change the downstream landscape and market,” which requires a regulatory framework that brings legal security and tax simplification.

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Anelise Lara, Executive Director of Refining and Natural Gas at Petrobras, highlighted that, in two years, the company will go from 98% control of refining to around 50%. But Petrobras, she said, will remain relevant: “Our strategy is to reduce costs, increase energy efficiency, advance decarbonization, compliance, governance and empower our internal team for the opening. We will be strong and agile competitors in this new scenario.” 

“The timing of Petrobras’ divestments is excellent. Brazil needs to connect with what is happening in the global refining and remove barriers to evolve,” said José de Sá, Senior Partner at Bain&Company, on the “The New Downstream Market” panel. 

For Rafael Grisolia, CEO of BR Distribuidora, “the pandemic brought changes in urban mobility, transportation habits, tourism, and aviation, but we learned a lot during the crisis. The energy transition also increasingly influences customer decisions.” He participated in CEO Talks.

Biofuels

Valeria Amoroso Lima, Executive Director of Downstream at IBP, stated that the energy transition has been challenging in various sectors, and that biofuels are one of the main alternatives for decarbonizing the sector. “Today, Brazil is the second largest producer of ethanol and biodiesel, mature and robust industries. This does not guarantee future success. We must advance in adopting public policies that allow for an increasing synergy between biofuels and other markets.”

For Claudio Rogerio Linassi Mastella, Executive Manager of Commercialization at Petrobras, it is necessary to invest in new advanced biofuel technologies. 

Ricardo Mussa, CEO of Raízen, emphasizes the importance of biofuels but warns of the need for government regulation. “There is no doubt that Renovabio will drive the participation of biofuels in the national energy matrix over the next 10 years. The points that require attention are related to tax reform and legal security – a guide to attract infrastructure for the production, transportation, and distribution of fuels and ensure competitive equality,” he said at the Biofuels: The Path to Free Market panel.

Integration Between Gas and Electricity

In the session “Gas-Electricity Integration,” the focus was on discussing how toharmonize the demands of both sectors. With renewable energies becoming increasingly competitive, thermal generation, according to the debaters, was highlighted as an important demand, with attributes such as energy security, electrical security, peak generation, and reduction of transmission losses.

For Edson Silva, a member of the Executive Committee at ENGIE, thermal generation must be competitive. “To put more megawatts into generation, there needs to be more demand to consume.” 

Luiz Carlos Ciocchi, President of ONS, highlighted the importance of flexibility. “As a certain region requires flexibility or power, I need energy at a certain time or for contingency. This service with well-defined economic signaling can attract investors to place their capital into that service. Currently, what happens is seeking this flexibility in services that are not paid for by consumers.”

Renaissance of Onshore

Defining clear policies aligned with a stable framework is crucial for national onshore to gain greater attractiveness and competitiveness. At the same time, it will be necessary for the potential for oil and gas production in mature fields to advance through continued investment in research and well-defined rules for environmental licensing for new operators. 

“There is a divestment program from Petrobras underway, and we are experiencing the transition of fields to independent producers. At the same time, we have ambitious goals for the next decade: to increase the recovery factor, advance into new frontiers, and expand the declaration of commerciality,” emphasized Carlos Agenor, director of the Department of Oil and Gas Exploration and Production Policy at the Ministry of Mines and Energy, in the session “The Renaissance of the Brazilian Onshore.”

Energy transition and financial discipline, in turn, are on the radar of majors for growth in alignment with social demands for clean and accessible energy, as well as effective cost management in the face of a Covid-19 crisis. In the panel “Challenges and Perspectives of the O&G Industry in Brazil,” the president of ExxonMobil Brazil, Carla Lacerda, defined that the country needs to prioritize its intellectual capital, its robust supply chain, and value its pre-salt resources.

The pandemic and the crisis have brought new topics to the O&G sector, which are integrated with the demand of global society, according to André Araújo, president of Shell Brazil. 

Rio Oil & Gas 2020 is sponsored by Petrobras, Equinor, Shell, BR Distribuidora, Ipiranga, bp, Chevron, ExxonMobil, Raízen, Total, Petrogal, Repsol Sinopec Brasil, Siemens Energy, Braskem, Enauta, PetroRio, Salesforce, Dow, Oracle, Solvay, TBG, Techint, United Airlines, Vallourec, and Wintershall DEA.

Source: IBP