Yes, and it is much simpler than you think. WSB is able to help determine your carbon footprint with our digital tool. We can also demonstrate the means to compensate for your business footprint. We are now ready to also facilitate the entire process of your footprint compensation and provide you with a certified solution, to compensate in part or in total (Net Zero) your emissions, with a certificate. And the best: this is all monitored through a tool where your management can directly access your information, generate reports, and detailed overviews.
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For this month´s edition of energy talks, WSB Advisors welcomed Gabriela Menezes Silva, INTCOM´s busi ness analyst.
Gabriela is a petroleum engineer graduated at University of Tiradentes (UNIT) (Sergipe), with MBA in Spe cialization in Innovation in Software Engineering at Federal University of Rio de Janeiro (UFRJ).
In her early career, Gabriela carried out a study on the use of water-based drilling fluid in the reactive formation, with focus on the Calumbi Formation (reservoir rock recently discovered in northeastern Brazil). She has also collaborated with the development of research projects carried out by the Institute of Technology and Research in partnership with CENPES / Petrobras, in which opportunity Gabriela worked on the control and prevention of precipitation and fouling in the oil industry.
On the Shell innovation program, Gabriela worked on developing a software solution aimed at helping with inventory management. Gabriela worked for Maha Energy, member of the mainte nance team for upstream equipment in the Campo de Tartaruga (Sergipe), assisted in the com pany’s internal audit, and monitored well interventions. She also worked at Ocyan in risk analysis of formation of hydrates in offshore wells, providing support in matters of incrustation of salts, equipment corrosion and prevention of formation of hydrates.
Gabriela was also a part of the winning team of the hackathon promoted by SBM offshore, acting as product owner during the development of the MVP that sought to optimize the maintenance of equipment in FPSOs, a solution that is currently contracted by SBM as legacy system. Gabriela accepted to join “INTCOM – Digital That Matters”, a Westhon invested IT enterprise with offices in Brazil, Portugal, France and the United States of America, and she currently fills in as the right hand of the company CEO, as a result of her vast and very interesting early career.
You have a degree in Petroleum Engineering and worked with projects in companies such as Shell and Ocyan. You decided to work at INTCOM, a technology company. What drove you to make the change from the more traditional oil & gas to the technology sector?
To answer that question, I will have to tell a little more about my path here. I started my
interest in technology still at university, where there were many classes regarding program ming at a more basic level. I participated in research along with CENPES on the forecast of inhibitors concentration where we were responsible for creating a database on the lab experiments using more advanced software such as MATLAB. This study was patented by CENPES and Petrobras uses it regularly
to foresee the inhibitor concentration that shall be needed in different projects. After I graduated, I moved from Aracaju to Rio de Janeiro, and I wanted to get a postgraduation in geology. However, there were not enough students to get the class started. So, I started my MBA in Specialization in Innova tion in Software Engineering at UFRJ. Even though I liked working with technology, I did not want to leave the oil & gas sector, therefo re working at INTCOM brings out the best of two worlds for me, since it is a company with ties to both sectors.
For Maha Energia you worked, as an intern, in the development of the Tartaruga field. What were your biggest functions and learnings in this experience?
Tartaruga is an onshore field acquired from Petrobras during its divestment process. The re was a drilling campaign, which I was not involved. I was involved in the maintenance of the existing well-head, dealing mostly with the pumps, and recovery of the damaged pi pes. But even though I was not involved in the drilling campaign I always sought to learn the most of it, following its operations from time to time. Maha giving me the opportunity to be in touch with both was superb.
