Galp targets new sectors in Brazil

Upstream no Brasil | Galp

Galp CEO Andy Brown believes oil prices are “too high” for both industry and consumers. “We are entering a difficult time in the oil market. We hope production will keep up with demand and not put too much pressure on prices,” he told reporters in Rio de Janeiro, on his first visit to Brazil after taking over the Portuguese oil company.

The executive pointed out that European companies are investing less in exploration and production of new areas of oil and gas, especially in a new frontier, less known regions. “We need to find a balance in which companies invest in exploration and production so that demand is met. Oil consumption will start to fall at some point, but we don’t see signs of that yet,” he said.

In this context, Galp intends to expand its activities in Brazil beyond exploration and production of oil and gas. The plan is to also operate in power generation with renewable sources and in the commercialization of natural gas and electricity. The company will invest $300 million to $400 million in renewables in Brazil as it sees great attractiveness here to start developing the portfolio of 4 gigawatts of clean energy it intends to have in Latin America by 2030.

The entry into the Brazilian solar energy market was announced last week, with the acquisition of two 300-megawatt projects in Bahia and Rio Grande do Norte. Although the initial investment occurred in the Northeast region, Galp is studying new opportunities across the country, both in government electricity auctions for the regulated market and in contracting in the free market.

Mr. Brown said Galp is looking at solar and wind generation projects, which in the future may help to develop initiatives in green hydrogen and batteries. “We see Brazil as an attractive market, in which there will be an increase in energy consumption. Renewables are very competitive,” he said.

The executive said the company also plans to start in January 2022 the commercialization of natural gas produced by the company in the country. Mr. Brown recalled that Galp has stakes in the Tupi and Sépia fields, operated by Petrobras in the Santos Basin’s ultradeep waters known as pre-salt. “We have our own associated gas production in these areas, and we also have access to gas from other companies. We want to be leaders in commercialization,” he said.

In addition, Galp is studying projects to supply liquefied natural gas in the country to supply the electricity system, the executive said. “There have been droughts recently and there is increased demand for electricity. If hydroelectric plants continue with weak generation, the country will need much more gas than it is producing,” he said.

In the oil and gas industry, Galp is interested in the second transfer of rights surplus bidding round. “We are interested and have considered participating in the auction, but we have no announcement to make so far about any intention to bid,” he said.

Scheduled for December 17, the auction will offer stakes in the areas of Atapu and Sépia, in the Santos Basin. The blocks failed to attract bids in the first auction, in 2019. The executive shows confidence to invest in the country despite the recent crises. “Inflation is high and there are political uncertainties here, but Galp is used to it. The company has been in the country for 20 years and has seen many changes of government. We have great confidence in Brazilian institutions and in the respect for contracts,” he said.

Galp’s production in Brazil reached 116,000 barrels of oil equivalent (boe) per day in the third quarter of this year. Altogether, the company has already invested $5 billion in the pre-salt, especially in the Tupi and Iara blocks, in the Santos Basin, where it holds minority stakes. The group’s exploratory portfolio also includes fields in the Campos, Pernambuco-Paraíba and Barreirinhas basins.

The executive highlighted, however, that Galp will not invest in little-explored areas in the next years. “We are not going to drill more new frontier areas. We already have many resources under development that will keep us busy for the next decades. At the same time, it is still very uncertain what will happen with the demand for oil,” he said.

For Mr. Brown, the low number of areas auctioned in the 17th round of the National Petroleum Agency (ANP) earlier this month is linked to changes in the industry amid the energy transition, which leads companies to be pickier about investments. “For an international oil company that wants to take part in the energy transition, it will become increasingly difficult to find capital to invest in new blocks. The industry is changing,” he said.

The executive declined to comment on the possibility of privatization of Petrobras, of which it is a partner in most projects in the country. “We have a lot of respect for Petrobras, which has a great technical ability to deliver projects,” he said.

Source: Valor international

https://valorinternational.globo.com/