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O Mapa da Mina |
O caso Wikileaks continuou repercutindo fortemente, seja pela prisão contestável de Assange quanto pela repercussão dos cables, cuja divulgação segue a todo vapor ou mesmo pela repercussão do assunto junto à Ordem Internacional. Se Assange continua preso na Inglaterra com futuro incerto e apesar dos boicotes ao site do Wikileaks propriamente dito, fato contornado por uma ação conjunta sem precedentes na qual hackers do mundo todo têm se desdobrado para manter canais de divulgações das informações. Ainda, líderes importantes do mundo em desenvolvimento com Putin - sarcasticamente, como lhe é peculiar - e Lula se pronunciaram contra a prisão do fundador do Wikileaks - e, claro, das duas falas a de Lula é que se sobressaiu, seja porque falamos de um líder que termina seu segundo mandato extremamente popular, depois de ter vencido eleições limpas ou pelo fato de que o seu Governo tenha respeitado firmemente as liberdades individuais, embora tenha sido alvo de uma campanha dura de certos setores da mídia corporativa em sentido contrário, numa contradição que ele soube explorar bem em sua fala (ver na quebra de página):
Em suma, Lula, em sua melhor forma política, traz à baila o calcanhar-de-aquiles da mídia corporativa que lhe fez, ao longo dos últimos oito anos uma verdadeira oposição canina, ao mesmo tempo em que também pega seus colegas líderes do mundo desenvolvido, arautos da civilização, no contrapé. Essa fala tem mais peso do que se pode supor no que concerne o que será o futuro Governo Dilma e isso tem pouco a ver com política externa, dado que Lula apenas referenda a linha adotada pelo Ministério das Relações Exteriores nos últimos anos; a questão aqui é a política de comunicação: A pauta passou a ser levada a sério depois de anos cedendo o Ministério para um homem do sistema como Hélio Costa sem ganhar nada em troca - de bom, claro.
Seja a primeira entrevista de Dilma não sendo dada para a Globo, a indicação de Paulo Bernardo para o Ministério das Comunicações ou mesmo a entrevista de Lula para os blogueiros e essa sua fala apontam para um horizonte claro: Os petistas perceberam que sua própria - e elementar - sobrevivência eleitoral demanda a expansão da Internet e das opções em meios de comunicação em massa e, mais ainda, que é quase impossível conceber um cenário de trégua por parte do grande establishment midiático, capaz até de transformar bolinha de papel em rolos de fita - na falta de chance de surgir, quem sabe, com uma bigorna. Mais até do que isso
Por outro lado, a jornalista Natalia Vianna continua divulgando os cables que dizem respeito ao Brasil - ao todo, eles chegam a mais de 5 mil - em blog recém-lançado em parceria com a CartaCapital. O que chega até agora é o incômodo americano com a política articuladora de Lula que põe a estratégia de Washington em xeque: Ao mesmo tempo que não rompeu os EUA, a política externa altiva e ativa de Amorim rompeu com o atlantismo , negociando com interlocutores do mundo inteiro, mesmo adversário estratégicos americanos, o que exige do Departamento de Estado um grau de sofisticação no trato com o Brasil que ele nunca precisou ter. As notícias que chegam pelos cables sobre o Brasil se dividem em três eixos centrais: O detalhamento da articulação política americana em torno das nossas reservas minerais (sobretudo, energéticas), o lobby para a venda de caças para a Força Áerea e as análises do processo eleitoral.
Se no terceiro caso esbarramos com o já sabido desconhecimento crônico dos americanos sobre a política nacional mais alguma especulação sobre a doença de Dilma, a sutil preferência por Serra e quetais, no segundo e primeiro caso temos informações mais relevantes; se na questão da venda dos caças se manifesta o incômodo claro com a política externa e a proximidade brasileira com os franceses - assim como o nome dos ministros amigos, o que traz à luz de forma cada vez mais clara a face de Jobim e seu papel de contra-ministro, seja nas relações internas ou externas -, no primeiro caso, topamos com detalhes cada vez mais claros de um jogo no qual converge a política estratégica dos EUA para cima dos nossos recursos naturais e o jogo eleitoral brasileiro, o que revela a grande diferença entre PT e PSDB hoje: Os lados que cada um deles ocupa no grande tabuleiro internacional.
Sim, estou falando das posições de bastidores do candidato Serra que vieram à tona hoje, inclusive, repercutindo na grande mídia; como eu coloquei aqui durante a campanha eleitoral, um dos grandes itens dessa campanha presidencial era o Pré-Sal, posto que não havia mesmo concordância entre os dois candidatos e os dois projetos: Se o PT postulou um modelo de soberania energética e distribuição dos lucros da exploração, o PSDB insiste num modelo privatista, cujos lucros gerados invariavelmente tendem a ficar por cima e, mais do que isso, nem por dentro, para além do que aponta toda a parafernália retórico-tecnocrática ou, mesmo, os ensurdecedores silêncios de Serra na campanha passada, em relação a esse tema, inclusive. E volto a dizer, o Wikileaks cumpre nesse tema aquilo que é a sua grande utilidade prática, colocar definitivamente certos assuntos fora do campo da teoria da conspiração: Sim, há provas de que o interesse americano sobre a exploração Pré-Sal num regime de concessões é claro e envolveu manobras nos bastidores, inclusive, para frustrar modelo de partilha proposto pelo Governo Lula, com a anuência do nosso Serra.
Sim, isso também revela que estamos em um patamar primário de debate da política energética, onde basicamente tudo gira em torno em como explorar o modelo posto - com suas deficiências e problemas vários que, no entanto, passam batido -, mas existe um diferencial aí que são os interesses que se articulam em torno de um projeto e outro e o que isso pode efetivamente retornar para a sociedade; em um, temos um modelo nacional e socializante, no outro, o enquadramento no jogo do Capitalismo Internacional e suas grandes empresas no comando. Isso faz muita diferença. Tudo isso, aliás, ajuda a descortinar grande parte do jogo que está em disputa neste exato momento e que teve um capítulo importante durante Setembro e Outubro. Mantenhamos os nossos olhos abertos.
Atualização das 19:29: Passei o vídeo para a quebra de página para não atrapalhar os arquivos (a mudança de formato do Youtube ficou uma droga mesmo), mas ele está linkado na citação de todo modo.
Atualização II 14/12 às 16:46: Seguem os links para os cables sobre a questão petrolífera e sua íntegra copiada e colocada abaixo da quebra de página: 28/01/08, 15/04/08, 30/06/08, 21/01/09, 27/08/09, 02/12/2009 e 21/12/09 (caso você não saiba inglês, jogue os textos no tradutor do Google e salve as informações.
