BY CONTINUING TO USE THIS SITE, YOU ARE AGREEING TO OUR USE OF COOKIES. REVIEW OUR
COOKIE NOTICE

Register with us today

and in less than 60 seconds continue your access to:Latest news headlinesAnalytical topics and featuresCommodities videos, podcast & blogsSample market prices & dataSpecial reportsSubscriber notes & daily commodity email alerts

Already have an account?

Log in to register

Forgot Password

Please Note: Platts Market Center subscribers can only reset passwords via the Platts Market Center

Enter your Email ID below and we will send you an email with your password.


  • Email Address* Please enter email address.

If you are a premium subscriber, we are unable to send you your password for security reasons. Please contact the Client Services team.

If you are a Platts Market Center subscriber, to reset your password go to the Platts Market Center to reset your password.

In this list
Oil

Analysis: Brazil's Bolsonaro likely to advance oil-industry reforms

Energy | LNG | Natural Gas | Natural Gas (European)

Russian Gas in Europe: More Than Pipelines

Oil

Platts Rigs and Drilling Analytical Report (RADAR)

Oil | Refined Products | Fuel Oil | Shipping | Dry Freight | Marine Fuels | Tankers

Mediterranean Bunker Fuel Conference, 8th Annual

Oil

USGC octane prices slip as gasoline complex softens, exports dip

Analysis: Brazil's Bolsonaro likely to advance oil-industry reforms

Rio de Janeiro — Brazil's oil and natural gas industry will likely continue to see reforms aimed at luring investments and boosting production, especially in the highly productive subsalt frontier, after the country elected Jair Bolsonaro, the self-styled "Trump of the Tropics," president Sunday.

Not registered?

Receive daily email alerts, subscriber notes & personalize your experience.

Register Now

Right-wing President-elect Bolsonaro, who ran on a law-and-order platform, topped leftist Fernando Haddad of the Workers' Party, or PT, by a 55%-45% margin. Polls ahead of the second round of voting indicated a Bolsonaro win, although the final margin of victory was closer than expected.

The grand reopening of Brazil's oil patch, which started in mid-2016 after the impeachment of former president Dilma Rousseff, is expected to continue under the new administration, with Bolsonaro maintaining the reforms implemented over the past two years. Brazil set a fixed annual schedule of production-sharing auctions and bid rounds, reduced requirements to use locally produced goods and services in exploration and development and allowed foreign oil companies to operate subsalt fields sold under production-sharing agreements.

Brazil's National Petroleum Agency, or ANP, already has plans to hold the country's 16th bid round and sixth subsalt production-sharing auction in the second half of 2019, which is expected to be maintained and approved by the National Energy Policy Council, or CNPE, this week. In addition, Bolsonaro will likely push for the government to complete price-adjustment talks on the transfer-of-rights areas with Petrobras. That would clear the way for the government to sell off additional volumes of oil Petrobras discovered in acreage the government controls.

A transfer-of-rights auction would be highly anticipated by the oil industry, with the sale putting up an estimated 5 billion-15 billion barrels of oil equivalent that has been discovered, derisked and drilled on the market. Initial estimates pegged potential signing bonuses generated by the auction at $100 billion.

Petrobras already holds the rights to produce 5 billion barrels from the region, with the Buzios Field that pumped first oil in April containing an estimated 3.1 billion barrels recoverable.

PARTIAL PLAN

Under terms of Bolsonaro's economic policy plan filed in early October, the new president also pledged to gradually remove local content requirements, establish incentives for small companies as well as incentives for the exploration and development of unconventional deposits, and open the natural gas markets to competition. Petrobras will continue to be a state-led, mixed-capital company, but subsidiaries holding dominant market positions in refining, distribution, logistics and transportation will be sold off, according to the plan.

Oilgram News

Platts Oilgram News brings fast-breaking global petroleum and natural gas news every day covering supply and demand trends, corporate news, government actions, exploration, technology, and much more. Click on the link below and we will set you up with a free trial.

Free Trial

Bolsonaro's nominee for finance minister, widely respected economist Paulo Guedes, also confirmed Monday that the government would continue to privatize state-led industrial entities under the new government.

The government support is expected to help Petrobras move forward with its often-delayed plan to sell $21 billion worth of assets in 2017-18. Several major asset sales are currently halted because of a Supreme Court injunction ruling that Congress must vote to approve strategic asset sales, such as Petrobras' sale of four refineries representing 25% of installed capacity and natural gas pipeline network Transportadora Asociada de Gas, or TAG. The TAG sale was expected to raise more than $5 billion for Petrobras.

The injunction was handed down despite an improved, more-transparent sales methodology implemented by the Federal Audit Court, or TCU, which acts as a government watchdog.

One of the new government's biggest challenges will be what to do with an ongoing subsidy on domestic diesel prices. The government agreed to reduce diesel prices to settle a brutal 10-day strike by independent truckers in May, but the subsidy expires on December 31. Petrobras and other distributors, importers and refiners that adhere to the subsidy will be reimbursed for the difference between international and domestic prices, which is expected to cost about Real 9.5 billion.

Bolsonaro will likely need to retreat from his anti-establishment campaign rhetoric to negotiate with a Congress, that will likely be led by an opposition-controlled alliance in the early weeks of the new government, to resolve the diesel-subsidy issue or face a potential crisis. The recent strengthening of Brazil's real currency versus the US dollar and lower international prices for oil products, however, were helping to naturally reduce fuel prices in a trend that should help the talks.

The subsidy talks also could be included as part of a broader overhaul of Brazil's distribution segment. Bolsonaro's economic plan included changes to the way transportation fuels are taxed in Brazil, as well as the implementation of "appropriate hedges" to ease the impact of fuel-market volatility on domestic consumers.

Bolsonaro's Social Liberal Party, or PSL, is the second-biggest voting block in the Lower House, although the group could eventual expand its power with a possible alliance with a group of centrist parties. But even alone, the PSL's size should be enough to ward off any opposition attempts to overturn recent reform advances such as making Petrobras the sole operator of subsalt fields sold under production-sharing agreements.

Few concrete details have emerged about Bolsonaro's primary energy policy targets and appointments as of Monday. Market chatter late last week indicated Bolsonaro was considering nominating a general to be chief executive at Petrobras, which could be seen as a step back given the market-oriented leadership of Pedro Parente and Ivan Monteiro. The Mines and Energy Ministry will be tasked with continuing studies about how best to open Brazil's fuel and natural gas markets to competition, which will require competent leadership with industry knowledge.

The contract of ANP Director General Decio Oddone, a widely respected industry leader, runs through 2020, with Oddone saying previously he would like to continue in the post. Oddone helmed the ANP through a massive modernization and the plethora of bid rounds carried out over the past two years.

--Jeff Fick, newsdesk@spglobal.com

--Edited by Derek Sands, derek.sands@spglobal.com