Page 5 - LatAmOil Week 01 2023

LatAmOil COMMENTARY LatAmOil

As the head of the ministry, Silveira will be pipeline networks, as well as the break-up of
extensively involved in the operation of the Petrobras’ monopoly on domestic gas produc-
country’s oil and gas sector and in energy policy tion and sales.)
issues such as domestic fuel pricing. He will also
lead the government body that chooses candi- New Petrobras CEO
dates for seats on Petrobras’ board of directors. Meanwhile, Silveira is not Lula’s only new
appointee. The president announced on Decem-
Focus on gas ber 30, shortly before his inauguration, that he
The new minister gave some indication of his was nominating Jean Paul Prates to replace Caio
policy priorities in an inaugural speech on Janu- Mario Paes de Andrade as CEO of Petrobras.
ary 2, saying that he saw the development of the Prates, a senator from Rio Grande do Norte
natural gas sector as one of his most important State, is a member of Lula’s PT faction. He is a
tasks. close ally of the president, as he served as the
In practical terms, this means MME is likely Lula campaign’s point man for hydrocarbon
to encourage Petrobras and other offshore oper- issues and was a member of the president-elect’s
ators to reduce the amount of associated gas transition team. He has been critical of Bolson-
re-injected back into oilfields to maintain reser- aro’s bid to push Petrobras to perform more as
voir pressure, he indicated. Argus Media quoted a corporation than an instrument of the state,
him as saying that Brazilian oil producers ought saying that the NOC ought to invest more in the
to start making more gas available to the domes- development of renewable energy rather than
tic market so that Brazil was not left “hostage” to focus so narrowly on its upstream pre-salt assets.
foreign LNG suppliers. Nevertheless, he also has work experience in
Under current circumstances, far too much the oil and gas industry and has sought to calm
of the country’s gas is “wasted,” leaving con- investors’ fears about the possibility that the
sumers at a “disadvantage,” he asserted. “Only company might be harnessed to serve the gov-
52% of the gas produced in Brazil is tapped, and ernment’s whims. In December, he stressed that Now that
the rest is lost to re-injection and flaring,” he the Lula administration had no wish to trigger a
commented. “breakdown” and would not take an interven- Lula has
Silveira also called for “democratising” gas tionist approach to Petrobras. He also stated
consumption – that is, for expanding the base that the new government intended to make a assumed the
of industrial and residential consumption point of discussing its intentions with oil and presidency,
throughout Brazil. Argus Media explained his gas investors.
statement by noting that Brazilian gas con- Prates has not spoken publicly about his pol- Brazilians
sumption was currently unevenly distributed icy agenda since Lula’s inauguration, as he has
throughout the country, with usage heaviest in not yet taken the job of CEO. Before he can do will be able to
the coastal regions, which are served by trunk so, he must be nominated to a seat on Petrobras’
pipelines, and lightest in the interior, where gas board of directors and be approved by the other see how his
is only available in the form of LPG and sold in members of the company’s board. His path energy policy
13kg canisters. toward the post is being cleared, as Andrade
The new minister did not say exactly how he formally announced his resignation on Janu- stances play
intended to accomplish these goals, and MME ary 4, several months ahead of schedule. (In
is likely to face some resistance. Offshore oil the interim, his position is being filled by João out in practice
producers – and especially Petrobras, which Henrique Rittershaussen, Petrobras’ chief pro-
accounts for the lion’s share of offshore out- duction development officer.)
put – have typically defended the practice of
gas re-injection and describe it as a necessity Petrobras: not just an oil producer?
for maximising oil output and optimising res- Assuming no obstacles emerge, the senator is
ervoir pressure. They have also been reluctant likely to assume the reins at Petrobras within the
to commit to sending a larger portion of their near future. And barring any unforeseen diffi-
gas output to the domestic market without state culties, he will probably continue to another
pledges of financial support for construction year-long term as CEO beginning in April.
of the underwater pipelines needed to connect It is not clear what he might identify as his
their fields to shore. Likewise, Petrobras and top priority during that first year. Based on his
other producers, along with various gas distribu- recent statements, there is a good chance that
tors, have not had an easy time raising the funds he might emphasise the need for Petrobras to
needed to cover the cost of building pipelines expand its business strategy to encompass more
capable of serving Brazil’s interior markets. investment in renewable energy.
These problems are not going to disappear According to a report from Bloomberg,
just because the new head of MME is talking Prates said at a press conference in December
about investing more in gas. As such, it remains that the NOC would fall behind if it did not
to be seen just how much momentum Silveira take notice of the fact that many international
is able to generate – and just how much time oil companies (IOCs) were widening the scope
he devotes to either opposing or continuing of their operations due to the global climate cri-
the gas reform programme launched by Bol- sis. “All oil companies are turning into energy
sonaro. (Interestingly, the new minister does companies, and it isn’t just talk,” he remarked.
not seem to have said much about the reforms, “None of this is happening at the right scale at
which involved the sell-off of some of Petrobras’ Petrobras.” ™

Week 01 04•January•2023 www. NEWSBASE .com P5