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14% Increase in Offshore Drilling in North America makes USA’s Petroleum Liquid Feedstock Market Highly Important for the Economy

Offshore drilling policy impacts shipments of export cargo and import cargo in international trade. feedstock
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14% Increase in Offshore Drilling in North America makes USA’s Petroleum Liquid Feedstock Market Highly Important for the Economy

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FMI anticipates that the global petroleum liquid feedstock market valuation could reach US$ 313 billion in 2023. As per the projection of the analysts, the market is likely to record a value of over US$ 474.1 billion by 2033, registering a CAGR of 4.2% between 2023 and 2033. Increase in oil & gas prices and the demand for aromatics and growth of the petrochemical industry and automotive fleet are expected to drive the global demand for petroleum liquid feedstock during the forecast period.

A significant area of the energy sector is the petroleum liquid feedstock market. This includes the supply and demand of different petrochemical products used as feedstock in multiple applications. It entails the production, refinement, and distribution of liquid petroleum products. They have various uses, such as the production of chemicals, polymers, and other industrial products as well as fuel for vehicles.

Global supply and demand, geopolitical unrest, and technical advancements are a few of the variables that have an impact on the liquid petroleum products market. The market is also subject to price volatility, with prices often fluctuating in response to changes in global economic conditions, production levels, and supply chain disruptions.

The market is significantly fueled by the petrochemical industry. An increase in petrochemical product utilization in end-use sectors has contributed to the petrochemical industry’s growth. Additionally, political and economic considerations have an impact on the price of oil and gas globally which shapes the market expansion.

The production and processing of aromatics are one of the main applications of petroleum liquid feedstock. Owing to their high usage as feedstock for several products, aromatic compounds like xylene, benzene, and toluene are in high demand from different end-use sectors including the chemical industries. This is likely to propel the market for petroleum liquid feedstock to expansion.

Naphthalene is a significant byproduct of petroleum liquid feedstock. The naphthalene products market is an important sub-segment of the petroleum liquid feedstock market and it has experienced significant growth lately. The increased demand for naphthalene products across different end-use sectors, such as textiles, plastics, and construction, is responsible for this expansion.

The growth in technological developments is another key market factor for the petroleum liquid feedstock industry. Specifically, the transportation industry is what drives demand for petroleum liquid feedstock. Local transportation uses naphtha and oil which are petroleum liquid feedstocks. They include motor vehicles, engine vehicles, and bunkers. Marine fuel is also used in the industrial and commercial sectors.

Naphtha is an important product within this market as it is a feedstock used in the production of various products. The naphtha products market is primarily driven by the petrochemical industry which uses naphtha as a feedstock for the production of plastics, synthetic rubber, and other chemicals. The growth of the petrochemical industry across the world has driven the demand for naphtha products in recent years. In addition to its use in the petrochemical industry, naphtha is also used as a fuel for power generation and as a blending component in gasoline production.

To produce low Sulphur fuels and high-value petrochemicals, the industry is witnessing a trend towards lighter and cleaner feedstock. Natural gas liquids (NGL) are being utilized more often as a petrochemical feedstock and as a crude oil alternative while biofuels and renewable feedstocks like biomass and waste oils are also becoming more significant.

The opportunities in the market are vast and varied. Expanding the uses of petroleum products as feedstock for new and ongoing applications in the petrochemical, refining, and energy industries is substantial potential. Developing new and innovative processing technologies to convert lower-value feedstocks into high-value products is another significant opportunity.

The Oil and Gas Sector in the United States Switches to Survival Mode

The United States petroleum liquid feedstock market is highly important for the economy of the country as it is one of the leading producers and consumers of petroleum products. The World Oil research of international petroleum ministries and departments predicted a 14% increase in offshore drilling in North America in 2022.

The availability of significant shale gas and crude oil deposits is likely to have a beneficial impact on the future of the United States industrial sector. For instance, according to the Energy Information Administration (EIA), proven crude oil reserves increased to 367 million barrels in 2019. The extensive shale resource development and the expanding use of data analytics to boost drilling and production are also anticipated to hasten the adoption of oil & gas analytics.