Petrobras conducted a survey with CENPES on the prevention of precipitation and scaling in the oil and gas industry. What was your role in this research? And what is the main benefit that this research has brought to the industry? It was a small team, and I was still in college. The project took 4 years. I was responsible for the lab experiments and for loading the data as required in the database that was created. It was not unusual that the responsible personnel would deliver to us unlabeled samples with a known compound to check whether our line of work was in the right direction. There was 2 pieces of equipment that I was respon sible for, one that simulated temperature and pressure in a well and when added produc tion water can cause corrosion on the pipes. The equipment measured the pressure diffe rence in the intake and exit of the fluid to check whether there was precipitation. The larger
the difference, more precipitated, which cau ses more corrosion. When the inhibitors were added, the tendency was for the difference to decrease. The other equipment used a light beam, to study refraction in a fluid. With the refraction data it was possible to identify the concentration in the fluid.
Did the work you did at Ocyan, as risk analyst for hydrate formation in offshore wells, and the research carried out with Petrobras/CENPES have any correlation with the product you presented to win the hackathon promoted by SBM Offshore?
Yes, it did. The product presented to SBM was an image database of equipment located on the topside of a platform. The pipes and pumps in the database were analyzed for sig ns of corrosion and prioritized from worst ca ses to least urgent and a list would be emitted in order of which equipment should receive maintenance earlier.
This product is now in implementation phase by SBM with the objective to be used in an entire platform as legacy software, their IP – Intellectual Property. The great gain SBM has with this product is that it is not necessary to put more people offshore for the mainte nance, the equipment stay up to date without operational stoppages (for that reason).
Gabriela has accepted the challenge to open activities for INTCOM in the city of Porto, Portugal, where she has moved to this month.
Onthe last week of September I decided to look through the ANP’s Monthly Production Report to have a percep tion of the oil production in Brazil. To my sur prise, the last Report was from June 2022 when, usually, the information is published no later than 45 days after the end of the given month so it seems that there have been some delays in issuing the report.
I expected to have July’s Report as we are at the end of September therefore my ob servations will be based on June 2022 data but they can be considered quite up- to-date, even though they will not capture the return of production from the Peregrino Field operated by Equinor.
Oil production in June 2022 was 2,828 MM bbl/d with 97.4% coming from offshore production fields concentrated in the Southeast of Brazil (Campos and Santos Basins). As expected, Petrobras remains the major oper ator even 25 years after the monopoly was broken. Clearly, in all these years operating in Brazil, the IOCs encountered a company with good knowledge and technical expertise to compete with them.
Petrobras, as an operator during June 2022, is responsible for 92.7% of the oil production and it is easy to verify the strength of the Presalt fields’ production. Pre-salt fields are de livering an oil production of 2.188 MM bbl/d .
The magnitude of these production figures is fantastic and probably nowhere in the world should we have a concentration of such a volume of offshore production in the hands
of one company and in a specific geographic location. This for sure allows Petrobras to explore lots of synergies in the operations sup port for the offshore fields which, in return, helps to achieve lower operational costs to the probable satisfaction of the non-operator partners.
However, a deeper look into the oil production figures in the last 3 years (from June 2019 to June 2022), shows a stabilization or a ceiling in the country total oil production even with the entry into production of new fields such as the Sépia field, produced through FPSO Carioca, which in June 2022 was the unit with the highest average production (172,902 MM bbl/d).
The table can lead us to some conclusions, such as:
a) The entry into operation of new production platforms such as the FPSO Carioca (Sépia Field) and P-74/P75/P-76/P-77 (Buzios Field), contributed to the increase in Pre-salt Fields production. On the other hand the coun try´s total production had no significant increase which in the last 3 years remained around 3 MM bbl/d.
b) The jump of oil production from 2.5 MM bbl/d in 2019 to 3.0 mm bbl/d in 2020 was the result of the start of pro duction at Buzios Field (P73, P-74, P -75, P-76) units.
c) High decline in production from the Pre-salt fields: Tupi field (former Lula) shows a decline of 29% in the peri od between June 2020/June 2021 and had a decline of 22 % in the period between June 2021/June 2022.
The number of production units installed and produc ing in the Brazilian pre-salt and operated by Petrobras is impressive with the only exception being Lapa Field, operated by Total albeit also developed and installed by Petrobras. This is the actual
scenario where the big play er in Brazil still is Petrobras.
