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BrazilOil & Gas From risk, rewardApril 2014

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CONTENTS4 BRAZIL, FROM RISK, REWARD

5 EXPOSED TO THE EYES OF THE WORLD

7 SBM OFFSHORE; DARING TO SUCCEED

8 TECH-FIX

9 AKER SOLUTIONS; BRAZILIAN BULLS-EYE

10 GE OIL AND GAS; PROFESSIONALISM PRECEDES PROFIT

12 INTERVIEW WITH

Almir Barbassa, CFO - Petrobras

14 INTERVIEW WITH

Renato Bertani, CEO - Barra Energia

16 INTERVIEW WITH

Denis Palluat de Besset, Managing Director - Total E&P Brazil

18 INTERVIEW WITH

Marcos Assayag, former Executive Manager - CENPES

20 INTERVIEW WITH

João Carlos de Luca & Milton Costa, President & Executive Secretary - IBP

22 INTERVIEW WITH

Stephane Dezaunay, Country Manager - PGS

INTERVIEWS

2 Brazil Oil & Gas report April 2014

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Rio de Janeiro, Brazil, and summer is displaying the city

in her full glory. The city’s golden beaches slide into

the sea; the warm waters offer cooling respite from

the heat to locals and tourists spending time and money. Under-

neath the waters of the South Atlantic however, it is not golden

beaches offering the entire country an economic opportunity but

black gold: hydrocarbon resources that offer tremendous pros-

pects for growth in Latin America’s largest country.

Such confi dence saw the state controlled hegemon of Brazil’s

oil and gas market, Petroleo Brasileiro Petrobras SA, or Petro-

bras, detail an ambitious plan of investment expending USD

236.7 billion until the end of 2017 to exploit offshore resources.

BRAZILfrom risk,reward

Photo courtesy of Ines Nandin

March 2014 oil & gas financial journal | www.ogfj.com | energyboardroom.com 87

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88 energyboardroom.com | www.ogfj.com | oil & gas financial journal March 2014

Despite such a significant figure, claims that Bra-

zil has been overpromising and under delivering

remain. 2013 was a year of frenetic energy for the

Brazilian oil and gas industry: May 14th saw Brazil’s

first auction for oil and gas rights for five years,

which raised 2.82 billion reais (USD 1.4-billion). This

was followed by the presalt auction of October

21st, where Petrobras, Shell, Total, China National

Petroleum Corporation (CNPC) and China National

Offshore Oil Corporation (CNOOC) paid 15 billion

reais (USD 6.88 billion) for the rights to the Libra

field. New discoveries, too, underlined the huge

opportunity that exists in Brazil: at the end of Sep-

tember, the SEAL-11 field was touted by Petrobras

and IBV Brazil (50-50 joint venture between India's

Bharat Petroleum Corp (BPCL) and Videocon Indus-

tries Ltd) as likely to contain over a billion barrels

of oil, and in mid-November the ANP (National

Petroleum Agency) stated that the Franco field off

Brazil’s southeastern coast could contain even more

oil than the Libra reserve.

These promises are tempered by the fact that

OGX (now Óleo e Gás Participações SA) announced

that its Tubarão Azul operations were a commer-

cial calamity in July. Almost three months later,

OGX filed for bankruptcy. In November 2013, HRT,

another indigenous Brazilian enterprise, had drilled

14 wells: failing to obtain oil from any.

Petrobas’ PRODESIN divestment program, sell-

ing assets such as the entirety of Petrobras’ wholly owned subsidiary

Petrobras Energia Peru (PEP) to China National Petroleum Corporation

(CNPC) for USD 2.6 billion to fund domestic development, has also

run into trouble. In March 2013, Petrobras lowered the predicted value

of asset sales by almost 40 percent to USD 9 billion from USD14.8 bil-

lion. Stories like this fuel the perception of risk in the Brazilian market.

Many commenters display morbid glee at indications of tumult

affecting Brazil, particularly troubles affecting Petrobras. This schaden-

freude, however, ignores socio-economic imperatives surrounding the

oil and gas industry. Brazilian policy-makers acknowledge the impor-

tance of this opportunity and that it represents a golden path to eco-

nomic development. Despite undoubted risks to entering the Brazilian

market, the rewards available could be transformative for any business

savvy enough to pilot a route to success.

Brazilian businessmen remain confident about opportunities in Bra-

zil. “There is no question about the availability of the technology to

drill and produce the pre-salt,” says Renato Bertani, CEO of Barra

Energia. Milton Costa, executive secretary of the Brazilian Petroleum

Gas and Biofuels Institute (IBP) agrees, stating: ‘I truly believe that Bra-

zil is one of the best countries in the world to invest today given the

size of the country and its population, the pace of its economic devel-

opment, and the size of the opportunities both offshore and onshore.’

2014 will be the second year of Magda Chambriard’s leadership of

the ANP and Maria das Graças Foster’s leadership of Petrobras. The

latter has focused on reducing costs and increasing the capabilities of

Brazil’s operating giant, mobilizing for a big push to production. Almir

Barbassa, CFO of Petrobras states: ‘There are few companies in the

world today that invest more in the future than Petrobras.’ Chambri-

ard has echoed this, calling for investment to be focused on develop-

ing productive capabilities. This investment and effort will profoundly

shape the future of Petrobras and Brazil. In future, companies operat-

ing here need to balance between avoiding risk and pursuing rewards

as Brazil’s oil and gas industry matures and consolidates.

ExposEd to thE EyEs of thE worldPetrobras effectively has an open run at goal, the

government in 2010 guaranteeing them preferen-

tial access to presalt resources: only Petrobras is

the sole operator in this domain- a fact which is not

uncontroversial in Brazil. João de Luca, president of

the IBP says ‘IBP has been opposed to the single

operatorship for Petrobras in the pre-salt since the

government first suggested it. In our opinion it is

not good either for Petrobras or for the rest of the Brazilian industry.’

Petrobras’ development plan for presalt gives exploration and pro-

duction 62.3 percent of investment as the company seeks production

of 5.2 million boe/day by 2020. Brazil’s state controlled oil company is

going all in, as its unwavering focus and levels of debt indicate.

Domestic fuel price restrictions continue straining the giant’s rev-

enues whose shares recently fell when the Brazilian government failed

to produce a plan for bringing fuel prices to market parity, albeit con-

currently permitting a limited increase to reduce pressure on Petro-

bras. On January 7th 2014, the state controlled company sold USD 5

Renato Bertani, CEO & President, Barra Energia

Milton Costa Filho , secretary general, IBP, Instituto Brasileiro de Petróleo, Gás e Biocombustíveis

João Carlos de Lucas, president, IBP, Instituto Brasileiro de Petróleo, Gás e Biocombustíveis

Amir Barbassa, CFO, Petrobras

Petrobras headquarters, Photo courtesy of Ines Nandin


















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billion in bonds to help finance offshore develop-

ment over the coming five years. Accordingly, the

company’s debt increased approximately 206 per-

cent between 2006 and 2012.

