Just before the oil price started slumping in autumn 2014, Brazil and Mexico were optimistic that opening up key aspects of their oil and gas industries to new entrants would attract foreign investment and technology to galvanize production.
These opportunities had previously been monopolized by state-owned national oil companies (NOCs) Petróleo Brasileiro (Petrobras) and Petróleos Mexicanos (Pemex).
Since then, offshore oil and gas activity in both countries has been hit by a combination of ’lower for longer’ oil prices and political upheaval.
A probe into corruption involving Petrobras continues. Political turmoil led to Michel Temer becoming Brazil’s new president in August 2016. Mexico’s president Enrique Peña Nieto appointed former deputy finance minister José Antonio González Anaya as Pemex’s chief executive in early 2016 to drive a restructuring programme to counter low oil prices and realize opportunities from energy reform.
That said, there remains much to play for in maximizing the economic opportunities of the two nations’ substantial oil and gas reserves (figures 1a and 1b), experts say.
Optimism rebounds in Brazil
Confidence in the outlook for 2017 rose 34% in a year among senior oil and gas professionals in Brazil, reaching 50%, according to opinion research for DNV GL’s annual industry outlook report. This is higher than the global average (+32%) as president Temer’s pro-business approach and reforms come into play.
“The industry is not yet firing on all cylinders, and the business environment still needs improving. It has turned the corner though, and Brazil’s large reserves remain a compelling story for long-term investors,” says Alex Imperial, managing director, South America, DNV GL – Oil & Gas.
“Petrobras’s new governance and strategy are very positive signals for the industry’s outlook. Meaningful legislative reforms will increase transparency over bidding, long-term predictability, continuity and competitiveness.”
Rules for production sharing agreements for pre-salt exploration and production areas have been revised to allow companies other than Petrobras to operate such fields. Pre-salt plays tempt foreign investors as production per well in developed pre-salt areas is much higher than in the North Sea and Gulf of Mexico.
The federal government recently approved a three-year licensing round schedule (2017-2019) with a total 10 rounds contemplating both concession and production sharing blocks. Four of them are scheduled for 2017, two of them being in the pre-salt region in the Santos and Campos basins.