Ministry of Mines and Energy Secretariat of Energy Planning and Development – SPE MINISTRY OF...

Ministry of Mines and EnergySecretariat of Energy Planning and Development – SPE

MINISTRY OF MINES AND ENERGY

Brazilian Oil, Gas and Reneweble Fuels Policies

João José de Nora SoutoDeputy Secretary of Oil, Natural Gas and

Renewable Fuels

Quito – 13th July 2011


Guidelines for the Brazilian Energy Policy

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Energy Supply Security

Reasonable Tariff Policy

Service availability for the entire population

Regulatory framework stability

Strengthening of planning

Energy matrix diversification and renewables usage

National energy integration

National technological development

Concern about social-environmental constraints


3

37.9

8.8

4.81.4

15.2

10.1

18.0

3.8

31.0

12.1

6.9

1.6

12.49.2

21.5

5.4

%

2009243,7 Mtoe

47,2% renewable

2019429,9 Mtoe

48,4 renewable

Source: PDE 2019, IEA Data Services - World Energy Balances and IEO 2010/DOE

Brazilian Energy Supply Matrix (%)

Energy (Mtoe)World 2008: 12.267 → Brazil 2009: 2,0%World 2020: 14.882 → Brazil 2019: 2,9%

GDP Growth: 4.7 % per annum

5.8 % p.a.


E&P Activity in Brasil - 2010

Total sedimentary area: 7.5 million sq km 2.8 million sq km of E&P

efective area (37.3% from total) Granted area: 344.6 th sq km

(12.3% from efective area) 376 exploratory blocks 392 fields in production phase 7 blocks at Onerous Assignment 80 E&P concessionaries

Source: ANP, 2010


Oil & Gas Statistics

Proved Reserves (December, 31 - 2010): 14.25 billion barrels (+11% over 2009) Production (2010): 2.14 million barrels/day Consumption (2010): 2.23 million barrels/day Imports (2010)*: 0.34 million barrels/day Exports (2010)*: 0.63 million barrels/day Refine capacity (2010): 2 million barrels/day Reserve / Production Rate - R/P: 18.3 years

Source: MME 2011 and ANP 2011 (www.anp.gov.br)

Proved Reserves (December, 31 - 2010): 423.03 billion m³ (14.9 tcf, +16% over 2009) National Production of NG (2010): 62.84 million m³/day Consumption in Process, Reinjection, Flare (2010): 34.81 million m³/day National Gas made available to the market (2010): 28.04 million m³/day Imports (transport consumption deleted - 2010)*: 33.66 million m³/day Total supply of natural gas (2010): 61.70 million m³/day Reserve / Production Rate - R/P: 22.8 years

Natural Gas: Expected Investments: R$ 8,96 billion - 2010-2014

Petroleum: Expected Investments E&P: R$ 232,91 billion - 2010-2014


Main Derivates: GLP, Nafta, Gasoline, QAV, Diesel, Fuel Oil and Coke. Source: PDE 2010-2019 and ANP, 2011

National Oil Production and Demand – 2010 to 2019

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

Produção Petróleo

2.137 2.507 3.211 3.494 3.742 3.989 4.362 4.739 4.94 5.113

Demanda Principais Derivados

2.23 2.038164276

2.08297969

2.160309234

2.247267237

2.324313776

2.414667839

2.51270706

2.621217466

2.721344635

0.500

1.500

2.500

3.500

4.500

5.500

Oil

Prod

ction

x D

eman

d [t

hous

and

bbl/

day]


Supply and Demand for Oil Products (Kbbl/day)

1979 2009 20190

1000

2000

3000

4000

5000

163

1956

5113

1089

1843

2721

Produção Demanda de derivados

Surplus96%

deficit85%

Maximum deficitbetween 1970 and 2009 Surplus

6%

Note: % surplus and deficits = net external trade divided by internal demandIn 2019, net imports will be around 2,200 Kbbl/day