Nevertheless, factors including a drop in exploration and production activity and an increase in inventory costs limit market expansion. With growing concerns over climate change and the transition towards cleaner energy sources, the market is likely to face significant challenges during the forecast period.

For the first time since EIA started providing statistics on renewable diesel production, renewable diesel output topped biodiesel production in the January 2023 Petroleum Supply Monthly (PSM), which contains United States’ biofuel production data through November 2022.

Competitive Landscape

The global petroleum liquid feedstock market is highly fragmented with Tier-I players accounting for approximately 25%-35% of the global petroleum liquid feedstock market, while other global players along with several local players account for the remaining market share. Global market leaders in the petroleum liquid feedstock market are BP p.l.c., Exxon Mobil Corporation, TOTAL S.A., Royal Dutch Shell plc, Idemitsu Kosan Co., Ltd., Flint Hills Resources and YPF.

Key Market Players and Their Recent Developments in the Petroleum Liquid Feedstock Market

BP p.l.c. – The British Petroleum Corporation plc and BP Amoco plc were both renamed to become BP plc, a global oil and gas corporation with its headquarters in London. According to sales and earnings, it is among the top “supermajors” in the oil and gas industry. It is a vertically integrated business that engages in electricity generation, trading, distribution, and marketing, as well as oil and gas exploration and extraction.

In September 2022, the agreement to buy EDF Energy Services was announced by BP p.l.c. This increased BP’s market share in the retail electricity and gas market for the United States commercial and industrial (C&I) customers.

In August 2022, together, BP and Eni formally launched Azule Energy, a new independent joint venture that combines the two firms’ Angolan activities in a 50/50 split.

In February 2022, a strategic partnership between Nuseed and BP was formed to quicken the market’s acceptance of Nuseed Carinata as a low-carbon and sustainable biofuel feedstock.

Exxon Mobil Corporation – The ExxonMobil Corporation is a global oil and gas company with its headquarters in the United States. It was created on November 30, 1999, by the union of Exxon and Mobil. These two retail brands are still in use today with Esso for gas stations and downstream goods. The corporation is vertically integrated throughout the whole oil and gas sector. It also has a chemicals section that creates plastic, synthetic rubber, and other chemical goods.

In January 2023, ExxonMobil disclosed that it possessed a bulk stake in Imperial Oil Limited. The business will spend around US$560 million to advance the building of Canada’s leading renewable fuel facility.

In November 2022, ExxonMobil revealed the arrival of the first LNG cargo from the $8 billion Coral South floating LNG (FLNG) project off the coast of Mozambique, adding more LNG to the world energy market.

TotalEnergies – One of the seven supermajor oil corporations, TotalEnergies SA is a French multinational integrated energy and petroleum firm that was created in 1924. Its operations span the whole oil and gas value chain, from the exploration and extraction of crude oil and natural gas to the creation of electricity. Its maneuver also includes the movement of petroleum products across international borders and the sale of those products.

In January 2023, the Lapa South-West oil development, which is 300 km off the Brazilian coast in the Santos Basin, received TotalEnergies’ approval for the final investment decision. With a 45% ownership stake and a joint venture with Shell (30%) and Repsol Sinopec (25%), TotalEnergies manages the project. Three wells will be used to develop Lapa South-West.

In September 2022, in the Grandpuits (Seine-et-Marne) zero-crude platform, TotalEnergies and SARIA reached a partnership to develop sustainable aviation fuel.

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Brazilian’s Minister of State of Mines and Energy goes in Depth about Brazil’s Resilience through the Pandemic

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Brazil has proven to be a durable country despite the peculiar situation faced globally. As Latin America’s largest country, Brazil has secured $78.2 billion in investments this year while making significant improvements to drive its sustained success. The recent changes have resulted in the country becoming a global hub for innovation and economics.

Global Trade Magazine had the opportunity to speak with Minister Bento Albuquerque, Brazilian Minister of State of Mines and Energy, through an exclusive opportunity, Albuquerque expanded on Brazil’s resilience throughout the global pandemic, notable investment opportunities, and how unique factors have affected the business of Brazil’s energy sectors.

