BUSINESS OPPORTUNITIES IN OIL & GAS SECTOR IN BRAZIL: JOINT VENTURES BETWEEN BRAZILIAN AND JAPANESE COMPANIES

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1 Associação Brasileira da Infra-estrutura e Indústrias de Base (Brazilian Association of Infrastructure and Basic Industries) BUSINESS OPPORTUNITIES IN OIL & GAS SECTOR IN BRAZIL: JOINT VENTURES BETWEEN BRAZILIAN AND JAPANESE COMPANIES

2 SUMMARY ABDIB AND INFRASTRUCTURE SOME MACROECONOMIC INDICATORS PROFILE OF BRAZIL INFRASTRUCTURE BUSINESS OPPORTUNITIES: AN OVERVIEW PAC GROWTH ACCELERATION PROGRAM 2

3 ABDIB AND INFRASTRUCTURE 3

4 ABDIB AND INFRASTRUCTURE FOUNDED IN 1955 IN SÃO PAULO. DURING THE 60, 70 AND 80 s : PROMOTED THE FIRST LARGE PROJECTS IN THE SECTOR. DURING THE 90 s : HELPED TO START PRIVATE INITIATIVE INVESTMENT IN INFRASTRUCTURE. TODAY : CONTINUING TO CONTRIBUTE FOR A BUSINESS ENVIRONMENT IMPROVEMENT AND TO ATTRACT INVESTMENT AND PARTNERS FROM ALL COUNTRIES. 4

5 AREA COVERAGE INFRASTRUCTURE AND BASIC INDUSTRY ELECTRICAL POWER OIL, GAS AND PETROCHEMICAL TRANSPORTATION BASIC SANITATION PAPER/PULP STEEL MINING TELECOM 5

6 INTERRELATED AREAS GOODS AND SERVICES FOR INFRASTRUCTURE AND BASIC INDUSTRY SYSTEMS / EQUIPMENT ENGINEERING CONSTRUCTION ASSEMBLY OTHER SERVICES INVESTORS OPERATORS 6

7 MEMBER COMPANIES MEMBERS 160 REVENUE US$ BILLION (15% GDP) EMPLOYEES 318,000 7

8 SOME MACROECONOMIC INDICATORS 8

9 Major Developing Countries as FDI Receivers : * (US$ billion and % of world FDI inflows) * Country US$ billions % of world FDI US$ billions % of world FDI US$ billions % of world FDI US$ billions % of world FDI China 1º % 1º % 1º % 1º % Hong Kong 2º % 2º % 2º % 2º % Brazil 3º % 5º % 7º % 4º % México 4º % 4º % 6º % 6º % Singapore 5º % 3º % 3º % 5º % Russian Fed 6º % 6º % 4º % 3º % Korea 7º % 9º % Chile 8º % 10º % 8º % 7º % Source: WIR-UNCTAD and SOBEET Elaboration: ABDIB *last estimate: UNCTAD 9

10 BNDES Disbursements and Approvals Approvals exceed disbursements by R$ 34 billion LAST 12 MONTHS 98,8 80 APPROVALS 74,3 R$ Billion ,5 17, ,1 27,6 27, ,2 41,1 40,4 37,4 33,5 39,8 37,9 54,5 64,9 51,3 47 DISBURSEMENTS Source: BNDES 10

11 COUNTRY S INVESTMENT RATE EVOLUTION 22 % of GDP 20 21, , ,4 16, ,4 15,3 16,1 16,3 16,5 17,6 19, (e) 2009 (e) Source: IBGE and BNDES (e) : Estimated 11

12 BNDES Disbursements and Approvals in Infrastructure Gap between approvals and disbursements has considerably increased since R$ Billion LAST 12 MONTHS 46, APPROVALS ,6 7,7 8,2 8,3 6,9 6,6 11 8,6 7,5 6,5 16, , ,2 13, ,6 26,6 17,1 17 DISBURSEMENTS Source: BNDES 12 1 R$ = 0.52 US$ (AVG 2007)

13 PROFILE OF BRAZIL INFRASTRUCTURE 13

14 ACTUAL INVESTMENT IN 2007 (R$ billion) ELECTRIC POWER 16.0 OIL & GAS 38.0 TRANSPORT / LOGISTICS 12.7 SANITATION 4.5 TELECOMUNICAÇÕES 12.9 TOTAL R$ = 0.52 US$ (AVG 2007) 14

15 ACTUAL INVESTMENT INVESTMENT IN INFRASTRUCTURE IS GROWING BUT IT S STILL FAR FROM REAL NEED R$ Bilhões Notes: 1 = (e) Estimate 2 = 2007 Prices 72,2 70,6 58,8 52,6 Demand of R$ billion 84,1 86,6 79,8 % 77,6 % (e) 15