Cable 1 --
Reference ID | Created | Released | Classification | Origin |
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VZCZCXRO3089RR RUEHRGDE RUEHRI #0019/01 0281636ZNR UUUUU ZZHR 281636Z JAN 08FM AMCONSUL RIO DE JANEIROTO RUEHC/SECSTATE WASHDC 4341INFO RUEHBR/AMEMBASSY BRASILIA 0701RUEHSO/AMCONSUL SAO PAULO 5125RUEHRG/AMCONSUL RECIFE 3403UNCLAS SECTION 01 OF 04 RIO DE JANEIRO 000019SIPDISSENSITIVESIPDISSTATE FOR WHA/BSCE.O.: 12958: N/ATAGS:ECONEINVENRGPGOVBRSUBJECT: U.S. OIL COMPANIES ON INVESTMENT OPPORTUNITIES IN BRAZILSensitive But Unclassified. Please handle accordingly.¶1. (SBU) Summary: The US Commercial Service in Rio organized an oil roundtable discussion with US oil companies and Ambassador Sobel on January 8, 2008. The CEOs of Chevron, Exxon Mobil, Devon Energy, Anadarko, and Hess Corporation briefed Ambassador Sobel on the investment climate for foreign players in Brazil, prospects for future oil discoveries, and shared their views on the oil and gas regulatory and fiscal regimes. The participants believed the overall investment climate was positive for US companies but obstacles included instability in the oil auctions and in the tax and licensing regimes. The Ambassador offered to advocate on behalf of the participants with GOB officials and w ith the National Petroleum Agency (ANP). The companies welcomed this idea and suggested emphasizing the need for stability to encourage investment. The Ambassador also proposed that the Brazilian Petroleum Institute (IBP) meet with relevant foreign ambassadors in Brazil to discuss overall concerns. End of Summary.¶2. (U) Ambassador Sobel met with executives from US oil companies operating in Brazil on January 8 in a roundtable organized by the US Commercial Service in Rio and hosted by American Chamber of Commerce President Joao Cesar Lima. Participants included Anadarko President Kurt McCaslin; Chevron Brasil President Daniel Rocha and Business Development and Government Relations Director Patricia Pradal; Devon Energy President Murilo Marroquim; Exxon Mobil (Esso) President John Knapp; and Hess Brasil Exploration Coordinator Paul Gomes and Negotiations and Business Manager Joseph Wesley.Brazil's Oil and Gas Potential ------------------------------¶3. (SBU) Ambassador Sobe l asked the participants for an overall description of the investment climate for US companies in Brazil. Expressing the view of all present, John Knapp, President of Exxon Mobil, confirmed that Exxon had a great deal of interest in Brazil because of perceived substantial undiscovered potential beyond even the Tupi field that Petrobras recently discovered. However, he expressed concern about the recent unstable investment environment caused by Rio State tax changes, oil blocks being removed in the last two auctions, and the Government of Brazil's (GOB) apparent willingness to change the oil concession contracts. He indicated that companies might begin to reassess the economic benefits of investing if there were continued instability.Changes in Oil Auctions -----------------------¶4. (SBU) Responding to Ambassador Sobel's question on whether the oil blocks removed from the recent 9th oil licensing round would be made available for an upcoming auction, Knapp said that the GOB had not yet made a decision. One of the justifications alleged by the GOB for having removed those blocks was based on Petrobras' statement that the Tupi oilfield discovery brought a new exploration niche for Brazil, thus reducing the exploration risk to find oil, with which Knapp did not agree. In his opinion, exploring under-salt areas presented significant geological and technical challenges. Devon Energy's President Murilo Marroquim added that Petrobras had lied about the easy prospects of finding oil in under-salt areas due to the Tupi discovery. He believed Petrobras influenced the GOB to remove the blocks from the 9th oil auction to avoid stiff competition with other bidders. Devon asserted that Petrobras did not have sufficient drilling equipment so had an interest in removing those blocks to allow more preparation time for it to bid for those blocks in future auctions.¶5. (SBU) Knapp believed that the GOB might reconsider the current oil auction model that is based on signature bonuses. Marroquim from Devon did not seem so sure about drastic changes, and added that if substantial modifications to the current oil law were proposed, the Brazilian Congress would need to approve them, which might take a long time. Marroquim believed that the GOB might not want to take this route as it may have an unpredictable outcome. For example, he and others cited the new proposed gas bill that has been in Congress for at least four years. Petrobras has been advocating to protect its interests in gas infrastructure, but several amendments have been made to the gas bill that may, in the end, not favor Petrobras. (Note: In a recent interview to the Folha de Sco Paulo newspaper, Petrobras President Gabrielli cleared defended changes in future oil auctions. He views oil production sharing or service rendering contracts, where an oil company operates an oilfield and is financially compensated for that while the State keeps the oil field ownership, as bette r contract alternatives for Brazil.)Advocacy through IBP --------------------¶6. (SBU) Ambassador Sobel suggested that the US companies engage other foreign Chambers of Commerce in Brazil to advocate for their interests. Marroquim assured the Ambassador that they already work through the Brazilian Petroleum Institute (IBP) and noted that generally when politically sensitive topics were discussed at IBP meetings, Petrobras officials tended not to participate as actively. Ambassador Sobel also suggested that the IBP organize a meeting with foreign Ambassadors in Brazil to have an open dialogue about the sector's issues. Chevron Business Development and Government Relations Director Patricia Pradal, who sits on the IBP Steering Group, expressed an interest in coordinating such a roundtable. Additionally, Rio American Chamber of Commerce (AmCham) President Joco Lima mentioned that some state governors seemed interested in a roundtable with the AmC hams, which Ambassador Sobel found interesting due to the political clout it may give to the oil industry.¶7. (SBU) Marroquim further commented that in December 2007, right after the 9th oil auction, the IBP met with the National Oil Regulatory Agency (ANP) to voice the oil industry's concern about possible changes in the oil law. The ANP General Director reportedly told IBP that the GOB might want to review current oil royalty and special participation fee levels. (Note: The latter refers to payment due on oil and natural gas exploration and production in the case of high volume or high profit margin fields. The basis for calculating the special participation fees is net revenue from quarterly production from each field after the legally permitted deductions. The percentage rates vary from 10 to 40%.) If these fee changes are made, IBP believes there will be no need to pass them by Congress. Anadarko's President Kurt McCaslin said that oil royalties were in place in the Gul f of Mexico, but special participation fees were not. McCaslin emphasized that indirect taxes in Brazil, in general, were a burden for foreign investors.Partnership with Petrobras --------------------------¶8. (SBU) All US companies present at the oil roundtable confirmed that they are partnered with Petrobras in some capacity. For example, Devon holds nine oil concessions in Brazil, three of which are in partnership with Petrobras. Anadarko is partnered with Petrobras in four out of ten oil concessions. Chevron is currently developing the Frade oil field with Petrobras. Hess has one block in partnership with Petrobras and Exxon, the latter as the field operator.¶9. (SBU) McCaslin stressed that Petrobras owned oil and gas infrastructure in Brazil, but being a partner with Petrobras did not mean one would have automatic access to the facilities. Marroquim stated that if one produced natural gas, it had to sell to Petrobras. On the other hand, oil offshore production did not depend as much on Petrobras' infrastructure, making exports from Brazil an easy process. Knapp explained that it was strictly a business decision if a company wanted to work with Petrobras. Sometimes it made more sense to work independently. In this regard, Brazil could be considered an open oil market. "More and more companies now have acreage where Petrobras is not a partner." A good example of companies not partnered with Petrobras was the case of new oil player OGX, owned by a large Brazilian mining company EBX and investor Eike Batista. In the most recent oil round, OGX presented the highest bids for seven blocks with strong potential in the offshore Campos basin. OBX spent more than 1.4 billion reais (US$754 million), which was more than 70% of the total for the entire round. Batista was able to attract a team of former Petrobras officials to work at OGX, including Francisco Gros, ex-President of Petrobras; Paulo Mendonga, ex-Executive Manager of E&P of Petrobras; and Luis Reis, ex-Petrobras Contract Manager.GOB to Limit Oil Exports from Brazil? -------------------------------------¶10. (SBU) Another regulatory risk cited in the roundtable was that the GOB might restrict oil exports if Petrobras delayed domestic (e.g. Tupi) oil production. The Brazilian oil law allows for this possibility in case of oil shortage