Supply Demand


0

20.000

40.000

60.000

80.000

100.000

120.000

140.000

160.000

180.000

2010 2011 2012 2013 2014 2015 2016 2017 2018 2019

mil m

3 /d

ia

AnosTérmicas Bicombustível Térmicas Gás Demanda termelétrica média

Demanda Não-Termelétrica Oferta Total

mill

ion

m³/

day

180

Natural Gas Supply and Demand

Source: PDE 2010-2019Northern Region not included

160

140

120

100

80

60

40

20

0


Natural Gas Supply and Demand Projections (Mm³/day)

2009 2019 (a) 2019 (b)0

50

100

150

200

250

57.9

166.4

230.8

80.8

190.4 190.4

Produção Demanda de derivados

deficit28%

deficit13%

Surplus21%

Note: % surplus and deficits = net external trade divided by internal demand(a) Expected production, based on known reserves (imports of 24 Mm³/day)(b) Expected production, based on known and to be discovered reserves (net exports of 40 Mm³/day)

Supply Demand


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Main Oil & Gas Discoveries in Pre-salt

Granted area: 42 th sq km (28%)Cession area: 3.,74 th sq km(2.5%)

Estimated volumes (12/2010)

25.3 to 33.8 billion boe

Parque das Baleias1.5 to 2 bi boe

Franco2.0 to 5.5 bi boe

Iara3 to 4 bi boe

Lula - Cernambi8.3 bi boe

Guará1.1 to 2 bi boe

Entorno de Iara0.6 to 0.8 bi boeFlorim

0.1 to 0.4 bi boe

Sul de Guará0.1 to 0.3 bi boe

Sul e NE de Tupi0.5 to 0.7 bi boe

Peroba1.1 to 1.8 bi boe

Libra7 to 8 bi boe


E&P LegislationLaw nº 9,478/1997 – Petroleum Law, establishes concession rules for outside of Pre-salt polygon

Law nº 12,351/2010 – Establishes the use of production sharing contracts for oil and gas exploration and production in Pre-salt polygon and areas with strategic or high potential for oil and creatse the Social Fund to receive the results

Petrobras will be the only operator at new contract areas (PSC) in the Pre-salt polygon , with at least 30% of work interest in the contracted consortium

Government will either contract Petrobras directly or other companies through bidding

Contract is under construction with collaboration of oil companies associations. At the end it will be object of public debate

Block offers at PSC model will take into account the national policy for oil exportation and the national industry for oil and gas sector capacity to attend the requirements of the Local Content policy

Social Fund - resources will be invested in profitable activities in Brazil’s or foreign countries. Profits will be used in national projects to reduce poverty, and to improve education, public health, culture, sports, science and technology, environmental issues and to mitigate climate changes


Natural Gas Law - OverviewLaw nº 11,909/2009 and Decree nº 7,832/2010

Establishment of a new framework for natural gas transport activitiesMain goals:

• Increase investments in natural gas exploration, production and infrastructure • Expansion of Brazilian natural gas market

Competition in transport will bring more investments in

E&P, resulting in more investments in infrastructure,

creating a virtuous circle

New concession contracts should bring more

competition in the transport sector


Local Content Policy• Concessionaries operating in Brazil must grant equal opportunities

to local suppliers, giving them preference based on competitiveness– Contract clause establishing minimum percentage for local supply of goods

and services

• Aims to enhance the participation share of national industries, in a competitive and sustainable way, at local and foreign projects for petroleum industry

• Local suppliers development will be necessary to attend petroleum industry contract compromises

• Brazilian and foreign companies associations to produce locally are encouraged

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Oil and Gas Rounds

• 11th Bidding Round for exploration blocks in concession modality planned to November, 2011

• 1st Bidding Round in production sharing modality planned to take place by the end of 2011

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14


15

Refining Instaled Capacity Expansion (Kbbl/day)

2009 2019 (a) 2019 (b)0

500

1,000

1,500

2,000

2,500

3,000

3,500

2,044

2,428

3,328

+23%

+68%

(a) Base Line: +38 expansion of the current refineries + 230 Abreu e Lima Refinery(PE) + 150 COMPERJ Refinery (RJ) + 30 Potiguar Refinery (RN)

(b) Premium refinery trajectory: base line + 300 (CE) + 600 (MA)

Oil Production in 2019= 5,113 Kbbl/day


Bioenergy

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BioethanolThe ethanol production will rise from 27,9 million m³ (2010) to 73,3 million m³ (2020).The usage of ethanol allows Brazil to avoid, yearly, around 10% of the Green House Gas

emissions.Flex-fuel vehicles represent almost 90% of the

new vehicles licensed (2011)The productivity of sugarcane ethanol in Brazil

is the highest in the world (6,800 l/ha).

