Pedro Parente talks about the challenges and prospects of the oil & gas industry at FGV

On August 1, Fundação Getulio Vargas welcomed the President of Petrobras, Pedro Parente, to talk about the company’s efforts to regain the market’s confidence and reclaim its position as one of the drivers of growth in Brazil. The event was organized by FGV Energy as part of the ‘Energy in Focus’ series.

During his presentation, Parente addressed the current scenario of the oil market and Petrobras’ business plan. The President emphasized that the challenges of the energy market are significant, considering the new sources of oil that are emerging, geopolitical changes, and the greater influence of renewable sources. On the other hand, Parente pointed out that the world is also undergoing transformations on the demand side, such as shifts in global patterns, the spread of electric vehicles, energy storage technologies, and smart grids, in addition to changes in climate policies, treading towards lower carbon emissions.

“This industry faces a huge challenge. It is an acceleration process, and all projections lead to lower oil consumption in the long run. The key point for the industry is what will actually replace oil and gas in this USD 1.2 trillion-dollar business, which is expected to stabilize at USD 3 trillion as of 2020. That is the big question that companies will have to answer: what business can replace oil and gas in volume?” he said

The executive pointed out that energy commodity prices fell in the first half of 2017, despite the increase in the value of other commodities. Parente said that this drop can be explained by the increase in oil production, particularly in the U.S. and among major producers, such as Nigeria and Libya. In Brazil, there was also an increase in production and exports.

The President of Petrobras then talked about the current situation of the Brazilian market, which has 46 oil producers, 26 of which are operators. In 2017, pre-salt production surpassed all others combined (land, shallow waters, and deep waters) for the very first time.

Parente also spoke about the progress in the regulatory environment, in which Petrobras is no longer the sole pre-salt operator, but now has the right of first refusal to explore the blocks. Other advances include improvements in the local content policy, predictability of bidding rounds, and new programs launched by the company, such as ‘Gás para todos’ [Gas for All] and ‘Combustível Brasil’ [Brazil Fuel].

The final part of the presentation focused on Petrobras’ business and management plan. Parente shared some figures showing that the financial situation has improved, although there is still a long way to go, especially regarding financial leverage targets. In terms of management, the President pointed out that safety has become a priority with the launch of the ‘Compromisso com a vida’ [Commitment to life] program. Another breakthrough is a reinforced corporate governance structure, with changes in executive selection and the composition of the Board of Directors. Progress was also made in the decision-making process, in addition to the values of ethics and transparency, with the implementation of an anonymous complaint channel.

“We are monitoring all risks that are relevant to the company in real time. Taking the main goals as examples, a person responsible for monitoring each relevant risk and proposing mitigating measures,” he said.

Parente ended his presentation talking about the consistent improvement in Petrobras’ results, and that the main self side analysts have already recommend the purchase of company stock, which indicates that pessimism has been left behind.

Watch the full event below: