Brazil's president-elect Jair Bolsonaro aims to overhaul the oil industry. AP
Brazil's president-elect Jair Bolsonaro aims to overhaul the oil industry. AP

Brazil, Bolsonaro and oil: a future in the balance



New Brazilian president, the far-right Jair Bolsonaro, who takes office in January, has been labelled bad for the environment, human rights and democracy, but good for oil.

His surprise election is the culmination of failed policies and corruption that ensnared previous leftist governments. And whether he really does open up Brazil’s oil industry, his presidency will get a major boost from past petroleum investments.

Despite Mr Bolsanaro’s erratic and unpleasant pronouncements, state-run oil producer Petrobras does need cleaning up. Once the darling among national oil companies, a world-leader in deepwater production, it has been badly damaged under the rule of the Workers’ Party (PT) of former presidents Luiz Inacio “Lula” da Silva and Dilma Rousseff.

The discovery of giant “pre-salt” oilfields in deepwater (oil deposits trapped under a thick layer of salt deep in the Atlantic seabed) from 2006 onward promised a windfall for Brazil, alongside rising oil prices.

But resource nationalism saddled Petrobras with an impossible burden; the world’s largest upstream investment programme alongside other commitments such as a mega-refinery. Its discretion over bidding was removed, forcing Petrobras to take a stake in exploration blocks with foreign companies even if it considered them unattractive and to be sole operator of the pre-salt blocks. No company in the world could have executed such a plan.

The state firm’s missteps were compounded by the failure of private companies founded to exploit the boom, such as OGX, led by Brazil’s richest man, Eike Batista, which collapsed when most of its much-touted fields were found to be unviable. Disputes with states over the division of tax revenues and a new production sharing contract deterred foreign investment. Tough domestic content regulations drove up costs and led to delays of up to three years as local oil service providers had to build up capacity.

Oil production growth stalled, as advances in the pre-salt were undone by declines in Petrobras’ neglected legacy deepwater fields. In 2014, the country suffered its worst ever recession, including a commodity slump compounded by the effect of the oil price crash.

Petrobras also became the centre of a huge corruption scandal, “Lava Jato” or “Car-Wash”. This discredited the PT, landed Mr Lula in jail for 12 years, and led to the impeachment of Ms Rousseff.

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The PT did have notable anti-poverty achievements, without the disastrous consequences of supposedly pro-poor policies in Venezuela next door. Monthly cash payments to low-income families, the Bolsa Familia, are a model for such programmes worldwide. But Venezuela’s disastrous implosion has been a cause celèbre for the right across Latin America, however unfair the comparison to moderate left-wing parties.

Like his supposed prototype, the “Trump of the Tropics”, Mr Bolsonaro is a populist known for outrageous statements on women, race, environment and dictatorship, and not for his policy consistency. As a long-time member of congress, he promoted statism, and praised former leftist Venezuelan president Hugo Chavez. He has expressed fears that troubled electricity monopoly Eletrobras might fall into Chinese hands. Nationalist retired generals who back him also consider state oil giant Petrobras a strategic asset, and a general is a possible choice to run the company.

But a key adviser, Paulo Guedes, educated at the traditionally free-market University of Chicago, has been tipped as “super-minister” of finance, trade and planning. The new administration’s economic plan includes introducing competition in natural gas, reducing fuel subsidies, privatising Petrobras subsidiaries and removing the state firm’s monopoly on offshore operatorship. In echoes of its North American soulmate, it also plans to open the Amazon to mining and logging and build hydroelectric and nuclear power plants there, although it has dropped a threat to withdraw from the Paris climate agreement.

Brazil is a key country for the medium and long-term oil market. After the US and Russia, it is expected to contribute the most to production growth outside Opec, gaining 1.8 million to 4 million barrels per day to 2040, according to BP and the International Energy Agency. Alongside neighbouring Guyana, it has been the main area for new non-Opec conventional oil finds over the last decade.

Next year, Brazil will offer some 9 million to15 billion barrels of discovered oil for bid to private firms, hoping to raise $27 billion.

