

Currently released so far... 12689 / 251,287
Browse latest releases
2010/12/01
2010/12/02
2010/12/03
2010/12/04
2010/12/05
2010/12/06
2010/12/07
2010/12/08
2010/12/09
2010/12/10
2010/12/11
2010/12/12
2010/12/13
2010/12/14
2010/12/15
2010/12/16
2010/12/17
2010/12/18
2010/12/19
2010/12/20
2010/12/21
2010/12/22
2010/12/23
2010/12/24
2010/12/25
2010/12/26
2010/12/27
2010/12/28
2010/12/29
2010/12/30
2011/01/01
2011/01/02
2011/01/04
2011/01/05
2011/01/07
2011/01/09
2011/01/10
2011/01/11
2011/01/12
2011/01/13
2011/01/14
2011/01/15
2011/01/16
2011/01/17
2011/01/18
2011/01/19
2011/01/20
2011/01/21
2011/01/22
2011/01/23
2011/01/24
2011/01/25
2011/01/26
2011/01/27
2011/01/28
2011/01/29
2011/01/30
2011/01/31
2011/02/01
2011/02/02
2011/02/03
2011/02/04
2011/02/05
2011/02/06
2011/02/07
2011/02/08
2011/02/09
2011/02/10
2011/02/11
2011/02/12
2011/02/13
2011/02/14
2011/02/15
2011/02/16
2011/02/17
2011/02/18
2011/02/19
2011/02/20
2011/02/21
2011/02/22
2011/02/23
2011/02/24
2011/02/25
2011/02/26
2011/02/27
2011/02/28
2011/03/01
2011/03/02
2011/03/03
2011/03/04
2011/03/05
2011/03/06
2011/03/07
2011/03/08
2011/03/09
2011/03/10
2011/03/11
2011/03/13
2011/03/14
2011/03/15
2011/03/16
2011/03/17
2011/03/18
2011/03/19
2011/03/20
2011/03/21
2011/03/22
2011/03/23
2011/03/24
2011/03/25
2011/03/26
2011/03/27
2011/03/28
2011/03/29
2011/03/30
2011/03/31
2011/04/01
2011/04/02
2011/04/03
2011/04/04
2011/04/05
2011/04/06
2011/04/07
2011/04/08
2011/04/09
2011/04/10
2011/04/11
2011/04/12
2011/04/13
2011/04/14
2011/04/15
2011/04/16
2011/04/17
2011/04/18
2011/04/19
2011/04/20
2011/04/21
2011/04/22
2011/04/23
2011/04/24
2011/04/25
2011/04/26
2011/04/27
2011/04/28
2011/04/29
2011/04/30
2011/05/01
2011/05/02
2011/05/03
2011/05/04
2011/05/05
2011/05/06
2011/05/07
2011/05/08
2011/05/09
2011/05/10
2011/05/11
2011/05/12
2011/05/13
2011/05/14
2011/05/15
2011/05/16
2011/05/17
2011/05/18
2011/05/19
Browse by creation date
Browse by origin
Embassy Athens
Embassy Asuncion
Embassy Astana
Embassy Asmara
Embassy Ashgabat
Embassy Apia
Embassy Ankara
Embassy Amman
Embassy Algiers
Embassy Addis Ababa
Embassy Accra
Embassy Abuja
Embassy Abu Dhabi
Embassy Abidjan
Consulate Auckland
Consulate Amsterdam
Consulate Adana
American Institute Taiwan, Taipei
Embassy Bujumbura