and energy security interests. McCaslin worried that oil shortages caused by delayed production might lead to instability in government and a subsequent change in oil laws requiring foreign companies to sell to Petrobras. Hess Corporation Oil Exploration Coordinator Paulo Otvio Gomes did not foresee any technological barriers that would inhibit Petrobras developing the Tupi field. Gomes cited Petrobras' advanced technological research center as an important tool to give all the technological support Petrobras would need. He himself led a key Petrobras' project when he worked there aimed at the geological evaluation of the und er-salt section of the Santos Basin, including the Tupi and "Sugar Loaf" deepwater areas between 1999 and 2001. Gomes believed there were further discoveries adjacent to Tupi. He hoped these fields would be offered in a competitive auction so Hess could participate.Brazil's Gas Needs ------------------¶11. (SBU) The participants agreed that Petrobras and Venezuela's government oil company PDVSA joint projects were aimed at increasing Brazil's heavy oil refining capacity, but Marroquim did not believe that the planned mega gas pipeline from Venezuela to Brazil would materialize since Petrobras is bringing liquefied natural gas (LNG) plants to Brazil instead. None of the US oil companies are partnered with Petrobras in this new LNG business in Brazil. In Marroquim's opinion, Brazil was being forced to invest in Bolivia to produce more gas. There is pressure for Petrobras to supply enough gas to fire the natural gas power plants because of low hy dropower reservoir levels and possible power shortages. (Note: Although Petrobras owns the majority of domestic gas-fired power plants, a predominant share of Brazil's energy comes from hydropower (81.2%)).Taxation Problems -----------------¶12. (SBU) When asked about the status of changes to Rio State's VAT ("ICMS") tax on oil equipment, Patricia Pradal from Chevron provided a quick background on the temporary admission regime (REPETRO) that the Federal government created in 1999. REPETRO exempted from federal taxes the importation of some of the equipment used by the oil and gas exploration and production industry. Since then, some states, particularly Rio, have made some changes that increased the states' VAT tax. (Note: About 85% of the oil produced in Brazil comes from the state of Rio. However, the VAT tax on the oil produced goes to the states where the oil is refined, mainly Sco Paulo which has four refineries. This has created a feeling of inequity.) Pradal said th at the most recent development to the VAT tax was a counter-proposal made by IBP where Rio State would tax 5% with future credits, or, alternatively, 2% without credit. The Rio State Finance Secretary Joaquim Levy is considering a 3 to 7% alternative.¶13. (SBU) The participants welcomed Ambassador Sobel's advocacy offer with Levy and suggested that the Ambassador convey to him a message on the need for tax stability. As the oil industry's high investments are only recovered long-term, it was crucial that they invest under a stable tax regime.Licensing Complaints --------------------¶14. (SBU) When the Ambassador asked how relations were with Brazil's environmental licensing organization IBAMA, several participants lamented the wait time on approvals and suggested that IBAMA's personnel could benefit from training offered by other countries, as Padral noted USG officials had done before. McCaslin said, "It does not matter when you need the permit, they will approve it two we eks before."Advocacy through Upcoming USG Visitors --------------------------------------¶15. (SBU) Ambassador Sobel cited the upcoming visits to Brazil of Energy Secretary Bodman and other VIPs as opportunities to engage GOB officials on areas of concern. He also welcomed talking points for his upcoming meeting with ANP and suggested another oil roundtable with Secretary Bodman during his visit. (Note: CS Rio has scheduled a meeting with ANP for February 15.) Regarding the meeting with ANP, Gomes added that conveying the importance of having a 10th round in 2008 would be appreciated.¶16. (SBU) Chevron President Daniel Rocha noted that he was impressed with ANP's efficiency during the 9th oil auction and he hoped that ANP would preserve that system as it was a cornerstone for oil investment in Brazil. He added that the ANP had strong credibility and a good reputation for respecting contract sanctity. Rocha further stated that as Petrobras had recently been able to win a lio n's share of blocks in the Gulf of Mexico, ANP should see that Brazil continued to benefit from foreign investment.Comment -------¶17. (SBU) Although our interlocutors complained of Brazil's somewhat inadequate climate for foreign investment due to tax instability, possible regulatory framework changes, and Petrobras' dominance and influence over regulatory issues, all oil roundtable participants seemed interested in remaining in Brazil due to good geological prospects to find oil and gas, and a more reliable investment and business environment than many other countries. A new Brazilian Minister of Mines and Energy recently assumed office. He will be faced primarily with ways to avoid power shortage in 2008 and 2009. Some directors at Petrobras are also expected to change due to political pressure from opposition parties. It remains to be seen how these changes may impact Brazil's oil sector, especially regarding future oil auctions. This cabl e has been cleared with Embassy Brasilia.MARTINEZ
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VZCZCXRO8203RR RUEHRGDE RUEHRI #0091/01 1061916ZNR UUUUU ZZHR 151916Z APR 08FM AMCONSUL RIO DE JANEIROTO RUEHC/SECSTATE WASHDC 4437INFO RUEHBR/AMEMBASSY BRASILIA 0779RUEHSO/AMCONSUL SAO PAULO 5143RUEHRG/AMCONSUL RECIFE 3421RUCPDOC/USDOC WASHDCRHEBAAA/USDOE WASHDCUNCLAS SECTION 01 OF 03 RIO DE JANEIRO 000091SIPDISSIPDISSENSITIVESTATE FOR WHA/BSC, WHA/EPSC AND GREG MANUELEB/ESC JAMES EIGHMIEUSDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR DUSDOE FOR CAROLYN GAY AND RHEA DAVISE.O. 12958: N/A TAGS:ENRGEPETEINDEINVBRSUBJECT: BRAZIL'S CHIEF PETROLEUM REGULATOR INADVERTANTLY CONFIRMS RUMORS OF MEGA OIL FIELD IN SANTOS BASIN REF:A) RIO DE JANEIRO 35,B) 07 SAO PAULO 0953Sensitive but unclassified, please protect accordingly.¶1. (SBU) Summary. Brazil National Petroleum Agency (ANP) Director Haroldo Lima is under fire and, some speculate, may lose his job for confirming what petroleum industry insiders have believed for some time -- that, at a depth of around 4000 meters in the Santos Basin off the coast of Sao Paulo, Brazil potentially has a mega oil field estimated to contain between 30-40 billion barrels of oil. If these reserves are confirmed, Brazil could jump into the top 10 oil countries by reserves, surpassing nations such as Nigeria and Libya. Though the possibilities have generated a great deal of excitement, industry observers caution that the technological challenges involved are extensive and expensive to overcome, meaning that any developments will, at the very least, be slow in coming. In light of the potential gains, there are signs that GOB is looking for ways to maximize the government share of these historic finds and to allow Petrobras to position itself to be the leading developer in the new fields. End Summary.Making News and Moving the Markets ----------------------------------¶2. (U) Speaking as part of a seminar panel on April 14, ANP Director Haroldo Lima announced that Brazilian state oil company Petrobras is sitting on the world's biggest oil discovery in 30 years. ANP quickly released a statement distancing itself from Lima's remarks, saying that he had been speaking outside of his official capacity. Brazilian semi-publi c state oil company Petrobras declined to confirm the estimate, saying only that studies on the find are still underway. Still, shares of Petrobras closed up 6 percent on the day.¶3. (U) According to Lima, Petrobras, which operates the BM-S-9 block ("Carioca"), has a significant stake in a massive sub-salt structure that could contain more than 33 billion barrels of oil equivalent and is estimated to be five times the size of the recently announced, large Tupi discovery (5-8 billion barrels)(ref B). He went on to comment that Carioca has the potential to be the third biggest active field in the world. Brazil's Securities and Exchange Commission harshly criticized Lima, saying that he should have known the effect his comments would have on the stock market. In the near-term, ANP and Lima will focus their energies on damage control but Lima could very well be fired over this slip-up within the next few days.