Worryingly, the rating agency Moody's down-

graded the debt ratings of Petrobras to Baa1 from

A3 reflecting the ‘high leverage of state’ (a measure

considering debt and equity) and Petrobras stocks

fell from USD 17.9 to USD 12.5 per share between

November 18th 2013 and January 22nd 2014.

Brazil asks a great deal from its hydrocarbon industries, seeking

jobs and to boost development using its oil resources. Some of these

regulations are on occasion considered stifling, such as local content

requirements (LCRs). Another common complaint is the limited avail-

ability of skilled, technical labor.

Total is a prominent international oil company (IOC) working in

Brazil with bold ambitions for growth. Denis Palluat de Besset, man-

aging director of Total E&P Brazil, argues government policy could

be improved. “At the moment, LCR is a punitive system; it can kill

a project and means that companies may not engage, afraid of the

risks doing so would entail,” he says. “An incentive system is wiser,

encouraging investment in the areas of the sectors which are provid-

ing for the needs of companies such as Total. This

would make the system more beneficial for contrac-

tors, the whole supply chain and the government.”

Another significant cost is procuring suitable

labor: Brazil’s oil and gas sector hungers for experi-

ence and technical skills. Frequently businesses deal

with this themselves, setting up training schemes

where possible.

These difficulties are felt by indigenous and for-

eign companies. “Three years ago, the Norwegian Trade Minister vis-

ited Brazil,” remembers Hans Ellingsen, general manager of Olympic

Maritima, a company aiming to build up its fleet to a minimum of ten

vessels by 2017 from four in October 2013. “It was the biggest trade

delegation ever from Norway,” he continues. “It was a big show that

led a lot of Norwegian suppliers that had never set foot in Brazil to

believe that they would get rich in a heartbeat here. That is not how it

works. A friend of mine once said, ‘Brazil is not for beginners.’”

Ellingsen, from Norway, has worked in Brazil for over 20 years and

is familiar with local challenges. He predicts the future of the market:

“Petrobras today is responsible for 93 percent of the vessel contracts.

The latest data indicates this will drop to 70 percent in the coming five

years, as IOCs grow their operations.”

Hans Falnes Ellingsen, general manager, Olympic Brazil

Denis Palluat de Besset, managing director, Total E&P do Brasil ltds

FocPGS_OGFJ_1403 1 2/21/14 4:16 PM

7


DARING TO SUCCEED! PhiliPPe levy, country manager, SBm offShore talkS aBout eStaBliShing hiS comPany in Brazil:

SBM turned local content into something positive. Levy ensured that his local

suppliers were fully equipped and trained to provide for SBM’s needs.

Whilst working on the P-57 platform for Petrobras, Levy states: “I asked

them [the local suppliers] to dedicate 20-25 percent of their turnover to us. The

question I got was if it would be sustainable.” Levy adds that frequently these

suppliers had only worked for Petrobras. However, he persisted. “I told them

that it would be sustainable, because SBM believed that local content would

start to grow and will stay and remain stable.

“P-57 was a big success. The SBM supplier network grew, and we started

to create alliances. SBM even stimulated foreign companies to enter Brazil and forge alliances with

Brazilian manufacturers to be the preferred partner to SBM, because Brazil had the capacity, but not

the engineering capabilities to manufacture.”

“Of course they took a risk by doing this.” Levy, however, feels the solid manufacturing base

created was worth this risk. This supply chain which now provided for the FPSOs Paraty and Ihlabela-

P-57 has paved the way for further works. Levy elucidates what developing this supply chain means

for SBM: “With the Brasa yard…we can easily execute projects at 65 percent [LCR]).”

Levy concludes, stating that SBM had to convince the supply chain, demonstrate success, and

capitalize on to create a reliable reputation for SBM in Brazil.

SBM commenced a joint venture partnership with Naval Ventures Corp in the Brasa Shipyard,

which started in 2011. The Brasa Yard is located in Niteroi and is a 65.000m2 module yard capable of

assembling up to 12 FPSO modules at once. ‘Owning the yard, the crane barge, and the quay side

facilitates a very smooth execution of the project for SBM. These three tools combined ensure that

we control our own destiny’ states Levy.

The decision to invest in this yard has turned SBM into an important, local player in the Brazilian

shipbuilding industry.

FocOly_OGFJ_1403 1 2/21/14 4:22 PM

FPSO Cidade de Paraty, Photo courtesy of SBM

Philippe Levy, country manager, SBM Offshore Brazil



“There is so much to develop in a short

period of time that is hard to believe that

the global supply chain will be able to cope,”

says Paulo Cesar Martins, president of Abe-

spetro, an organization that represents 51

service companies from various segments, all

key players in the Brazilian oil & gas indus-

try. “We are not only talking about massive

quantities of several different critical compo-

nents, but also with very high specs.”

“If you take the example of Petrobras’

portfolio of prospects, detailed in their lat-

est five year business plan, even considering

its experience and leading technology, it is

impossible not to be concerned over their

capacity to take on the load. This brings

uncertainty to the market.”

Decision makers face a dilemma between

potential rewards and the risk in obtaining

them. Total is one, illustrated by the compa-

ny’s late decision to join the Libra Consortium.

The recent October 2013 auction, sell-

ing the rights to Brazil’s Libra field in the

Santos Basin, is a prime demonstration of

the rewards awaiting persistent companies.

The field has an estimated recoverable oil

volumes of 8-12 billion boe. Denis de Bes-

set, managing director of Total E&P in Brazil

remarks: “I am confident that those compa-

nies who are absent from Libra will be the

ones who most regret the outcome of the

Libra auction.”

The Libra block was discovered approxi-

mately 105 miles offshore from Rio de

Janeiro in the Santos Basin. The field could

generate a trillion USD in public revenue and

is totemic of the opportunities available from

Brazil’s pre salt resources- its size and volume

mean that the reserve is vital to Petrobras’

hopes of producing 4.2 million bpd by 2020,

double its current production rate.

Libra became a possibility for Total

because, de Besset attests, the final agree-

ment saw parties split risks of production and

rewards from the venture. Total was pleased

excessive political interference now seems

unlikely. Shell, CNPC and CNOOC joined

Petrobras in commercial activities on this

field, indicating their agreement that Brazil’s

promise outweighs possible hazards.

tEch-fix“These criticisms of Petrobras, as well as issues including the downfall of OGX

and HRT’s momentary wobbles have created the prevailing feeling amongst

investors that Brazil currently represents a risky business venture,” says John

Riggs, managing director at Intermoor do Brasil, a company providing moor-

ing services including engineering and maintenance. Intermoor has taken on

some particularly challenging projects, including installing drilling and produc-

tion conductors on the Papa Terra platform. Mr Riggs commends on this say-

ing ‘It was a very tight technical spec with strict tolerances for the welded pipe,

the conductor position and inclination, etc., which were really beyond what is

normal in the industry.”