Embassy Buenos Aires
Embassy Budapest
Embassy Bucharest
Embassy Brussels
Embassy Bridgetown
Embassy Bratislava
Embassy Brasilia
Embassy Bogota
Embassy Bishkek
Embassy Bern
Embassy Berlin
Embassy Belmopan
Embassy Belgrade
Embassy Beirut
Embassy Beijing
Embassy Banjul
Embassy Bangkok
Embassy Bandar Seri Begawan
Embassy Bamako
Embassy Baku
Embassy Baghdad
Consulate Barcelona
Embassy Copenhagen
Embassy Conakry
Embassy Colombo
Embassy Chisinau
Embassy Caracas
Embassy Canberra
Embassy Cairo
Consulate Curacao
Consulate Ciudad Juarez
Consulate Chennai
Consulate Casablanca
Consulate Cape Town
Consulate Calgary
Embassy Dushanbe
Embassy Dublin
Embassy Doha
Embassy Djibouti
Embassy Dili
Embassy Dhaka
Embassy Dar Es Salaam
Embassy Damascus
Embassy Dakar
Consulate Dubai
Embassy Helsinki
Embassy Harare
Embassy Hanoi
Consulate Ho Chi Minh City
Consulate Hermosillo
Consulate Hamilton
Consulate Hamburg
Consulate Halifax
Embassy Kyiv
Embassy Kuwait
Embassy Kuala Lumpur
Embassy Kinshasa
Embassy Kingston
Embassy Kigali
Embassy Khartoum
Embassy Kathmandu
Embassy Kampala
Embassy Kabul
Consulate Kolkata
Embassy Luxembourg
Embassy Luanda
Embassy London
Embassy Ljubljana
Embassy Lisbon
Embassy Lima
Embassy Lilongwe
Embassy La Paz
Consulate Lahore
Consulate Lagos
Mission USOSCE
Mission USNATO
Mission UNESCO
Embassy Muscat
Embassy Moscow
Embassy Montevideo
Embassy Monrovia
Embassy Minsk
Embassy Mexico
Embassy Mbabane
Embassy Maputo
Embassy Manila
Embassy Manama
Embassy Managua
Embassy Malabo
Embassy Madrid
Consulate Munich
Consulate Mumbai
Consulate Montreal
Consulate Monterrey
Consulate Milan
Consulate Melbourne
Embassy Nicosia
Embassy Niamey
Embassy New Delhi
Embassy Ndjamena
Embassy Nassau
Embassy Nairobi
Consulate Naples
Consulate Naha
Embassy Pristina
Embassy Pretoria
Embassy Prague
Embassy Port Of Spain
Embassy Port Louis
Embassy Port Au Prince
Embassy Phnom Penh
Embassy Paris
Embassy Paramaribo
Embassy Panama
Consulate Peshawar
REO Basrah
Embassy Rome
Embassy Riyadh
Embassy Riga
Embassy Reykjavik
Embassy Rangoon
Embassy Rabat
Consulate Rio De Janeiro
Consulate Recife
Secretary of State
Embassy Suva
Embassy Stockholm
Embassy Sofia
Embassy Skopje
Embassy Singapore
Embassy Seoul
Embassy Sarajevo
Embassy Santo Domingo
Embassy Santiago
Embassy Sanaa
