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The Brazil Oil and Gas Sector
CWC Publishing, Sep 2001
This report on the Brazil Oil and Gas Sector begins with a summary of Brazil's important social, political and economic characteristics and their impact on the energy sector, which must be considered by private investors. The report then identifies potential barriers and uncertainties affecting the energy industry as well as the Brazilian government's position on deregulation. The report concludes with the present situation of the Brazilian energy industry and makes some projections for its future development. DeregulationBrazil offers a well developed infrastructure, considerable potential for increasing energy demand, a reasonable command of leading technologies and an ongoing deregulation process, which together create an interesting climate for energy investment and activities. The deregulation process is not evenly spread over the whole energy sector. While some areas have opened up faster and have already attracted private capital - both foreign and national - there are still segments where state owned companies maintain a strong presence, competition is absent and it is difficult for Brazil to bring in private investors because of the lack of an appropriate regulatory framework. Electricity crisis As a result of the lack of investment, energy supply has been tightening up, and major energy disruptions are threatened. In 2001 the electricity sector was the first to suffer such disarray, with important economic, political and social consequences.The old, centralised, self-sufficient and nationalistic model for electricity supply was exhausted, while new opportunities were springing up for enthusiastic investors eager to take risks in a large, emerging country. New energy supply alternatives will materialise as Brazil inexorably dives into ultra-deepwaters for offshore oil and natural gas production. Energy integration with neighbouring countries such as Argentina, Bolivia or Venezuela also creates new options for gas and electricity supply. The speeding up of gas/electricity convergence is likely to become the major outcome from the electricity shortage in 2001. New technology and renewable energies Brazil may anticipate the introduction of new technologies for distributed energy generation with growing efficiency and flexibility. The country will also review the role of renewable energies as biomass, solar and wind become more competitive choices. A diversified mix of opportunities is available for investors, whether they be small or large, traditional or creative. Energy demand is expected to keep growing at a high rates if the country's economy recovers, increasing the impact of energy deficiencies. Consequently, risks as well as opportunities may increase and Brazil will perhaps become even more attractive to investors with a broad, strategic perception of the energy business. This report: describes the main features of the Brazilian energy environment as well as reviewing existing opportunities and the remaining barriers to private investment considers the balance of risks and opportunities in the country, looking at economic and political developments, as well as summarising the potential for the demand and supply of different energy sources and their effect on the future for energy investors recognises Brazil's central role in regional activities analyses the relationship between Brazil and other countries in the Southern Cone of South America, as well as Brazil's increasing role in the global energy industry and its impact on the environment summarises the questions frequently asked of the Brazilian National Petroleum Agency and tries to identify the government's position on energy deregulation and other aspects of the country's energy industry. Audience: This report is essential reading for those who are interested in an insight into Brazil's energy sector. Professor Edmilson Moutinho dos Santos provides fresh views and in depth contribution to the understanding of the country in terms of: population trends political perspectives and risk appraisal oil reserves data and energy consumption figures past and present macroeconomic stabilisation measures - the external dependence of the Brazilian economy and the need for further reforms the Brazilian oil and gas sector in the context of the global industry the potential for growth and key investment prospects but warns of the numerous pitfalls that are ahead the impact of current economic, political and legal issues on the future development of the sector and the effect on the investment climate current and projected upstream and downstream activity projected market trends.
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