However, whilst Riggs does speak of risk in Brazil, far from discouraging

investment, Riggs argues that now is the time to act- confirming his confi-

dence that investing in Brazil now will see solid returns, he states: “Now is

the time to invest looking at the developments in the North East, because

in three years the market most likely will turn again. Investors will need to

remain alert to the fact that this is a window that will close: prices will rise as

Brazil demonstrates it is a country fully capable of developing [its] pre-salt

resources.” Riggs’ opinion is echoed across the industry.

Iain Wilkinson, socio-director at Petrolink, an information and communications technology

company points out that: “Brazilian executives will often analyze information differently to

British executives; this has a great deal to do with Brazilian analysis of risk - there is a dif-

ferent feel here for how far a business can stretch - which does translate into business strat-

egy.” Wilkinson feels that Brazilians better seize opportunities than companies from more

risk-averse backgrounds, by acting early and decisively.

The technical challenges in Brazil are seeing the arrival of highly sophisticated, technically

adept companies gathering to capitalize on Brazil’s subsea wealth, despite the risks described.

Dr.Ian Wilkinson, socio-diretor, Petrolink

John Riggs, managing director, Intermoor do Brasil

Fig. 1: LOCATION OF LIBRA FIELD IN BRAZILIAN OFFSHORE BASINS

Areashown

SOUTHAMERICA

0

0

300

186

Km

Miles

SãoPaulo

Santos

Rio deJaneiro

Libra�eld

Camposbasin

AtlanticOcean

Known pré-sal area

EspíritoSantobasin

BRAZIL

Santosbasin

1,000

m

2,00

0 m

9


This technology helps the companies reduce risk. It is unlikely that

Petrobras’ aim of producing an additional two million barrels per day

by 2020 would be accomplished without using new

technologies on mature fields. Almir Mr Barbassa

highlights that Petrobras’ strategy is one with

finesse: “Operational efficiency is tied to our pro-

ducing fields, but we have offshore fields that have

been producing for thirty years, so the equipment

is no longer new and has to be improved in ways.

We did most of this in the last two years, essentially

in the second half of last year and the first half of

this year. Now we are seeing production responding.” Petrobras is

targeting both new resources and ensuring productivity from existing

assets remains high with technologies capable of delivering greater

results than previously.

Kongsberg Oil & Gas Technologies (KOGT), is another company

seeking to bring advanced solutions to the Brazilian market as an

established subsea EPC contractor and developer of information

technology solutions for drilling operations. The company’s general

manager, Håkon Ward, states: ‘The clear development trend in [the

IT systems] market at the moment is towards real time data…and

monitoring of operations.’

‘[A] facility KOGT offers which is of particular use to the offshore

Brazilian market is through our K-Spice and Ledaflow software sys-

BRAZILIAN BULLS-EYE luiS araujo, regional manager aker SolutionS diScuSSeS

the value of Brazil to hiS comPany:

Aker Solutions has been in Brazil for about 30

years, but only in the 1990s entered the oil and gas

market. We signed our first contract with Petrobras

in 1994, and since then have delivered around 200

subsea christmas trees to Petrobras. We have be-

come a key supplier for Petrobras, particularly in

subsea equipment.

During the 2011 crisis we realized we needed

to tackle this market head on, considering the im-

portance of Petrobras and Brazil to our global business. In an effort to

do so, we engaged with Petrobras at all levels from operational level to

the senior representatives and together we developed a detailed plan

for the future. We jointly convinced our board of the need to invest

more in Brazil.

Hakon Ward, general manager, Kongsberg Oil & Gas Technologies

Luis Araujo, EVP & president, Aker Solutions Brazil

FocInt_OGFJ_1403 1 2/21/14 4:31 PM



tems. Together they are an integrated solution,

delivering process simulation and multi-phase

flow simulations. KOGT is the sole provider of

this holistic system. By having these tools, clients

have access to a far more detailed understanding

of the whole process of production, from drill-bit

to wellhead. …these services can assist Petrobras

or other players in maximizing the extraction of

oil from mature fields… in a way which will secure

maximum returns…The need for this facility in Bra-

zil is acute.’

“Technology is very important,” agrees Miguel

Gradin, president of Gran Energia, a company

focused on oil & gas services, intermodal logistics,

and project management. “Petrobras’ aim of pro-

ducing an additional two million barrels per day by

2020 cannot be accomplished without using new

technologies on mature fields, and the support of

service companies.”

For investors looking to Brazil, research and

development is vital to reducing perceptions of

risk. Asked about the importance of further invest-

ment in R&D, Marcos Isaac Assayag, formerly exec-

utive manager of Petrobras’ R&D Center, Centro

de Pesquisas Leopoldo Américo Miguez de Mello

(CENPES) says, “Continuing to invest in R&D on

top of what is done already is a must. Certainly we

can create a lot more value by optimizing drilling

operations, so that we could drill faster, cheaper

and safer, or by improving recovery factors so that

we could extract, with the same number of wells,

more oil from the reservoir.”

The R&D investment of Petrobras was around

USD 160 million per year in 2001-2003. This

increased six fold in 2004-2008, reaching a level

of USD 900 million. From USD 3.1 billion invested

across the period 2009-2011, 47% went to exploration and produc-

tion. Petrobras is prioritizing research and development in order to

gain further profit.

Petrobras is aware that new technology offers a more secure path

to profit. “Despite being very cost-aware given the investment the

pre-salt developments require, Petrobras has always been very keen

on using new technology,’ states Stephan Dezaunay, country man-

ager for PGS. “This focus on using better technology to increase

production has paid off. In September 2013, pre-salt production of

329,000 barrels per day (bpd) has increased eight fold from the aver-

age pre-salt production in 2010 of 42,000 bpd.”

Many companies are investing in technology to augment their busi-

ness. Dezaunay describes the motivations for PGS to invest in more

advanced capabilities: caused by the “lack of bids [until 2013], PGS…

PROfESSIONALISm PRECEDES PROfITjoao geraldo ferreira, ceo of ge oil & gaS for latin

america talkS aBout the qualitieS giving hiS comPany a

comPetitive edge:

GE has built a high caliber professional structure in

Brazil where good business practices are based on

high quality people. The best gas turbine and the

highest specification christmas trees in the world

were designed by people who were empowered to

take forward these technical issues. At GE, we seek

to create the environment for empowerment.

Any company must have a structure optimally

designed to achieve key goals and ambitions. Staff

with an accurate and in-depth understanding of the

Brazilian market are important and the right, high quality people who

will assist a company achieving its goals. Such an understanding will al-

low the business to react better to government regulation and design

products and services optimally customized to the local environment.

Lastly, I would say that it is important to ensure one listens. Never as-

sume a complete understanding of any issue. Acceptance of other views

will ensure a more durable and better thought out plan for success.