¶4. (U) Lima, 67, is an electrical engineer from the state of Bahia. B efore being named Director of ANP in 2005, Lima was a five-term federal deputy in the Brazilian Congress. He is a member of Communist Party of Brazil (PCdoB), which supports the Lula Administration. Though Lima did not come to ANP with a strong background in petroleum, industry generally gives a positive assessment of his performance as Director. Under Lima, ANP has held four bidding rounds for oil and natural gas exploration and production blocks. Lima understands that regular and transparent bidding rounds are fundamental to maintaining international investment in the petroleum and gas industry. In a recent interview in ISTOE Magazine, Lima called for the creation of a 100% state-owned company to receive all the oil extracted from Brazil and partners would receive monetary payments.How Much Oil Are We Talking About? -----------------------------------¶5. (SBU) For years, industry insiders have conjectured that there might be a lot more oil at deeper geological intervals t han those where Petrobras, Shell and Devon produce today in Brazil. Talk of "another Campos Basin below the Campos Basin" and large potential in Santos Basin has been circulating through the oil community for a while. In 2005, Petrobras began drilling the Parati well in the Santos Basin, the first well to reach hydrocarbon-bearing reservoirs below a 2 mile-thick layer of salt. The well was the most expensive ever in the country, but it was key as it confirmed that there was indeed oil below the salt that might be put into production. Since then, Petrobras drilled three other wells in the area (along with four others in different areas off of Brazil's coast) and all found relatively light oil (28-30 API) below the salt. The Tupi announcement in November 2007 was the crowning event of a long process.¶6. (SBU) However, industry insiders never considered Tupi as the largest structure in the region. With the latest technology available, subsurface maps of what the area below the salt layer might look like have indicated that it is only the smaller of two relatively large "hills" under the salt. If oil bearing, the larger RIO DE JAN 00000091 002 OF 003 structure might hold a quantity of oil estimated to be between 30-40 billion barrels. Located to the south of Tupi, the larger structure has yet to be given a public name but is being referred to by the industry as "Sugarloaf."¶7. (SBU) Petrobras tested one well in the Sugarloaf structure last year in the BM-S-9 block (Carioca) and is still drilling another. It operates the block in partnership with BG Group (30%) and Repsol (25%). In an official release, Petrobras stated that the second well has not yet reached the sub-salt level. In the absence of more conclusive data on the block's potential, Petrobras is remaining tight-lipped. Through its work in Brazil and in Mexico's deep-water reserves, Petrobras has developed expertise and a reputation as a leader in cutting edge deepwater drilling technology.¶8. (SBU) While Petrobras is getting the majority of the press play right now, it should be noted that other companies are also well positioned should a discovery at Sugarloaf be confirmed. The BM-S-22 block, just south of Petrobras' Carioca block, is thought to be the apex of the structure and is operated by Exxon (40%) in partnership with Hess (40%) and Petrobras (20%). Galp, BG, and Shell also have minority stakes in neighboring blocks. Exxon Brazil President John Knapp told Mission Brazil officers that the industry as a whole is extremely excited about pre-salt opportunities in Brazil, but cautioned that the government and press euphoria does not sufficiently take into account the serious technological and financial challenges of drilling so deep. Knapp also expressed some concern that, in this euphoria, the GOB may be tempted to change its current concession model which industry views as fair, transparent, and effective in order to allow the GOB and Petrobras to take ma ximum advantage of the finds, possibly at the expense of the international oil community.Next Steps for the Government of Brazil ---------------------------------------¶9. (SBU) As previously reported (Ref A), the Government of Brazil withdrew 41 prime blocks in the Santos Basin from auction shortly after the Tupi announcement in November 2007. Pending a determination of how to best develop the Santos Basin pre-salt reserves and capture the most revenue, no further bidding will take place. This has international industry concerned since, in the absence of new exploration opportunities, they could be forced to leave Brazil. ANP has formed a task force and contracted international consulting firm Wood MacKenzie to study how other countries handle such contracts. ANP has also expressed interest in sending a delegation to the U.S. to study how the USG handles contracts in the Gulf of Mexico and in Alaska.¶10. (SBU) While Petrobras CEO Sergio Gabrielli has made public comments t hat Brazil should look into amending its Petroleum Law, industry insiders and academic experts agree that the most likely outcome is for Brazil to maintain its current concessions arrangement and increase the government's take, or "special participation rate" (maybe to as high as 80 percent). There is likely not enough support within the Congress to support such a new Petroleum Law, and little confidence in Congress' ability to come up with a palatable new framework. The benefit of increasing the special participation rate is that it can be achieved by Presidential Decree.¶11. (SBU) Petrobras would also likely oppose any change towards a production sharing or service contract regime. It appears as though Gabrielli's strategy is to stall the auction process for a few years so that Petrobras can be better positioned, financially, to bid competitively on the prime blocks. As it is, Petrobras is confronting serious resource constraints on Tupi, and getting Sugarloaf into product ion may be beyond its current capabilities. There is a worldwide shortage of geologists, engineers and equipment, and the depth of these discoveries (2000 plus meters of water and up to two miles of salt) would require the most advanced (and most expensive) drilling technology on the market. (Note: There are only a few drills capable of drilling at such depths. Per ref B, two of these have been reserved to begin work at Tupi in 2009. End Note.)¶12. (SBU) Supported by key players within the Brazilian government, such as Presidential Chief of Staff and Chairman of Petrobras' Board of Directors Dilma Rousseff, Petrobras is shifting resources to develop Tupi as quickly as possible. The government views the new sub-salt discoveries as a good source of future political leverage, and is about to embark on a US$50 million publicity campaign to spread the news about Brazil's apparent new oil riches. If Dilma Rousseff indeed runs for the presidency in 20 10, it is possible that these oil and gas developments combined with the government's large-scale planned infrastructure projects could boost her profile as a candidate.Comment -------¶13. (SBU) The potential discovery of additional oil deposits in the Santos Basin is certainly good news for Brazil. Unfortunately, the bad news is that there is insufficient drilling equipment to bring these resources on line quickly and there remain significant technological hurdles to drilling in such extreme conditions. If the best estimates have the Tupi field producing no sooner than 2013 even with the full support of Petrobras and the rest of the GOB, developing "Sugarloaf" may indeed take some time. Undoubtedly, however, these discoveries have the potential to make Brazil a player in international energy markets and may have an impact on Venezuela's role for the region as well. The GOB's decisions on how to develop the area will have further impact on U.S. companies' ability to partici pate in these exciting new finds. End Comment. 12. (U) This message was cleared/coordinated with Embassy Brasilia.MARTINEZ
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Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
VZCZCXRO6584RR RUEHRGDE RUEHRI #0165/01 1821619ZNR UUUUU ZZHR 301619Z JUN 08FM AMCONSUL RIO DE JANEIROTO RUEHC/SECSTATE WASHDC 4524INFO RUEHBR/AMEMBASSY BRASILIA 0865RUEHSO/AMCONSUL SAO PAULO 5163RUEHRG/AMCONSUL RECIFE 3435UNCLAS SECTION 01 OF 02 RIO DE JANEIRO 000165SENSITIVESIPDISSTATE FOR WHA/BSC, WHA/EPSC, EB/ENRUSDOE FOR SECRETARY BODMAN, CAROLYN GAY AND RHIA DAVIS DHS FOR SECRETARY CHERTOFFFROM AMBASSADOR SOBELE.O.: 12958: N/ATAGS:ECONEINVENRGPGOVPBTSMARRBRSUBJECT: AMBASSADOR SOBEL MEETS WITH KEY ENERGY ENTITIES IN RIO Ref(s): A) 08 RIO DE JAN 138; B) 08 RIO DE JAN 0044 and previous Sensitive But Unclassified - Please handle accordingly. This message has been approved by Ambassador Sobel.SUMMARY -------¶1. (SBU) On June 6 Ambassador Sobel met with the two top executives of the Brazilian Petroleum Institute (IBP), an association representing the 71 energy companies operating in Brazil, and with Petrobras' new International Director, Jorge Luiz Zelada. In both meetings, discussions centered on the effects of the large oil and gas discoveries off the Brazilian coast in the Santos basin - an area measuring 800 km long and 200 km wide with an estimated potential of more than 80 billion barrels of oil equivalent (boe). The Ambassador explored opportunities for developing new bilateral partnerships in light of upcoming visits by DHS Secretary Chertoff and DoE Secretary Bodman. He also discussed the possibility of developing a strategic partnership with Petrobras. End Summary.IBP DISCUSSES SANTOS BASIN AND SOVEREIGNTY CONCERNS --------------------------------------------- ------¶2. (SBU) On June 6, Ambassador Sobel met with IBP President Joco Carlos de Luca and Executive Secretary Alvaro Alves Teixeira. They explained that IBP's goal is to protect and develop the oil industry in Brazil, while at the same time supporting and encouraging the free market in Brazil. To that end, they occasionally find themselves at odds with Petrobras, a majority shareholder in IBP, as well as Petrobras's Exploration and Production (E&P) Director Guilherme de Oliveira Estrella, who happens to be the Chair of IBP's board. Th eir most recent disagreement has been over continuing application of the concession model to E&P in the Santos Basin - which IBP supports vs. development of a new production sharing model where companies would pay royalties in oil vs. petrodollars (Ref A). Royalties are currently at 65 percent, and the GoB is considering a rate hike (which ANP supports). Petrobras, which controls 90 percent of E&P in Brazil is advocating for the production-sharing model. IBP believes that adopting a new model would unnecessarily delay ANP conducting new oil rounds, since any new model would have to be approved by the Brazilian Congress.