Brazil’s oil and natural gas industry will likely continue to see reforms aimed at luring investments and boosting production, especially in the highly productive subsalt frontier, after the country elected Jair Bolsonaro, the self-styled “Trump of the Tropics,” president Sunday. Right-wing President-elect Bolsonaro, who ran on a law-and-order platform, topped leftist Fernando Haddad of the Workers’ Party, or PT, by a 55%-45% margin. Polls ahead of the second round of voting indicated a Bolsonaro win, although the final margin of victory was closer than expected.
The grand reopening of Brazil’s oil patch, which started in mid-2016 after the impeachment of former president Dilma Rousseff, is expected to continue under the new administration, with Bolsonaro maintaining the reforms implemented over the past two years. Brazil set a fixed annual schedule of production-sharing auctions and bid rounds, reduced requirements to use locally produced goods and services in exploration and development and allowed foreign oil companies to operate subsalt fields sold under production-sharing agreements. Brazil’s National Petroleum Agency, or ANP, already has plans to hold the country’s 16th bid round and sixth subsalt production-sharing auction in the second half of 2019, which is expected to be maintained and approved by the National Energy Policy Council, or CNPE, this week. In addition, Bolsonaro will likely push for the government to complete price-adjustment talks on the transfer-of-rights areas with Petrobras. That would clear the way for the government to sell off additional volumes of oil Petrobras discovered in acreage the government controls.
A transfer-of-rights auction would be highly anticipated by the oil industry, with the sale putting up an estimated 5 billion-15 billion barrels of oil equivalent that has been discovered, derisked and drilled on the market. Initial estimates pegged potential signing bonuses generated by the auction at $100 billion. Petrobras already holds the rights to produce 5 billion barrels from the region, with the Buzios Field that pumped first oil in April containing an estimated 3.1 billion barrels recoverable.