Embassy San Salvador
Embassy San Jose
Consulate Strasbourg
Consulate St Petersburg
Consulate Shenyang
Consulate Shanghai
Consulate Sapporo
Consulate Sao Paulo
Embassy Tunis
Embassy Tripoli
Embassy Tokyo
Embassy The Hague
Embassy Tel Aviv
Embassy Tehran
Embassy Tegucigalpa
Embassy Tbilisi
Embassy Tashkent
Embassy Tallinn
Consulate Toronto
Consulate Tijuana
USUN New York
USEU Brussels
US Office Almaty
US Mission Geneva
US Interests Section Havana
US Delegation, Secretary
UNVIE
Embassy Ulaanbaatar
Embassy Vilnius
Embassy Vienna
Embassy Vatican
Embassy Valletta
Consulate Vladivostok
Consulate Vancouver
Browse by tag
AF
ASEC
AR
AEMR
AMGT
AE
AU
AID
AORC
APER
AS
AM
AFIN
AMED
AJ
AGR
ACOA
ANET
ASIG
ABLD
AL
AA
APECO
AGAO
AY
AGMT
APEC
AINF
AG
ACS
AECL
AFFAIRS
ABUD
ASUP
ADANA
AADP
AMCHAMS
ARF
ASEAN
ADPM
ATRN
ALOW
APCS
ADCO
ACAO
AORG
AROC
AO
AODE
ACABQ
AX
AMEX
AFGHANISTAN
AZ
AND
ARM
AQ
ATFN
AMBASSADOR
ACBAQ
AFSI
AFSN
AC
AUC
ASEX
AER
AVERY
AGRICULTURE
ASCH
AFU
AMG
ATPDEA
ASECKFRDCVISKIRFPHUMSMIGEG
AORL
ADM
AN
AIT
BU
BR
BL
BO
BA
BB
BG
BM
BBSR
BH
BEXP
BK
BD
BTIO
BT
BE
BY
BF
BX
BP
BRUSSELS
BILAT
BIDEN
BC
BMGT
BWC
BN
BTIU
CH
CG
CF
CU
CE
CVIS
CASC
CO
CS
CA
CIDA
CBW
CW
CMGT
CI
CODEL
CY
CPAS
CJAN
CD
CWC
CDG
CIA
CL
CROS
CAPC
CTR
CT
CR
CBSA
CEUDA
COM
CFED
CV
CACS
CARSON
CLINTON
CN
CONS
CM
CAC
CIC
COPUOS
CDC
CONDOLEEZZA
CICTE
COUNTER
COUNTRY
CBE
CKGR
CHR
CVR
COUNTERTERRORISM
CITEL
CLEARANCE
COE
CARICOM
CB
CSW
CITT
CACM
CDB
CJUS
CTM
CAN
CLMT
CBC
CNARC
CIS
EG
EZ
EUN
ECON
ETRD
ECPS
EFIN
ENRG
ETTC
EPET
EINV
EAID
EAIR
EWWT
EU
EAGR
EC
ELAB
EIND
EN
EMIN
ESENV
ENNP
EFIS
ELTN
ET
ECIN
EFTA
ES
EINT
EI
ENGR
ETRDEINVECINPGOVCS
ENVI
ETRDECONWTOCS
ECINECONCS
ELN
ELECTIONS
ENVR
EXTERNAL
EXIM
ETRO
ENIV
ESA
ER
EK
EUR
EFINECONCS
EUMEM
EUREM
EPA
ERNG
ENERG
ECA
ETRC
EINVEFIN
ETC
EAP
ECONOMY
EINN
ECONOMIC
EXBS
ECUN
ENGY
ECONOMICS
EIAR
EINDETRD
ECONEFIN
EURN
EDU
ETRDEINVTINTCS
ECIP
EFIM
EAIDS
EREL
EINVETC
ECONCS
ETRA
EAIG
EUC
ERD
ETRN
EINVECONSENVCSJA
EEPET
EUNCH
IS
IZ
IR
IC
IO
IN
ID
IGAD
IT
ILC
IAEA
ITU
ICAO
IMO
IBRD
IMF
ICJ
IAHRC
ITF
INRA
INRO
IWC
IQ
IV
ICRC
ICTY
INRB
IEFIN
ILO
ITRA
ITALY
IBET
ISRAELI
IL
INTELSAT
IRC
IDP
ICTR
IRAQI
IPR
IIP
INMARSAT
ITPGOV
ITALIAN
INTERNAL
IRS
IA
INTERPOL
IEA
INR
IZPREL
IRAJ
IF
ITPHUM
ISRAEL
IACI
INDO
IDA
ISLAMISTS
KSPR
KNNP
KWBG
KAWK
