Post on 23-Feb-2016
description
Industrialization under increasing
uncertaintyAndré Furtado, DPCT/IG/UNICAMP, Campinas, Brazil
TECHNOLOGY, MANAGEMENT AND POLICY GRADUATE CONSORTIUM AND RISK GOVERNANCE RESEARCH WORKSHOP
Lisbon, Instituto Superior Técnico, June 23-25
Outline
Brazilian Deindustrialization – Empirical Evidence Pre-salt Risk and Opportunity
Petrobras Present Situation Petrobras Changing Path Industrial and Innovation Policies Institutional Instability
Final Remarks
Brazilian Deindustrialization- Empirical Evidences Brazilian deindustrialization is controversial:
It is happening at an earlier development phase The share of manufacturing industry is falling
since the end of the 80’s in current prices There is a change in relative prices against
industry since the opening up of the economy in the 90’s
Industrial employment that has decreased dramatically in the 90’s, started to rise again in the present century
Brazilian Deindustrialization- Empirical Evidences
1947
1949
1951
1953
1955
1957
1959
1961
1963
1965
1967
1969
1971
1973
1975
1977
1979
1981
1983
1985
1987
1989
1991
1993
1995
1997
1999
2001
2003
2005
2007
2009
2011
2013
0
5
10
15
20
25
30
35
40
Manufacturing Value Added in Brazilian GDP
% o
f GDP
Source: IPEADATA
Industrial Employment
1992.011993.011994.011995.011996.011997.011998.011999.012000.012001.012002.012003.012004.012005.012006.012007.012008.012009.012010.012011.012012.012013.012014.010
20
40
60
80
100
120
140
Brazil: Employement in Industry
100
= 2
006
Source: CNI
Brazil Development Challenges Brazil is a natural resources rich developing country Since 2003, mineral commodities prices increased
impressively development opportunity Industrialization based on commodities
However, there are great risks: Deindustrialization due to currency overvaluation Consumerism Populism
Pre-salt Challenge Pre-salt Discoveries are creating a New Risks and Opportunities for
the Brazilian Economy Opportunities of Pre-salt for Brazil:
Self-sufficiency in Oil World Oil Exporter Increase Industrial Activity based on Natural Resources World Leader in Offshore Technology
Risks of Pre-salt for Brazil: Fuel Prices Control Policy Institutional Bargaining Limited industrial capacity of suppliers
Petrobras Present Situation Pre-salt promises are impressive:
Total oil and gas reserves are expected to reach 100 billons of bep (barrels of oil equivalent)
Petrobras is investing since Pre—salt discoveries 5 times more than previously
Pre-salt production reached 470 thousands barrels per day in June 2014
However, there is an increasing lag between investment growth and the total oil production and proven reserves expansion, which is strangulating Petrobras
Source: Petrobras
Petrobras Investments (US$ millions 2012)
Fonte: Petrobras
Petrobras Critical Situation Troubles with Oil Extraction
The recent drop in Brazilian oil output is related to the rapid fall of mature fields, partially due to lack of investment
Pre-salt production expansion wasn’t enough to balance mature fields decline
Investments in downstream are deferred (Recife and Rio refineries)
Bioethanol production drop increased gasoline imports
Oil products consumption increased steeply during the last years
Federal Government is holding back gasoline and diesel oil prices
Petrobras Oil Production in Brazil
Fonte: Petrobras
Brazil Oil and Gas Production by Firm (february 2014)
Oil (bbl/day) Gas (Mm3/day) Total Production (boe/day)
Petrobras 1,923,432 76,186 2,402,640Statoil Brasil 76,632 95 77,231Shell Brasil 43,566 656 47,690Parnaíba Gás 144 6,101 37,954Chevron Frade 16,230 166 17,279OGX 15,820 57 16,180HRT 10,521 33 10,729Total Brasil 2,089,694 83,248 2,613,326
Source: ANP, 2014
Fonte: EPE – Balanço Energético
Oil Products in Brazil: Production, Imports, Exports and Total Consumption
Petrobras Changing Path
Since 2010, Petrobras is trying to introduce a more realistic administration Targeting the Upstream (70% of total
Investments) Slowdown in the Downstream (New Refineries
