Oil & gas sector in Brazil

Oil & gas sector in Brazil

Future Petrobras investment plans offer opportunities for UK companies in the largest energy market in South America.

Market overview

US Energy Information Administration points Brazil as the main frontier for the expansion of oil production in the world until 2030. Brazil is the largest energy market in South America and has the second largest oil reserves in Latin America. In June of 2013 the oil production was, 2.1 million barrels per day, an increase of 3.4% compared with June of 2012.

Currently, more than 80 percent of the production comes from the Campos Basin but significant new discoveries are being made in the Santos, Espírito Santo basins in the Southeast of the Country and also in the North of the country at Amazonas basin. The State-run company Petrobras is still the dominant player, but the end of state monopoly in 1997 attracted most international oil companies, including Shell, BG, BP, Exxon, Statoil and Chevron.

According to ANP, in the first two months of 2012 Petrobras and other oil companies, made 24 discoveries of possible areas to explore.

Key opportunities

The most important Brazilian banks are investing strongly in the oil and gas sector in Brazil. Petrobras plans to invest US$ 236.5 billion under its 2013-2017 business. The Petrobras Exploration and Production (E&P) segment will invest U$141,8, a share of 60% of total investment of the company. According to Petrobras, the increased production will be sustained by the development of post-salt areas with the installation of major projects in the Company’s areas of operation. Additionally, new units will be installed in pre-salt areas already under concession.

  • Petrobras is also preparing for access to the critical resources that are needed to implement this Plan. In this context, it expects to have the largest availability of drilling rigs for deep-water among any other oil company, with a total of 26 rigs by 2014 and 53 by 2020 and 504 support vessels by 2020 (254 in 2009).

  • According to the main operators in Brazil, there is an increasing demand for horizontal wells to be used in pre-salt layer drilling activity. Some horizontal wells are estimated to reach more than 5000m depth. With regards to subsea, activities will range over the whole spectrum of installation of pipelines, flowlines, umbilicals, wellheads, Xmas trees and manifolds, anchor systems, and the maintenance of these facilities.

  • Support will also be needed for ongoing drilling and completion operations, pipeline and seabed surveys and more general inspection, repair and maintenance.

  • There will be an increasing demand for ROVs and tools able to operate, and perform more complex tasks in deeper and deeper water

Latest export opportunities – Oil & Gas

Latest export opportunities – Brazil

Getting into the market

The Brazilian market should be viewed as a long-term option for businesses. It is not an easy market to enter and success will rely on patience and the company’s willingness to research the market thoroughly. In almost all cases, it is necessary to identify reliable local partners or locate staff in country to assist with navigating the local market. Companies will have to invest in face-to-face meetings and getting to know potential partners in order to cultivate successful business deals, which often takes time. Frequent visits and exhibiting at trade shows can be useful methods of gaining the trust of prospective associates as well as acquiring market knowledge.

Successfully maintaining a business in Brazil will require resources and commitment. Burdensome bureaucracy and a complex tax system make doing business difficult. High import duties and various taxes are likely to at least double the FOB price of a product arriving at the distributor. It is recommended that UK exporters deal with a local Brazilian representative and seek independent legal advice early on. A professional’s expertise can be an important tool in understanding how these obstacles will affect the cost and sale of products or services, and in helping navigate the complexities of tax and bureaucracy.

Petrobras purchase in three ways:

  • directly (from manufacturers, distributors or retailers),

  • through directly appointed service companies,

  • or through EPC contractors.

In all three cases, Petrobras is normally obliged to purchase through competitive tender. Only companies that hold a current CRCC (supplier certificate) may participate in tenders. Much of the actual purchasing is not carried out by Petrobras itself, but by the contractors (service companies, EPCs, shipyards and constructors). In this case, these contractors are obliged to use only approved suppliers drawn from the Master Vendor List (MVL). In order to be included in the Master Vendor List, companies must have a current CRCC approval. Petrobras administer the supplier approval process exclusively over the web.

It is important to determine that a UK company’s product or service is required by Petrobras before proceeding with the time and expense of registration.

More about doing business in Brazil

Contacts

Market intelligence is critical when doing business overseas, and UKTI can provide bespoke market research and support during overseas visits though our chargeable Overseas Market Introduction Service (OMIS).

To commission research or for general advice about the market, get in touch with our specialists in country – or contact your local international trade team.

Contact your local international trade team

UKTI Events

UKTI runs a range of events for exporters, including seminars in the UK, trade missions to overseas markets and support for attendance at overseas trade shows.

Latest events – Oil & Gas

Major Events

Rio Pipiline

24 – 26 September 2013

www.ibp.org.br

OTC Brasil

29 – 31 October 2013

www.otcbrasil.org/2013/

Useful links

More about OMIS and other UKTI services for exporters

Sectors: Oil & Gas
Countries: Brazil
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