KISL
KPAO
KN
KS
KIPR
KCRM
KDEM
KIRF
KJUS
KHLS
KSCA
KOMC
KAWC
KV
KFRD
KWMN
KTIP
KPWR
KSUM
KGHG
KTIA
KTFN
KIRC
KCOR
KACT
KMDR
KGIC
KOLY
KUNR
KIDE
KMPI
KPKO
KCFE
KVPR
KRAD
KPAL
KFRDCVISCMGTCASCKOCIASECPHUMSMIGEG
KTEX
KTDB
KFSC
KZ
KSEP
KFLU
KE
KU
KPLS
KRVC
KRIM
KSTH
KG
KFLO
KPOA
KICC
KDDG
KPRV
KTBT
KBCT
KSAF
KMOC
KDRG
KBIO
KREC
KSTC
KVRP
KBTR
KMIG
KENV
KNSD
KCGC
KWAC
KFRDKIRFCVISCMGTKOCIASECPHUMSMIGEG
KWMM
KPRP
KNEI
KPAI
KO
KVIR
KX
KMCA
KCRS
KMFO
KID
KCIP
KNAR
KR
KCRCM
KBTS
KSEO
KHDP
KFIN
KOCI
KGIT
KNUP
KPAONZ
KNUC
KNNPMNUC
KERG
KSCI
KTLA
KHIV
KCSY
KTRD
KMRS
KNPP
KJUST
KCMR
KTER
KRCM
KCFC
KSAC
KCHG
KREL
KFTFN
KCOM
KLIG
KDEMAF
KAID
KGCC
KICA
KHUM
KSEC
KPIN
KESS
KDEV
KWWMN
KOM
KWNM
KRFD
KRGY
KIFR
KWMNCS
KPAK
KOMS
KHSA
MPOS
MOPS
MARR
MTCR
MNUC
MASS
MX
MCAP
MAR
MTRE
MASC
MK
MG
MTCRE
MI
MD
MA
MO
MY
MU
ML
MRCRE
MAS
MEDIA
MC
MR
MIL
MW
MARAD
MAPP
MZ
MP
MOPPS
MTS
MLS
MILI
MEPN
MEPI
MEETINGS
MERCOSUR
MT
MCC
MIK
MAPS
MV
MILITARY
MDC
MEPP
MASSMNUC
MUCN
MQADHAFI
NATO
NG
NL
NZ
NT
NW
NO
NU
NS
NPT
NASA
NI
NK
NSG
NE
NORAD
NAFTA
NP
NATIONAL
NSSP
NSF
NA
NGO
NV
NR
NDP
NIPP
NZUS
NH
NC
NEW
NRR
NAR
NATOPREL
NPG
NSC
NPA
NSFO
OPDC
OPRC
OEXC
OTRA
ODIP
OIIP
OVIP
OPIC
OPCW
OAS
OREP
OSCE
OSCI
OES
OFDP
OECD
OCS
OIC
OPAD
OVP
OHUM
OFFICIALS
OIE
OTR
OMIG
OSAC
OBSP
OFDA
ON
OCII
PREL
PGOV
PARM
PINR
PTER
PHUM
PK
PREF
PM
PHSA
PA
PINS
PE
PBTS
PCI
PO
PL
POGOV
PAK
PEL
PGIV
PROP
PP
PBIO
POL
POLITICS
POLICY
PINL
PBT
PMIL
POV
PTBS
PG
POSTS
PALESTINIAN
PROV
PNAT
PINF
PRL
PAS
PDOV
PRAM
PREO
PAHO
PHUMPGOV
PAO
PREFA
PSI
POLITICAL
PAIGH
PARMS
PROG
PTERE
PRGOV
PORG
PS
PGOF
PKFK
PSOE
PEPR
PPA
PINT
PMAR
PRELP
PNG
PFOR
PUNE
PGOVLO
PHUMBA
PSEPC
PNR
POLINT
PGOVE
PHALANAGE
PARTY
PDEM
PECON
PGOC
PY
PLN
PHUH
PF
PHUS
PU
PARTIES
PCUL
PGGV
PSA
PGOVSMIGKCRMKWMNPHUMCVISKFRDCA
PHUMPREL
RS
RU
RW
REACTION
RCMP
RSO
RO
RP
ROOD
RM
ROBERT
RICE
REGION
RSP
RF
RIGHTS
RIGHTSPOLMIL
RUPREL
RELATIONS
RFE
REPORT
SY
SP
SOCI
SMIG
SNAR
SCUL
SC
SU
SO
SI
SENV
SZ
SW
SA
SR
SF
SEVN
SN
STEINBERG
SEN
SG
SYR
SWE
SK
SH
SNARCS
SAARC
SNARIZ
SPCE
SARS
SNARN
SCRS
SYRIA
SL
SENVKGHG
SAN
ST
SIPDIS
SSA
SPCVIS
SOFA
SANC
SHI
SHUM
SIPRS
TSPA
TSPL
TU
TBIO
TRGY
TPHY
TS
TP
TW
TBID
TI
TF
TZ
TD
TT
TN
TNGD
TC
TX
TH
TL
TIP
THPY
TV
TK
TERRORISM
TO
TRSY
TURKEY
TINT
TFIN
TAGS
TR
US
UNSC
UNGA
UK
UP
UNCHC
UN
UNMIK
UNCSD
UY
USTR
USOAS