This scenario is not going to change in the next 5 to 10 years. So, suppliers, if you want to do business in Bra zil in the oil offshore market then your Business Plan must contain a strategy to have Petrobras as a client.
Having Petrobras as a client and already installed in Brazil, for sure will help you to attend to the necessities of other players such as Equinor, Shell and Total and even the smaller indepen dent companies with produc tion assets in the offshore environment like Enauta, PetroRio, Trident, Perenco, 3R and BWE.
Petrobras’ Business Plan for the period 2023/2027 will be released to the market in No vember and could be a good guide for companies inter ested in opening or increas ing its business in Brazil. Petrobras Business Plans sometimes are too optimis tic but, with a good review of the plan, for sure good infor mation and direction to guide in and forecast the Brazilian oil and gas market will be found.
With several fields successfully hand ed over, Petrobras could be reaching the target set forth under their E&P offshore divestment program. This means that the number of future divestment-rounds and opportunities may be considerably limited. On the Campos basin offshore mature fields, the opportunity on the short term seems to be for Barracuda and Caratinga cluster. Other fields would probably go direct to decommissioning. A forecast is expected to be anticipated in Petrobras’ Business Plan due to be published in November this year.
In many angles, Petrobras’ divestments can be credited as very successful. Petrobras has been especially able to negotiate conditions that present considerable cash considerations, both upfront upon the signature of the SPA (Sales and Purchase Agreement) as well as on Closing. Furthermore, on some occasions, Petrobras has even been offered with contin gent payments, that is, future payments con tingent on pre-established conditions which, if accomplished, will further compensate Petro bras.
The combination that enables one to deter mine whether the sale has been successful or not is not exactly simple. And the facts, or better saying, the details of each negotiation are not all known in advance. However, cer tain elements are common amongst all those opportunities opened by Petrobras and some of them have come to market more than once; for instance, the field of Golfinho that was originally on its own, at a later stage was aggregated to other vicinity fields, resulting in a successful offer being accepted by Petrobras from BWE, negotiation which is yet to reach “Closing”.
“
Closing” is the point in time when both parties, seller and buyer, have satisfied the respective conditions of the SPA (Sales and Purchase Agreement). At this time, the seller hands over the asset to the buyer and receives a consideration, called “consider ation upon Closing”
Outside the cash considerations and the method to receive and rank offers, Petrobras has also been well versed in addressing two challenges on their large portfolio going for divestment: decommission ing liabilities and operating as sets (offshore units).
Although the negotiated conditions regarding decommissioning liabilities are only known between the parties or, as part of the bid process which also runs in confidentiality amongst those participants, it is only obvious that many fields pres ent a considerable network of subsea and subsurface equip ment, wells and other liabilities that require a delicate analysis of every party involved. The simple fact that Petrobras has been able to hand over those liabilities, with special regards to Brazil’s complex environ mental legislation, already jus tifies calling it a success.
The fact is, if in some cases Petrobras have accepted to pay (or even handle) some of the decommissioning on the field, in other oc casions Petrobras has been able to either offer some cash as settlement for the future decommissioning to be performed by the buyer or even to negotiate con ditions where the buyer assumes the liabilities, shuffling those from Petro bras and at the risk of the buyer having to spend much more on equipment and vessels in the
future (if oil prices rise so does the rate of equipment).
Considering that many such buyers in the Brazilian offsho re segment are independent companies with limited finan cial resources, many counting with investment funds on the support, a challenge relies with ANP – the National Petroleum Agency on the scrutiny of the capacity of such new operators to fully support those decom missioning liabilities. The Bra zilian legislation is not aligned with other markets where, in similar cases, the seller would ultimately retain the liabilities of the field in case of default of buyers.
The other interesting aspect is how Petrobras has been able to hand over operating assets on the fields. There are oppor tunities where Petrobras has been able to hand over units that were operated by Petro bras itself, but also Petrobras has been able to attract offers where even units operated by third parties have also been taken over by the buyer, howe
ver advanced in age and with need of improvement for additional production those were.