FocABS_OGFJ_1403 1 2/21/14 4:18 PM

João Geraldo Ferreira, president Latin America, GE Oil and Gas

Jose Carlos Ferreira, vice president South American region, ABS

Stephane Dezaunay, managing Director, PGS Brazil

Miguel Gradin, president, Gran Energia

Marcos Isaac Assayag, former executive manager, Cenpes

11


felt we needed to diversify and invest in a

technology center to enable us to work on

reservoir and monitoring services.

“Companies in Brazil are actually keen to

use new techniques. PGS has ventured into

new ways of executing seismic” continues

Dezaunay. He summarizes: ‘PGS is continu-

ously challenging conventional industry wis-

dom and merits, both globally and in Brazil.’

Petrobras’ and the wider Brazilian oil and

gas industry’s production increase is being

facilitated by ever more offshore infrastruc-

ture and equipment coming to Brazil, each

adding to production capabilities. ABS, a

market leader in providing marine and off-

shore classification services, is one company

eager to expand operations offshore. José

Carlos Ferreira, vice president, South Ameri-

can Region for ABS states that: “We did not

get to where we are by chance. We became

the industry leader through lots of hard work

and by leveraging our international network

for support.” Ferreira continues: “consider-

ing the innovative nature of our industry,

we keep abreast of the latest technologies

and developments. The offshore industry

certainly moves with great speed, and if we

intend to regulate, then we have to keep up

with the pace. To this end, we have enacted

two initiatives in Brazil: the establishment of

an Offshore Technology Center as well as an

Offshore Technical Committee.”

This increase in capacity is underlined by

the fact that in October 2013, cumulative

extraction by Petrobras from presalt deposits

reached 250 million boe.

A grand total such as this is perhaps the

reason Almir Barbassa, states: “It takes a

period of heavy work before we start pro-

ducing oil and generate the cash flow.”

Describing steps forward from Petrobras he

says: “we have to optimally capitalize on the

opportunities we have in front of us, such as

the pre-salt fields. Already today we are pro-

ducing more than 300.000 bpd… Reaching

such output in six years’ time is faster than

many other countries.”

“Petrobras is installing more than thirty oil

rigs between 2013 and 2018.” Petrobras has

also started the development of 20 FPSOs,

each costing 1.5-1.8 billion USD. Barbassa highlights: “Every time an FPSO comes online, the pro-

duction curve receives a boost. In 2017, we will produce 750.000 bpd more than today – all oil.”

The IEA agrees Brazil’s future as a large-scale oil producer is likely. In November 2013,

the IEA predicted Brazil’s production tripling by 2035, to 6 million bpd. The IEA considers a

domestic focus on energy efficiency is key to Brazil meeting its export targets.

Brazil’s government has allowed Petrobras to increase in fuel prices at the pump to ease

pressure on the giant. There are indications price restrictions could ease again as early as

March 2014.

Clearly, Brazil’s prosperity is linked to the development of offshore pre-salt resources. Many

key skills will have to come to Brazil from abroad, and companies must consider risk and

potential profit before coming here. Brazil is a market requiring shrewd planning prior to

entry. However the more that companies can offer Brazil, the more Brazil offers commercially.

One certainty exists- this country will be relentless in its pursuit of realizing the potential of

its offshore energy opportunity.

Fig. 2: NATIONAL PETROLEUM AGENCY: BULLETIN OF PRODUCTIONOF PETROL AND NATURAL GAS, SEPTEMBER 2012-13

Pet

role

um p

rod

ucti

on,

tho

usan

d b

/day

2.2Oil Gas condensate

2.1

2.0

1.9

1.8

1.7

1.6

1.5 Sept. Oct. Nov.2012 2013

Dec. Jan. Feb. Mar. Apr. May Jun. July Aug. Sept.

Maintenance in the port of Agra, Photo courtesy of Luiz Baltar

12

INTERVIEW WITH:

Almir Barbassa, CFO - Petrobras

Almir Barbassa, CFO - PETROBRAS

Energyboardroom: Three years ago, you launched the biggest IPO an oil & gas com-pany had ever done till then. Could you please outline what the destination was of this money, and the returns it generated to date?ALMIR BARBASSA: Indeed in 2010 Petrobras raised as much as 70 billion USD in what was to date the world’s largest share sale.

In the same year, Petrobras invested 42.5 billion USD of new stock to acquire the rights to produce 5 billion barrels of government-owned oil.

Most oil companies would love to be pre-sented with this opportunity, but fortu-nately it came to us. But it takes a period of heavy work before we start producing the oil and generate the cash flow.

In less than two years, we will be there. We expect first oil in 2015. Once produc-tion starts, the cash flow from each bar-rel of oil produced in this area will be much higher than the oil we are currently producing.

EBR: As sole operator of the pre-salt accord-ing to government directives, Petrobras carries a big responsibility. Is Petrobras able to carry the finances of developing the massive pre-salt Libra field?ALMIR BARBASSA: The Libra field holds expected recoverable reserves of 8-12 bil-lion barrels and is an important opportu-nity for Petrobras. Although it requires a large bonus upfront, it is still a small sum compared to the amount of oil that may be there.

Today we are working to develop the existing fields we have discovered. Petro-bras is installing more than thirty oil rigs between 2013 and 2018. Most of the CAPEX needed to build this equipment has already been deployed – not only the 42 bil-lion USD for the transfer of rights, but the development of 20 FPSOs, each one of which costs us 1.5-1.8 billion USD.

In the next years we will be executing more exploration activities in Libra, and the large volumes of cash for developing this new area will not be needed until 2017 and onwards. This time frame fits our cash flow very well.

EBR: Could you outline how you approach the company’s debt management and how you assess the risk for the company to retain investment-grade rating? Where do you see the biggest challenges coming from?ALMIR BARBASSA: There are few companies in the world today that invest more in the future than Petrobras. All the debt that we are raising is for growth.

Petrobras’ investments today far out-strip our EBIDTA, and even without such investments we could be growing. But we feel we have to optimally capitalize on the

‘There are few companies in the world today that invest more in the future than Petrobras. All the debt that we are raising is for growth.’

Interview with: Almir Barbassa, CFO - Petrobras

13

Almir Barbassa, CFO - PETROBRAS

opportunities we have in front of us, such as the pre-salt fields. Already today we are producing more than 300.000 bpd, while the fields were discovered in 2007. Reach-ing such output in six years’ time is faster than many big fields in other countries.

In fact today we have USD36 billion (180 billion reals) of work in progress. Petrobras’ value is low looking at the return that the company is offering today. But looking at our cash flow, it is completely different sit-uation.

EBR: The Brazilian government lets Petro-bras charge Brazilians world prices for gasoline, diesel fuel and cooking gas. Where do you stand in this discussion?ALMIR BARBASSA: Petrobras’ current pricing policy is in place since 2002, and it adjusts domestic to international prices in the medium range. The policy was executed consistently most of the time, but we have fallen behind – for more than two years now. This is the result of depreciation effects.