 

 

What is the current state of the energy sector in Brazil and what are the goals for the next year?

The energy sector in Brazil is flourishing with undergoing reforms and opportunities that are being created in this context.

The national council made important decisions regarding the energy (CNPE) policy in 2019, before the pandemic. The decisions made several reforms possible and increased the number of auctions that were scheduled in advance to support investors’ decisions.

Two comprehensive and sectoral reforms are being implemented as we speak. First, the new gas law, which was sanctioned by President Jair Bolsonaro on April 8th, 2021. The new legal framework will make room for a more open, dynamic, and competitive gas market with increased opportunities for new agents. Aligned with the new gas market policy, many companies are already announcing important investments in the Brazilian Natural Gas Sector.

Secondly, in ten years our power load will increase about 27 GW on average. Brazil must enable investments in the expansion of its power system. We are fully committed to the modernization of our power sector by expanding methods and abiding by a modern, robust set of regulations. We are working towards opening our energy market to the all-out consumer, promoting efficient cost and risk allocation, making sure the power supply continues to be safe and reliable and promoting rules and regulations that incorporate all new technologies.

Finally, part of the modernization regulatory package was approved by our national congress under Law No.14.120.21. The Federal Government declared it one of its top priorities. 2022 will focus on the concretization of projects and opportunities and the upcoming auctions are the gateway to turn these projects into reality, as we count on foreign and national investors to help us push these initiatives forwards.

What are the competitive advantages Brazil’s energy sector offers business?

 When discussing the oil and gas sector beyond opening up and unbundling the natural gas market, we are promoting a strong divestment program in oil refining- a new era for our downstream. Petrobras recently approved a sale of RLAM (Landulpho Alves Refinery- 14% of Brazil’s total oil refining capacity) to a Mubadala capital for the US $1.65 billion. Moreover, the E&P expertise, the improvement of our regulatory agenda and the quality of our oil improve competitiveness in the Brazilian offshore basins, turning Brazil into a world leader in this segment.

Brazil is the world’s largest producer of sugarcane ethanol and the second-largest producer of biodiesel, which is based mainly on soy oilseed and animal fat. Our goal is to increase international cooperation in biofuels, by the transfer of technology and expertise to other countries.

The Brazilian population will grow at 6% until 2030 reaching 225.4 million inhabitants. The expectation is there will be around 83 million permanent private households in 2030, an increase of 13 million. The way our power sector is today, we have 186 thousand MW of installed compacity; 162.7 thousand KM of transmission lines; 70 million consumer units. With the increase of modernization, there will be plenty of room to expand with the incorporation of new technologies. Guaranteeing reliability in supply, suitable risk, and costs of allocation. Our region has the challenge of keeping our power matrix as clean and renewable as possible, while expanding its capacity and promoting energy security.

How is the energy sector contributing to foreign direct investment in Brazil?

Between 2019 and 2020, about USD 32 billion was invested in the energy and mining sectors in Brazil. Last year, 26% of the total foreign direct investment was directed to the energy and mining sectors alone. We are convinced that business environment improvement and agent’s confidence recovery help consolidate the pace of economic growth.

We annually update and publish our 10-year expansion plan. According to its predictions, as much as USD 44 billion is expected to be invested in the energy, oil, natural gas, and biofuels sector in the next 10 years. (E&P about the US $337 billion, supply $4.1 billion, natural gas $17.9 billion, and biofuels $12.8 billion)

For the same period, the total investment expected for centralized generation, distributed generation and transmission systems will be about USD 68 billion.

To boost economic recovery and improve the business environment we have updated our legal and regulatory frameworks, strengthened legal certainty, reinforced the governance in our institutions, introduced more predictability and transparency, and designed our projects bearing in mind OECD standards of environmental, social, and governance impact.

How do you think Brazil’s resilience during the pandemic affected the business environment and energy sectors in Brazil?