In a few occasions Petrobras has cancelled the sale, such as in the most recent negotia tion of Albacora with Petrorio. It would seem no side is to be blamed. The conditions chan ge in face of time and in such complex operations, time is another element that permea tes the Petrobras divestment program. Many are the exam ples of Closing reaching far out, sometimes as long as 2 years. It is a risk but, conside ring that the oil price has sur ged and that Petrobras after selling is not exactly depleting the reservoirs, it still makes sense for seller and buyer to… Close.
Calling it a success for Petro bras does not necessarily and directly mean saying that every buyer made a bad deal. Not in every case. But for sure, every buyer is to have a great challenge to extract an extra dollar from each barrel in fields bou ght from Petrobras.
The Brazilian legislation, specifically for the off shore support segment, allows owners with Brazilian built tonnage to suspend the foreign flag of a vessel and reflag it to Brazilian flag for a certain period (usually limited to 3 years), in equivalence to half the Brazilian built tonnage reg istered by the owner, with some exceptions. That means that an owner which may have say 4 PSVs 3000t dwt built in Brazil could bring up to 2 foreign PSVs 3000t dwt to Brazil, re-flag them to Brazilian flag, and have the same rights of any Brazilian built vessel in terms of not be ing blocked or, to block foreign candidates under a given op portunity. The intention of this legislation was to stimulate the Brazilian shipbuilding industry...
With the shrink of demand for vessels during the industry downturn, more specifically from 2015 to 2021, it became evident that foreign flagged ves sels were ruled out in face of ei ther Brazilian built tonnage and /or foreign flagged vessels un der REB. It was also a fact that while some “REBed” vessels were employed, some equivalent Brazilian built tonnage was left idle or in lay-up.
So, what is laying underneath the market equilibrium that a deeper look on the fleet can re veal?
First and foremost, the unrestricted use of tonnage from barges as “offshore support” tonnage allowed owners to seek third party affordable ton
nage from abroad to compete with Brazilian built tonnage. Although ANTAQ has been in vestigating evidence of truthful use of barges as offshore sup port to justify the “REBing” of those third party foreign flagged vessels, the current set up has allowed for such loopholes be used to compete – and in oc casions defeat – Brazilian built tonnage.
Likewise, owners with ageing vessels, many in cold stack, have also made use on many occasions of such tonnage to re-flag , third party tonnage into Brazil.
It is not the point to question the legitimacy of such possibil ities but to elucidate how this happens. In many cases such foreign tonnage has been writ ten-off by the original owners and financers in difficulty and either bought or currently being managed by parties with an ex tremely efficient Capex ( com plementing the write offs) when compared to the Brazilian built ships. It is also fair to say that the legislation reacts slowly to sudden changes on the glob al scenario, a point that needs to be addressed to protect the original intent of the legislators i.e. an incentive to the local shipyards.
That is because on the oth er hand, owners with Brazilian built ships would not seek to bring their own foreign tonnage under REB until such time their locally built tonnage would be fully committed.
Built age 10 years or less
Built age between 10 and 20 years
Built age 20 years or more
Sixty-two percent (62%) of the current off shore fleet is Brazilian built. Foreign vessels under REB account for twenty-four percent (24%) whereas foreign flagged vessels fourteen percent (14%). “Only” ten percent (10%) of the Brazilian built tonnage is 20 years or more in age whereas the majority forty seven percent (47%) fleet is younger than 10 years and forty three percent (43%) between 10 and 20 years built.
Approximately the same spread applies to “REB” tonnage: Forty five percent (45%) of
the fleet is 10 years or less, forty one per cent (41%) between 10 and 20 years of age and fourteen percent (14%) 20 years or old er. Foreign flagged vessels however have In summary, “REB” tonnage is not being taken in as a mean to address gaps of age of the locally built fleet. On the contrary, the age profiles of the Brazilian built and of the for eign built “REB” flagged fleet are very sim ilar. A minor difference exists in the foreign fleet, where tonnage with less than 10 years of age is approximately 10 points greater than Brazilian built and “REBed”.