are posponed) More realistic production previsions, which is
expected to reach 2.5 millions bbl/day in 2015 and 4.2 millions bbl/day in 2020 (2011-2015 Work Plan expected 4.9 millions)
To reach its main planned targets, Petrobras is mobilizing its own staff to follow up local suppliers
Petrobras Work Plans
Source: Petrobras
2010-2014 Plan 2012-2016 Plan 2014-2018 PlanUS$
millions% US$ millions % US$ millions %
Exploration and Production
118.8 53.0 141.8 60.1 153.9 70.0
Refineries 73.6 32.8 65.5 27.8 38.7 18.0Gas and Energy
17.8 7.9 13.2 5.6 10.1 5.0
Petrochemicals 5.1 2.3 5.0 2.1 0.0Distribution 2.4 1.1 3.6 1.5 2.7 1.2Biofuels 3.5 1.6 3.8 1.6 2.3 1.0
Others 2.9 1.3 3.0 1.3 3.2 1.4Total 224.1 100.0 235.9 100.0 220.6 100.0
Pre-salt Evolution
In spite of its high priority, the number of Pre-salt projects were reduced (32 until 2020) Libra field is out of that figure (9 platforms)
First new platforms for Pre-salt must start 2016 In 2020, Pre-salt will reach 47% of Brazilian oil
production (aprox. 2 millions bbl/day) Foreign Suppliers like FMC, Baker Hughes,
Schlumberger have installed new labs close to the University of Rio related to Pre-salt
Industrial and Innovation Policies In 2003, Ministry of Energy created PROMINP with Petrobras,
which is program to promote local suppliers ANP (Oil National Agency) established since 2003 local
content requirement in the bids. New initiatives:
Petrobras Progredir Program: facilitate supplier access to bank loans
BNDES P&G Program: contribute to the development of oil and gas supply chain :
BNDES P&G Automatic, for cash flow funding BNDES P&G Estruturante, to create and widen local productive capacity,
facilitate firm restructuring, foreign expansion, support of technological capabilities and innovation
Inova Petro Program(BNDES-FINEP-Petrobras), to fund oil and gas suppliers technological development (R$ 3 billions from 2012 to 2017)
Gathers a set of funding instruments from BNDES and FINEP, with Petrobras technical supervision
Institutional Instability Rent seeking behaviour of society, and especially of political elites is
a main feature natural resources course Federal Government tried to change institutional framework
because of Pre-salt: Production sharing system Petrobras became the single operator Social Fund to promote Brazil development
The Fund Project was a good idea, however the result was very different from the original idea: Congress reduced impressively the share of royalties and of other taxes
allotted to Oil Producing Municipalities and States Between 2008 and 2013 several law Project were vetoed by the
President, but the veto was rejected by the Congress Final arrangement assign to Education (75%) and Health (25%) This arrangement is creating a great stress for Oil Municipalities and
States, and also for Science and Technology Ministry
Final Remarks Brazilian industry, which was for long time the
locomotive of the economic development, is loosing space in the Brazilian GDP Part of this situation is due to macro-trends of the economy
The Pre-salt example shows the risks for the Brazilian Economy of the present phase: Petrobras is grieved by Federal Government price policy Mature fields production is decreasing very sharply Low returns investment in Downstream Local Suppliers are not following Petrobras and others
companies investments Pre-salt royalties dispute among regions and several
government priorities created institutional instability
Final Remarks
Will Brazil take advantage of Pre-salt opportunity to become a large oil exporter?
The production leap will be smaller than what was previously expected, however until the end a decade Brazil must become an oil exporter
Will Brazil make an industrial and technological leap in offshore technology?
The industrial and technological change is happening, but more slowly than firstly expected. There are some promising signals like new industrial and innovation policies and the decision of some foreign suppliers to built research close to Rio University.