Brazilian pre-salt specialist Petrobras could consider taking some of its exploration dollars to Guyana if authorities in its home country fail to adapt the country’s regulatory structure to more competitive times, the boss of the state-controlled giant has warned.

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In an outspoken interview held during the Rio Oil & Gas 2020 digital event on Thursday, chief executive Roberto Castello Branco was sharply critical of what he sees as Brazil’s failure to provide an attractive and predictable regulatory framework.

“We have very good geology and a good track record in Brazil but, while necessary, this is not sufficient. The regulatory framework needs to be modified," he urged.

Apart from adding his voice to those calling for Brazil to drop its overlapping system of contracting models, Branco directed some of his fire at the National Petroleum Agency (ANP), Brazil's market regulator.


“Brazil needs to reformulate and modernise the ANP, and make it less interventionist,” Branco said, suggesting that the agency is not keeping up with the fact that Petrobras is currently throwing open the Brazilian midstream and downstream sectors to competition, through a series of major divestments.

“Brazil is in the process of creating two new (competitive) industries — that of refining and natural gas. The ANP has to modernise. In the past it was just a case of going to Petrobras to sort out your problems, but it is no longer like this,” he said.

Castello Branco fired off two complaints against the Brazilian regulator, referring to a “three-year wait” to obtain authorisations for an eleven-kilometre onshore pipeline needed to connect the “Route 3” trunk pipeline from offshore pre-salt fields to the Comperj gas processing system.

He also criticised the ANP’s slow progress in defining new cost and tariff references for the Bolivia-Brazil (Gasbol) pipeline, seen as essential for Petrobras to sell its own stakes in the TBG pipeline consortium and to become a mere customer for the unbundled transport service.

TBG sale strife

The oil giant has an anti-trust commitment to sell its interest in TBG by the end of next year.

“This matter has been stuck in the ANP for more than a year and every week it is taken off the agenda of the directors' meeting. It seems that there is one director there who does not want to solve the problem, and he is sitting on this,” Castello Branco said.

Powerful political lobby groups from the north and north-east of Brazil have staged some resistance to the country’s deregulatory reforms for the gas sector. Critics say this is due to their own interests in state-controlled gas distribution companies and regionally-advantaged fuels distribution firms. Castello Branco did not say which ANP director might be involved in such moves.

Castello Branco — who was being interviewed by the president of the Brazilian Petroleum Institute (IBP), Clarissa Lins — also called for Brazil to end its system of overlapping contracting models, arguing that the business world “does not like such complexity.”

He called for future convergence into a concessions-based system, which would mean dropping the production sharing contracts used for new pre-salt areas.

“Production sharing contracts make more sense in a country where it is inherently difficult to do business, which is not the case with Brazil,” the chief executive said.


Castello Branco saved his harshest criticism for a Brazilian environmental permitting process that has left vast areas off northern Brazil untouched by drillers nearly eight years after they were put on the licensing block and attracted bids — with some companies paying heavy signature bonuses.

“You can’t sell an area and then leave an oil company in the lurch, unable to get a licence from (federal environmental agency) Ibama. This is what happened,” he said.

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He was referring to the long wait that companies have faced trying to obtain permits in the Foz de Amazonas basin, which borders with the Guyana-Suriname basin. BP and Total have recently relinquished their interests in these areas.

“Guyana is having a party now. Maybe Petrobras will have to go there rather than the north of Brazil, which is poor and needs developing,” Castello Branco fired.

"Petrobras is working for development of Brazil. If we do well, we will benefit suppliers, buyers, and provide tax revenues and goods for Brazil. What is needed is more global vision and less bureaucracy."