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Brazil upstream unscathed by political crisis: ANP

15 Jun 2017, 9.06 pm GMT

Brazil upstream unscathed by political crisis: ANP

La Jolla, 25 May (Argus) — Brazil's upstream sector remains appealing to investors in spite of the country's political crisis, according to Brazilian oil regulator ANP.

"This will not damage us in any relevant way," ANP director general Deccio Odonne told Argus on the sidelines of the Institute of the Americas' Latin American energy conference in La Jolla, California.

Several companies have expressed strong interest in investing ahead of a series of upstream licensing rounds, and the schedule of bidding rounds will not be delayed because of the political crisis, he added.

But some oil executives at the annual event expressed skepticism that the tender plans would be completely immune from the scandals engulfing the country. The political crisis could also lead to decision paralysis among some investors who may resist exposure until the political unrest is resolved, one attendee noted.

Decision-making in Brazil ground to a halt during the eight months it took to conclude former president Dilma Rousseff's 2016 impeachment, and some say a possible repeat scenario to remove current president Michel Temer's could drag on for longer.

Temer has refused to resign after the revelation of a secret recording in which he allegedly encouraged the payment of hush money to keep himself above the Lava Jato investigation into widespread corruption centered on state-controlled Petrobras. Temer has said the tape was doctored.

But Temer's star is already falling. Allied parties are discussing possible candidates to replace him before his term ends in 2018, but without jeopardizing the government's reform agenda and limiting the impact of another political transition on the still-fragile economy.

As expected, Odonne struck a bullish tone. "Some of the blocks in offer are among the most attractive exploration opportunities available in the world," he told delegates, adding that Petrobras' new divestment plan offers additional acquisition possibilities.

He highlighted other opportunities in logistics, biofuels and refining.

The series of upstream licensing rounds covering onshore, offshore and sub-salt blocks is scheduled to begin in September.

Brazil's energy sector can "offset" all the present turmoil, Andrea Regra, Odonne's adviser said. "The oil industry is very resilient. Demand for oil and gas comes from abroad – it is not related to Brazil's economy."

For some oil companies, broader issues more endemic to the oil industry are more pressing than Brazil's political crises in Brazil. "BP is still adjusting to the environment with prices hovering around $50/bl. Our outlook is lower for longer," vice president of Americas exploration Jay Thorseth said. "In Brazil, the industry will weather the [political] storm. The opportunity is there for the whole country and investments will continue. Politics go up and down, but the industry will forge ahead."

Petrobras' divestment campaign and an opening to alternative sub-salt operators are advantages, he said. "Getting diversity of operatorship in Brazil is great – it is a win-win for the industry and is good for the country. Proposed changes to local content rules is also really helpful. The layout of license rounds will make it a busy year."

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