¶3. (U) The Ambassador expressed interest in building a stronger working partnership with Brazil to increase world energy security. He inquired as to what public resources the United States could offer to assist Brazil with oil and gas exploration of the pre-salt areas of the new huge Santos basin off Brazil's coast, an area 800 kilometers long, extend ing from Santa Catarina to Esprito Santo and 200 kilometers wide. He also asked about opportunities for U.S. companies.¶4. (SBU) The IBP executives highlighted Brazil's concerns that the United States is not a signatory to the UN convention recognizing the 200 nautical mile economic zone. They also expressed concern about the recent announcement of the reestablishment of the Fourth Fleet headquartered in the U.S. Southern Command, which occurred at about the same time as the Santos Basin reserves became public knowledge. They explained that the GOB is very sensitive about sovereignty and that the Fourth Fleet announcement "could not have come at a worse time," causing a nationalist, protectionist reaction in Brazil. There is concern that the United States could threaten to use its considerable military assets to commandeer and exploit Brazil's offshore assets. The IBP officials felt that an offer to help Brazil develop a defense system to protect its "blue Amazon" would furt her build on an already positive relationship that exists between our two Presidents. Ambassador Sobel assured the IBP officials that the United States does indeed recognize Brazil's economic zone as extending 200 miles off Brazil's coastline. He stated that he would seek guidance on this issue, and raise it with DHS Secretary Chertoff and Defense Minister Nelson Jobim.¶5. In response to the Ambassador's inquiry about the commercial viability of extracting oil from the Santos Basin given the complexity (and expense) of drilling in the pre-salt area, the IBP representatives pointed out that the large potential finds announced in Tupi (5-8 billion barrels of oil equivalent) and Carioca (33 billion barrels of oil equivalent) represent a small sampling of the oil and gas reserves that may lie in the pre-salt area, which is 2000 to 3000 meters (6,000-10,000 feet) below sea level and could yield more than 80 billion boe - a find that would rival the North Sea and secure Brazil's p lace in the global arena as a major energy RIO DE JAN 00000165 002 OF 002 producer. Given Brazil's leadership in ultra-deep E&P technology, it could easily handle depths of that magnitude; however, exploration in the pre-salt area may strain Brazil's exploration capabilities. They also noted that while the intellectual capital for E&P lies with U.S. companies, DoE technology would be of considerable value to Brazil.¶6. (U) The Ambassador offered to explore the idea of a visit by DoE technical experts to assess what resources DoE might be able to offer in support of Brazil's expressed desire to explore the Santos Basin, and to prepare for Secretary Bodman's visit.PETROBRAS PLANS TO BECOME A GLOBAL ENERGY SUPPLIER --------------------------------------------- -----¶7. (U) Ambassador Sobel and Denis Bovin, a member of the President's Intelligence Advisory Board, met with Petrobras' new International Operations Director Jorge Zelada to discuss what role the USG might pl ay in supporting Petrobras' E&P and distribution of oil and gas discoveries in the Santos Basin, and Petrobras' investment in the United States. Zelada explained that Petrobras is seeking to strengthen its position as a global energy supplier. Its board is currently determining how to best achieve that goal given challenges presented by geology, technological limits and resource restrictions, and should have a revised five-year plan by the end of 2008.¶8. (U) Every year, the Petrobras board conducts a mid-year assessment. This year, the board is reconsidering resource allocations between domestic and international operations for the next five years. According to Zelada, the discoveries in the Santos Basin will affect how and where Petrobras invests abroad. He asserted that Petrobras will continue to grow as a global energy company, but may have to refocus and refine some of its international activities. It is prioritizing West Africa, the Gulf of Mexico, Nigeria, and Ang ola.¶9. (SBU) Responding to the Ambassador's concerns with Petrobras' activities in the Iran and the Caspian, Zelada explained that Petrobras understood and was sensitive to those concerns. He echoed Samir Awad's assertions (Ref B) that Petrobras was unlikely to renew or seek new contracts in Iran.¶10. (U) Zelada went on to affirm that the US$5 billion Petrobras has invested in the United States (out of US$15 billion internationally) is likely to increase and will be part of an overall integrated refining strategy. (Note: Petrobras produces mainly heavy crude and must import light crude for refining. End Note). Petrobras is adapting its refineries to work more with light crude to address a production surplus in Brazil. Zelada said that Petrobras is trying to acquire the other 50 percent of the Pasadena refinery in Houston to alleviate refining pressure in Brazil and referred to the new Pernambuco refinery, which is a joint venture between Petrobras and PDVSA, Venezuela's sta te-owned oil company.¶11. (U) Ambassador suggested that when in Washington, Petrobras executives meet with Senator Lugar, and that they meet with Secretary Chertoff and Secretary Bodman during their visits to Brazil. The Ambassador also offered to look into the possibility of bringing in USG resources and technology to complement Petrobras' efforts.COMMENT -------¶12. (U) Comment: The recent discoveries in the Santos Basin have created a golden opportunity for the United States to deepen its strategic relationship with Brazil's public and private sector to ensure global energy security. To the extent that we can, we should encourage U.S. resources to support Brazil's E&P efforts in the Santos Basin. No doubt key officials in the Brazilian government and Petrobras board would appreciate the offers of technological support and partnership to allay fears of the United States not respecting Brazil's sovereignty. Such a partnership could also offer additional strategic benef its in terms of joint E&P efforts around the globe. Additionally, positive engagement in this dynamic area at the early stages of exploration could reap benefits both in terms of enhancing U.S. energy security, as well as continuing to improve the bilateral relationship through cooperation in an area of mutual interest.MARTINEZ
Cable 4 --
Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
VZCZCXRO1611
RR RUEHRG
DE RUEHRI #0014 0211523
ZNR UUUUU ZZH
R 211523Z JAN 09
FM AMCONSUL RIO DE JANEIRO
TO RUEHC/SECSTATE WASHDC 4748
INFO RUEHBR/AMEMBASSY BRASILIA 1073
RUEHSO/AMCONSUL SAO PAULO 5223
RUEHRG/AMCONSUL RECIFE 3488
RUCPDOC/USDOC WASHDC
RHEBAAA/USDOE WASHDC
UNCLAS RIO DE JANEIRO 000014
SIPDIS
STATE FOR WHA/BSC, WHA/EPSC, EB/ESC
USDOC FOR 4332/ITA/MAC/WH/OLAC/JANDERSEN/ADRISCOLL/MWAR D
USDOE FOR CAROLYN GAY AND RHEA DAVIS
E.O. 12958: N/A
TAGS: ENRG EPET EINV BR
SUBJECT: US OIL COMPANIES ONE STEP CLOSER TO PRE-SALT OIL DISOVERY IN BRAZIL'S SANTOS BASIN
REFS: A) 07 Sao Paulo 899,
B) Rio de Janeiro 91,
C) Rio de Janeiro 35,
D) Rio de Janeiro 138,
E) Rio de Janeiro 135,
F) Rio de Janeiro 159,
G) Brasilia 910,
H) Brasilia 1122,
I) Rio de Janeiro 237,
J) Rio de Janeiro 235,
K) Rio de Janeiro 237,
L) Rio de Janeiro 245
¶1. U.S. oil companies Exxon and Hess, together with Brazilian partner Petrobras, have found evidence of oil in their highly anticipated pre-salt exploration block in Brazil's Santos Basin. Exxon, which operates the well, and Hess each own 40 percent of the concession while 20 percent is held by Petrobras.
¶2. The discovery was made at well 1ESSO3SPS (test well that began drilling in October 2008) in the BM-S-22 block at a water depth of 2,223 meters (7,294 feet), the National Petroleum Agency released on January 20. The companies haven't determined if the find can be developed commercially but energy insiders expect the discovery in this block, called "Azulao", to be larger than the neighboring "Tupi" block which is currently the largest confirmed pre-salt find at 5-8 million barrels. The Azulao block lies at the apex of what geologist consider the largest structure of the pre-salt oil and gas reserves.
¶3. Unrelated to the Azulao announcement, Exxon CEO Rex Tillerson visited Brazil last week. His trip took place among speculation that, with almost $37 billion of cash on hand, the company may be positioning for a major deal. Rumors circulating include a takeover of Shell, a merger with BG Group (which also holds a major stake in Brazil pre-salt), or a partnership with Petrobras to finance and develop pre-salt oil development in Brazil.
