Brazil Oil & Gas Report Q4 2013 - New Market Study Published

With several deepwater fields yet to come online in H2 2013, such as Papa Terra or Roncador 3, along with Frade's restart, we expect Brazil's crude production to rebound from its 2012 fall and flatline in early 2014. Further down the line, Petrobras' colossal pre-salt development plan will support this upward trend. Fields such a Lula, Iracema or Franco will boost crude output above 4mn barrels per day by 2020. Muted primary interest in the Brazil's first subsalt round is triggering doubts that the country's below-ground potential could be limited by associated above-ground risks. Thus, we expect the string of contractual terms and bidding fees imposed by ANP to be relaxed before the next pre-salt round expected in 2015. Finally, we continue to believe there is a risk that Brazil will become increasingly dependent on LNG imports in the coming years, as large international sporting events will require the country to leverage its gas power generation capacity.

Full Report Details at
- http://www.fastmr.com/prod/698060_brazil_oil_gas_report_q4_2013.aspx?afid=301

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

* Only 11 companies agreed to pay the US$1mn fee required to place bids on the Libra field auction in November 2013. This is much less than the 40 companies initially expected by ANP. While this is a sign that stringent regulation is likely to deter investors, we do not see this as a risk to our forecasts. Rather, it limits certain upside risks that could come from foreign international oil companies (IOCs) entering the market. We expect that ANP will review the pre-salt production sharing agreement before 2015.
* We maintain our long-term bullish outlook for Brazil's crude production. While fields such as Papa Terra and Roncador 3 will help the country's output to rebound in 2013, we believe that it will be subsalt developments such as the massive Lula or Franco fields that will contribute to the country's long-term outlook. We expect oil production to keep growing throughout the forecast period, from 2.2mn b/d in 2013 to more than 4.0mn b/d after 2020.
* We nonetheless outline that with a total of 39 FPSO and production units required by Petrobras to meet its production target, the country's timely resource development is likely to face delays. Stringent local content requirement is overwhelming Brazilian shipyards. Not only could Petrobras face delay due to the slow construction of its production units, but the company could also miss its target because some of the shipyards in question are yet to be completed.

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