Built age 10 years or less
Built age between 10 and 20 years
Built age 20 years or more
Built age 10 years or less
Built age between 10 and 20 years
Built age 20 years or more
Eye-for-an-eye: It is revealing though, that if in one hand the legislators have thought of “REB” as the means to attract investments to local shipbuilding, the use of local tonnage is not exactly cartesian (PSVs to “REB” PSVs, AHTSs to “REB” AHTSs and so forth). Leaving the use of barges as tonnage aside for a moment, data reveals that within the offshore vessel categories - namely PSVs, AHTSs, RSVs, OSRVs, SDSVs and Special Vessels - there is a certain disproportion between the Brazilian fleet and the “REB” fleet profiles.
Although PSVs account for the larger num ber of “REB” tonnage akin to what the Brazilian fleet profile reveals, already as from graph number 2, differences appear. The special vessels account for twenty six percent (26%) of the “REB” fleet in a clear demonstration that foreign vessels have been secured under “REB” to treat a tech nical gap of the Brazilian fleet.
The growing number of converted RSVs, MPSVs, PLSVs and other subsea-focused
type ships demonstrates where Brazilian tonnage lacks the most (specialized vessels compose only 7% of the Brazilian built fleet). Furthermore, in Special Vessels as a category, the number of vessels under “REB” is greater than the number of Brazilian built vessels (respectively 43% and 30%). This is not repeated in any other vessel category within the offshore support segment.
Special vessels also account for the great er number of foreign flagged vessels with thirty five percent (35%) of the foreign flagged fleet. With Special Vessels category dominating the fleet of “REBed” vessels and foreign flag, it is possible to conclude that, in the first place, owners have been using local tonnage to bring such special ized vessels to Brazil under “REB” to main tain a captive position. Secondly, demand has been such that foreign flagged vessels have been employed without much hassle from Brazilian flagged units in this category. Both situations occur because of Brazilian built fleet not being able to cover the de mand for this vessel category.
Looking in the rear mirror helps us drive in the right direction going forward. Most recently Petrobras released a PSV tender to hire, in multiple categories, up to twenty (20) PSVs. When the tender came out, there was a certain buzz in the market, especially in Europe, re garding the possibility of a great num ber of overseas tonnage fleeing over to Brazil for this tender. Considering the number of PSVs becoming available, the number of Brazilian built units and the number of PSVs under “REB” as demonstrated above, it should be rea sonable to expect that only in the case where the foreign tonnage is chartered or bought at a great, great discount, it would have the proper means to com pete with an established tonnage profile in such category.
On the other hand, Petrobras has requested information (not a tender) re garding Special Vessels, a category where clearly there is room for more “REB” and foreign tonnage. Want to know more? Contact us at: comercial@wsb-advisors.com
Suggested by Alex Vilela
The first of the two multiple lots AHTS tenders from Petrobras is moving. First place on the Lot A has been shopping around for tonnage, aiming to secure around 5.000 tonnes for at least one vessel, indicating that Petrobras has initiated the contracting process. Securing tonnage as we outlined on our One.Energy magazine last month has become quite a challenge for owners, whilst ANTAQ has become stringent with the indiscriminate use of barges to supplement offshore support foreign flagged vessels. Special attention given to owner internalizing third party tonnage specifically to cover new contracts. On the other hand, the second place on lot A seems able to present existing tonnage for what has been offered, whereas on the next AHTS tender some Brazilian built tonnage has been offered.