MARTINEZCable 05 --
Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
VZCZCXRO2636
PP RUEHRG
DE RUEHRI #0288/01 2391515
ZNY CCCCC ZZH
P 271515Z AUG 09
FM AMCONSUL RIO DE JANEIRO
TO RUEHC/SECSTATE WASHDC PRIORITY 5063
INFO RUEHBR/AMEMBASSY BRASILIA PRIORITY 1356
RUEHRG/AMCONSUL RECIFE PRIORITY 3519
RUEHSO/AMCONSUL SAO PAULO PRIORITY 5279
RHEBAAA/DEPT OF ENERGY WASHDC PRIORITY
RUEAIIA/CIA WASHDC PRIORITY
RUCPDOC/DEPT OF COMMERCE WASHDC PRIORITY
RHEHNSC/NSC WASHDC PRIORITY
C O N F I D E N T I A L SECTION 01 OF 03 RIO DE JANEIRO 000288
SIPDIS
STATE FOR WHA/EPSC, MMCMANUS, BDUGGAN
NSC FOR RACHEL WALSH, LUIS ROSSELLO
FOR DOE GWARD, RDAVIS, LEINSTEIN, RROSS
STATE PASS USTR KDUCKWORTH DOC FOR ADRISCOLL, LFUSSELL, MCAMERON
E.O. 12958: DECL: 08/26/2019
TAGS: BR ECON ENRG PREL
SUBJECT: RIO'S OIL PLAYERS REACT TO SPECULATION ON PRE-SALT REGULATIONS
REF: BRASILIA 1021 Classified By: Consul General Dennis W. Hearne. Reasons 1.4 (b,d).
SUMMARY -------
¶1. (C) While the Government of Brazil (GOB) has yet to publicize its regulatory framework for the exploration of pre-salt reserves (reftel), Petrobras executives, petroleum industry representatives, and Rio de Janeiro-based managers of American oil firms have expressed concern over the main provisions of the reform package reported in the press. In reaction to the likelihood the new framework will mandate Petrobras as the sole operator for all unlicensed blocks, Petrobr as and Brazilian Institute for Petroleum executives argued the company does not have sufficient resources to effectively carry out this role, which could lead to subcontracting opportunities for other oil firms. While petroleum companies praised the concession model under the existing regime and opposed the likely shift to production sharing contracts (PSC), some analysts argued PSC provisions could potentially carry fiscally advantageous terms for investors. The possibility of a new state company to own and administer all pre-salt reserves is anathema to industry representatives in Rio de Janeiro, although there appears to be a sound legal justification for such an entity. Local representatives of Chevron and Exxon Mobile are bracing for a far more challenging operating environment, but both companies will maintain an active presence in Brazil, regardless of the changes the new reform package brings. End Summary.
PETROBRAS AS SOLE OPERATOR --------------------------
¶2. (C) In reaction to the widely-accepted perception that the new framework will mandate Petrobras as the sole operator for all unlicensed blocks, Petrobras and Brazilian Institute for Petroleum (IBP) executives in Rio de Janeiro contend the company does not have sufficient resources to effectively carry out this role. Fernando Jose Cunha, General Director of Petrobras for Africa, Asia, and Euroasia, told Rio Econoff on Monday August 17 that such a provision, along with the strong likelihood Petrobras will also be guaranteed at least a 30 percent share in every block, could deter potential investors and partners. Alvaro Teixeira, General Director for IBP, an industry association that represents Petrobras and other petroleum companies operating in Brazil, called the proposal a "bad idea," stating the GOB would first have to recapitalize Petrobras. According to Gustavo Gattas, a prominent energy analyst with UBS Pactual, Petrobras' lack of resources will likely lead to extensive cont racting for pre-salt exploration and production operations. He explained that some companies stand to benefit more than others from this model, explaining many IOCs and oil services company consider Petrobras to be one of the "harshest" contractors in the world. "Some people are comfortable working with Petrobras, others are not," he explained.
¶3. (C) Reaction by Rio de Janeiro-based representatives of American oil companies to the possibility of Petrobras as the sole operator is mixed. Exxon Mobile's External Relations Director Carla Lacerda, told Rio FCS officer on August 10 the proposed model constituted a reversion to Brazil's former monopoly system. As the sole operator, she explained, Petrobras would have more control over equipment purchases, personnel, and technology selection, which, in turn, could adversely affect U.S. equipment and service supply to Brazil. Chevron's Director for Business Development and Government Relations Patricia Pradal told Rio Econoff on Aug ust 21 that she had doubts over the legality of such a provision. "The Brazilian government will have to fight this out in the courts or change the shareholder composition of Petrobras to give the government a greater share," she explained. In spite of that possibility, Pradal did not believe non-operating partner status would necessarily be bad for Chevron. She stated, "We are trying to maintain a lower profile nowadays," adding, "We area already partnering with RIO DE JAN 00000288 002 OF 003 Petrobras on five projects here."
MOVE FROM CONCESSION TO PRODUCTION SHARING CONTRACTS --------------------------------------------- ----------
¶4. (C) Although industry is opposed to the likely shift from concession to production sharing contracts (PSCs) under the new regime, PSC provisions could potentially carry fiscally advantageous terms for investors. IBP's Teixeira and Chevron's Pradal praised the concession model under the existing regime, calling it "strong and stable." Pradal said the shift from such a model to a PSC was a political move, explaining "Everything the Brazilian government is trying to get from a PSC, they could have done through concessions." USB Pactual's Gattas offered a more favorable view on PSCs, however, explaining the new model could erase the upfront cash payments associated with current concession contracts. The Tupi field, for example, required an upfront payment of 15 million Brazilian Reals (8 million USD). Gattas also explained that new provisions could possibly allow companies to recover a greater percentage of their investment within the first years of production. "A quick pay back under a PSC can be very attractive to many IOCs," he explained.
FORMATION OF NEW STATE COMPANY ------------------------------
¶5. (C) The likelihood of a new state company to own and administer all pre-salt reserves is anathema to industry representatives in Rio de Janeiro. Petrobras' Cunha stated Petrobras never agreed with the concept of a new state company. With Petrobras already at capacity, he did not know how such a company would receive its financial and human capital. "Will we be robbing Peter to pay Paul?," he asked rhetorically. Chevron's Pradal said the GOB's motivation for creating such a company was based on political jockeying, stating, "The PMDB needs their own company." (Note: The PMDB, the government's coalition partner, has reportedly been negotiating with President Lula's PT party for seats on the board of such a company, in exchange for political concessions going into an election year. Energy Minister Edison Lobao, who is a leading PMDB member, was a key proponent of the new state entity. End note). According to USB Pactual's Gattas, however, it makes legal sense for the GOB to form a body to serve as a contract counterparty in court disputes and PCS re-negotiations." IBP's Teixeira said such a company will consist of less than 100 personnel, and would receive technical support from the Min istry of Mines and Energy.
UNITIZATION AND LOCAL CONTENT -----------------------------
¶6. (C) There is mixed reaction over whether unitization and local content requirements will be included in the new framework. While some industry players have speculated the regulations will address unitization, a term of art in the petroleum industry for the process of distributing unlicensed blocks that share reservoirs with licensed blocks already under concession, Nelson Narciso Filho, Director for the Brazilian National Petroleum Regulatory Agency (ANP) stated the new regime will not address the unitization issue (Note: ANP is responsible for administering unitization. End Note). "We should not touch unitization until after the new regulations are in place," he said. While the Ministry of Mines and Energy Undersecretary for Oil, Natural Gas, and Renewables told Brasilia Econoff that the new regulations will provide for a flat local content requirement for all blocks (reftel), as oppos ed to local content factoring into bidding criteria under the concession system, USB Pactual's Gattas doubted this would be the case. (Note: At the July 20 CEO Forum, an attendee of Presidential Chief of Staff Dilma Rousseff's meeting with the Brazilian CEOs told Brasilia Econoff that an increase in local content requirements would be part of the new pre-salt regulations. End Note). Gattas explained local content requirements are already too high for the Brazilian equipment companies. "Everyone is fully contracted right now," he stated, "And this could go overboard." He argued such requirements would not be RIO DE JAN 00000288 003 OF 003 addressed in the law, but rather handled through individual contracts, perhaps based on the precedence of the first PSC to fall under the new framework.
AMERICAN OIL COMPANIES: 'WE WILL STAY' --------------------------------------
¶7. (C) Although Rio de Janeiro-based representatives of Chevron and Exxon Mobile are bracing for a far more chal lenging operating environment, both companies will maintain an active presence in Brazil, regardless of the changes the new reform package brings. According to Exxon Mobile's Lacerda, the Brazilian market remains attractive, especially considering declining access to reserves, world wide. Chevron's Padral conceded her company will be "struggling" in the coming years, but said existing investments and her company's long-term goals here will keep Chevron engaged. "The rules can always improve later on," she said. Both Lacerda and Padral stated their companies were accustomed to PSCs world-wide and would enter into them here, given competitive and transparent terms.
