Brazil will need to work on the "predictability, stability and pace" of its oil investment environment to remain competitive as global capital becomes increasingly selective, an executive with Brazil's largest non-state oil producer said.
Although Brazil is highly attractive for capital, "it doesn't necessarily mean it is here to stay unless we fight for it", Shell's vice president of its pre-salt operations in Brazil, Pablo Tejera Cuesta, said at the Offshore Technology Conference in Houston, Texas, on Monday.
Shell is Brazil's second-largest crude producer after state-controlled Petrobras, with 427,000 b/d of output in March out of Brazil's about 2.4mn b/d total. Shell operates 20 floating production, operating and storage vessels which recently helped push Shell's daily production to a record 500,000 b/d, Tejera Cuesta said.
But Brazil's government receives a relatively high share of production in comparison to some other producers, and recently regulatory decisions such as a 12pc export tax on crude that is being fought in court could contribute to eroding investor confidence in Brazil, Tejera Cuesta and other oil executives operating in Brazil said. There have also been debates and delays in decisions on drilling in the southern Pelotas basin and the environmentally sensitive equatorial margin, companies have complained.
These frontier areas seen as key to maintaining Brazil's output "need to be explored" and "decisions need to be taken today, not tomorrow", Tejera Cuesta said.
Brazil is also moving from decades of mostly greenfield growth from new crude discoveries to a "brownfield optimization space" in which it must use new technologies to enhance recovery of existing assets, he said.
But there is still exploration underway, such as BP's 8bn bl Bumerangue oil discovery offshore Brazil. BP is advancing quickly on gathering more information on the subsurface, with plans to drill two appraisal wells and initial evaluation of an early production system starting, BP's senior vice-president of Brazil upstream Felipe Arbelaez said.
"Hopefully we'll be here next year or in the next couple of years with even better news," Arbelaez said.
Arbelaez as well urged Brazil to maintain a stable environment, holding up declining North Sea production as an example of excessive regulation in another part of the world.
Regulators acknowledged some terms could improve, but touted Brazil's overall attractiveness.
"We hope to keep advancing the regulatory and the bidding round activity [for new oil blocks] to keep this industry growing," said the director general of Brazil's oil regulatory agency ANP, Artur Watt. We want to "attract international investors to help us do that."
