The future of the energy sector in Brazil

CCBC’s Legal Affairs Committee promotes a seminar to debate petroleum bids in the context of the transition to a model focused on renewable energy sources

 By Sérgio Siscaro

The latest oil and gas blocks’ bidding round promoted by the National Oil, Gas and Biofuels’ National Agency (ANP) in October 2021 indicated a decrease in investors’ interest. Only five of the ninety-two blocks auctioned were bought – all in the Santos Bay -, while Petrobras itself did not present any bid at the time. Could it be a sign of a preference for renewable energy sources and the gradual rejection of fossil fuels?

The Legal Affairs Committee (CAJ) of the Chamber of Commerce Brazil-Canada (CCBC) promoted a virtual seminar, on late January, to discuss the subject considering the current worldwide search for renewable energy sources: Global energetic crisis: Is there a future for ANP’s block auctions? Three experts of the oil and gas field led the debate: lawyers Gabriela Bezerra Fischer (Trench, Rossi & Watanabe) and Marcello Lobo (Pinheiro Neto Advogados) and ANP consultant and former director John Forman (J. Forman Consulting). CAJ’s coordinator Alberto Murray mediated the debate.

High demand

According to Forman, the sector lacks interest in the blocks offered, not in ANP’s auctions, once companies are often aware of the most promising areas for oil supply. “Today, geological information is substantially more precise. Considering oil is discontinuously present within the blocks, companies are often uninterested in bidding”, he affirmed.  

Forman also asserted that international oil and gas prices are up after a drop caused by the Covid-19 pandemic. He ponders that this strengthens the argument that the demand for fossil fuels is still high.

Transition

Gabriela Bezerra Fischer emphasized the importance of a stronger growth of the current energy source transition process – from fossil fuels to renewable – identified worldwide in the last couple of years. “The alignment to an ESG (Environment, Social and Governance)] agenda is increasingly more important for banks and other financial institutions. This is transforming the industry – and the tendency is that companies will structure themselves in accordance with the ESG agenda”, she affirmed.

However, Fisher added, this tendency does not equal a disinterest in auctions for oil and gas exploration areas: “The energetic transition is a reality, a real concern, but it is a long-term reality. This does not mean that companies will be abruptly disinterested in auctions and suddenly targeting only renewable energies. However, it is important to consider the environmental sensibility of some sectors and this transition context”.

Strategic shift

This transition could be impacted by each country’s internal factors. Lobo mentioned that Brazil has privileged renewable energy sources, once practically half of the country’s energy is produced by hydropower plants. “But we need to guarantee our energetic safety. For that reason, the energetic transition cannot be a simple turn of a key. It must be made smartly and strategically”. Lobo added that the oil and gas sector has a fundamental role in enabling this transition.

The lawyer stressed the importance of Brazil learning from past mistakes – as in the case of the subsidised wind power model, which was unfeasible. “In the oil sector, we have seen excessively optimistic local content policies which considered Brazilian industry’s capable of meeting the demand and that did not work. We need to focus more in enabling private investments than in governmental interference”.

Readers interested in the full debate can access the webinar here.

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