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We're back with "Palavra Cruzada".
And our topic today is "Pre-Salt". Our guest is lawyer and,
oil and energy expert, Claudio Araújo Pinho.
Also participating are journalist and professor
João Carlos F. Pena, the professor of International Politics
Ricardo Ghizi Corniglion, and the journalist,
Rafael Sânzio, from the newspaper "Hoje em dia".
You can also participate, via phone or e-mail.
João Carlos, let's start with you. I'll ask you to repeat your question.
Well, we were discussing the regular crisis of oil.
Then I asked "When will oil get to an end?"
Is this a topic that'll be over in this century?
Over the next one, we'll only hear of renewable energy sources?
Let's talk about this variable equation.
Nowadays, if I consider the known reserves,
the expectation of oil usage is 40 years.
If nothing new shows up, in 40 years,
keeping the current usage, in progression,
it is believed that it'll be over.
But what's in this variable?
It's composed by some data that we can analyze.
In 2030, the idea is that there will be a 40% increase
in the total energy consumption that we currently have.
-Nowadays, the matrix surrounding oil... -In world terms?
In world terms. The 40% increase are equal to,
exactly, what the USA's current consumption is.
What is not little. It's like, in 20 years from now,
-another USA entered the equation. -25%, right?
-Yes. In this equation... -We have to put in this equation
-the fact that oil is not only fuel. -I'll get there...
There are another 3 variables in this equation
that I find to be interesting for us to comment.
Never, in human history,
a country grew as much as China's rate of growth.
20% per year.
And if we compare China's growth rate
and it's energy production growth rate,
China has the ideal rate of energetic growth.
However, demand growth has surpassed long ago.
It's deficient.
And it is against it, breaking the power trade.
Why? Because, while it's looking for more energy,
on the other hand, China will never sign
the according to non-carbon.
So...
Let's imagine that we have on a table, where we're playing cards,
and we say to the players:
"Look, for you to be a part of this game,
to buy a stack, you got to have some qualities.
One of them is to have signed the according to non-carbon
due to the greenhouse effect."
That's how the world works.
China sat on the table without having it.
But why? Because of its size.
And China won't be leaving the table.
It's already an important player.
And China won't compromise now, in this matter.
What else is in the energetic matrix?
When we talk about fossil fuel,
nowadays, more than 80% of the world energetic matrix
comes from oil and natural gas.
What's the world tendency?
First, that natural gas becomes more active,
because of several historical factors.
First, because it's a much less controlled
and regulated activity than oil is.
Gas will increase its market share,
oil, in the world energetic matrix,
will decrease. So, the tendency is that oil...
Which now has an important part,
in 2020, will reduce its part in 64%.
The tendency is that the alternative sources,
the renewable ones,
will increase from 5% to 18%, in 2020.
And, in 2020, to an industry that is developing in such speed,
it's like the blink of an eye. So, it means,
that even if the participation of oil and natural gas
in the energetic matrix decreases, even if the matrix grows,
which means, this oil increase, alone, is equal to the USA.
-So, the total number is huge. -Everybody talks of the 8 billion,
concerning the production expectation
in one of the Pre-Salt's wells
is correspondent to a 3-month consumption...
It's a little. If we're not able to drill other ones,
and find very little, right?
Another element present in the oil industry's equation,
is that this development part,
the drilling, discovery,
-it ends up... -There's also a deadline...
It takes longer, but once in production,
that's when it starts to be profitable.
I also believe it's about how much it can...
-Right! -Produce.
This dimension will be discovered day-by-day.
Because Pre-Salt is in a moment that we call
LLT, which are the Long Term Tests.
The geological tests are beginning, and there's already a production.
But, still, it's really far from a mass production.
What we need to take into account is that,
nowadays, Pre-Salt is walking towards the same reality
that Campos Basin lived in the 70s.
And what's the salt difficulty?
It's important for the viewer to understand.
I'd like to address 2 common sense thoughts,
so that we can understand.
The first is the oil finding matter.
And everyone believes that oil,
like in cartoons, when we drill it, there's a black flow of liquid.
So, it's like taking a pumice,
the one we use on baths.
When we're kids, we use it to clean the dirtier parts.
Let's imagine we put soap on it, so, the pumice...
Oil is the soap on the pumice.
Which means, it's encrusted on the stone.
So, when we drill it, there's a shift in pressure,
it sucks the soap encrusted on the stone.
So the oil depends on the stone's porosity, right?
Of how encrusted... There are lots of geological figures
that will change oil. So, everything comes.
Sometimes the stone comes with it.
Sometimes, it's not economically viable, because of it.
-And you can't drill it all. -No, you can't.
Now we have the technological funding
in order to look for a greater productivity, and that's when we see that
that Brazil is in the right place. Why?
Because the technological level will allow Brazil, in its new drilling,
not to make the mistakes, the drilling mistakes,
that in early years of oil drilling, the other countries made.
-Deeper, right? -When it wasn't regulated.
And something else,
25% of the expected amount of oil
for 2020,
25% will be in deep waters.
-Let me... -I'm taking the opportunity.
You spoke of the importance of Pre-Salt, in wealth terms.
That's clear, there's a lot of potential.
Because of it, our country changed the rules concerning oil,
seeking for a bigger participation of the government
in these resources.
Was this the right path? The best way to get these resources?
Let's work with some ideas.
What worries me
about Pre-Salt, is not the kind of contract,
but the fact that you can start of from a supposed model
without concretely analyzing Brazil's experience.
This worries me... I'll give you an example.
Petrobras is where it is now,
because of a free competition based on a legal framework.
