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Brazil Oil and Gas Conference Brazilian-American Chamber of Commerce. Brazil Oil & Gas Growth prospects and new regulation. Jose Luis Villanueva, Director. BP Spill Unlikely to Put Pressure on LT Oil Prices. Pressures: Drilling moratorium Insurance costs Safety costs Increased regulation

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brazil oil gas growth prospects and new regulation

Brazil Oil and Gas Conference

Brazilian-American Chamber of Commerce

Brazil Oil & GasGrowth prospects and new regulation

Jose Luis Villanueva, Director

bp spill unlikely to put pressure on lt oil prices
BP Spill Unlikely to Put Pressure on LT Oil Prices
  • Pressures:
    • Drilling moratorium
    • Insurance costs
    • Safety costs
    • Increased regulation
  • Mitigants:
    • Fewer players
    • Drilling costs
    • Service costs
  • Fitch’s oil price deck:
    • $70/b in 2010
    • $65/b in 2011
    • $60/b thereafter

www.fitchratings.com

oil prices not likely to end nationalism
Oil Prices Not Likely to End Nationalism
  • Hydrocarbon related revenues a significant revenue stream for the sovereign
    • Close to 50% for Venezuela and Malaysia
    • About 35% for Mexico, Russia and Kazakhstan
    • Less than 20% for China, India, Thailand, Colombia and Brazil
  • Need to attract capital and technical expertise from IOC to EM at risk
    • Discouraged by higher royalties and taxes
    • Nationalization or coerced sales in Venezuela, Bolivia, Russia and Kazakhstan
  • Regulatory changes introduce marginal improvements or significant set-backs
    • Mexico’s energy reform improves Pemex’s corporate governance & financial flexibility
    • Brazil’s new pre-salt regulation increases government intervention in the industry

www.fitchratings.com

oil surplus in middle east africa and south america
Oil Surplus in Middle East, Africa and South America

Sources: BP and Fitch Ratings

www.fitchratings.com

consistent production increases in brazil
Consistent Production Increases in Brazil

Sources: BP and Fitch Ratings

www.fitchratings.com

capex efficiency diverges within regions mexico vs brazil
Capex Efficiency Diverges Within RegionsMexico vs Brazil

Oil Production (’000 Bpd)

Investments (USD bn)

Sources: Petrobras, Pemex, Fitch Ratings

Sources: Petrobras, Pemex, Fitch Ratings

www.fitchratings.com

brazil internal demand is robust
Brazil: Internal Demand is Robust

Sources: BP and Fitch

www.fitchratings.com

discoveries increase production reserve growth prospects
Discoveries Increase Production/Reserve Growth Prospects
  • With the pre-salt areas reserves are expected to more than double in Brazil
    • 5 billion boe to 8 billion boe in Tupi
    • 3 billion boe to 4 billlion boe in Iara
    • 1 billion boe to 2 billion boe in Guara
  • Production also could double by 2020 (excluding PSA)
    • 2015E production of 582 mboe
    • 2020E production of 1,815 mboe
  • Significant investments are required for developing pre-salt (excluding PSA)
    • USD29 billion from 2009 to 2013
    • USD111 billion from 2009 to 2020

www.fitchratings.com

new regulation increases government intervention
New Regulation Increases Government Intervention
  • Creation of Petrosal
    • Participates in PSA’s operating committees
    • Has veto power
  • Increased attribution of the CNPE
    • Determines areas considered strategic
    • Defines the oil profit paid to the government in areas directly assigned to Petrobras
  • Government may increase stake in the industry
    • “Profit oil” vs royalties and special taxes
    • If minority shareholders do not exercise their pre-emptive rights
    • By buying Petrobras’ shares with treasury notes

www.fitchratings.com

petrobras to take a more active role in the industry
Petrobras to Take a More Active Role in the Industry
  • Benefits from the new regulation:
    • Operator in all blocks
    • 30% minimum participation in PSAs
    • Government contribution of up to 5 billion boe
    • Likely to raise more than USD20 billion from minority shareholders
  • Burdens from the new regulation:
    • Significant investment requirements to develop pre-salt
    • Could end up participating in non-economical fields
    • Technical and economic challenges
    • Resource overextension

www.fitchratings.com

petrobras to raise more than usd50 billion transfer of up to 5 billion boe and equity issuance
Petrobras to Raise More than USD50 billionTransfer of up to 5 billion boe and equity issuance

www.fitchratings.com

fitch rates petrobras bbb with stable outlook leverage could put pressure on ratings
Fitch Rates Petrobras ‘BBB’ with Stable OutlookLeverage could put pressure on Ratings

www.fitchratings.com

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