To this end, Brazil’s Minister of Mines and Energy will launch ‘Potencializa E&P programme,’ which will be presented at the next meeting of the National Council for Energy Policy (CNPE) – still without a set date – aiming to guarantee investments in oil and natural gas exploration and transform Brazil into the fourth largest oil producer in the world. The Potencializa E&P initiative intends to focus on the critical points for the development of exploration in frontier areas and encourage investments in mature fields or marginal economic ones.
In addition, the programme intends to promote regional development and encourage independent oil and gas producers, whose actions generate increased revenue, taxes, government participation, jobs and income. According to the Brazilian Minister of Mines and Energy, the objective is to ensure, through public policy measures, the country’s continuous development of the oil and natural gas exploration and production industry.
The minister further claims that the extremely challenging scenario of global competition for investments, the need to replenish oil and gas reserves and the energy transition require speed from all government actors, following the guidelines of President Lula’s government to promote Brazil’s development with “common sense and respect for the environment.”
Alexandre Silveira, Brazil’s Minister of Mines and Energy, remarked: “The future of the energy transition also involves oil and natural gas, we need to take advantage of the wealth of the Brazilian people that is underground. Without measures to promote its exploration and production, there are no jobs, income or regional development.
“We have a window of opportunity, we cannot miss the new pre-salt that may be on the equatorial margin and that will be the passport to the future of the north and northeast regions of Brazil.”
Reaching 5.4 million barrels of oil per day by 2029
Big pre-salt discoveries attracted large investments in the exploration and production of oil and natural gas, with emphasis on the performance of Petrobras. Brazil currently produces three million barrels of oil per day, however, this number is expected to reach 5.4 million by 2029, enabling the country to become the fourth largest oil producer in the world – with 80 per cent of these resources coming from the pre-salt layer.
The Brazilian government points out that the positive results obtained as a result of the actions of the Lula and Dilma governments require continuity, with the replacement of oil and natural gas reserves, given that the R/P indicator – the ratio between proved reserves and production – is at 12.5 years.
Furthermore, the pre-salt areas not yet contracted present “a high geological risk and little potential for new discoveries of significant volumes of oil and natural gas,” says the Brazilian government while outlining that this makes it necessary to develop new exploratory frontiers such as the Brazilian equatorial margin, which extends from the coast of Rio Grande do Norte to Oiapoque (AP), in the far north of the country. The last well with approved environmental licensing on the equatorial margin was in 2015 in the Potiguar Basin.
Based on studies conducted by the MME, the resumption of environmental licensing for E&P projects on the equatorial margin would have the potential to generate state revenue of $200 billion, if 10 billion barrels of oil were discovered and produced in the region, in addition to generating hundreds of thousands of jobs. Since the end of January 2023, Petrobras has had a drilling rig stopped in deep water off the coast of Amapá, at the cost of more than $500,000 per day, awaiting the issuance of the proper license.
Oil & gas spearheading Brazil’s development
Silveira sees the oil and natural gas sector as a driving force behind Brazil’s development, accounting for 15 per cent of the Brazilian industrial GDP, 48 per cent of the domestic supply of energy and generating more than 1.6 million direct and indirect jobs.
“It makes no sense that Guyana and Suriname are attracting investment and wealth, with almost a hundred wells drilled, with more than 13 billion barrels of oil having already been discovered, while we are stuck in the uncertainty brought about by the inertia of the last government. The last administration not only allowed deforestation in the region, but also impeded its economic development by not granting environmental licensing in a safe and responsible manner,” highlighted Silveira.
Moreover, Brazil’s Minister of Mines and Energy claims that the strengthening of the oil and gas industry will bring great opportunities, adding: “We need to give young people in these regions the opportunity to dream of a job in the oil industry and to acquire technical qualifications. The new pre-salt on the equatorial margin will be a revolution in employment, income and the dreams of young people who want a better job.”
IBP backs strengthening of oil & gas sector
In a separate statement, the Brazilian Institute of Petroleum and Gas (IBP), threw its support behind the MME’s Potencializa E&P programme to fortify the country’s oil and natural gas sector. IBP sees the initiative of the Ministry of Mines and Energy, led by Minister Silveira, as “very positive,” to encourage the development of the oil and gas industry, as the objective of this programme is to attract investments in oil and natural gas exploration.
While IBP considers the goal of transforming Brazil into the fourth largest oil producer in the world as challenging, it explains that the Brazilian oil industry has already shown its potential with technical capacity, technology and human resources to meet the growth in production.
The government’s initiative to support the development of exploration and production activities in mature fields and also in areas with great potential, but not yet explored, such as the equatorial margin, for example, sends “a favourable signal” to market agents and investors, and counts with full support from the IBP.
“The alignment between the government and the productive sector strengthens the Brazilian market, as it generates predictability, legal certainty and credibility to attract new investments, fundamental for the development of the oil and gas sector, which plays a central role in the transition process and energy security,” concluded IBP.
The oil and gas industry accounts for an estimated generation of more than 445,000 direct or indirect jobs a year over the next decade and around $180 billion in investments over the same period. Stimulating the development of the sector means investing in the growth of the Brazilian economy, based on IBP’s statement.