There is some impact from the govern-ment’s macro-economic policy on energy prices. Brazil has been facing pressure of inflation for some time now. At the root of the cause are certain government policies that lead prices to depreciate, which hap-pened in May 2012 and June 2013, and urged Brazil needs to import goods.

Through this, Brazil is importing costs, which in turn reduces the adherence of domestic prices to international ones.

The management of the company is aware of this and presents its view to the board every meeting, outlining where we shall arrive in terms of cash flow, rating, and investments.

EBR: How difficult is it to balance the inter-est of the Brazilian government and giving return to the investors?ALMIR BARBASSA: We have been well aligned

most of the time. The government is aligned with the interest of the minority sharehold-ers.

The shadow of inflation looms large over Brazil.

The year 2010 was one of the absolute highlights in the economic history of Bra-zil, with 7.5 percent GDP growth. But then, we reached to full employment, and the government did not move the direction of the macro-economic policy. They should have moved from consumption to invest-ment and create more production capacity, but instead continued injecting more demand in the economy. The result was inflation and higher costs.

We need to build capacity and de-bottle-neck our infrastructure. The government has made mistakes in terms of auctions to attract private investment in these areas.

With that, we are facing more inflation, making it more challenging to align between our interest and that of the gov-ernment. But even in such challenging cir-cumstances the government raised energy prices several times: in mid-2012 and twice early 2013, totaling 15 percent for diesel, and 24 for gasoline. These are clear efforts of the government to adjust the situation.

‘Most oil companies would love to be presented with [the presalt] opportunity, but fortunately it came to us. But it takes a period of heavy work before we start producing the oil and generate the cash flow.‘

14

INTERVIEW WITH:

Renato Bertani, CEO - Barra Energia

Renato Bertani, CEO - BARRA ENERGIA

Energyboardroom: What is the new propo-sition that Barra Energia brings to the existing oil and gas paradigm in Brazil?RENATO BERTANI: That is the context. Barra Energia is a small company compared to the players that are involved in this area. We have been successful first of all because we have the required financial backing. We put together a very solid, experienced team of geologists, reservoir engineers, geophysicists that knows how to be selective in acquiring opportunities.

Selective is a key word here. We assessed over 20 opportunities before deciding to acquire two blocks: BS-4, and BMS-8. We acquired ten percent of BMS-8 from Shell, and ten percent from Shell and 20 percent from Chevron on BS-4.

Out of 1.2 bil l ion USD we spent roughly 500 million USD, so we still have lots of capability to carry on our invest-ment plan. We will continue extremely disciplined in terms of any future deals that we will incorporate in our portfolio.

This activity is intrinsically risky. Understanding the risk is crucial. In pre-salt, some say that there is no risk, or at least the risk is very low. It is an extraor-dinarily new oil province, but there are lots of uncertainties that companies operating in the province have to deal with – success is not certain when invest-ing in pre-salt.

Indeed pre-salt challenges are mani-fold: very unusual reservoir, expensive wells, and logistical hurdles. How does a rookie company mitigate risk in this envi-

ronment through your portfolio manage-ment?

The first thing is spreading the risk. It is essentially good technology and good understanding of the issues. You need a capable team that will be able to under-stand the issues. We need to start by understanding that the risk is there. We need to be prepared to eventually have results that are not as expected, because intrinsically there is risk.

But you mitigate that risk by under-standing the issues that are related to your activity and the level of risk that you have to live with, and are able to spread and build a portfolio with sufficient diversification. Focus in a certain place, and within that area seek diversification and build together multiple opportuni-ties, so that in the end, in the balance, you increase the chances of success.

EBR: Could you speak to the set-up of this first pre-salt licensing round, primarily the Production Sharing Contracts and Petrobras’ operator obligation? RENATO BERTANI: First of all, the new con-tract model that the government decided to adopt for the pre-salt has some inno-vative features. One of them is a sliding scale for sharing of profit oil based on oil prices and average well productivity. A number of these features have to be tested in real life as we move forward.

To give you the broad picture, the industry is prepared to work with Produc-tion Sharing Agreements, and I expect strong interest of companies around the

Interview with: Renato Bertani, CEO - Barra Energia

15

Renato Bertani, CEO - BARRA ENERGIA

world in the Libra bid round. The simple reason is that it is a huge discovery, even though there is a significant range of uncertainty.

So the information from this well has to be extrapolated to the rest of the whole area where we expect that there may be oil. That indicates that there is a range of uncertainty in the size of the accumula-tion. Nevertheless, it is something very significant, and that is why I think we will see strong interest from oil compa-nies around the world.

Petrobras is an extraordinary company that is very capable – I do not have any doubts that they can do it. They have already demonstrated this: they produced over 300.000 bpd from pre-salt in June 2013.

EBR: Talking about Petrobras as an extraordinary company that has devel-oped the expertise to exploit these chal-lenging fields – do you feel that the pace of technological development of Brazil’s oil & gas industry is high enough? RENATO BERTANI: Certainly the achieve-ments so far are extraordinary. Start with the very fact that it took wells that cost 150 to 200 million USD to discover the pre-salt. That credit goes to Petrobras and their partners, decided to drill below the pre-salt layer and test for the possi-bility of the existence of a reservoir, which you do not find if you drill below the salty shallow waters offshore Brazil.

There was the vision that we should change the paradigms, and through good geosciences, Petrobras and their partners concluded that there could be high-qual-ity reservoirs in deep waters not seen in shallow waters. That change in paradigm was what caused the company to discover the pre-salt.

Then, drilling through 2000 meters of

salt, in some places with very high tem-peratures and pressures or with very high levels of CO2 and H2S associated with oil, poses serious challenges, also logistically. We are talking about wells that are 200-300 kilometers from the coast. All these challenges are being overcome. There is no question about the availability of the technology to continue drilling and pro-ducing the pre-salt.

Continuing to invest in R&D on top of what is done already is a must. Certainly we could create a lot more value by opti-mizing drilling operations, so that we could drill faster, cheaper and safer, or by improving recovery factors so that we could extract, with the same number of wells, more oil from the reservoir.

‘Barra Energia is a small company compared to the players that are involved in this area. We have been successful first of all because we have the required financial backing. We put together a very solid, experienced team of geologists, reservoir engineers, geophysicists that knows how to be selective in acquiring opportunities.’

16

INTERVIEW WITH:

Denis Palluat de Besset, Managing Director - Total E&P Brazil

Denis Palluat de Besset, MANAGING DIRECTOR - TOTAL E&P BRAZIL

Energyboardroom: Total plan to invest $300 in Brazil (out with Libra commitments) in 2014. Yet you yourself stated that this is a limited amount of outlay, in part caused by the late arrival of a rig to the Xerelete field, which will only arrive next year. Where will this money be focused?DENIS PALLUAT DE BESSET: Next year will be interesting for Total in Brazil, as steps will be taken to put the Xerelete field toward production. Whilst the field itself was found about a decade ago, and was initially only considered to be a post-salt discovery in water 2,400 meters deep with heavy oil, yet more recently it has been ascertained there is a presalt prospect lying underneath. Total will be seeking to discover the full potential of this field.