16 ACTUAL INVESTMENT BY SECTOR (2007) Sector Demand (R$ billion) Actual (2007 prices) (R$ billion) % of demand TRANSPORT ELECTRIC POWER OIL AND GAS TELECOMMUNICATION SANITATION TOTAL For Oil & Gas : E&P, Downstream, Gas and Power; for Telecommunication: fixed and mobile telephony 16

17 PUBLIC and PRIVATE INVESTMENT IN INFRASTRUCTURE 2007 PRICES (Public Investment includes state-owned companies) 60 52,9 R$ Bilhões ,0 23,6 55,1% 44,9% 50,5% 49,5% 29,1 38,3 32,3 54,2% 45,8% 41,4 30,9 57,3% 42,7% 63,0% 31,2 37,0% Public Private 17

18 INVESTMENT OPPORTUNITIES 18

19 ABDIB s POSITIVE AGENDA RATIFY IMPORTANCE OF PRIVATE CAPITAL PARTICIPATION IN INFRASTRUCTURE ESTABLISH CLEAR AND STABLE INSTITUTIONAL RULES CONSOLIDATE REGULATORY AGENCIES WITH AUTONOMY AND INDEPENDENCE DEFINE A SET OF STRUCTURING PROJECTS CREATE ALTERNATIVE MECHANISMS FOR FINANCING 19

20 INVESTMENT OPPORTUNITIES YEARLY DEMAND ELECTRIC POWER OIL & GAS (*) TRANSPORT/ LOGISTICS SANITATION TELECOMMUNICATION (**) TOTAL R$ 21.2 bi R$ 41.4 bi R$ 21.8 bi R$ 10.5 bi R$ 13.5 bi R$ bi (*) E&P, Downstream, Gas and Power (**) Fixed and mobile telephony 20

21 INVESTMENT OPPORTUNITIES OIL & GAS YEARLY DEMAND FOR THE NEXT YEARS Segment Exploration & Production Downstream Gas and Power Total R$ billion/year

22 OIL & GAS CONCESSION ROUNDS Blocks Year / 2009 Round Tendered * Awarded * New Agents * Note: 8 th round suspended in 2006 ANP is the Regulatory Agency for Oil & Gas 22

23 OIL & GAS OIL AND LNG Reserves Proven (YE 2007): 11.1 billion barrels, enough to supply Country s need for the next 18 years, excluding new possible findings. Daily Production 1,918,000 bpd (oil and LNG) 382,000 boed Refining capacity 1,965,000 bpd Projected Production ,778,000 boed ,421,000 boed Source: Petrobrás 23

24 OIL & GAS OIL DERIVATIVES Projected Consumption (+ 2.9% per year) 2006: 1,824,000 bpd 2020: 2,732,000 bpd OIL DERIVATIVES MARKET ,4% Diesel 12,6% Diesel 11,3% 38,7% Gasoline Fuel 9,4% 40,5% Gasoline Fuel 17,4% Naphta LPG 16,6% Naphta LPG 6,0% 18,2% Others 5,1% 15,8% Others Source: Petrobrás 24

25 OIL & GAS NATURAL GAS Reserves Proven: (YE 2007): billion m 3, good part of it associated to oil reserves (unable to be produced separately) Projected Consumption (19.4% per year) 2006: 46.3 million m³/ day 2012: million m³/ day Projected transportation network 2005: 7,600 Km 2011: 16,100 Km Projected distribution network 2005: 11,000 Km 2011: 14,100 Km 25 Source: Petrobras

26 PAC GROWTH ACCELERATION PROGRAM 26

27 EXPECTED INVESTMENT ( ) Sector (R$ Million) TRANSPORTATION ENERGY NAVAL INDUSTRY SOCIAL & URBAN TOTAL ELECTRIC OIL & GAS BIO FUEL SANITATION SUBWAYS HOUSING OTHERS 47,700 78, ,950 17,404 10,580 40,000 3, ,300 21, ,889* * ABDIB first estimate: 40% private, 60% public 27

28 ONE LAST MESSAGE 28

29 BRAZIL ENGINEERING / CAPITAL GOODS INDUSTRY Brazilian engineering companies are highly qualified to perform studies, basic and executive projects, assembly and construction, and operate under strict quality management standards in all infrastructure sectors, by using front-end technology. Brazilian capital goods industry compete in global markets with high quality standards, competitive products, technology innovation and installed capacity able to supply both internal and external markets. 29

30 ASSOCIAÇÃO BRASILEIRA DA INFRA - ESTRUTURA E INDÚSTRIAS DE BASE abdib.org..org.br abdib@abdib abdib.org..org.br 30