Pedro Camarota General Manager Wood Mackenzie Brasil - IBP
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Pedro Camarota General Manager Wood Mackenzie Brasil
Pre-FID projects are crucial to fill 2025 supply gap
Based on our latest Macro Oils market analysis, over 20 million b/d needs to be developed by 2025 to
offset production declines and meet the growth in Wood Mackenzie's base-case demand view. Most of
this comes from US L48 future drilling and conventional pre-FID projects
Growing supply gap to 2025 Cost of pre-FID projects and new drilling required
105
25
100
95 20
90
85 15
Million b/d
Million b/d
80
10
75
70
5
65
60 0
Supply $80 Non- Call on
gap80% of US Lower 48 future drilling is now commercial under $60/bbl
but only 55% of conventional projects are
US Lower 48 breakeven bands Conventional pre-FID breakeven bands
8 8
>$90
7 7 >$90
$80-$90
$80-$90
$70-$80
$70-$80
6 $60-$70 6
$60-$70
$50-$60
$50-$60
Production (million b/d)
Production (million b/d)
$40-$50
5 5 $40-$50Evolution of pre-FID cost curves since 2009
Longer, lower and flatter. Tight oil is the key driver behind this structural change
Pre-FID cost curves since 2009, rebased to 10 years from dataset vintage
16
Cost curve by resource theme
14 Tight Oil
Cumulative porduction 10 years from dataset
Ultra-deepwater
12 Deepwater
Shallow water
120 10 Oil sands
Onshore
(million b/d)
8
100 6
4
2
Breakeven (US$/bbl Brent)
80
0
2009 2011 2014 2015 2016
$60/bb
60 l
40
6 million b/d from the 2009 cost 2009 dataset (2019 production)
curve would have been 2011 dataset (2021 production)
20
commercial at $75/bbl, now that 2014 dataset (2024 production)
number is closer to $50/bbl 2015 dataset (2025 production)
2016 dataset (2026 production)
0
0 2 4 6 8 10 12 14
Source: Wood Mackenzie, not including incremental projects Cumulative liquids production 10 years from dataset vintage (million b/d)
Source: Wood Mackenzie, not including incremental projectsThe drop in oil price has had deep impact on upstream investment,
falling by 45% from its peak…
Global upstream spend (US$ bn)
2014 spending proves Conventional FIDs: 6
unsustainable in 2015, similar in
2016
Capital investment
Exploration spend -
down to US$400 bn
halves to cUS$45 bn
compared to US$660
2016-18 –
bn in 2014
consequences?
L48: uncons flexibility:
Exploration spend –
recovers 2017 with
picks up towards
firming oil price
2020
Source: Wood Mackenzie. Forecast of trend for development costs based on Wood Mackenzie databaseFrom a fiscal terms perspective, REPETRO keeps Brazil marginally
competitive
Without REPETRO, Brazil falls behind other deepwater regimes competing for investment
Fiscal Regime Attractiveness
Net Present Value 10 (USD per barrel)
-10 -5 0 5 10 15 20
Brazil PSC Without Repetro
Barrel at USD 75
Brazil PSC With Repetro
Barrel at USD 55
Brazil Concession Without Repetro
Brazil Concession With Repetro
Angola
Nigeria
Norway
Canada
Mozambique
US
UK
Note: Based on a 660 million barrel deep water oil field under each fiscal regimeAbove-ground issues undermine the investment attractiveness of the
country’s highly prospective acreage
The operational & regulatory environment reduces ability to plan and execute efficiently.
Bonuses per Round Bonuses per Round
140 Total onshore signature bonus 6 1,000 70
120 Average onshore signature bonus per 60
5 800
US$'000/km2
km2 50
US$ million
100
US$ million
4
'000 km2
600 40
80
3
60 400 30
40
2 20
200
20 1 10
0 0 0 0
1 2 3* 4 5 6 7 8** 9 10 11 12 Round 10 Round 11 Round 12 Round 13
Round onshore
* Round 3 is out of scale at US$37,660 per km2. ** Round 8 cancelled Signature bonus Work Commitments Acreage awarded
• Environmental licensing delays ; strained domestic supply chain delays and cost overruns
• No clarity around waivers for local content; expiry of REPETRO highly uncertain future cost
estimates
• Round 13 outcome: Result of more of the same terms; not enough to mitigate mounting
concerns over issues that impact economic viability of future oil and gas developments.Final remarks
The new Government is giving positive signs of its intention to improve the sector
attractiveness, but investors will require more than just promises.
Government Actions that would improve attractiveness
• Improve Dialogue with the industry. Set up an interactive and permanent process to get
companies feedback and to focus on the key issues
• Perform an objective review of its strategic long term targets and benchmark Brazil
across all key metrics (fiscal, environmental permitting, regulation, access to markets).
• Understand what other countries are doing to be in line with global industry trends
• Needs to define a path to achieving those objectives and analyze the implications.
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