Brazil managed to look through the pandemic with good governance and method. The federal government created a committee to monitor the Covid-19 impact on the economy. At the ministry of mines and energy side, we established three sectorial committees. Three of the outcomes are the uninterrupted power supply, the guaranteed supply of fuels, and the preservation of mining activities. Several decisions were made in order to minimize the impact on consumers and preserve the attractiveness on the supply side.

As far as the power supply is concerned, 10 million households that use less than 220 KWh a month were exempted from chargers. We created a “Covid Account” in order to minimize the impact on consumers, causing tariffs to plummet from 12% to 3%. Hydrological risk -which was a concern for hydropower plants- was duly tackled by the parliament. In 2021, Energy consumption increased by 19.2% in comparison to 2020.

The whole chain of production has been monitored as of day one. Consumption of gasoline and ethanol fell significantly but resumed by the fourth quarter of last year. The LPG, the ministry of mines, and energy made awareness campaigns to put a halt on panic buying LPG and the rate was around +2.6% last May. The mandatory blending of biofuels was revised so that targets could be met under current circumstances.

Exports of crude oil and iron represented 21.1% of the total exports in 2020, reaching around USD 45.4 billion in our trade balance.

As a timely measure taken at the beginning of the pandemic, we managed to declare mining as an essential service for the economy, taking into account that mineral goods are the basis of the Brazilian industry. We made arrangements to extend administrative timeframes in a reasonable manner, and donations by the private sector to tackle the pandemic played an important role in our collective effort., By caring for the health of our sectors, our actions focus on the health of our citizens.

How do you predict Brazil’s business environment post pandemic?

 Economic measures led to growth in 2020, focusing on the most vulnerable population. After a server downfall in April 2020, which affected primarily income, jobs, and family habits, industry, trades, and services in Brazil have made a V-shaped trajectory of recovery. Stabilization was evident in the fourth quarter of 2020. This was the result of a concerted and temporary effort involving government, associations, and the private sector.

The pension reform, the tax reform, and the administrative reform will allow the Brazilian government to save almost USD 375 billion in ten years. A more productive economy leads to higher demand for employment. Some scenarios foresee an injection of up to 370 thousand job opportunities in the labor market. Additionally, to the reforms passing at our house representatives, outstanding programs contributed to the Brazilian economic rebound.

When it comes to government expenses, it is important to stress that we do differ emergency measures from structural ones. Emergency measures are temporary. Otherwise, structural reforms are aimed at fiscal consolidation and increase productivity. Brazil believes that mass vaccination, fiscal consolidation, and structural reforms are the way to long-term sustainable economic growth.

How did Brazil’s resilience differ from other countries during the pandemic?

 I wouldn’t like to judge other country’s domestic decisions, but Brazil does attribute positive results. We can showcase today in terms of the functioning of our mines and energy sectors to the robust governance that has focused on the people’s and sector’s health.

Crosscutting decisions taken back in 2019 made it possible for us to promote sectoral reforms that are meant to dramatically change the way these sectors work. We developed robust governance and evidence-based information to support policymakers in the pandemic. Finally, we designed policy and recommendations focused on the preservation of structural arrangements, with attention to the customers and competitiveness on the supply agenda.

As demand increases, we will need a more robust energy infrastructure. Brazil is a developing country and energy is the basis for development. Furthermore, Brazil is extremely well-positioned to take advantage of the ongoing energy transition. We believe in international collaboration, partnerships, and investments to make our projects a reality in the coming years.

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The Low-Carbon Agenda and the Rising Demand for Innovative Fuels to Drive the Global Ammonia Market

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IndexBox has just published a new report: ‘World – Anhydrous Ammonia – Market Analysis, Forecast, Size, Trends, and Insights’. Here is a summary of the report’s key findings.

Ammonia constitutes one of the world’s basic chemical products widely important for its use as a raw material for the production of mineral fertilizers, nitric acid, explosives, and polymers. Agricultural fertilizers account for near 80% of the world’s ammonia use.

Due to the continuous growth of the world’s population and a stable increase in world GDP, the need for crop-based foods and animal feed is rising, which is a key fundamental factor in the growth of demand for ammonia.

