This is a best prospect industry sector for this country. Includes a market overview and trade data.
Last Published: 8/10/2017

Overview

Oil and Gas Industry in Brazil - Unit: US$ millions

 

2014
(Estimated)

2015 (Estimated)

2016 (Estimated)

2017 (Estimated)

Total Local Production

35,000

20,000

14,500

14,000

Total Exports

3,000

2,000

3,000

3,000

Total Imports

20,000

12,180

11,500

10,500

Imports from the US
 

5,000

3,045

2,875

2,625

Total Market Size

52,000

30,180

23,000

21,500

Exchange Rates

3.1

3.1

3.1

3.1

(Total market size = (total local production + imports) - exports).
Source: CS Brazil estimate
.
 
Long-term growth in Brazil’s Oil and Gas (O&G) sector remains strong because of proven below-ground resources, a developed and sophisticated O&G sector, and a diversified economy. The 2017 estimate for purchases in Brazil’s oil and gas equipment and services market, including the upstream, midstream, and downstream segments, as well as maintenance and operations (M&O), is approximately US$21.5 billion. Of that amount, US$10.5 billion will likely be imported, with approximately US$2.6 billion being imported from the United States, according to CS Brazil estimate.
 
Data Sources: Statistics are unofficial estimates built upon state-owned oil company Petrobras’s investments and other oil companies’ estimated market share. The Brazilian Foreign Trade Office does not publish complete oil and gas equipment/machinery import and export statistics in a single chapter, as many types of equipment also apply to other industry sectors. The import statistics on the above table were partially based on the Brazilian Federal Income REPETRO data available for 2014 and 2015. In 2015, Brazil imported US$9.37 billion worth of oil and gas equipment; however not all types of oil and gas equipment are eligible under the REPETRO (*).
 
In 2015, Brazil ranked 12th in world crude oil production, 5th in the Americas, 3rd in Latin America, and 2nd in South America, according to Brazil’s National Oil Regulator (ANP) and BP. According to ANP, Brazil owns the 15th largest world proven reserves of 12.67 billion barrels of oil and 372 billion cubic meters of gas. Estimated possible reserves are 22.7 billion barrels of oil and 638 billion cubic meters of gas. The BP Energy Outlook forecasts a 16 percent and 43 percent increase in oil and natural gas consumption, respectively, in Brazil, by 2035.
 
In 2016, data from the ANP shows that Brazil produced 2.5 million barrels of per day (mbpd) of oil, 94.9 percent of which comes from offshore, very deep water. The development of deep-water and especially ‘pre-salt’ resources have driven dramatic increases in Brazil’s production, with pre-salt production making up for 40.7 percent of overall production in 2016 with an average of 1.02 mbpd, an increase of 45 percent in one year. BP Energy Outlook estimated Brazil’s oil production to reach 4.4 Mb/d by 2035.
 
According to the Ministry of Mines and Energy (MME) Annual Report, in 2016, natural gas (NG) production reached 103.8 million m3 /day, of which 30.24 mm3/d were reinjected; 4.05 mm3/d were flared or lost; 12.89 mm3/d were consumed in oil exploration and production units; and 4.2 mm3/d were absorbed by gas process units. Deducting the above, Brazil’s NG supply amounted to 52.40 mm3/d in 2016.
 
According to MME, to complement Brazil’s NG demand of 80.26 mm3/day, in 2016, Brazil imported 28.33 million m3/day from Bolivia; and 3.81 mm3/d from liquefied natural gas (LNG) cargoes. The significant reduction in LNG imports in 2016 (e.g.: from 17.94 mm3/d in 2015) reflects the economic downturn and improved hydrologic conditions, which allow for increased hydropower generation, in Brazil. The electrical power and industrial sectors demanded 29.59 and 40.82 mm3/d, respectively, in 2016.
 
Recent reforms in Brazil’s offshore O&G sector are being driven by Petrobras cashflow issues, the reduced world oil price, and changes to the Brazilian Administration. One such reform took place on October 5, 2016, when Brazil’s lower house passed a long-awaited bill (PL-04567/2016) that removed restrictions on offshore oil and gas production and reshaped state-owned oil company Petrobras’s role in Brazil’s deep water “pre-salt” oil and gas fields. The bill amended a 2010 law to allow greater IOC participation in offshore exploration and production in future pre-salt auctions. The 2010 law, known as the pre-salt law in Brazil, saw newfound offshore oil and gas as Brazil’s exclusive patrimony, and required Petrobras to serve as sole operator and minimum 30 percent equity holder in all offshore pre-salt oil and associated gas fields. While Petrobras still maintains right of first refusal under the new law, its previously burdensome production and equity requirements have been lifted.
 
