Oil May Bring 400,000 Jobs and $258B in Investments to Brazil
Petroleo Brasileiro S.A.'s (Petrobras) new CEO Roberto Castello Bronco has made it his mission to increase oil production and reduce the company’s massive debt.
With a new regulatory framework, in the next few years, the oil and gas industry is forecasted to bring 400,000 new jobs and $1 trillion Reais ($258 billion USD) in investments to Rio de Janeiro, which has been plagued by moral and financial crises for years.
The secretary general of the Brazilian Institute of Petroleum, Gas and Biofuels, Milton Costa Filho, recently spoke about the industry’s recovery to the Rio Convention and Visitors Bureau’s press office.
The interview was emailed to Rigzone. You can find it below. (It has been edited for brevity).
Rio: Are there any signs of a new rise to the oil and gas industry?
Filho: There are several factors that point to a strong recovery in the whole world and in Brazil. The most important thing is that we are leaving the crisis that started with the drop in oil prices. They reached the lowest level in February 2016. We have lived a moment of great supply and we are living an energy transition, with the arrival of other very competitive energies. These factors contributed to bring down oil prices. But now, the problems [facing] some countries in recovering the production and the strong demand – with the world GDP on the rise – have changed this scenario. The crisis lasted almost four years and caused the industry to rethink the business model, cutting costs and seeking new technologies and ways to work to be more competitive. Nowadays, the industry is on a new level.
Rio: So, although the crisis was strong, it also brought new opportunities?
Filho: Nowadays, all oil companies are in a very good position for this new reality. They are prepared to operate in challenging conditions, which includes the pre-salt oil and the American unconventional oil.
Rio: Concerning the pre-salt oil, in September, we held the fifth round of auctions. What is your assessment of this process?
Filho: This round successfully crowns a process of changes in regulations that have made our industry attractive for investments. And that had an intense engagement of the industry itself. Basically, there are two requirements for a country to be attractive to investors in the oil industry. One is you must have oil. And Brazil has spectacular reserves. But geology alone is not enough. Another requirement is to have a regulatory framework that attracts investors. We are talking about a battle to attract investment. Brazil has one of the three most competitive areas in the world: the pre-salt. The others are the American unconventional and the Middle East. The auctions attracted very large and very bold bids. It worked.
Rio: Looking to the future, what does this mean?
Filho: The future is contracted. We have commitments made for investments of tens of millions of dollars. The bonuses are just a sign. The federal government raised a total of more than $30 billon Reais ($7.98 billion USD). Now, the most important thing is the commitment from these companies to develop and produce oil. In five years, Brazil will be able to increase production by about 2 million barrels, and in 10 years, add another 6 or 7 million. We will create a lot of jobs. There is an expectation to hire 400,000 new highly skilled workers. We face decades of many challenges and many opportunities.
Rio: What is the impact of the recovery of the industry for the city of Rio de Janeiro?
Filho: The state of Rio de Janeiro produces two-thirds of Brazil’s oil, and since most of these latest auctions are for blocks in Rio, it will keep being the main producer for a long time. The profit just from royalties will be gigantic, bringing wealth to the cities. The city of Rio has head offices of every major oil company. This means demand for skilled workers and technological investment, as well as impact on several industries, such as trade and hotels. The National Petroleum Agency estimates that, in 10 years, the state of Rio de Janeiro can receive $1 trillion Reais, including royalties and taxes.
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