UNHRC
UNFCYP
UG
UNAUS
UNESCO
UNIDROIT
UNO
UV
UNHCR
USUN
UZ
USNC
UNCHR
UNCND
UNEP
USEU
USPS
USAID
UE
UNVIE
UAE
UNDP
UNODC
UNCHS
UNFICYP
UNDESCO
UNC
UNPUOS
UNDC
UNICEF
Browse by classification
Community resources
courage is contagious
Viewing cable 08RIODEJANEIRO19, U.S. OIL COMPANIES ON INVESTMENT OPPORTUNITIES IN BRAZIL
If you are new to these pages, please read an introduction on the structure of a cable as well as how to discuss them with others. See also the FAQs
Understanding cables
Every cable message consists of three parts:
- The top box shows each cables unique reference number, when and by whom it originally was sent, and what its initial classification was.
- The middle box contains the header information that is associated with the cable. It includes information about the receiver(s) as well as a general subject.
- The bottom box presents the body of the cable. The opening can contain a more specific subject, references to other cables (browse by origin to find them) or additional comment. This is followed by the main contents of the cable: a summary, a collection of specific topics and a comment section.
Discussing cables
If you find meaningful or important information in a cable, please link directly to its unique reference number. Linking to a specific paragraph in the body of a cable is also possible by copying the appropriate link (to be found at theparagraph symbol). Please mark messages for social networking services like Twitter with the hash tags #cablegate and a hash containing the reference ID e.g. #08RIODEJANEIRO19.
Reference ID | Created | Released | Classification | Origin |
---|---|---|---|---|
08RIODEJANEIRO19 | 2008-01-28 16:36 | 2010-12-13 07:00 | UNCLASSIFIED//FOR OFFICIAL USE ONLY | Consulate Rio De Janeiro |
VZCZCXRO3089
RR RUEHRG
DE RUEHRI #0019/01 0281636
ZNR UUUUU ZZH
R 281636Z JAN 08
FM AMCONSUL RIO DE JANEIRO
TO RUEHC/SECSTATE WASHDC 4341
INFO RUEHBR/AMEMBASSY BRASILIA 0701
RUEHSO/AMCONSUL SAO PAULO 5125
RUEHRG/AMCONSUL RECIFE 3403
UNCLAS SECTION 01 OF 04 RIO DE JANEIRO 000019
SIPDIS
SENSITIVE
SIPDIS
STATE FOR WHA/BSC
E.O.: 12958: N/A
TAGS: ECON EINV ENRG PGOV BR
SUBJECT: U.S. OIL COMPANIES ON INVESTMENT OPPORTUNITIES IN BRAZIL
Sensitive But Unclassified. Please handle accordingly.