COMMENT -------
¶8. (C) Petroleum actors and insiders in Rio de Janeiro uniformly view the pre-salt reform as pre-election politicking by the Lula Administration. Given the fact that the GOB has not yet publicly released details of the new regulatory framework, however, industry is tempering its reaction to the actua l terms of the framework until after its announcement in Brasilia on August 31. Ultimately, the pace of production the GOB subsequently sets for the pre-salt reserves could influence the IOC's ability to develop these fields more than the actual terms that govern how they do so.
¶9. (C) Even once the announcement of the government's vision of a new regulatory framework is made next week, it will still be a government proposal that needs the approval of the Congress. Given the highly politicized nature of Congressional debate as Brazil anticipates the coming election year, a bill as important as this one will not face an easy road to approval. The final product will likely be substantially different than the details that have been leaked. For example, press reports varied leading up to the announcement, from Minister Lobao indicating that the distribution of royalties to states and municipalities will be omitted from the August 31 proposal so that the issue does not hold up pa ssage of the rest of the legislation, to other reports that the GOB, under pressure from oil producing states, will in fact include royalties in the new framework, in a formulation closer to the current scheme. Such a decision which would almost certainly create disappointment and controversy among the non-oil producing states. Sources at the Ministry of Mines and Energy confirm that it is still unclear how this issue will be handled vis-a-vis the August 31 announcement. While this element of the new regime is not one that has concerned industry thus far, it is clearly one of the biggest headaches for the government and likely to produce the toughest battles for the government. The fact that this very issue already prompted the delay of the previously planned August 19 announcement, and government consultations with affected state and local leaders in the interim do not appear to have brought them any closer to a resolution, is likely just a harbinger of the difficulties tha t lie ahead for this part of the new regulatory regime. Post will continue to closely monitor and report on developments. End Comment.
¶10. (U) This cable has been coordinated with Embassy Brasilia.
HEARNECable 06 --
Reference ID | Created | Released | Classification | Origin |
|---|---|---|---|---|
VZCZCXYZ0000
OO RUEHWEB
DE RUEHRI #0369/01 3362113
ZNY CCCCC ZZH
O 022112Z DEC 09
FM AMCONSUL RIO DE JANEIRO
TO RUEHC/SECSTATE WASHDC IMMEDIATE 0037
INFO RUEHBO/AMEMBASSY BOGOTA IMMEDIATE
RUEHBR/AMEMBASSY BRASILIA IMMEDIATE
RUEHSO/AMCONSUL SAO PAULO IMMEDIATE
RUEHRI/AMCONSUL RIO DE JANEIRO
C O N F I D E N T I A L RIO DE JANEIRO 000369
SIPDIS
STATE - PLEASE PASS NSC FOR RACHEL WALSH AND LUIS ROSELLO
STATE - PLEASE PASS DOE FOR RUSSELL ROTH
STATE - PLEASE PASS TO DOC FOR LORRIE FUSSELL
STATE - PLEASE PASS TO USTR FOR KATE KALUTKIEWICZ. WHA/EPSC EEB/ESC/IEC AMEMBASSY BRASILIA PASS TO AMCONSUL RECIFE
E.O. 12958: DECL: 2019/12/02
TAGS: EPET EIND EINV PREL PGOV BR CO
SUBJECT: CAN THE OIL INDUSTRY BEAT BACK THE PRE-SALT LAW?
REF: BRASILIA 1099; RIO DE JANEIRO 294; RIO DE JANEIRO 288 CLASSIFIED BY: Dennis W. Hearne, Principal Officer; REASON: 1.4(B), (D)
SUMMARY
¶1. (C) Although major international and independent oil companies continue to view the regulatory framework to develop Brazil's offshore Pre-salt oil and gas reserves as potentially debilitating to their future exploration and production (E&P) operations here, the Rio de Janeiro-based industry group that represents these companies has thus far been unsuccessful in efforts to enact changes to the law in the House of Deputies. Industry continues to argue that the most detrimental aspect of the framework on the commercial viability of future Pre-salt operations, and even local manufacturing, is Petrobras' designation as chief operator, part of the bill addressing PSAs. Local manufacturers and suppliers also will also be affected, but the largest Brazilian petroleum suppliers group complained the political nature of the framework was impeding their voice on the matter in Congress. With industry resigned to the passage of the framework's four bills in the House of Deputies (for the most part in current forms), its strategy going forward is to enlist new partners to focus on the Senate, with the goals of winning key amendments to the bills, as well as pushing a vote back until after the October Presidential and Congressional elections. End Summary.
ELECTION YEAR MAKING FOR A "HARD BATTLE" FOR INDUSTRY
¶2. (C) Although major international and independent oil companies (IOCs) continue to view the regulatory framework to develop Brazil's offshore Pre-salt oil and gas reserves as potentially debilitating to their future exploration and production (E&P) operations here, the Rio de Janeiro-based industry group that represents these companies has thus far been unsuccessful in efforts to enact changes to the law in the House of Deputies. Patricia Pradal, head of government relations for Chevron told Econoff on November 19 that since President Lula announced the framework on August 31, industry had been fighting a "hard battle" to enact changes to the legislation, but the House of Deputies has not taken any industry concerns into consideration. (Note: Pradal also heads the steering committee of the Brazilian Institute for Petroleum (IBP), the industry umbrella group that represents all major international and independent oil companies operating in Brazil, including Petrobras. She spoke to Econoff in this capacity. E nd Note). Pradal lamented the lack of support from opposition parties in Congress, blaming Presidential and Congressional elections next year and explaining, "The PSDB [primary opposition party] simply has not shown up to this debate." She expressed begrudging respect to President Lula's International Relations Adviser Marco Aurelio Garcia and Press Secretary Franklin Martins as the principal orchestrators of the Government's strategy, stating, "They are the professionals, and we are the amateurs."
PSDB'S SERRA REPORTEDLY OPPOSES FRAMEWORK, BUT NO SENSE OF URGENCY
¶3. (C) According to IBP's Pradal, likely PSDB 2010 Presidential Candidate Jose Serra opposed the framework, but seemed to lack a sense of urgency on the issue. She quoted him as telling industry representatives, "Let those guys [Worker's Party] do what they want. There will be no bid rounds, and then we will show everyone that the old model worked...And we will change it back." As for what would happen to foreign o il companies in the meantime, Serra reportedly remarked, "You will come and go." Congressional sources have also told Embassy officers that Serra has signaled PSDB and other opposition sources that they should amend - but not oppose the final Pre-Salt legislation, and urged opposition legislators to avoid vocal opposition to the law.
CURRENT STATUS OF THE FRAMEWORK
¶4. (U) On August 31, President Lula announced the framework and sent it to Congress for approval. On November 18, the House of Deputies (Camara) passed the first of the four bills (reftel A) that make up the framework, by a vote of 250 to 67, to create Petrosal, a new government entity that will represent the Brazilian government in the not-yet-approved production sharing regime. Further reporting will be reported septel. (Note: The next bill to likely go to vote in the House of Deputies will be the creation of a social fund, followed by the 50 billion USD Petrobras capitalization bill. We anticipate the bill inst ituting Production Sharing Agreements (PSA) - and making Petrobras the chief operator of all Pre-salt blocks - will be the last to go before a House of Deputies vote. Once the House of Deputies passes a bill, it must then go before the Senate for approval. If the Senate passes the bill, it is final. If it amends the Qll, it will then go back to the House of Deputies for discussion and revote. Post will report further on legislative developments septel. End Note).
PETROSAL: ALL THE CONTROL, NONE OF THE LIABILITY?
¶5. (C) While not opposed per se to the existence of Petrosal, industry is concerned this group of political appointees, who will administer the Pre-salt blocks on behalf of the Brazilian government, will also wield disproportionate power over the operations of any Production Sharing consortium into which an oil company enters. Under the law as proposed, Petrosal controls 50 percent of the seats - with veto power - in a PSA consortia's operating committee. According t o IBP's Pradal, this will therefore give Petrosal significant power over key E&P decisions, such as budget, environmental, and safety matters, in the Pre-salt blocks. "They will have all the control, and none of the liability," she said.