While that bill kept the production sharing agreement (PSA) regime for pre-salt fields, the concession regime is also in force in Brazil’s oil and gas sector, and will continue to apply for future bid rounds of the non-pre-salt fields. There will be at four bid rounds in 2017, two of which for pre-salt fields, under a PSA regime. Additionally, the Brazilian National Energy Policy Council (CNPE) has recently approved an oil auction calendar with 10 bid rounds between 2017 and 2019.
 
Local Content Requirements (LCR) Reforms:
On March 28, 2017, the Industry and Competitiveness Development Secretariat of the Brazilian Ministry of Industry and Foreign Trade (MDIC) published Resolution #1 ratifying proposals made last February by the Brazilian interagency group leading LCR changes. The reforms, which apply to the 14th bid round (concession regime) and for the 3rd pre-salt (PSA regime) round, have lowered the percentage of Brazilian-made goods and services required for oil and gas exploration and production. New global LCRs for deep water oil and gas exploration fell by half on average, to a minimum of 18 percent – down from 37 percent for previous auctions – and LCRs for deep water production development will now follow macro-segments: 25 percent for oil/gas well construction; 40 percent for subsea production activities; and 25 percent for oil offshore production units. Previous LCR for the production/development phase was 55 percent on shore exploration and development LCRs, previously at 70 percent and 77 percent respectively, were reduced to 50 percent as well.
 
All the existing oil exploration and production concession and/or PSA contracts will continue to follow their LCR percentages, as the new rule will only apply for the upcoming 2017 bid rounds. Currently, exploration phase activities require between 37 and 85 percent local goods and services, and development phase activities must use between 55 and 80 percent Brazilian content.
 
The new rules also establish a one percent charge to producers, the proceeds of which will go to increasing local industry’s competitiveness with imports. The GoB also announced that no further waiver requests for LCRs in the petroleum industry will be entertained. In the past, offshore producers won auctions by agreeing to very high LCRs and were subsequently fined when they could not meet those untenable requirements. According to the revised regulations, if the percentage of violated LCR is less than 65 percent of the established LC, the fine will be 40 percent of the value of the non-compliant investment. In case the violated LCR reaches 65 percent or above, the fine will vary from 40 to 75 percent following the same principle.
 
Another upcoming change that the oil operators in Brazil are looking for is the extension of the REPETRO regime (*). In 1999, the GOB established the Special Customs Regime of Export and Import of Goods destined to Exploration and Production of Oil and Natural Gas ("REPETRO"), which aimed at reducing the tax burden levied on exploration and production of oil and gas fields. The REPETRO suspends and provides exemption of Import Duty ("II"), Excise Tax ("IPI"), and Social Contribution on Imports ("PIS/COFINS-Importação") to goods listed in the appendix of the Normative Ruling N. 844/08 ("IN 844/08"). This regime is due to expire in 2019, but the Brazilian Ministry of Mines and Energy has been working with the Brazilian Treasury Ministry to extend it for another 20 years, thus allowing oil companies to take long-term investment decisions.
 
Despite the recent positive changes, Petrobras and IOCs are still concerned about a Rio State December 2015 law attempting to reintroduce an 18 percent ICMS tax at the wellhead on oil and gas production (Note: ICMS is a state-level tax levied on the movement of merchandise). First introduced in Rio in 2003, this law was found to be unconstitutional. The Brazilian Oil and Gas Institute has filed a legal suit against the Rio State proposal.
 
Leading Sub-Sectors

On April 11, 2017, the Petrobras Strategic Procurement Department provided the U.S. Commercial Service Rio a list of critical goods and services for 2017. Petrobras noted, however, that they “cannot guarantee a concrete demand for all the listed items, but they are open to evaluating market opportunities and new business models”.
 