Which means, when its monopoly was broken in 1995, by a Constitutional amendment
it started to dispute, equally,
participating and bidding in each bloc. So, it's where it's now,
because we haven't gotten a base in Pre-Salt,
in a competition regime.
So, what does the Pre-Salt regulation say?
It says two things.
First, that a public company must be created.
-Which is PPSA. -Pre-Salt Petróleo S.A.
Which will manage
this polygon and this regulatory mark.
PPSA, by Constitutional definition,
it follows the legal framework of private companies,
such as Petrobras.
-So, it'll have a market reserve... -It's a mix capital company?
It'll be closed. It's really a public company.
Petrobras is the one with mix capital.
But PPSA will be a closed public company.
So, the public company
which follows the legal framework of the private company,
which means it works such as any other private business,
that is in Brazil.
It'll have a market reserve. And Petrobras, in Pre-Salt's model,
it participates with 30% of the consortium.
So, the question that is asked is not if the model is right,
the question is:
before the Constitutional amendment, when the rule was Petrobras' monopoly
and there was an specific prediction for Petrobras,
so, I broke the monopoly, by a Constitutional amendment and the free competition came along.
So, there are 2 questions. First,
don't we need Constitutional protection to create a market reserve?
Second. Once the monopoly is broken,
and the rule of free competition was maintained under the Article 170,
can I create an amendment to restrict free competition?
I can already tell you this, the first answer,
related to the Constitutional protection,
there's no doubt about it.
I've said it in lectures and I wrote it on my book.
The legislator, and we're the majority in Congress now,
make an amendment to avoid this regulatory mark
goes to the judiciary (Supreme Court), as it's already doing in Rio de Janeiro State.
That in the Petrobras'capitalization time, started a direct action of unConstitutionality
to ask the Brazilian Supreme Court to rule the payment of the special participation as predicted in the O&G law.
There's no doubt about this one.
The second one,
if an amendment can create a restriction to free competition
and a market reserve,
I understand the Brazilian Supreme Court will rule "yes" to it.
It wouldn't be an entrenchment clause to the Constitution.
It wouldn't make impossible to change the Constitution.
So, we're able to create this rule. The first thing to answer is
instead of asking if the model is the best, is if it's safe.
And this safety has to be shown everywhere.
Another detail...
What was the difficulty surrounding Pre-Salt?
-In technological terms. -Drilling itself...
Exactly. Not only it, not only the depth,
there are some exploration areas not in depth,
the thing is... I get that pumice, and with a drill
I perforate it. The hole is in there.
This is the regular drilling. Now, if I get the same drill,
and put it in the sugar bowl,
when I take the drill out,
the bowl will move again,
and it'll recompose. That's the difficulty with the salt.
If it was a salt bowl, it would've been the same.
Because the instability and pressure matters,
-they turn the drilling harder. -And it expensive, right?
-It's expensive to drill. -It's expensive, and the level
-of technology needed is high. -The first well cost US$240 million?
-I read it... -Sorry?
-The starting cost. -The starting cost.
-US$240 million. -Do you want to see numbers?
The number given 2 weeks ago by José Formigli
in the OTC, in Houston.
The expectation is that in 2020 the operation in Pre-Salt
will be spending
US$40 million
a day.
-A day. -[That's a lot of money.
We see how much Petrobras had to raise just to invest.
-The most important... -One big controversy
is that we hear a lot about, lots of criticism,
PPSA's creation. In fact, wouldn't Petrobras have
the ability to manage Pre-Salt's exploration?
I believe... First, the question is...
Which means, it's another State owned company
and there's the risk of all the problems
that we already know in Brazil. There are lots of risks.
Doesn't Petrobras have this ability? There's a good technological ability,
but is there a managing ability?
Right, let me change the question, and base it,
on that little green book we call "Federal Constitution".
That is my guide.
Let's look through the Constitution focus.
When the monopoly was broken, with the Constitutional amendment,
the monopoly's exercise, which was Petrobras',
became part of a regulatory agency, ANP.
At that moment, Petrobras had to return the unexplored blocs to ANP,
so that it could start to bid on a concession.
When the regulatory mark of Pre-Salt was created, what do we have?
What isn't Pre-Salt, is still with ANP.
And what is Pre-Salt becomes part of PPSA.
So, what worries me, in this aspect,
is much more the coherency of the model, in legal matters,
than creating another one, not creating another one,
because Petrobras is an executor,
and it operates in Brazil, and all over the world.
-And it has foreign shareholders. -Yes. In this case,
PPSA is a closed company, but let's think for a minute,
we talk about the model of Production Sharing Agreement.
Could this be a model we've never seen in Brazil?
I always give this example. I'll give you 2 basic examples
of Model Production Sharing Contract.
There's a guy that owns a little farm, then his neighbor comes and says
"Can I put my cows in here? And we can sell the breeding,
and create in here."
What is it? Isn't it the production share?
In the same way, when a lawyer starts a tax case,
intricate by a company, and he says
"If we win this, my fee is a portion of the wins."
If there's a win, I'll share the production, right?
Which means, the success share.
We have to look at these contracts even to identify the tax incidence,
the regulation and how the court is treating it.
In this scenario, I'd like to set the political element.
-Ok. -How did you see the participation
of Lula's govern is this process? Not the govern, the president himself.
Did he leave with the feeling that he defended
this treasure of the country
by saying that part of its profit must go to social works,
creating the company and such?
The feeling that we get, right or wrong,
is that he defended the country, and not the companies,
that wanted their share of the wealth. How do you see it?
I'll ask you one more time to answer on the next segment.
-Ok. Ok?
We'll be back in a few moments.