PETROBRAS AS CHIEF OPERATOR UNIVERSALLY CRITICIZED
¶6. (C) Industry continues to argue the most detrimental aspect of the framework on the commercial viability of future Pre-salt operations is Petrobras' designation as chief operator, part of the bill addressing PSAs. Emphasizing a point she made to the Charge d'Affaires on September 1 (reftel B), Exxon's Lacerda said having Petrobras run all Pre-salt blocks will effectively relegate oil companies to mere financing bodies. Robert Abib of Anadarko said on November 19 that Petrobras' role as chief operator could shut out the smaller independent oil companies if the parastatal focuses on the Pre-salt's largest fields, rather than smaller ones where independents normally specialize and focus their operations. Exxon's Lacerda complained the PSA bill failed to sufficiently define the fiscal terms assigned to the contracts, and said under the proposed regime, such terms would only become clear immediately prior to a bid round, making it nearly impossible for a company to effectively prepare. Both IBP's Pradal and Lacerda said ongoing debate on the distribution of royalties to oil producing and non-producing states, municipalities, and the federal government, which is also part of the PSA bill, was preventing any real discussion on the framework's transparency and ability to attract investment.
¶7. (C) Should Petrobras' chief operator designation remain, IBP's Pradal said it would be impossible to compete in bid rounds against National Oil Companies (NOC), such as China's Sinopec and Russia's Gazprom. According to Pradal, it will come down to who gives the government the most profit. "The Chinese can outbid everybody," she explained. "They can break-even and it will still be attractive to them. They just want the oil." Pradal said Chevron would not even bid under such circumstances. (Note: Foreshadowing greater NOC involvement in Brazil, Colombia's 90 percent state-owned oil company Ecopetrol opened an office in Rio de Janeiro on November 18. Furthermore, Petrobras CFO Barbassa said on November 23 that the parastatal would be sending top executives to China in early 2010, in an effort to attract Chinese petroleum equipment suppliers to Brazil. Post will report on both issues septel. End Note).
WHAT ABOUT THE LOCAL MANUFACTURERS?
¶8. (C) Brazilian manufacturers and suppliers also stand to lose from Petrobras' role as chief operator, but Brazil's largest petroleum suppliers group complained the political nature of the framework was impeding their voice on the matter in Congress. Exxon's Lacerda said local manufacturers and suppliers would stand to lose by having only one principal client, suggesting the National Organization for the Petrol eum Industry (ONIP), a nonprofit forum that brings together Brazil's largest petroleum service providers and suppliers, could be a powerful ally in this fight. She complained, however, that ONIP had thus far been "quiet" on the issue. ONIP Director Alfredo Renault told Econoff on November 23 that while ONIP does not engage on public policy or lobbying, it was concerned about Petrobras' designation of chief operator in the framework, and expressed these worries to Congress. Unfortunately, he explained, the Special Committee in the House of Deputies where Renault made his presentation was driven by "politics rather than logic," and appeared indifferent to his concerns. According to Renault, having only one client would not benefit Brazilian manufacturers' competitiveness nor provide them with the opportunity to establish the buyer-supplier relationships with major international and independent oil companies, crucial to doing business overseas. Renault stated some industry asso ciations within ONIP favored the framework, but said these groups tended to include companies that already have extensive commercial relationships with Petrobras.
RISKY PETROBRAS CAPITALIZATION
¶9. (C) Oil company representatives see legal problems with the bill concerning the capitalization of Petrobras through a guarantee of 5 billion barrels of Pre-salt oil, and question the constitutionality of the transaction. IBP's Pradal explained the proposed capitalization, which will infuse Petrobras with promised reserves in exchange for increased government shares in the company, has precedent in other countries; she said, however, such precedent involved proven reserves, rather than unproven ones, as they are in this case (Note: Pradal was unable to name the country where this occurred, but stated Chevron's legal team was researching the precedent. End Note). Anadarko's Abib emphasized the risk of diluting Petrobras' shareholder value, and said the company was risking a breach of its fiduciary responsibilities. Claiming it was impossible to accurately value the Pre-Salt oil, he claimed Petrobras shareholders could sue the company, if it turns out the reserves were over-valued. According to Pradal, accounting firms and investment banks held serious concerns over the transaction, but only one group of minority shareholders was vocally expressing these worries. She expressed consternation that the CVM had not even opened an investigation into the transaction. (Note: CVM is the Brazilian equivalent of the SEC. End Note). Pradal added, "As a matter of fact, we do not believe Petrobras is doing things by the books," claiming Petrobras willfully overestimated the 5-8 billion barrels of oil deposits in the Tupi offshore area. (Note: Petrobras is currently under Congressional investigation for fraudulent practices - tax evasion, overpaying for goods, and favorable donations to Lula supporters - but is widely expected to be cleared of charges by a Senate comm ittee controlled by the governing coalition. End Note).
INTERNAL CONFLICT IN PETROBRAS?
¶10. (C) Petroleum industry players in Rio claim there is a division of opinion within Petrobras over the framework, and how it will end up affecting both Petrobras and the Pre-salt's overall development. Industry insiders claim some key Petrobras personnel oppose the shift to PSAs and the chief operator role, Qile Petrobras' upper management mostly favor the framework, viewing the Pre-salt reserves in zero-sum, nationalistic terms. For example, at a November 23 conference in Rio de Janeiro, Petrobras CFO Almir Barbassa expressed concern over whether Petrobras had the capacity to meet even its current commitments. "The pace of growth of new projects continues to increase, and I always wonder how much longer we will be able to grow at this pace," he said. "Projects abound, but we are constrained by a lack of available personnel, material, and equipment." Fernando Jose Cunha, General Directo r for Petrobras for Africa, Asia, and Euroasia told Econoff in August that the chief operator provision, along with the 30 percent mandatory share in every block, would "chase investors away" (reftel C). On the other hand, Exxon's Lacerda said Petrobras E&P Director Guilherme Estrella was largely responsible for the PSA bill's terms that prejudice international oil companies. (Note: Estrella has publicly compared Petrobras to a national space program, in terms of nationalist ambition, and is considered close to President Lula. End Note).
INDUSTRY STRATEGY: WHAT NOW?
¶11. (C) With industry resigned to the passage of the framework's four bills in the House of Deputies (for the most part in current forms), its strategy going forward is to focus on the Senate, which has a greater number of opposition legislators than the House of Deputies. Pradal said IBP would seek to enlist new partners to focus efforts, such as Brazilian independent E&P company OGX, the Federation of I ndustries of Sao Paulo State (FIESP), the Confederation of National Industries (CNI), and various Chambers of Commerce, in order to win Senate amendments concerning the Petrobras chief operator role and Petrosal terms. She also said it would be ideal to prevent a Senate vote before May, which could then push a vote back until after the October Presidential and Congressional elections. According to Pradal, the "real fight" would take place in February, after Congress returns from Recess. Exxon's Lacerda also stated industry planned to make a "full court press" in the Senate, but, not leaving anything to chance, Exxon would now also branch out on its own to conduct lobbying efforts. Pradal emphasized both IBP and Chevron's hopes that Ambassador-designate Shannon could make a significant impact in this debate, and asked Econoff on multiple occasions when Congressional confirmation was expected.
COMMENT
¶12. (C) As they increase their efforts within this highly nationalistic deba te, the IOCs will have to tread cautiously. Numerous Congressional contacts have shared their assessments with Post that, by becoming more vocal on the subject, the IOCs risk galvanizing nationalistic sentiment around the issue and damaging, rather than helping, their cause. At the same time, the IOCs are not optimistic over their ability to force key amendments to the current framework. Furthermore, even if the IOCs succeed in at least forcing a delay of a Senate vote until after a possible - but uncertain - victory of an opposition President, there is a sense that the wait to bid on commercially attractive opportunities in the Pre-salt will be long. Such outlooks, as well as the limited attractiveness of onshore blocks and the uncertainty of non-Pre-salt offshore frontier acreage, impede the IOCs' ability to effectively map out their local operations, and threaten their overall interest in Brazil. End Comment.
¶13. (U) This cable has been coordinated with Embassy Brasilia.
HEARNE..
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