Category: Well services, FPSO and Rig Leasing 

  • FPSO and floating rig leasing
  • Well integrated construction services
  • Services of cementing, well evaluation, drilling, and logging
  • Managed pressure drilling (MPD) services
  • Fluid, completion, and casing management services
  • Mudlogging
  • Diving Support vessels
  • Category: EPC and Engineering Services, Project Design, and Revamp
  • EPC/Construction & assembly of stationary oil production units (UEP) and industrial plants
  • EPC/Construction & assembly of land pipelines
  • Maintenance of UEPs, oil and gas pipelines
  • Technical conformity assessments
  • Industrial unit projects
  • Oil and petrochemical processing projects
  • Support to engineering project management
  • Civil construction 

Category: Subsea Systems and EPCI 

  • Flexible lines and accessories
  • EPCI for subsea projects
  • ROV and diving support systems
  • Manifolds, subsea PLEMs and PLETs, tools, and parts
  • Electro-hydraulic umbilicals and accessories
  • Wet Christmas trees, associated tools, and spare parts
  • Polyester cables, mooring, and anchor systems
  • Drill pipe risers
  • Subsea equipment (pigs, ESDVs, and others)
  • Geodesy

Category: Valves, Tubing, Fittings, and Static Equipment
 

  • Casing tubes (OCTG)
  • Pressure vessels
  • Heat exchangers
  • Manual and actuated valves: sphere, butterfly, globe, retention, and other types
  • Process ovens and towers

 
Category: Industrial Equipment
 

  • Turbogenerators and turbo compressors
  • Motor pumps and motor compressors
  • Cranes
  • Maintenance support for rotary equipment

Category: Logistics
 

  • Vessel, airplane, and helicopter leasing
  • Storage, transportation, and materials control
  • Port tugs/dredges
  • Land load and personnel transportation
  • Docking services

Category: HSE, IT, and Geophysical
 

  • Software development, maintenance, licensing, and technical support
  • Seismic acquisition and processing
  • Environmental Defense Centers (CDAs)   
 Category: Chemicals and Catalysts
 
  • UFCC and HDT catalysts
  • Chemical products for oil/gas exploration and production
  • Chemicals (gas dehydrators, corrosion inhibitors, additives, and several others)
  • Solvent and kerosene markers
  • Special gases, nitrogen, etc
  • Lubricant oil for engines and pumps
 Other Items:
  • Accounting payment outsourcing services
  • International inspection services
  • Catering, sea and land lodging services
  • Facilities (cleaning services) 
In the oil onshore segment, independent Brazilian oil producers noted that best sales prospects could include:
  • Drilling rigs
  • Flow measurement equipment
  • Mobile well test plants
  • Pig valves
  • Pig launchers
  • Chokes
  • Electrical panels
  • Completion tools
Additionally, as ANP has renewed the exploration and production concession contracts of several fields lately, in exchange for increased production, deepwater oilfield life extension services should be in high demand. The same demand will apply to operational efficiency programs.
 
Opportunities

The 2016 Rio Industry Federation Oil and Gas Report estimates investments in the Brazilian oil and gas sector over US$500 billion just to develop discovered and to-be-developed pre-salt fields.
The largest oil player in Brazil is still the national oil company Petrobras. In 2016, Petrobras’s oil and gas production (2.14 million/bpd) increased 0.75 percent from 2015. As of December, 2016, Petrobras production accounted for 94 percent of Brazil’s total production. After Petrobras, companies including Statoil (two percent), Shell (two percent ), Chevron, and others (one percent each) were the other main oil producers and/or operators in Brazil.

On March 21, 2017, Petrobras announced its 2016 financial results. It reported a loss of R$14.9 billion (approximately US$4.5 billion), against a net income loss of R$34.8 billion in 2015.
Despite financial constraints and a five-year investment plan decreased by 25 percent, Petrobras will invest US$74.1 billion during the 2017-2021 period, thus remaining one of the world’s largest investors. The E&P area will receive US$60.6 billion (76 percent for production development; 11 percent to exploration; and 13 percent to operational support). A total of US$12.4 billion will be invested in the refining and natural gas segments, 50 percent of which allocated to the assets’ operational continuity and the remainder to projects related to the outflow of oil and gas production.

Petrobras is expected to raise nearly $20 billion through a divestment plan that creates strategic partnerships in the areas of exploration and production (E&P), refining, transportation, logistics, fuel distribution among other segments. In the previous biannual divestment plan (2015-2016), the company divested $13.6 billion by concluding the sales of its 60 percent stake in the Carcará pre-salt oil field to Statoil; its LPG Liquigás subsidiary to the Ultragaz/Ultrapar group; and  its Southeast Gas Transportation subsidiary (NTS) to the Canadian company Brookfield.

Aside from Petrobras, 47 local and 49 foreign companies hold oil exploration and appraisal areas in Brazil, as shown below. Hence, opportunities to supply these oil companies in Brazil also exist:

Oil Exploration Companies

Group

Country

 

Group

Country

Aloes

Brazil

 

Maersk

Denmark

Alvopetro

Canada

 

Mitsui & Co

Japan     

Anadarko

United States

 

Niko

Canada

Arclima

Brazil

 

ONGC

India

A.R.G.