Shell has become the leading international player in Brazil via its 2015 acquisition of BG, and Norway’s Equinor, Total, Chevron and China’s Sinopec are other important stakeholders. The country has become central to their plans for oil output growth, exposing them to the upsides and possible turbulence of the radical new administration.

Despite Mr Bolsonaro’s cosiness with US President Donald Trump, his economic plans will depend on China as an investor and buyer of petroleum, iron ore, soya beans, sugar and other commodities. In these areas, Brazil is already benefiting from the retaliatory China-US tariffs.

Whatever policies are followed, the economy is going to get a belated boost from previous oilfield investment. Petrobras’ production is set to grow by 9 to 12 percent next year, adding 200-to 240,000 barrels per day, and pre-salt fields should add 1 million bpd by 2025. If oil prices remain reasonably strong, the NOC’s profits, already the highest since 2011, will reduce the deficit and give the new government more money to play with. In fact, Mr Bolsanaro has been happy to steal policies from the left, saying he would expand the Bolsa Familia – which higher oil revenues would allow.

A fragmented congress may yet limit how much Mr Bolsonaro can change Brazil. But the Brazilian left must take much of the blame for his rise, in how it squandered a potential oil boom. A gush of petro-real will sustain his rule and give him a freer hand.

Robin Mills is CEO of Qamar Energy, and author of The Myth of the Oil Crisis

Tickets

Tickets start at Dh100 for adults, while children can enter free on the opening day. For more information, visit www.mubadalawtc.com.

The specs: 2018 Jeep Compass

Price, base: Dh100,000 (estimate)

Engine: 2.4L four-cylinder

Transmission: Nine-speed automatic

Power: 184bhp at 6,400rpm

Torque: 237Nm at 3,900rpm

Fuel economy, combined: 9.4L / 100km

Company%C2%A0profile
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HWJN
%3Cp%3EDirector%3A%20Yasir%20Alyasiri%3C%2Fp%3E%0A%3Cp%3EStarring%3A%20Baraa%20Alem%2C%20Nour%20Alkhadra%2C%20Alanoud%20Saud%3C%2Fp%3E%0A%3Cp%3ERating%3A%203%2F5%3C%2Fp%3E%0A%3Cp%3E%3C%2Fp%3E%0A
Jigra
Director: Vasan Bala
Starring: Alia Bhatt, Vedang Raina, Manoj Pahwa, Harsh Singh
Rated: 3.5/5
UAE currency: the story behind the money in your pockets
Call of Duty: Black Ops 6

Developer: Treyarch, Raven Software
Publisher:  Activision
Console: PlayStation 4 & 5, Windows, Xbox One & Series X/S
Rating: 3.5/5

Naga
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if you go

The flights

Flydubai flies to Podgorica or nearby Tivat via Sarajevo from Dh2,155 return including taxes. Turkish Airlines flies from Abu Dhabi and Dubai to Podgorica via Istanbul; alternatively, fly with Flydubai from Dubai to Belgrade and take a short flight with Montenegro Air to Podgorica. Etihad flies from Abu Dhabi to Podgorica via Belgrade. Flights cost from about Dh3,000 return including taxes. There are buses from Podgorica to Plav. 

The tour

While you can apply for a permit for the route yourself, it’s best to travel with an agency that will arrange it for you. These include Zbulo in Albania (www.zbulo.org) or Zalaz in Montenegro (www.zalaz.me).

 

Tree of Hell

Starring: Raed Zeno, Hadi Awada, Dr Mohammad Abdalla

Director: Raed Zeno

Rating: 4/5

COMPANY PROFILE

Company: Bidzi

● Started: 2024

● Founders: Akshay Dosaj and Asif Rashid

● Based: Dubai, UAE

● Industry: M&A

● Funding size: Bootstrapped

● No of employees: Nine

COMPANY PROFILE
Name: ARDH Collective
Based: Dubai
Founders: Alhaan Ahmed, Alyina Ahmed and Maximo Tettamanzi
Sector: Sustainability
Total funding: Self funded
Number of employees: 4

The Breadwinner

Director: Nora Twomey

Starring: Saara Chaudry,  Soma Chhaya,  Laara Sadiq 

Three stars

Joker: Folie a Deux

Starring: Joaquin Phoenix, Lady Gaga, Brendan Gleeson

Director: Todd Phillips 

Rating: 2/5

How to protect yourself when air quality drops

Install an air filter in your home.

