• 3 minutes e-car sales collapse
  • 6 minutes America Is Exceptional in Its Political Divide
  • 11 minutes Perovskites, a ‘dirt cheap’ alternative to silicon, just got a lot more efficient
  • 12 hours The United States produced more crude oil than any nation, at any time.
  • 6 days e-truck insanity
  • 1 day How Far Have We Really Gotten With Alternative Energy
  • 5 days Oil Stocks, Market Direction, Bitcoin, Minerals, Gold, Silver - Technical Trading <--- Chris Vermeulen & Gareth Soloway weigh in
  • 4 days James Corbett Interviews Irina Slav of OILPRICE.COM - "Burn, Hollywood, Burn!" - The Corbett Report
  • 4 days The European Union is exceptional in its political divide. Examples are apparent in Hungary, Slovakia, Sweden, Netherlands, Belarus, Ireland, etc.
  • 6 days Biden's $2 trillion Plan for Insfrastructure and Jobs
  • 6 days "What’s In Store For Europe In 2023?" By the CIA (aka RFE/RL as a ruse to deceive readers)
  • 9 days Bankruptcy in the Industry
Nick Cunningham

Nick Cunningham

Nick Cunningham is an independent journalist, covering oil and gas, energy and environmental policy, and international politics. He is based in Portland, Oregon. 

More Info

Premium Content

The World’s No.1 Offshore Boom Is Facing Uncertainty


The outcome of Brazil’s upcoming presidential election is astoundingly unclear, with scenarios that range from a winner from the far-right, center or left. The energy industry is certainly not at the core of the debate by any means, but there could be significant ramifications for Brazil’s oil and gas industry.

Brazil has a two-round voting system in which the top two candidates in the first-round square-off in a second vote. The leading candidate is the far-right Jair Bolsonaro (at the time of writing, the Associated Press reported that Brazilian presidential candidate Jair Bolsonaro was stabbed during an event on Thursday, his son and officials have come out saying that the injury was not life threatening), who has consistently polled at about 20 percent, more than any other candidate.

Except Lula. Former president Luiz Inacio Lula da Silva is very divisive in Brazil – you either love him or hate him – but he has led in the polls for months and would almost certainly win in a runoff against Bolsonaro. However, Lula was controversially barred from running over a corruption charge.

That means that, as of now, it looks like Bolsonaro will advance to the second round against one of a series of other candidates who are locked in a dead heat. Center-left (or leftist, some say) candidate Ciro Gomes and environmentalist Marina Silva are tied in the latest poll at 12 percent, with centrist and business-friendly candidate Geraldo Alckmin at 9 percent. Lula’s likely preferred candidate, former mayor of Sao Paolo Fernando Haddad, has only about 6 percent.

Interestingly, Gomes, Silva and Alckmin are all on track to beat Bolsonaro in the second round, suggesting that the majority of the country will unite in a sort of anti Bolsonaro vote, although that is far from an inevitability. Still, this dynamic means that there is extra emphasis on who can win that second spot in the runoff against Bolsonaro. Related: A Bearish September For Oil

The horse-race analysis aside, there are huge ramifications for Brazil’s oil and gas industry. The current government of President Michel Temer is one of the most unpopular in Brazil’s history, as it presided over a period austerity, economic recession and extensive corruption. Temer’s government also pushed through a partial privatization of Brazil’s energy sector, allowing international oil and gas companies to take the lead on pre-salt oil fields, which had previously been under the control of state-owned Petrobras.

It is not clear how things will change under a new president. Bolsonaro, though he has a violent and angry platform on domestic security and social policies, has more fluid opinions on the economy, and has deferred to a team of free-market economists. As such, he favors privatizing a lot of state-owned companies, though he wants to hold off on strategically important companies, such as Petrobras. He would likely continue the status quo.

Ciro Gomes has offered a clearer sense of his approach to energy. He is against privatizing Petrobras and has stated that he would re-nationalize oil fields and strengthen the control of the oil sector under the state. He warned investors earlier this year not to rush into the oil sector because he would shift course. “What I want to say is: ‘Don’t buy. Wait a bit,’” Gomes said in March, according to Reuters. He said that companies that had obtained the rights to Brazil’s oil fields during last year’s auctions would be compensated, including Royal Dutch Shell, ExxonMobil, Equinor and Total, for instance.

His argument is that the privatization that occurred under the current government is illegitimate because it was only possible after the impeachment of former president Dilma Rousseff (he and others say it was a coup). “To be clear to the foreign investor, I am announcing and I will repeat to you: all Brazilian oil fields that were sold abroad after the coup and after the repeal of the [energy laws], shall be expropriated – with due compensation,” Gomes told Americas Quarterly in June. There are some echoes with Mexico’s Andres Manuel Lopez Obrador, although a lot remains to be seen.

Marina Silva has based a large part of her career on environmentalism, so to some degree, she too would present a problem for the oil and gas industry.

However, the leftists candidates likely will lack majorities the Congress to radically change Brazil’s energy laws, so the most likely outcome is a continuation of the status quo, although, like Mexico, perhaps the pace of new auctions could slow. Related: Is This The Riskiest Oil Frontier In The World?

All of this is occurring against a backdrop of a poor economy. Brazil’s real, like other emerging market currencies, has lost a lot of ground this year and the people are fed up. "Whoever wins will preside over a polarized nation, with almost half the electorate viewing the new president negatively… The near-term outlook for Latin America's biggest economy isn't great," Cliff Kupchan, chairman of Eurasia Group, said in a research note published Tuesday.

At the same time, the international oil industry is eager to expand in Brazil. Equinor recently announced plans to spend up to $15 billion in Brazil over the next 12 years, a figure that includes oil, gas and renewables. The company, formerly Statoil, hopes to ramp up output from 300,000 bpd to 500,000 bpd by 2030. “Brazil is a perfect match for Equinor with our operational, technical competence that we have built over decades on the Norwegian continental shelf,” said Anders Opedal, Equinor’s head of operations in the South American country, according to Reuters. “Our portfolio in Brazil will have high value, we see very good break-evens,” Opedal said. Others, including ExxonMobil and Shell, are rapidly increasing spending in Brazil’s offshore sector as well.


However, they may want to put their enthusiasm on hold and wait and see what happens in the upcoming election.

By Nick Cunningham for Oilprice.com

More Top Reads From Oilprice.com:

Download The Free Oilprice App Today

Back to homepage

Leave a comment

Leave a comment

EXXON Mobil -0.35
Open57.81 Trading Vol.6.96M Previous Vol.241.7B
BUY 57.15
Sell 57.00
Oilprice - The No. 1 Source for Oil & Energy News