Brazil Oil & Gas Report Q2 2013 - New Report Available

New Energy market report from Business Monitor International: "Brazil Oil & Gas Report Q2 2013"

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Boston, MA -- (SBWire) -- 05/28/2013 --BMI View: We remain firmly bullish on the long-term outlook for the Brazilian energy sector, with production from the country's pre-salt reserves pushing production to new highs. The 11th Licensing Round, to be held later in 2013, also presents strong upside risks, although at this point, any new production from these new blocks may fall outside the scope of our 10-year forecast period to 2022. The short-term outlook is more mixed, however, as ongoing regulatory challenges provide reason for some caution. Of these, a flare up in the ongoing battle for a new Oil Royalty Law underscores the highly politicized nature of Brazil's regulatory environment. This remains particularly true as local content requirements and strict labour costs present rising costs and a growing deterrent for doing business in Brazil. There have been some positive developments for state-owned Petrobras, however, as fuel prices have risen substantially since June 2012, helping to relieve the immense financial pressures on the company.

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The key trends and developments in the Brazilian oil and gas sector are:

- The long-term outlook for the Brazilian energy sector is decidedly bullish, with an average oil and gas production growth rate of 7.9% and 6.6%, respectively, over our forecast period. Included in our forecast is a total oil production increase from 2.88mn barrels of oil per day (b/d) in 2012 to 4.34mn b/d in 2017, largely driven by increased volumes coming from the country's vast pre-salt oil reserves. This is particularly true as state-owned Petrobras will be placing increasing emphasis on increasing pre-salt production over the next few years.
- Our short-term view is more cautious as Petrobras, the dominant player in the sector, seeks to implement an extensive reform agenda as a part of its US$236.5bn strategic plan for 2012-2016. The extent to which the company maintains a credible commitment to reform, however, will be an important bellwether for the next several quarters. Importantly, in terms of its financial health, Petrobras continues to be plagued by some critical factors largely outside of its control: a weakening real, the 'Custo Brasil', and an unsustainable domestic fuel pricing regime. That fuel pricing regime has improved considerably since June 2012, however, as the company and government have allowed fuel prices to increase substantially.
- Brazil will launch its first auction of oil exploration blocks in five years in May and November 2013. ANP, Brazil's oil and gas regulator, has identified 289 blocks to be auctioned in the '11th Round,' with an equal number of them located onshore and offshore. The first of auction will include blocks from the 'equatorial margin' region, located in the north, the prospectivity of which is supported by the Continental Drift Theory.

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