HOUSTON—Three years ago, Brazil was making headlines, and not necessarily for all the right reasons.

Alongside news of massive offshore presalt discoveries and foreign investors’ quest to jump into the action were reports of corruption, bid rigging and bribery surrounding Brazil’s energy industry and state-run Petrobras. The scandal involved more than a dozen companies and led to more than 90 convictions with alleged kickbacks surpassing $1 billion.

The already debt-laden Petrobras, which CEO Pedro Parente has called a victim in the ordeal, suffered financial losses—writing off billions as it carries out an even larger divestment program to bring in cash while focusing on assets closer to home. Petrobras on May 12 reported a first-quarter 2017 net income of $1.4 billion, compared with a loss of $318 million a year earlier, with more free cash.

Meanwhile, the government is doing what it can to bolster the industry and attract investors to develop hydrocarbon resources onshore and offshore. This has included making changes to local content requirements and scheduling additional licensing rounds.

As Brazil’s Energy Minister Fernando Coelho Filho put it last week during the Offshore Technology Conference, the country is getting “back on track.” During the conference, which marked a first for Coelho Filho, the energy minister sat with Hart Energy and other media during a roundtable. Here are his thoughts on some of the topics facing Brazil’s oil and gas sector.

Upcoming Bid Rounds: The oil and gas industry has responded favorably to Brazil’s upcoming bid rounds, according the energy minister. Earlier this year, Brazil announced plans to conduct about 10 licensing rounds between 2017 and 2019 for exploratory blocks and mature onshore fields. The rounds will include presalt acreage.

“They are coming to us to say they are very interested in the assets that we just released. Of course, they are doing their research and they are going to make their decisions ahead,” Coelho Filho said. “They are very interested not only in the presalt…but also the other areas that we are offering. I think we’re going to have tremendous success in 2017.”

Recent Regulatory Changes: Brazil also has made progress in making regulatory changes, although the energy minister cautioned there is still work to do. Coelho Filho, who was approaching the end of his first year as energy minister, reflected on the early days in office. He recalled communicating with oil and gas companies as well as the Brazilian Petroleum, Gas and Biofuels Institute.

“We went to the industry to see what we could do—what kind of improvements we should make for Brazil to become more competitive in comparison to other countries in this area,” Coelho Filho said.

Among the changes made in an effort to make Brazil more competitive:

  • Opening up operatorship of presalt blocks to companies other than Petrobras. However, the company still has the right to have a stake in prospects;
  • Creating an auctions calendar so companies will know about upcoming licensing rounds; and
  • Lowering local content requirement percentages.

But there is still work to do in this area, particularly on the environmental front.

Environmental Permits: “Environmental licensing is an issue not only for oil and gas in Brazil. …We have that problem in mining. We have that problem in railroads, toll roads,” Coelho Filho said. “We need to speed up the process.”

Oil and gas companies must obtain a permit from the Brazilian Institute of Environment and Renewable Natural Resources before beginning exploratory work. But the approval process has moved at a snail’s pace, particularly for environmentally sensitive areas such as in the Foz do Amazonas Basin amid fears of the damage an oil spill could cause. Total, for example, has not been cleared to start exploratory work four years after it and partners paid $196 million for five exploration blocks, Reuters reported May 12.

While the issue is not within the purview of the energy ministry, Coelho Filho said the ministry is available to hear companies’ concerns to see how the government can help. The energy ministry has already given its input to the environmental ministry. “The ministry of environment is working on a bill to send to Congress to see how we can speed up this process,” he said.

Most importantly, “We don’t want to do anything without respecting the environment, but we need a time. They can’t just hold the license for ever.”

Natural Gas Market: While the push to develop oil resources is great, there is also an effort to develop natural gas offshore Brazil as the country weans itself off of neighboring Bolivia and aims to become self-sufficient. Its gas supply contract with Bolivia ends in 2019.

“Brazil will have a very competitive price on gas market,” Coelho Filho said, later adding the country has an opportunity to develop the industry and become more competitive.

Presalt could be part of the equation. However, developers must tackle high CO2 levels and infrastructure improvements are needed.

The country remains hopeful with companies like Repsol Sinopec and Statoil developing fields and more eager to join. “They have the possibility to develop gas projects,” he said. “We believe this presalt gas will be competitive in the future.”

But Coelho Filho doesn’t foresee any incentives in terms of subsidies to produce gas. “If there is a consumer, they can start developing the fields,” he said, noting power plants and other large consumers can drive developments.

Velda Addison can be reached at vaddison@hartenergy.com.