The presalt element of this field may add substantial reserves which would make Xer-elete commercially highly attractive and a represent a great prize for the company.

EBR: Last year, Total took over the title of ‘operator’ of the Xerelete field in the Cam-pos Basin from Petrobras, How did Total put an end to these hold ups existing on this well and to what extent will Total over-haul the working practices at the rig?DENIS PALLUAT DE BESSET: Unpredictable cir-cumstances or events causing delays should almost be expected in this business; all one can do is anticipate where they might arise, and ensure work moves back on track. Drill-ing a single well here in Brazil is difficult

because of cost associated with subletting drilling rigs- most are contracted for longer projects. Total was fortunate to agree with Petrobras to use one of their rigs.

The delay drilling this well until January 2014 is no issue of significance. The reasons for this delay are not financial, or statutory reasons and operations will be progressing in the near future.

Xerelete seemed a limited volume and relatively unexciting find until drilling deeper discovered the pre-salt reservoirs. It is a positive result to discover significant reserves like this and Total considers this to be a marker signifying our increased presence in Brazil.

EBR: Whilst your presence has certainly increased, Total’s existence in Brazil, with no oil output yet, really does not reflect the importance of the company on the World Energy map nor the importance of Brazi. How do you explain this situation and do you have any further comments on this?DENIS PALLUAT DE BESSET: At the point of dis-covery of pre-salt resources in Brazil, Total was non-existent here. The possibilities cre-ated by the pre-salt fields meant that Total decided to refocus on this country, building up its presence; this strategic decision has been implemented over the last few years. Firstly, Total bought 20 percent of the rights to block BM-S-54 “Gato de Mato” from Shell, secondly, Total took over the opera-torship of Xerelete from Petrobras which

Interview with: Denis Palluat de Besset, Managing Director - Total E&P Brazil

17

Denis Palluat de Besset, MANAGING DIRECTOR - TOTAL E&P BRAZIL

was another strategic decision aimed at expanding our presence. Thirdly, we started to invest in greater exploration, and we real-ized this tangibly through acquiring ten new concessions in the 11th bidding round. The cherry on the cake was entering into the Libra consortium.

Five years ago it was true there was a gap between the importance of Brazil and Total’s representation here, but now how-ever Total’s efforts to secure a significant chunk of this market at the moment have closed this margin entirely.

EBR: Total joined the Libra consortium late over concerns about political influence. What finally overcame Total’s concerns and gave you confidence that the Libra project would not be politically compromised? DENIS PALLUAT DE BESSET: Those companies who are absent from Libra will be the ones who most regret the outcome of the Libra auction. Total is very happy to be in the Libra consortium because the Production Sharing Contract final version, published in August this year showed significant improvements on earlier versions- suffi-ciently so to make this contract attractive.

Changes in the governance of the project too, helped assuage any concerns we had. When we saw the persons elected to become directors of PPSA, we realized that the gov-ernment was eager to promote the early and effective development of the Libra resource. The political risks which had been the sub-ject of much discussion, seemed far smaller following this development.

EBR: You have previously praised the ambi-tion behind the Local Content Require-ments but also openly raised fears about the Brazilian supply chain. How has local content affected Total’s business and what would be a balanced solution that would offer satisfaction to both parties?

DENIS PALLUAT DE BESSET: One of Total’s con-cerns as an IOC operating in Brazil is about local content requirements. These commit-ments cannot be allowed to kill the project. At the moment, LCR is a punitive system. Those companies not achieving required lev-els of LCR face fines up to 60 percent of the value of what they will not have achieved in terms of Local Content commitment. This has the potential to be enormous; it can kill a project and means that companies may not engage with projects, afraid of the risks doing so would entail.

An incentive system is wiser, encourag-ing investment in the areas of the sectors which are providing for the needs of com-panies such as Total. This would make the system more beneficial for the contractors, the whole supply chain and the government, rather than simply hazardous to invest-ment.

‘One of Total’s concerns as an IOC operating in Brazil is about local content requirements. These commitments cannot be allowed to kill the project. At the moment, LCR is a punitive system. An incentive system is wiser, encouraging investment in the areas of the sectors which are providing for the needs of companies such as Total. This would make the system more beneficial for the contractors, the whole supply chain and the government, rather than simply hazardous to investment.’

18

INTERVIEW WITH:

Marcos Assayag, former Executive Manager - CENPES

Marcos Assayag, FORMER EXECUTIVE MANAGER - CENPES

Energyboardroom: What is CENPES capac-ity for research today?MARCOS ASSAYAG: Petrobras started its R&D activities in 1963. On December 4 of this year, we are celebrating 50 years of exis-tence. This is an integrated R&D center. This means that we focus on R&D all together in one center.

We have 227 labs divided over two build-ings. We have a very modern center, with other smaller centers in other parts of the country that can serve if we want to test something in the field.

Petrobras today invests 1.1 billion USD in R&D, which is a seven-fold increase from 2001. Roughly 60 percent of the money is invested in exploration and production.

EBR: What is the motivation for innovation for Cenpes today?MARCOS ASSAYAG: Today Brazil has 15.7 bil-lion barrels of reserves, but the potential with the pre-salt is to reach 31.5 billion barrels of oil equivalent, 92 percent of which will be offshore, and 8 percent onshore.

Today we have confirmed 5 billion trans-fer of right, and 10.8 billion in the pre-salt concession areas, excluding Libra.

The motivation is substantial deepwater oil reserves in the Campos Basin, discov-ered in 1984, we discovered pre-salt in 2006 in deepwater and ultra-deepwater in the Santos Basin at up to 2000-2500 meters of water depth.

All these fields are located in pre-salt and far from shore. We need to adopt new

technologies to exploit these fields, and in a competitive environment, because we opened the market in 1997.

Furthermore, we do this in a sustainable manner, because our industry is potentially polluting. We have to take all the measures we can to avoid accidents, preserve the environment.

EBR: What is the strategic organization behind this?MARCOS ASSAYAG: In terms of strategy, we are organized in five centers that take care of research & development, notably geosci-ences, geosciences & well engineering, product engineering, downstream & biofu-els, and gas, power and sustainable devel-opment.

We have two areas dedicated to basic engineering, integrating R&D with engi-neering, because through the engineering we can concretize the innovation directly to the field. One area is dedicated to explo-ration and production such as designing new platforms, semisubmersibles, jackets, FPSOs, etc, and in downstream we have people that design refineries, petrochemi-cals, fertilizers, etc.

