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Brazil’s oil sector looks past political upheaval

08 Jun 2017 23:19 (+01:00 GMT)
Brazil's oil sector looks past political upheaval

Rio de Janeiro, 8 June (Argus) — Brazilian national energy policy council CNPE adopted a series of measures aimed at boosting the appeal of the country's recovering oil patch against a backdrop of renewed political uncertainty.

Capitalizing on fresh interest in Brazil's upstream play, the CNPE added three sectors in the Sergipe-Alagoas Basin and Pernambuco-Paraíba basins to the 15th upstream licensing round tentatively scheduled for May 2018.

In April, the council said the 15th round would include onshore and post-salt acreage in 10 basins, including Campos and Santos. The council decided to swap two Campos sectors, bringing forward one sector planned for the 16th round in 2019 to the 15th round and pushing a 15th round sector back to the 16th.

The CNPE also decided to expand the scope of the fourth production-sharing round covering sub-salt assets. The round, also planned for May 2018, will now be expanded to cover the southern portion of the Uirapuru sub-salt block in the Santos basin.

That round is expected to include the Saturno and Três Marias sub-salt blocks in Santos and the C-M-537, C-M-655, C-M-657 and C-M-709 sub-salt exploration blocks in Campos.

After years of flagging activity, the result of lower oil prices and the fallout from a massive corruption scandal centered on state-controlled Petrobras, Brazil is hoping a packed schedule of upstream offers through 2019 will help revive the country's economy.

Regulatory changes aimed at promoting more competition will be put to the test in three upstream licensing rounds planned for later this year.

On 27 September the ANP will launch a concession model round covering 287 onshore, shallow and deepwater blocks. A second production-sharing round covering four unitization sub-salt assets and a third production-sharing round covering four sub-salt assets in the Santos basin will follow on 27 October.

The CNPE also adopted new rules that appear to leave blocks offered but not awarded or those returned to Brazilian oil regulator ANP permanently open for licensing, excluding sub-salt regions.

Further details of the change will only be known when the CNPE publishes the resolution. The ANP says the change will help stimulate upstream activity.

Government officials have downplayed the potential impact of a new eruption in Brazil's long-running political crisis.

But the uncertainty surrounding the future of Brazilian president Michel Temer, who took over for ousted former president Dilma Rousseff in August 2016, has raised concerns for some investors.

Today's CNPE meeting, chaired by mines and energy minister Fernando Coelho Filho, ran parallel to a hearing in the federal electoral court TSE that could unseat a second Brazilian president in less than a year.

The TSE is in the process of deciding whether to annul the 2014 Rousseff-Temer ticket on claims it received funds diverted from inflated Petrobras contracts. The decision of the court appears to hinge on whether it will allow into evidence the explosive plea deals from scandal-hit Brazilian conglomerate Odebrecht.

A decision on whether to include the Odebrecht plea deals, which implicate dozens of politicians, could come as early as tonight. But a final ruling on the request to annul the 2014 ticket will likely only be handed down over the weekend.

Regardless of the TSE's ruling, the Brazilian commodities-driven economy remains precarious as it starts to emerge from a deep recession. After some early congressional victories for Brasilia, the future of Temer's controversial labor and pension reforms looks bleak as the president's allies, featuring many politicians who are also under investigation, debate whether to stand by him ahead of October 2018 presidential and congressional elections. Temer has said he will not seek re-election.