Brazil's Finance Minister Outlines Oil, Gas Investment Plans

Brazil's planning, budget and management minister Guido Manteiga outlined government plans for securing oil and gas sector investment in a presentation Friday to the national oil industry organization, Onip.

The PROMINP mobilization program for the oil and gas industry "aims to map out bottlenecks in the production chain that will be used for the base of mounting investment projects," Manteiga said, adding that the emphasis is to help local industry provide for the domestic market and become competitive to export. The federal government has already targeted priority projects for the sector, which are part of its 2004-2007 Plano Plurianual (PPA) investment plan, most of which are already known.

Through both the PPA and PROMINP, the government is looking to achieve self-sufficiency in oil, provide incentives to the shipbuilding industry, and increase the share of Brazilian-manufactured equipment, parts and components in the national oil and gas industry. The PPA foresees 9.02bn reais (US$3.11bn) in 3,315km of pipelines; 7.99bn reais for the conversion of five platforms, each with a 180,000 b/d capacity; 3.54bn reais to revamp and acquire 22 oil transport-related ships; and 5.86bn reais for the Replan, Reduc and Repar refineries.

"The biggest problem [faced by the oil sector] is financing, and we are designing the financial architecture that will permit the profitability of the undertakings," Manteiga said. The PPA foresees investments coming from both the private sector and government entities including federal and state-owned companies. To attract more private capital into the oil and gas sector as well the infrastructure sector as a whole, the planning ministry is putting the final touches on new legislation, dubbed private-public partnership (PPP). A bill for the PPP should be submitted to congress within the next few weeks after public consultations are carried out, he said.

For the oil and gas sector, there are a number of financing alternatives. Along with the leadership of federal energy giant Petrobras, the government could back investment initiatives by using federal development bank BNDES, and using sector funds managed by the government. Special purpose companies, for example, could be created through a partnership between Petrobras and private investors that could fund projects by issuing BNDES debentures backed by receivables and be guaranteed by a special fund for PPP contracts. The Inter-American Development Bank (IDB) could also enter as a guarantor, and foreign pension funds could find Brazil attractive for obtaining better returns, Manteiga said. "We could offer greater profitability than in developed countries in order to attract capital. The PPP will open a huge door for the private sector," the minister said.

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