We have then one area called technology management, which is basically working with me to manage the rest.

All the R&D activities develop from the strategic plan that is developed by the board and follow certain processes. Next to that, we have a High Risk, High Reward project which is normally long term and can bring very good efficiency to Petrobras

Interview with: Marcos Assayag, former Executive Manager - CENPES

19

Marcos Assayag, FORMER EXECUTIVE MANAGER - CENPES

for 20 years from now. The activities under this header are not directly linked to the strategic plan. Roughly five percent of the research we do falls under this header. An example would be our efforts to develop a system for high power generation in sub-sea, 50 megawatt, to feed the subsea equip-ment.

Then we have a lot of challenges for the coming years, and under the header Future Vision we gather projects for the long term.

We have a range of projects aimed to expand the limits of our current business, projects aimed at value added and product diversification, and at sustainability.

One of the directions aimed to expand the limits of our current business is called Exploratory frontiers. For them, pre-salt is already history. another key area under this is logistics, which is becoming very impor-tant for us. Brazil is a huge country with many frontiers. Today we focus on the equatorial margins for instance. The Santos area is already discovered for them.

In sustainability we are working to reduce emissions and water treatment, minimization of water consumption.

EBR: How should our international reader-ship judge the progress of pre-salt produc-tion?MARCOS ASSAYAG: Today, to produce the pre-salt in very competitive ways is the key focus of Petrobras.

Already in June 2013, we produce over 300.000 bpd. Pre-salt is a reality. We have a lot of oil to produce and to increase pro-duction.

Today we produce 2 million bpd, and increase to 4.2 million in 2020. Most of the technologies to produce the pre-salt are available today. We give full support to the E&P department to achieve this. We have people work directly to solve problems as they arise during drilling, in the reservoir area, in subsea, etc. we give technical ser-

vice when they call us.

EBR: How important are research collabo-rations for you? MARCOS ASSAYAG: There are few projects we do alone. For most of our projects we work together either with R&D institutes or uni-versities or the supply and service compa-nies. We call this open innovation. This can start in the idea, we can have it pre-project, during the project, or in the implementa-tion phase.

We have the Rio Technology Park, which helps us a lot in establishing long-term rela-tionships with the suppliers. Among others we have a very good relationship with FMC Technologies, Halliburton, Baker Hughes, GE, Schlumberger, Siemens, and BG.

Looking at collaborations with aca-demia, Petrobras has increased its invest-ments in Brazilian universities eleven times between 2004 and today. The sum stands at USD341 million today.

Cenpes is a prestigious employer and known to invest in its employees. We greatly value and stimulate international exposure of our employees. We have a bud-get to invest in this.

Since conducting the meeting with Mar-cos Assayag he has now become executive manager for rigs and production units in the exploration and production division at PETROBRAS.

One of the directions aimed to expand the limits of our current business is called Exploratory frontiers. Pre-salt is already history.

20

INTERVIEW WITH:

João Carlos de Luca & Milton Costa, President & Executive Secretary - (Instituto Brasileiro de Petróleo, Gás e Biocombustíveis)

João Carlos de Luca & Milton Costa, PRESIDENT & EXECUTIVE SECRETARY - IBP

Energyboardroom: What are the key themes on top of the agenda of the industry today?JOÃO DE LUCA: We just finished our contri-bution to help the government build the new Production Sharing Contract (PSC) that shall apply to the 1st pre-salt licens-ing round. IBP was closely involved in the process over the past four months. We committed much of our manpower to this: lawyers, technicians, fiscal specialists, in order to bring forward the interest of our membership to the government.

EBR: Another matter of debate is the deci-sion to make Petrobras sole operator for pre-salt. Isn’t it in the best interest of the country and of the industry that more operators get involved?JOÃO DE LUCA: IBP has been opposed to the single operatorship for Petrobras in the pre-salt since the government first sug-gested it. In our opinion it is good neither for Petrobras nor for the rest of the Brazil-ian industry.

Petrobras cannot be obligated to par-ticipate in blocks that they do not have a direct interest in or even did not partici-pate in the economic formulas for. They cannot support a proposal that does not make economic sense according to the information that Petrobras has for the pre-salt. MILTON COSTA: We are in favor of other com-panies participating and operating and

sharing financial and technological means. The current model can limit the devel-

opment of pre-salt, because of the limited capability of Petrobras in terms of HR and financial resources.

EBR: What are the most pressing techno-logical issues that the Brazilian oil & gas industry faces specifically in pre-salt? JOÃO DE LUCA: The key challenge today is not so much technological but rather financial: how can we further reduce costs of the technology applied to raise the attractiveness?

Drilling operations need to be further optimized. This is work in progress. The pioneer wells in pre-salt cost up to 200-300 million USD. In Lula, Petrobras is already drilling for some 70-80 million USD, in less than three months.

Brazil has been very lucky, because the

João de Luca: IBP has been opposed to the single operatorship for Petrobras in the pre-salt since the government first suggested it. In our opinion it is good neither for Petrobras nor for the rest of the Brazilian industry’.

Interview with: João Carlos de Luca & Milton Costa, President & Executive Secretary - IBP

21

João Carlos de Luca & Milton Costa, PRESIDENT & EXECUTIVE SECRETARY - IBP

pre-salt discoveries came just after the techniques for the deepwater Campos Basin had matured.

When we discovered the pre-salt fields in 2007, we already had 20 years of experi-ence in building subsea technology behind our belt such as the wet christmas tree. We just had to try to extend that kind of tech-nology and innovate technologies to com-pensate CO2 challenges in gas in pre-salt areas.

Indeed Petrobras’ technological progress is impressive. Simultaneously, the company has been criticized by analysts and inves-tors as investment spending has yet to result in significant increases of crude oil production, despite finding some of the world’s largest oil discoveries in 20 years. How justified is this criticism?Milton Costa: Petrobras needs to keep their financial capabilities to face their strong CAPEX, one of the largest in the world. It is very difficult to criticize Petrobras if you see how steeply its CAPEX has increased over the past decade and if you look at the opportunities that this investment can cre-ate in Brazil for suppliers, for employees, for tax. It is a huge project. Of course this has its challenges; it is not easy to invest 234 billion USD in five years without any problems.

Petrobras has a huge financial challenge in the next three to four years. The industry and IBP have to try and help Petrobras and the government to adjust the framework of the sector to incorporate different visions, private visions, and foreign visions, to con-tinue improving the performance of the oil industry in Brazil.

EBR: You speak about including different visions in Brazil’s E&P campaign. What role do you see for junior E&P players? JOÃO DE LUCA: It is not good for the Brazilian industry and the market for juniors that OGX and HRT are going through difficult

times. At the same time, there are other, more positive stories to point at such as Queiroz Galvao or Barra Energia.

