Durante o debate, Clarissa Lins abordou os impactos da crise atual sobre o setor de O&G brasileiro e transição energética
On May 19th, Clarissa Lins, Catavento’s founding partner, joined Decio Oddone and Elizabeth Urbanas in the panel “Brazil Energy Update – Production Cuts, Natural Gas, Power Market and Policy Developments and Brazil-US Energy Forum”. The discussion was part of the XXIX La Jolla Energy Conference 2020, hosted by the Institute of the Americas and CEBRI.
What are the impacts of the current crisis on the Brazilian oil & gas industry? Is the pre-salt still competitive and how will investments respond? Will the energy transition be delayed? Below, you will find the main takeaways from the discussion.
O&G sector: relevance and impacts
Clarissa highlighted how the energy sector is key to provide reliable and accessible energy to support essential activities during the COVID-19 crisis, such as electricity to power homes and hospitals, and fuels to transport essential workers and services.
Regarding the O&G sector’s relevance for Brazil, it is responsible for 10% of the country’s industrial GDP and, in 2019, it was responsible for 1/5 of the country’s Foreign Direct Investment (FDI) .
Clarissa emphasized that, given Brazil’s vast and diverse energy sources, the country can be a leader in the global energy landscape . Elizabeth Urbanas, from the US Department of Energy, mentioned that the US-Brazil Energy Forum hopes to support the country in this direction, focusing on cooperation and interagency partnership for environmental licensing, offshore decommissioning, and competitive natural gas market opening.
Having said that, the current scenario of reduced global energy demand and the oil price shock require capital discipline from companies to drive portfolio allocation decisions. We should expect investments to be postponed, but the panelists agreed that the pre-salt will remain one of the most competitive plays globally, mainly due to the productivity of its reservoirs. Décio and Clarissa highlighted that the breakeven cost for pre-salt projects is already below USD 30/barrel and that the lifting cost is reaching historically low levels in some fields.
Regulatory improvements and the natural gas market opening
The panelists emphasized that the current crisis requires the maintenance of the regulatory advancements implemented in the last years, while also further advancing in key areas that promote a competitive business environment through the “simplification of whatever can be further simplified”, such as a more predictable environmental licensing process and the implementation of the New Natural Gas Market program.
As for the latter , the panelists heightened that it is key to foster Brazilian competitiveness and increased competition in the energy market. The bill to be voted by the Lower House should provide the needed guidelines for further investments. Clarissa pointed out to some positive initiatives going on at different state levels, while Decio believes that this agenda will be a priority for Congress after the peak of the crisis eases.
The energy transition
Throughout the debate, a consensus emerged as for the energy transition trajectory remaining clear while society will keep on pushing for a diversified, competitive, reliable, and sustainable energy system. Having said that, Clarissa pointed out that the Brazilian energy mix already relies on a share of 47% of renewables , a level which other countries would very much like to achieve in 20-30 years from now.
Solar, wind, and biomass will increasingly grow in relevance in the Brazilian mix, but this shall be done in accordance with the development of all energy sources, including oil & gas, as long as they are competitive in this new environment. “Once the economy restarts growing, all the energy sources will be able to benefit from growing energy demand”, said Clarissa.
In her final remarks, Clarissa shared her views on the main lessons learned during the crisis. “People and lives come first. Also, governments should understand the need to listen to science. Scientific knowledge is key to provide further advancements in development and energy.”
 Brazilian Institute of Oil, Gas and Biofuels. CNI, 2017. BACEN, 2019.
 CEBRI. “The energy sector in 2022”. 2018.
 Energy Planning Agency – EPE. “10-year plan”, 2020.