Brazil

 

Orion Holding

Brazil

Aurizonia

Brazil

 

Ouro Preto

Brazil

Azimuth Group

Bermuda

 

Pacific Rubiales

Canada

Barra Holding

Cayman Islands

 

Panergy

Brazil

Bayar

Brazil

 

Panoro

Norway

BG

United Kingdom

 

Parnaíba Gás Natural

Brazil

BHP

Australia

 

Partex Oil and Gas

Portugal

Bildung

Brazil

 

Perenco

United Kingdom

Bizzo Sotomayor

Brazil

 

Perícia Engenharia

Brazil

Bolognesi

Brazil

 

Petro Latina

Singapore

BP P.L.C.

United Kingdom

 

Petro Rio S.A.

Brazil

Brasoil

Brazil

 

Petrobras

Brazil

BTG Pactual

Brazil

 

Petrorecôncavo S.A.

Brazil

CEMIG

Brazil

 

Premier Oil PLC

United Kingdom

Central Resources

United States

 

Proen

Brazil

CEPSA

Spain

 

PTT E&P

Thailand

Chariot

Guernsey

 

Queiroz Galvão E&P

Brazil

Cheim

Brazil

 

Quantra

Brazil

Chevron

United States

 

Ral

Brazil

CNOOC

China

 

Repsol YPF

Spain

Codemig

Brazil

 

Rio Proerg

Brazil

COPEL

Brazil

 

Rosneft

Russia

Cowan

Brazil

 

Royal Dutch Shell PLC

United Kingdom

EBX

Brazil

 

Serena

Angola

Ecopetrol S.A.

Colombia    

 

Severo & Vilares

Brazil

Egesa

Brazil

 

Sinochem

China

Eneva S.A.

Brazil

 

SINOPEC

China

EP Imetame

Brazil

 

Sollita

Brazil

ERG

Brazil

 

Sonangol

Angola

Eromanga

Australia

 

Statoil ASA

Norway

Exxon Mobil

United States

 

Stogas

Brazil

Galp Energia

Portugal

 

STR

Brazil

G&C

Brazil

 

Synergy Resources

Panama

GDF Suez

France

 

TDC

United States

Genesis 2000

Brazil

 

Trayectoria

Panama

Geopar-Geosol

Brazil

 

Grupo Total

France

Geopark Limited

Bermuda

 

Tucumann

Brazil

Governo da China

China

 

UBX

Brazil

Gran Tierra

Canada

 

UTC Participações

Brazil

HLJW

China

 

Vale

Brazil

Inbrael

Brazil

 

VB

India

Inpex

Japan     

 

Vibrapar

Brazil

JX Group

Japan     

 

Vipetro Petróleo S.A.

Brazil

Karoon

Australia

 

 

 

                                                                                                                   Total companies: 96 - Source: ANP, as of March 2017

The companies listed above have competed for the 1,300 oil blocks awarded through 13 annual oil-concession licensing rounds, plus the first pre-salt round. Petrobras has won the majority of these concessions. Interested suppliers need to register in order to sell to Petrobras(click on the right side of the bottom for “instructions for suppliers from other countries”).

The registration requires that a foreign firm have a local representative. It is our recommendation that U.S. firms not established in Brazil consider partnering with a local firm that is registered as a supplier to Petrobras rather than attempting to register directly. 

Once Petrobras approves the registration of a supplier under their CRCC registration process, Petrobras uses an electronic purchase and contract portal called “Petronect” to invite companies to submit bids.

A supplier can start by securing a “Q” (technically qualified) status. The “Q” enables the company to submit a bid proposal. However, if the company wins a tender, it will need to complete an “A” (fully approved for registration) process. Through Petronect, one can also start its supplier’s registration process.

Petrobras does not procure through international oil and gas e-Commerce websites.

Web Resources

The U.S. Commercial Service — Your Global Business Partner
With its network of offices across the United States and in more than 80 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting our site.

For more information about export opportunities in this sector, please contact US Commercial Service Industry Specialist: Regina.Cunha@trade.gov

Prepared by our U.S. Embassies abroad. With its network of 108 offices across the United States and in more than 75 countries, the U.S. Commercial Service of the U.S. Department of Commerce utilizes its global presence and international marketing expertise to help U.S. companies sell their products and services worldwide. Locate the U.S. Commercial Service trade specialist in the U.S. nearest you by visiting http://export.gov/usoffices.



Brazil Oil and Gas Trade Development and Promotion