After a long and chaotic reverse auction, Petrobras’ AHTS-TS/TO tender was closed last Tuesday. In addition to the usual tug and supply (TS) scope of work present in this type of bid, owners had to provide a separate daily rate in case Petrobras required the vessel to perform the offshore terminal support scope (TO). In this case, the main difference from the TS category is the additional accommodation to receive Petrobras’ PAX.The opportunity was split into 2 lots based on the respective commencement dates: Lot A expected for May 2023 and Lot B for September 2023. In total 10 com panies participated in the auction with 20 different vessels being offered across both lots. Albeit the significant number of owners that placed proposals for the tender, the final day rates were surpris ingly good for this vessel category, with most of them starting with bids above USD 60.000,00 per day. The result for lot A was Haroldo Ramos, Reedbuck and Coxon Tide as best positioned at USD 35.000,00, USD 35.050,00 and USD 37.000,00 respectively. And for lot B, Skandi Ipanema, CN Z and Haroldo Ramos once more, were the most competitive bids at USD 34.640,00, USD 34.650,00 and USD 34.740,00 respectively.
New tender aiming to hire up to 20 vessels divided into 3 different catego ries (Multipurpose, Fluid Carrier, General Cargo). Distinctively to most recent processes from Petrobras, this will be a closed envelope opportunity, with current deadline on October 27th which may possibly be postponed. Several vessels currently on contract expected on re-bid.
A RFI (Request for information) for special vessel categories was issued di rectly to Vessel Owners by Petrobras, aiming to check for availability for both Brazilian flag as well as foreign units. The categories of interest to Petrobras in this RFI are: PLSV, RSV, SDSV, MPSV, AHTS and AHTS-R. Closing date for responses is October 21st exclusively by e-mail through those invited.
Petrobras expects to receive new UMS offers for a long-term, Semi-Submers ible only, re-tender process. The current deadline of the process is October 14th.
MODEC is out in the spot market looking for an AHTS to be engaged in a 15-20 days campaign and for immediate com mencement.
Bunker suppliers are actively procuring OSVs to cover various fuel run require ments given increased demand in a very limited market availability.
Petrobras issued a new medium-term op portunity for UMS. This tender will accept all types of units for a 180 days firm + 120 days option. The deadline is set for October 28th.
PetroRio recently acquired the semi-submersible drilling rig West Capricorn. The unit is currently in Chaguaramas Bay. The oil operator is getting ready for a drilling campaign for the Frade re-development and other uses (PRIO also operates Pol vo and Tubarão Martelo). PetroRio´s wish is to commence drilling in Q1/2023 and accordingly, the company went to market for PSVs to support the drilling campaign. Mobilization of rig and equipment to start soon.
During the last week of September the Rio Oil & Gas exhibition and con ference was held in Rio de Janeiro. The event celebrated the return of activities in the energy sector, with a natural focus on Oil & Gas, the vocation of Rio. Most oilfield operators utilized their space to present inno vative solutions for challenges faced along the way. The 20th edition of the largest oil and gas event in Lat in America was hosted, this time, at Pier Maua. Virtual digital experience was offered for those who couldn´t attend the event in person. As usual, the Rio Oil & Gas exhibition and conference is a great networking opportunity for all participants and a chance to meet old and new clients and friends. WSB Advisors would not have missed this chance.
During the conference, Intcom (Westhon´s Digital Transformation enterprise), in partnership with ´The Insight´, ´RIO Analytics´ and ´IDK Digital´, held at the Bolder® Audi torium the ‘Oil & Gas Technology Meeting’, a pioneering technology and innovation event featuring Peo ple Management and Operational
Safety with the use of technologies such as Artificial Intelligence and Wearables.
For the first time the conference was held at Pier Mauá, downtown Rio de Janeiro. With over 350 ex hibitors and an area of approximatelly 51 thousand square meters, the location of the event was highly praised and suited the sector, especially for the con venience of public transportation at its steps and the quayside. Visitors had the chance to enjoy new expe riences such as boarding marine equipment and hav ing a closer look at different types of support vessels, autonomous ships, tugs and barges.
Maersk Drilling awarded by Shell Brasil an estimated 90 days contract for semi-submersible Maersk Developer. The rig will drill min. one exploration well and perform subsea well inter vention at the BC-10 field Q2/2023.