¶1. (SBU) Summary: The US Commercial Service in Rio organized an oil roundtable discussion with US oil companies and Ambassador Sobel on January 8, 2008. The CEOs of Chevron, Exxon Mobil, Devon Energy, Anadarko, and Hess Corporation briefed Ambassador Sobel on the investment climate for foreign players in Brazil, prospects for future oil discoveries, and shared their views on the oil and gas regulatory and fiscal regimes. The participants believed the overall investment climate was positive for US companies but obstacles included instability in the oil auctions and in the tax and licensing regimes. The Ambassador offered to advocate on behalf of the participants with GOB officials and w ith the National Petroleum Agency (ANP). The companies welcomed this idea and suggested emphasizing the need for stability to encourage investment. The Ambassador also proposed that the Brazilian Petroleum Institute (IBP) meet with relevant foreign ambassadors in Brazil to discuss overall concerns. End of Summary.
¶2. (U) Ambassador Sobel met with executives from US oil companies operating in Brazil on January 8 in a roundtable organized by the US Commercial Service in Rio and hosted by American Chamber of Commerce President Joao Cesar Lima. Participants included Anadarko President Kurt McCaslin; Chevron Brasil President Daniel Rocha and Business Development and Government Relations Director Patricia Pradal; Devon Energy President Murilo Marroquim; Exxon Mobil (Esso) President John Knapp; and Hess Brasil Exploration Coordinator Paul Gomes and Negotiations and Business Manager Joseph Wesley.
Brazil's Oil and Gas Potential ------------------------------
¶3. (SBU) Ambassador Sobe l asked the participants for an overall description of the investment climate for US companies in Brazil. Expressing the view of all present, John Knapp, President of Exxon Mobil, confirmed that Exxon had a great deal of interest in Brazil because of perceived substantial undiscovered potential beyond even the Tupi field that Petrobras recently discovered. However, he expressed concern about the recent unstable investment environment caused by Rio State tax changes, oil blocks being removed in the last two auctions, and the Government of Brazil's (GOB) apparent willingness to change the oil concession contracts. He indicated that companies might begin to reassess the economic benefits of investing if there were continued instability.
Changes in Oil Auctions -----------------------
¶4. (SBU) Responding to Ambassador Sobel's question on whether the oil blocks removed from the recent 9th oil licensing round would be made available for an upcoming auction, Knapp said that the GOB had not yet made a decision. One of the justifications alleged by the GOB for having removed those blocks was based on Petrobras' statement that the Tupi oilfield discovery brought a new exploration niche for Brazil, thus reducing the exploration risk to find oil, with which Knapp did not agree. In his opinion, exploring under-salt areas presented significant geological and technical challenges. Devon Energy's President Murilo Marroquim added that Petrobras had lied about the easy prospects of finding oil in under-salt areas due to the Tupi discovery. He believed Petrobras influenced the GOB to remove the blocks from the 9th oil auction to avoid stiff competition with other bidders. Devon asserted that Petrobras did not have sufficient drilling equipment so had an interest in removing those blocks to allow more preparation time for it to bid for those blocks in future auctions.
¶5. (SBU) Knapp believed that the GOB might reconsider the current oil auction model that is based on signature bonuses. Marroquim from Devon did not seem so sure about drastic changes, and added that if substantial modifications to the current oil law were proposed, the Brazilian Congress would need to approve them, which might take a long time. Marroquim believed that the GOB might not want to take this route as it may have an unpredictable outcome. For example, he and others cited the new proposed gas bill that has been in Congress for at least four years. Petrobras has been advocating to protect its interests in gas infrastructure, but several amendments have been made to the gas bill that may, in the end, not favor Petrobras. (Note: In a recent interview to the Folha de Sco Paulo newspaper, Petrobras President Gabrielli cleared defended changes in future oil auctions. He views oil production sharing or service rendering contracts, where an oil company operates an oilfield and is financially compensated for that while the State keeps the oil field ownership, as bette r contract alternatives for Brazil.)