BiodieselDec. 2004: Launch of the National Program for the

production and use of BiodieselGrowing use of Biodiesel contributes to reduce

urban pollution, improving life quality of the citizens.

Brazil is already the world’s 3rd largest consumer (after Germany and France)

Accomplished in 2010: Obligatory addition of 5% of biodiesel on fossil diesel.


Ethanol and Biodiesel Projections – 2011 to 2020


Sustainable Biofuels ExpansionSugar Cane Agro- ecological Zoning

BRAZIL – Qualified Areas (P, R, M) in Livestock (Ap) and Agriculture (Ag)

P – Areas qualified as “Preferential”R – Areas qualified as “Regular”M – Areas qualified as “Marginal”

Due to environmental reasons, the bill would effectively make 92.5% of Brazil’s national territory off-limits for sugarcane

farming and processing.

Excluded biomas

• Suitable areas identified sum up to 64 million hectares (or 7.5% of the territory)

• Currently, sugarcane for ethanol corresponds to 4 million hectares or 1% of arable lands.


Sustainable Biofuels ExpansionPalm Oil Agro-ecological Zoning

• Restricts 86,4% of the apt areas in the agroclimatic point of view and 96,3% of the Brazilian territory

• Potential for sustainable expansion: 31,8 million ha

• Plantation in areas with previous human activities identified until 2008 only

• Fobids native vegetation deforestation• Orient the recovery of degraded lands


Latest Biofuel Regulations• Publication of the MP 532/2011 by the Executive:

With this regulation the ethanol is no more considered an agricultural good. Now ethanol is considered a energetic product.

The measure gives the ANP (regulatory agency) the competence to regulate, authorize and supervise the activities related to production, importation, exportation, storage, transportation, distribution and commercialization of ethanol.

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Energy Investments

Billion US$ (%)

ElectricityPower GenerationTransmission

12710423

22.518.44.1

Oil and Gas 398 70.6

Biofuels 39 6.9

TOTAL 564 100.0

ENERGY: Makes up about 2.2% of GDP and 10.1% of gross fixed capital formation on the period (2010-2019)

2019 Energy Plan: Investments

Source: PDE 2019 (MME), R$ 1 = US$ 1,69 (oct. 2010)

Investment Opportunities


Brazilian Oil & Gas Policies Ensure the supply of oil and natural gas Transform Brazil into a net exporter of oil and its derivatives Develop the national industry of suppliers of goods and services for the oil

sector Auctions for Oil Exploration Blocks

Realization of Round 11 in Concession System Realization of Round 1 in Production Sharing Regime

Local Content Policy Ensure that investments in the development of hydrocarbon production in Brazil result

in sustainable growth and competitiveness of domestic industry

Natural Gas Sector Regulation of the Natural Gas Act

Formulation of the Plan for Expansion of Pipeline Network - PEMAT

Assessing the PRE-SALT potential


FINAL REMARKS• Brazil has excellent opportunities for oil and gas exploration and production,

presenting growing expectations for both reserves and production• The Brazilian Government wants international oil companies as partners and

not as simple finance investors for the oil field development projects, even at the Pre-Salt

• The pace of bidding rounds in the Pre-Salt Area will depend heavily on local industry's capacity to provide goods and services required by local content rules

• Foreign companies are encouraged to seek partnerships with local suppliers and establish manufacturing operations within Brazil

• Government has also policies to achieve sustainability in the oil industry, according to long term goals

• The Brazilian Government will at all times give ways to assure and respect contracts, induce and facilitate the international trade

• The Brazilian energetic policies intend to keep increasing the participation of renewable fuels in its energy mix in accordance to sustainability criteria.


Rio de Janeiro, July 2011

THANKS!

www.mme.gov.br

João José de Nora SoutoDeputy Secretary of Oil, Natural Gas and

Renewable Fuels

MINISTRY OF MINES AND ENERGY

http://www.mme.gov.br/

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