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Oil producers in Brazil face new challenges and seek opportunities in the era of energy transition and ESG

Written by Bruno Teles
Published 04/05/2023 às 15:40
Oil producers in Brazil
photo: onshore exploration

Brazilian oil producers are in a new cycle, according to the president of the Brazilian Association of Independent Oil and Gas Producers (Abpip), Marcio Felix.

During the Petrobras' 2016-2022 divestment program, independent companies Oil and Gas have been successful in buying mature land areas and exploring new markets, such as the natural gas market. However, they must now prepare for a new era without the benefits of new asset sales, which requires gaining efficiencies, contributing to the ESG agenda and working together with the government to reduce the requirements to start oil and gas production.

According to Felix, in onshore sector, some independent companies are more focused on natural gas, which can replace other fuels in the energy transition. Companies in areas like Alagoas are contributing with a strong social commitment, revitalizing unproductive exploratory areas. There are also projects being considered for carbon capture in Brazil.

Felix sees possibilities for diversifying energy sources, aiding the energy transition and ESG.

Is it possible to create a new sense of purpose for the fossil fuels, making it hybrid and flexible. Brazil has many opportunities for this, onshore sector associates are in locations that often coincide with wind potential.

In addition, it is necessary to seek the highest possible [oil] recovery factor. Independent companies play a role in the transition, and many are starting to see themselves as energy companies, not just oil and gas.

Felix stated that his mandate as president of Abpip will seek a more conciliatory profile. A Petrobras completed its divestment cycle, and it is expected that the company will start a new round of sales, but in the onshore part, practically all the assets have already been put up for sale.

It's no use exalting the past. Campaigning for further divestments will not change the current situation. It is necessary to wait for new movements in addition to what is already underway. It is necessary to adjust the requirements and terms of investment in exploration in Brazil. Exploration is very strict in terms of regulations and deadlines. This period can be shortened. The continuous supply of blocks by the National Petroleum Agency can also be facilitated.

Felix points out that the challenge is that the requirements for a well producing 5 b/d are the same as for a well producing 50.000 b/d, with an offshore production mindset.

Low production, low risk areas should be facilitated. For this, it is important to think of temporary provisions to simplify the matter. The permanent offer of Oil National Agency aims to simplify, leaving the blocks available, but it has become an annual auction. We will still need to expand our exploration, especially where there is infrastructure.

With respect to gas market, Felix comments that he will grow up. We have emerging intermediate links in the gas chain, compressing, liquefying and delivering directly to industrial consumers in a free market model. This transformation is visible and will grow even more soon.

In summary, Brazilian independent oil and gas producers are facing new challenges and seeking new opportunities.

They are committed to the ESG agenda and the energy transition. Gradually, they are becoming energy companies, not just oil and gas.

This new phase in oil and gas production it is the result of the change in divestment dynamics a few years ago. Independent companies are focusing on the natural gas market, which is a more viable and less polluting source of energy, as well as possible carbon capture projects. These companies are increasingly committing to the ESG agenda and recognizing the value of becoming energy companies, not just oil and gas.

The president of Abpip, Marcio Felix, highlights the importance of adjusting the requirements and deadlines for investment in exploration in Brazil.

He points out that, currently, exploration is very rigid in terms of regulations and deadlines, which may affect the oil and gas production in the country. To face these challenges, areas of low production and risk must be facilitated, with a focus on expanding exploration in areas that already have infrastructure.

Additionally, we bring Felix mentions the gas market as an area that should grow. He notes that there are emerging intermediate links in the gas chain, compressing, liquefying and delivering directly to industrial consumers in a free market model.

In general, the independent Brazilian oil and gas producers are constantly evolving, facing new challenges and seeking new opportunities. They have a strong social commitment, revitalizing unproductive exploratory areas and, little by little, are becoming energy companies, contributing to the energy transition and the ESG agenda.

Bruno Teles

I talk about technology, innovation, oil and gas. I update daily about opportunities in the Brazilian market. With more than 2.300 articles published in CPG. Agenda suggestion? Send it to brunotelesredator@gmail.com

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