Close your windows and turn on the AC.

Shower or bath after being outside.

Wear a face mask.

Stay indoors when conditions are particularly poor.

If driving, turn your engine off when stationary.

The specs
Engine: 77.4kW all-wheel-drive dual motor
Power: 320bhp
Torque: 605Nm
Transmission: Single-speed automatic
Price: From Dh219,000
On sale: Now
THE DRAFT

The final phase of player recruitment for the T10 League has taken place, with UAE and Indian players being drafted to each of the eight teams.

Bengal Tigers
UAE players: Chirag Suri, Mohammed Usman
Indian: Zaheer Khan

Karachians
UAE players: Ahmed Raza, Ghulam Shabber
Indian: Pravin Tambe

Kerala Kings
UAE players: Mohammed Naveed, Abdul Shakoor
Indian: RS Sodhi

Maratha Arabians
UAE players: Zahoor Khan, Amir Hayat
Indian: S Badrinath

Northern Warriors
UAE players: Imran Haider, Rahul Bhatia
Indian: Amitoze Singh

Pakhtoons
UAE players: Hafiz Kaleem, Sheer Walli
Indian: RP Singh

Punjabi Legends
UAE players: Shaiman Anwar, Sandy Singh
Indian: Praveen Kumar

Rajputs
UAE players: Rohan Mustafa, Ashfaq Ahmed
Indian: Munaf Patel

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Company%20profile
%3Cp%3E%3Cstrong%3ECompany%20name%3A%3C%2Fstrong%3E%20Fasset%0D%3Cbr%3E%3Cstrong%3EStarted%3A%20%3C%2Fstrong%3E2019%0D%3Cbr%3E%3Cstrong%3EFounders%3A%3C%2Fstrong%3E%20Mohammad%20Raafi%20Hossain%2C%20Daniel%20Ahmed%0D%3Cbr%3E%3Cstrong%3EBased%3A%3C%2Fstrong%3E%20Dubai%0D%3Cbr%3E%3Cstrong%3ESector%3A%20%3C%2Fstrong%3EFinTech%0D%3Cbr%3E%3Cstrong%3EInitial%20investment%3A%3C%2Fstrong%3E%20%242.45%20million%0D%3Cbr%3E%3Cstrong%3ECurrent%20number%20of%20staff%3A%3C%2Fstrong%3E%2086%0D%3Cbr%3E%3Cstrong%3EInvestment%20stage%3A%3C%2Fstrong%3E%20Pre-series%20B%0D%3Cbr%3E%3Cstrong%3EInvestors%3A%3C%2Fstrong%3E%20Investcorp%2C%20Liberty%20City%20Ventures%2C%20Fatima%20Gobi%20Ventures%2C%20Primal%20Capital%2C%20Wealthwell%20Ventures%2C%20FHS%20Capital%2C%20VN2%20Capital%2C%20local%20family%20offices%3C%2Fp%3E%0A
Company profile

Company name: Dharma

Date started: 2018

Founders: Charaf El Mansouri, Nisma Benani, Leah Howe

Based: Abu Dhabi

Sector: TravelTech

Funding stage: Pre-series A 

Investors: Convivialite Ventures, BY Partners, Shorooq Partners, L& Ventures, Flat6Labs

How to watch Ireland v Pakistan in UAE

When: The one-off Test starts on Friday, May 11
What time: Each day’s play is scheduled to start at 2pm UAE time.
TV: The match will be broadcast on OSN Sports Cricket HD. Subscribers to the channel can also stream the action live on OSN Play.


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