Shell’s Final Investment Decision (FID) for Gato do Mato is expected to be released between November and December this year. This is Shell´s largest development project in Brazil.
Imetame Porto Aracruz dredging has started. Dredger No Woman No Cry from Eagle Rental & Services BV supported by 2x Brazilian flagged split hopper barges and 2x tugs are handling the service. The com pany expects conclusion by second half 2024 with many other investments being made until then. WSB Advisors is pleased to be supporting this project.
Rio de Janeiro state government awarded at auction
last March the 135.000 m2 area of former Caneco shipyard, in Guanabara Bay´s port area of Rio de Janeiro. Transaction amount was of R$ 96 million. Public entities have initiated studies for the technical and economic viabilities for the area, with the government driving certain priorities with social and economic benefits at aim. During the month of November the state government may have the area handed over and hearings have started within the fishing community and associations as well as other naval support as primary targets for deployment.
The OTSV tender result has been an nounced by Petrobras on September 27th with Locar awarded with vessel “Layla”, a PSV built 2022 currently in South Africa.
2nd place bidder during appeal phase pre sented a recourse for disqualification of awarded company Locar. Arguments are centered around vessel dimensions, lateral propulsion and stability.
2nd place further argued against Petrobras´ own discretionary approval of winning Lo car pre-qualification (PQ).
PSV call out tender was concluded October 11th after the reverse auction phase, C-Ouro from Camorim 1st. Bidders already instructed (stan dard procedure) to re-upload their PPUs with auction matching prices. Official evaluation re sults yet to be disclosed.
Shell closed their 3rd round for revised offers of short-listed candidates for PSVs to be engaged in their exploratory campaign in Campos Basin next year. Not more than a handful options be ing considered, but tonnage is getting shorter.
TotalEnergies concluded this Wednesday the commercial pro posals phase for Line Handler services to operate with their Lapa Field. The tender allowed for full, st-by and long term stby rates, considering the idle periods to be covered between offtakes.
Source: Imetame LinkedInpetrobras OTSV
petrobras PSV call-out
Lower demand from Chinese refin eries and increased supply of Bra zilian oil contributed to the Crude oil prices from major South American producers falling sharply.
The combination of increased freight and global demand concerns has increased discounts, especially on the Ar gentine and Colombian commodity but also affecting Brazilian pre-salt oil.
The main Brazilian grade of oil pro duced, Tupi, was valued recently at a discount of US$ 1.45 a barrel compared to Brent – not long before, was traded at a premium of US$ 3. The fall in demand from China’s independent refineries and Brazil’s increased supply help explain the devaluation.
Comparatively, Argentina’s Medanito oil was valued at a discount of US$5 a bar rel – the highest level since April 2021. Colombia’s Castilla heavy oil discount, in turn, reached $10 a barrel – the worst level in two years.
In its turn, freight costs have increased substantially: Oil tanker rates from Bra zil to Asia are costing more than $4 a barrel, up from $1.80 at the beginning of the year.
The increase in freight values reflects the new dynamics of the global market. With the war in Ukraine and the imposition of sanctions by the Western powers on Russian oil, the commodity of Rus sian origin came to have Asia as its final destination, mainly.
This displacement had a side effect in Brazil, causing a sharp fall in the coun try’s oil exports to China in the first half of the year. Historically, the Chinese are the main destination of pre-salt produc tion.
Another side effect and the main beneficiary of the market changes, seems to be the US Gulf becoming Europe’s preferred crude sourcing. In the years prior to the conflict in Ukraine, Europe imported about 6% of its crude oil from the US Gulf. Since the invasion, this has doubled to 12%. European imports from South America (such as Brazil and Guyana), West Africa and the Middle East have increased as well, albeit not to the same extent. These changes in Europe an trade flows have had a substantial impact on the tanker market.