Advocacy through IBP --------------------
¶6. (SBU) Ambassador Sobel suggested that the US companies engage other foreign Chambers of Commerce in Brazil to advocate for their interests. Marroquim assured the Ambassador that they already work through the Brazilian Petroleum Institute (IBP) and noted that generally when politically sensitive topics were discussed at IBP meetings, Petrobras officials tended not to participate as actively. Ambassador Sobel also suggested that the IBP organize a meeting with foreign Ambassadors in Brazil to have an open dialogue about the sector's issues. Chevron Business Development and Government Relations Director Patricia Pradal, who sits on the IBP Steering Group, expressed an interest in coordinating such a roundtable. Additionally, Rio American Chamber of Commerce (AmCham) President Joco Lima mentioned that some state governors seemed interested in a roundtable with the AmC hams, which Ambassador Sobel found interesting due to the political clout it may give to the oil industry.
¶7. (SBU) Marroquim further commented that in December 2007, right after the 9th oil auction, the IBP met with the National Oil Regulatory Agency (ANP) to voice the oil industry's concern about possible changes in the oil law. The ANP General Director reportedly told IBP that the GOB might want to review current oil royalty and special participation fee levels. (Note: The latter refers to payment due on oil and natural gas exploration and production in the case of high volume or high profit margin fields. The basis for calculating the special participation fees is net revenue from quarterly production from each field after the legally permitted deductions. The percentage rates vary from 10 to 40%.) If these fee changes are made, IBP believes there will be no need to pass them by Congress. Anadarko's President Kurt McCaslin said that oil royalties were in place in the Gul f of Mexico, but special participation fees were not. McCaslin emphasized that indirect taxes in Brazil, in general, were a burden for foreign investors.
Partnership with Petrobras --------------------------
¶8. (SBU) All US companies present at the oil roundtable confirmed that they are partnered with Petrobras in some capacity. For example, Devon holds nine oil concessions in Brazil, three of which are in partnership with Petrobras. Anadarko is partnered with Petrobras in four out of ten oil concessions. Chevron is currently developing the Frade oil field with Petrobras. Hess has one block in partnership with Petrobras and Exxon, the latter as the field operator.
¶9. (SBU) McCaslin stressed that Petrobras owned oil and gas infrastructure in Brazil, but being a partner with Petrobras did not mean one would have automatic access to the facilities. Marroquim stated that if one produced natural gas, it had to sell to Petrobras. On the other hand, oil offshore production did not depend as much on Petrobras' infrastructure, making exports from Brazil an easy process. Knapp explained that it was strictly a business decision if a company wanted to work with Petrobras. Sometimes it made more sense to work independently. In this regard, Brazil could be considered an open oil market. "More and more companies now have acreage where Petrobras is not a partner." A good example of companies not partnered with Petrobras was the case of new oil player OGX, owned by a large Brazilian mining company EBX and investor Eike Batista. In the most recent oil round, OGX presented the highest bids for seven blocks with strong potential in the offshore Campos basin. OBX spent more than 1.4 billion reais (US$754 million), which was more than 70% of the total for the entire round. Batista was able to attract a team of former Petrobras officials to work at OGX, including Francisco Gros, ex-President of Petrobras; Paulo Mendonga, ex-Executive Manager of E&P of Petrobras; and Luis Reis, ex-Petrobras Contract Manager.
GOB to Limit Oil Exports from Brazil? -------------------------------------
¶10. (SBU) Another regulatory risk cited in the roundtable was that the GOB might restrict oil exports if Petrobras delayed domestic (e.g. Tupi) oil production. The Brazilian oil law allows for this possibility in case of oil shortage and energy security interests. McCaslin worried that oil shortages caused by delayed production might lead to instability in government and a subsequent change in oil laws requiring foreign companies to sell to Petrobras. Hess Corporation Oil Exploration Coordinator Paulo Otvio Gomes did not foresee any technological barriers that would inhibit Petrobras developing the Tupi field. Gomes cited Petrobras' advanced technological research center as an important tool to give all the technological support Petrobras would need. He himself led a key Petrobras' project when he worked there aimed at the geological evaluation of the und er-salt section of the Santos Basin, including the Tupi and "Sugar Loaf" deepwater areas between 1999 and 2001. Gomes believed there were further discoveries adjacent to Tupi. He hoped these fields would be offered in a competitive auction so Hess could participate.
