Brazil's Oil Sector Trends And Recent Developments

The Covid-19 pandemic had a considerable impact on Brazilian oil and gas demand, affecting investments in the sector. However, the economy has been recovering, with demand coming very close to its previous peaks, even with air transport and mobility still lagging.

Oil and fuel prices have increased considerably in the first half of 2022, mainly due to the ongoing conflict between Russia and Ukraine, but also because of a stronger than forecast global demand growth. Domestically, retail prices also rose significantly. Ultra-low Sulphur diesel oil (ULSD) went through the sharpest increase, with 42%, while gasoline rose 8%, and liquefied petroleum gas (LPG) rose 10%, on average.

The oil sector's mid- and downstream is also undergoing changes. Petrobras' refinery divestments were delayed by the pandemic, but have overcome all the necessary hurdles, resulting in the completion of the sale of four out of eight refineries. Once completed, these divestments are expected to stimulate other market participants to invest in the modernization of these refineries, and also in new maritime terminals, pipelines and railways. This investment is needed to support Brazil's growing fuel demand, as per capita income increases. Players have started committing resources to infrastructure, and even more investments are expected over the next few years.

The natural gas sector is in the midst of a structural transformation and evolved considerably after the promulgation of the New Gas Law. Companies started to become operators and to diversify their activities and investments. This is mainly to progress in the discussions about third-party access to essential facilities, which will stimulate competition and more investments.