The changes in the European oil trades and their impact on the global tanker market have only just started. When the European ban on Russian seaborne crude oil imports goes into effect in December of this year, further changes will need to be made. Europe still imports almost 2.0M b/d of crude oil from Russia (down 20% from the 2.5M b/d in the 12 months prior to the conflict). Replacing this will need to come from longer-haul sources across the Atlantic, West Africa and the Middle East.
Finding alternative sources of supply for another 2.0M b/d will provide another massive stimulus to tanker rates, add ing to the pressure.
Environmental demands and the true pur suit for a greener world is really pushing the boundaries of many industries, including transport and oil and gas.
Oil operators such as Shell and Equinor are engaged with vessel owners to discuss and im plement hybrid solutions on (part of) their off shore support fleet in Brazil. Shell and Solstad are in discussions for battery hybrid solutions, whereas recently have Wärtsila and CBO an nounced the deployment of the Agreement for Decarbonization Modelling, a series of actions aiming the reduction of the carbon footprint of CBO’s fleet, featuring hybrid solutions but fur ther including the special focus on the use of alternative fuels such as ethanol (on ships!). The distinct strategies in the offshore segment promote a great reflection on electrification in Brazil.
Around the globe electrification is seen as an alternative for the use of fossil fuels. Therefore vehicles, including heavy transport, are being changed into battery electric vehicles (BEVs),
many of which plug-in hybrid, that is, also chargeable from the electricity network apart from a regular combustion engine. The movement is so strong that for instance, Scania, has launched new 100% electric heavy trucks with batteries that can deliver up to approximately 300km of range, delivered as from Q4/2023 in Europe, where 26% of the light vehicles sold in the last 12 months are already hybrid, many 100% electric.
The point is though, the electric vehicle itself may not be polluting, but if the energy source is polluting, the point of emissions is just chang ing places, and the environment keeps suffer ing.
The world energy matrix according to the IEA report for the year of 2021 account for thirty four percent (34%) of non-fossil energy where as sixty six percent (66%) of the energy generated in the world come from fossil fuels, considering the “green” contributions from Brazil, which we will cover in the sequence.
That means that, electrification in Brazil, from the standpoint of the electricity sustainability and “clean origin”, makes a lot of sense. Much more sense than, in average, around the globe, where potentially, in theory, the point of pollution is just being shifted around.
directly related to plug-in technologies such as those for electric light and heavy vehicles.
Electrification is not stronger in Brazil for many reasons. Indeed, with a continental size, spreading around charging stations for light and heavy vehicles or even replacing gas as energy source for industries and homes be ing uneconomical, the fact is that Brazil also counts with biofuels as an energy source like nowhere else in the globe. Simply put, Bra zil’s vocation is greener fuels, not electrifica tion. Bio diesel and ethanol are produced from renewable sources not used as food (sugar cane, vegetable oils and animal fat), and since 2005 biodiesel has been introduced elevating the Brazilian market to the second largest in the world.
In addition, not every hybridization initiative is
On the offshore vessels, as an example, the hybrid packages consist of batteries in a sys tem combined with the combustion engines. The engine alternates from batteries to fuel in creasing the energetic efficiency of the vessels and the reduction of the carbon footprint. But programs such as those from Wärtsila or the initiatives taken by Solstad go farther than a battery pack. The packages include digitalization of machinery, smart management of en ergetic efficiency on board and also the study on the use of biofuels, beyond biodiesel, but also exploring as said, the use of ethanol. Oth er “mechanic” improvements are also pursued as for instance the change on the paint of the hulls, as in a conversation with Solstad, the silicon paint seems to be accounting for con siderable savings on fuel not to mention the reduction (also considerable) in incrustation on the ship’s hull of i.e. the Normand Carioca.
If electrification is a target, no doubt that many initiatives in parallel make electrification be come… electrification smart!
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But why is it then that electrification is not stronger in Brazil and how does that all connect with the initiatives of Shell, Equinor, Wartsila, CBO and Solstad?