Nonetheless I do not think that the OGX & HRT stories scare off investors. Aside from the obvious hydrocarbon opportuni-ties that Brazil offers, the stability of the country and the strength of the rule of law make this a very attractive country for investors. MILTON COSTA: I truly believe that Brazil is one of the best countries in the world to invest today given the size of the country and its population, the pace of its economic development, and the size of the opportu-nities both offshore and onshore. The upcoming bid rounds (the 1st pre-salt round and the 12th licensing round) will open new frontiers.

The country has 7 million km2 of sedi-mentary basins. Few countries can boast similar potential. Of course we have to work hard to make it all work, but that doesn’t change the real factors of the oil industry.

Brazil is home to a mature oil & gas industry now with small and medium com-panies that create a dynamic market. Chal-lenges will continue to arise, but the results and gains will far outweigh the problems.

Milton Costa: ‘Petrobras has a huge financial challenge in the next three to four years. The industry and IBP have to try and help Petrobras and the government to adjust the framework of the sector to incorporate different visions, private visions, and foreign visions, to continue improving the performance of the oil industry in Brazil.‘

22

INTERVIEW WITH:

Stephane Dezaunay, Country Manager - PGS

Stephane Dezaunay, COUNTRY MANAGER - PGS

Energyboardroom: After five years with no licensing rounds, ANP organizes three in 2013. How relieved is the geophysics industry in Brazil? STEPHANE DEZAUNAY: Indeed the past five years have been tough for the industry. In order to generate business and cover blocks, we need licensing rounds. It impacted multi-client acquisitions quite significantly. The industry needs the potential of the license round to build its libraries.

Despite the challenging circumstances, PGS was awarded a very large survey in 2008, the largest HD4D ever shot in the world, which ran until 2012. The survey was conducted by the Ramform Sovereign under contract with Petrobras, and covered the large pre-salt areas.

The vessel towed 113 km of streamers in the water and covered a distance equal-ing five times around the globe in four years.

EBR: Did PSG also look at bringing forward new business models in the way that the company deals with Petrobras and the Brazilian market? STEPHANE DEZAUNAY: The lack of bids and exploration made us diversify into the res-ervoir side. PGS set up a group called Global Reservoir Monitoring Services. Due to the challenging times for seismic, we felt we needed to diversify and invest in a technol-ogy centre to enable us to work on reservoir & monitoring services. We wanted to make sure that we can answer our clients’ ques-tions and demand; and our clients want to

optimize their reservoir, even if they are not executing a large exploratory cam-paign.

Last May’s licensing round saw great interest from majors & supermajors such as BG, Total, BP, Shell, and even ExxonMo-bil came back to Brazil. Is it still all Petro-bras for the seismic industry in Brazil or do you see a serious market developing along-side Petrobras?

Indeed companies like Statoil, Repsol, BG, and Shell have been very active over the past years. And of course OGX came up very strongly in the previous bidding round in 2008. This changed the market dynamic, although Petrobras of course is still the big actor.

Now, with the 11Th round, some new players came in and invested in new areas, especially the equatorial margin. Total, BG, and Statoil have been very successful. Petrobras was still the best investor, although interestingly not so much as oper-ator but rather as partner.

It obviously creates a need for new seis-

Interview with: Stephane Dezaunay, Country Manager - PGS

‘Indeed the past five years have been tough for the industry. In order to generate business and cover blocks, we need licensing rounds. It impacted multi-client acquisitions quite significantly. The industry needs the potential of the license round to build its libraries.

23

Stephane Dezaunay, COUNTRY MANAGER - PGS

mic. Seismic is an old business, but the technology evolve quickly. For example, there is a lack of 3D seismic at the equato-rial margin. There is a lot of 2D seismic with long lines and not very good definition, and some 3D but shot between 2000 and 2005.

PGS launched the GeoStreamer in 2007. This is a broadband solution: you widen your frequency band so you can image the deeper target at the same time. At first, the industry condemned the idea as crazy, but now, six years down the line, we see specific tenders coming out asking for broadband solutions.

It was interesting to see how the indus-try perception changed now that PGS has executed several Geostreamer projects.

EBR: How far is PGS ahead of key compet-itors CGG and Westerngeco in the Brazil-ian context?STEPHANE DEZAUNAY: In Brazil, the market has been managed by three companies in Brazil: PGS, CGG, and Westerngeco. The other actors have been quite inconsistent. The Brazilian market has been a mutli-cli-ent market for many years. This reduced the market to three companies for multi-client. The market is quite equally divided between CGG and PGS, and Westerngeco following on short distance. I would esti-mate 40 percent for both PGS and CGG, and 20 percent for Westerngeco and others.

On the marine contract, we had quite some great projects with Petrobras and Repsol.

EBR: Looking at the development of PGS in the coming years, where do you want to take the operations in the coming five years?STEPHANE DEZAUNAY: Next year PGS will cel-ebrate its 20-year anniversary in Brazil, which coincides with one of the largest exploratory campaigns in Brazil taking off.

The first of three licensing rounds has

successfully taken place in May this year, which is a great sign also as a precursor for more frequent bid rounds in the future.

We have seen some very quick results from this round, with new players coming into the equatorial margin. It is a very chal-lenging area, nothing like Campos or San-tos Basins where the industry knows how to play the game and the infrastructure has been built up.

For the pre-salt, of course we will have to look at the first tender round, but we believe that there will be a need after Libra to explore other areas. It is interesting for PGS as it means that business will be more continuous and we can forecast better.

We have also had the possibility to start working on mature fields, which will remain a focus going forward as production from some fields in the Campos Basin is starting to slow down and will start decreasing soon. Companies in Brazil are actually keen to use new techniques. PGS has ventured into new ways of executing seismic. Before, shooting seismic was done 3D. Now we are seeing new designs of seis-mic to get better illumination of the sub-surface.

PGS is continuously challenging conven-tional industry wisdom and merits, both globally and in Brazil.

‘PGS launched the GeoStreamer in 2007. This is a broadband solution: you widen your frequency band so you can image the deeper target at the same time. At first, the industry condemned the idea as crazy, but now, six years down the line, we see specific tenders coming out asking for broadband solutions.’


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Company index

Abespetro .......................................... 8

ABS .............................................. 10,11

Aker Solutions Brazil ....................... 9

Barra Energia ............................ 5,14,15

Brazilian Petroleum, Gas and Biofuels Institute (IBP) ......................... 5, 20, 21

GE oil & gas ......................................10

CENPES ...................................10,18,19

Gran Energia .....................................10

Intermoor do Brasil ........................... 8

Kongsberg Oil and Gas Technologies ...........................9,10

Olympic Maritima ............................... 6

Petrobras .......................................4, 23

Petrolink ............................................. 8

PGS .................................... 10,11, 22, 23

SBM Offshore .................................... 7

Total E&P do Brasil ....5, 6, 8, 16, 17, 22

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Upcoming report:Singapore part 2

oil & gas from risk, reward - energyboardroom.com barbassa, cfo of petrobras states: ‘there...

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