Brazil's Gas Needs ------------------
¶11. (SBU) The participants agreed that Petrobras and Venezuela's government oil company PDVSA joint projects were aimed at increasing Brazil's heavy oil refining capacity, but Marroquim did not believe that the planned mega gas pipeline from Venezuela to Brazil would materialize since Petrobras is bringing liquefied natural gas (LNG) plants to Brazil instead. None of the US oil companies are partnered with Petrobras in this new LNG business in Brazil. In Marroquim's opinion, Brazil was being forced to invest in Bolivia to produce more gas. There is pressure for Petrobras to supply enough gas to fire the natural gas power plants because of low hy dropower reservoir levels and possible power shortages. (Note: Although Petrobras owns the majority of domestic gas-fired power plants, a predominant share of Brazil's energy comes from hydropower (81.2%)).
Taxation Problems -----------------
¶12. (SBU) When asked about the status of changes to Rio State's VAT ("ICMS") tax on oil equipment, Patricia Pradal from Chevron provided a quick background on the temporary admission regime (REPETRO) that the Federal government created in 1999. REPETRO exempted from federal taxes the importation of some of the equipment used by the oil and gas exploration and production industry. Since then, some states, particularly Rio, have made some changes that increased the states' VAT tax. (Note: About 85% of the oil produced in Brazil comes from the state of Rio. However, the VAT tax on the oil produced goes to the states where the oil is refined, mainly Sco Paulo which has four refineries. This has created a feeling of inequity.) Pradal said th at the most recent development to the VAT tax was a counter-proposal made by IBP where Rio State would tax 5% with future credits, or, alternatively, 2% without credit. The Rio State Finance Secretary Joaquim Levy is considering a 3 to 7% alternative.
¶13. (SBU) The participants welcomed Ambassador Sobel's advocacy offer with Levy and suggested that the Ambassador convey to him a message on the need for tax stability. As the oil industry's high investments are only recovered long-term, it was crucial that they invest under a stable tax regime.
Licensing Complaints --------------------
¶14. (SBU) When the Ambassador asked how relations were with Brazil's environmental licensing organization IBAMA, several participants lamented the wait time on approvals and suggested that IBAMA's personnel could benefit from training offered by other countries, as Padral noted USG officials had done before. McCaslin said, "It does not matter when you need the permit, they will approve it two we eks before."
Advocacy through Upcoming USG Visitors --------------------------------------
¶15. (SBU) Ambassador Sobel cited the upcoming visits to Brazil of Energy Secretary Bodman and other VIPs as opportunities to engage GOB officials on areas of concern. He also welcomed talking points for his upcoming meeting with ANP and suggested another oil roundtable with Secretary Bodman during his visit. (Note: CS Rio has scheduled a meeting with ANP for February 15.) Regarding the meeting with ANP, Gomes added that conveying the importance of having a 10th round in 2008 would be appreciated.
¶16. (SBU) Chevron President Daniel Rocha noted that he was impressed with ANP's efficiency during the 9th oil auction and he hoped that ANP would preserve that system as it was a cornerstone for oil investment in Brazil. He added that the ANP had strong credibility and a good reputation for respecting contract sanctity. Rocha further stated that as Petrobras had recently been able to win a lio n's share of blocks in the Gulf of Mexico, ANP should see that Brazil continued to benefit from foreign investment.
Comment -------
¶17. (SBU) Although our interlocutors complained of Brazil's somewhat inadequate climate for foreign investment due to tax instability, possible regulatory framework changes, and Petrobras' dominance and influence over regulatory issues, all oil roundtable participants seemed interested in remaining in Brazil due to good geological prospects to find oil and gas, and a more reliable investment and business environment than many other countries. A new Brazilian Minister of Mines and Energy recently assumed office. He will be faced primarily with ways to avoid power shortage in 2008 and 2009. Some directors at Petrobras are also expected to change due to political pressure from opposition parties. It remains to be seen how these changes may impact Brazil's oil sector, especially regarding future oil auctions. This cabl e has been cleared with Embassy Brasilia.
MARTINEZ