Emerging Markets Focus
A consortium of Petrobras, BG Group, and Petrogal discovered the Tupi field in 2007, which contains substantial reserves that occur in a pre-salt zone 18,000 feet below the ocean surface under a thick layer of salt. Following Tupi, numerous additional pre-salt finds were announced in the Santos Basin, such as Iracema, Carioca, Iara, Libra, Franco and Guara. Estimates for the total pre-salt resources vary. Some analysts place total extent of pre-salt recoverable oil and natural gas reserves at more than 50 billion barrels of oil equivalent.
Petrobras plans to invest $33 billion in pre-salt exploration and production activities to achieve an oil production target of close
to 4 million bbl/d by
2020.More than a quarter of this target is to come from pre-salt oil. Brazil’s pre-salt announcements immediately transformed the nature and focus of Brazil’s oil sector, and the potential impact of the discoveries upon world oil markets is vast. Shortly, the Brazilian government released the proposed regulatory framework for the pre-salt reserves in August 2009. Brazil’s new regulatory meets a need in the gas industry by providing legal stability in the sector. Also, the law is to encourage more investment as well as competition in the natural gas sector, especially in the midstream.
External Alliances
Russia, China, India and Iran recognize the strategic importance of Latin America and are building broad relationships in very systematic, aggressive ways.
Russia is widely recognized as using its vast natural resources as a political weapon and holding countries hostage by manipulating access, control and distribution of the energy resources. Russia has also been quite active in building strategic relationships with several resource-wealthy countries to enhance its own long term energy security. In September 2009, Russia and Venezuela announced several cooperative agreements on energy, defense and trade, including a commitment to supply Venezuela with almost $4 billion in weapons. PDVSA, Venezuela’s oil company, signed two agreements with a consortium of energy giants in Russia.
China’s grand strategy has been shaped by its desire to secure surety of energy supplies to fuel its continued industrialization. In April 2010, China announced a $900 million heavy crude production project with Venezuela. Just prior to that, in Brazil, China’s Sinopec and the China Development Bank signed a strategic development pact with Petrobras, Brazil’s state-owned oil company, whereby China agreed to provide financing to the tune of $10 billion in Petrobras over the next five years. China also has operations in Ecuador. In 2006, Andres Petroleum, a consortium of Chinese oil companies, purchased the Ecuadorian assets of the Canadian firm, EnCana for $1.42 billion.
India also recognizes the strategic importance of Latin America. India’s state-owned Oil and Natural Gas Corporation (ONGC) has exploration and production stakes in projects in Brazil and Colombia and is exploring opportunities in Venezuela. In 2006, ONGC Videsh Ltd. (the overseas investment arm of ONGC) joined with the Chinese firm Sinopec to acquire a 50 percent stake (for a combined $850 million) in the Colombian oil firm Omimex de Colombia.
Iran has also been cozying up to Venezuela and Brazil, as well as a number of Andean countries. In 2007, Venezuela and Iran signed three petroleum cooperation agreements which involved bilateral investment in Iranian gas and Venezuelan oil fields and Venezuelan gasoline exports to Iran. Brazilian energy firms - including Petrobras - are exploring possible deals to provide training and technology to modernize the Iranian energy sector. To support its strategic positioning in the region, Tehran has set up branches of its Export Development Bank in Brasilia as well as Caracas. Bolivia and Ecuador also enjoy cozy relations with Iran.
Findings
This short article is just a part of a much more complete report on Latin America’s energy. Anyway, it can be said that global demand for energy is expected to increase. Most of this demand will come from developing economies in the long term and will be fulfilled by the oil & gas industry. New analysis estimates that the Latin America region will produce around 11.17 million barrels daily in 2014.
Due to energy-efficiency trends, environmental regulation, and energy matrices reconfiguration, new technologies such as gasification (application IGCC), gas to liquid (GTL) or lignocellulosic ethanol will experience a high demand in Latin America in the years to come.
However, low internal savings’ rates have limited local capital markets. Because of this, most of that funding must come from direct foreign investment such as emerging strategic partnerships and joint ventures in innovative technologies which are expected on demanding areas that include upstream and downstream segments such as: pre-salt discoveries in Brazil; heavy oil upgrading; and the construction of refineries and transport infrastructure for oil, gas, and derivatives, vessels, liquefaction and regasification terminals.
Policy approaches drawing on these observations can help build the partnerships between industry and government that are needed to protect the interests of all stakeholders. Along with continued international collaboration on advancing technological development in the upstream oil & gas industry, such approaches will be needed if the hydrocarbon markets of tomorrow are to deliver on their promises.
CARVALHO RIBAS ADVOCACIA E CONSULTORIA is an independent law firm situated in Mafra city that is actively involved in international matters and transactions working in close collaboration with correspondents and law firms located in key cities in Brazil, USA, Canada, Europe and Asia, which ensures competent assistance in the handling of local matters. Our work focuses on legal advice on all areas of business law, and stands out for its commitment to helping companies develop their activities, defending their rights and negotiating their interests. To obtain more detailed information with respect to the assistance that our professionals are able to provide, our overseas Clients should contact CARVALHO RIBAS ADVOCACIA E CONSULTORIA at
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Drillers and Dealers :::
::: February 2011 Edition
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