The global ammonia market stood at  $90.7B, according to IndexBox estimates. Global consumption peaked at $100.7B in 2013; however, from 2014 to 2019, consumption remained at a lower figure. In physical terms, global ammonia consumption was estimated at approximately 182M tonnes in 2019, declining slightly against the previous year.

In early 2020, the global economy entered a period of the crisis caused by the outbreak of the COVID-19 pandemic. The quarantine measures that put on halt production and transport activity disrupted economic growth heavily throughout the world. According to World Bank forecasts, despite the gradual relaxing of restrictive measures and unprecedented government support in countries that faced the pandemic in early 2020, the annual decline of global GDP could amount to -4.3%, which is the deepest global recession being seen over the past eight decades.

However, the ammonia market remains relatively resilient to the pandemic. In the second quarter of 2020, there was a slight drop in demand from mineral fertilizer producers due to the introduced isolation regime and a shortage of labor, many regions missed handling the spring sowing season. After the lifting of restrictive measures, the demand for ammonia recovered, and companies adapted to new conditions of supply chains and sales channels.

China (48M tonnes) remains the largest ammonia-consuming country worldwide, accounting for 27% of the total volume. Moreover, ammonia consumption in China exceeded the figures recorded by the second-largest consumer, the U.S. (21M tonnes), twofold. India (19M tonnes) ranked third in terms of total consumption with a 10% share.

In China, ammonia consumption contracted by an average annual rate of -2.4% over the period from 2012-2019. The remaining consuming countries recorded the following average annual rates of consumption growth: the U.S. (+2.7% per year) and India (+2.6% per year).

In value terms, China ($33.4B) led the market, alone. The second position in the ranking was occupied by India ($12.1B). It was followed by the U.S.

With the pandemic’s impact, it is expected that in 2020, global consumption of ammonia should remain nearly unchanged against 2019. In the medium term, as the global economy gets back to work, the market will start recovering, driven by major fundamentals that existed before the crisis. Overall, market performance is forecast to pursue a positive trend over the next decade, expanding with an anticipated CAGR of +0.4% for the period from 2019 to 2030, which is projected to bring the market volume to 191 M tonnes by the end of 2030 (IndexBox estimates).

New areas of industrial use of ammonia are emerging, which are becoming increasingly relevant in the context of increased attention to environmental protection and reduction of greenhouse gas emissions. Standard industrial synthesis of ammonia from nitrogen and hydrogen from methane produces more carbon dioxide than many other chemical industries. The largest producers are developing the production of “green ammonia” and positioning it as a more environmentally friendly product in comparison with conventional ammonia.

Another promising opportunity for the use of ammonia is its use as a carbon-free fuel. Compared to hydrogen, ammonia has the advantage of being easier to transport and store because a large amount of energy could be stored in smaller volumes of a substance.

Given this background, Japan is considering replacing coal fuel for power plants with ammonia, and it is also emerging as a marine fuel. Ammonia as an energy source complies with the new IMO 2020 requirements that limit the sulfur content in bunker fuel and will reduce CO2 emissions to target environmental indicators.

Increased attention to the regulation of carbon emissions in the EU and large-scale measures under the Green Deal action plan, as well as the return of the United States to the Paris Climate Agreement, should contribute to the search for alternative fuels, including ammonia, and transforming energy markets. If promising technologies of ammonia fuel become widespread in the industry, the growth of production of low-carbon fuel may become a new driver of the world ammonia market in the medium and long term.

The changes in the ‘green’ legislation could potentially lead to market transformations in the energy sector. In connection with the announcement by the European Union of plans to introduce a cross-border carbon tax, many countries that do not produce “green” ammonia may lose their positions in the European sales market. In the medium term, this situation will force producers to restructure their processes towards obtaining “green” ammonia and may lead to significant shifts in the structure of the global ammonia value chain.

Source: IndexBox AI Platform

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States With the Largest Increase in Renewable Energy Production

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One of the most significant trends over the last decade for the economy, society, geopolitics, and the environment has been the rise of renewable energy. Fossil fuels have been the basis of the industrial economy for generations, powering tremendous economic growth but with dangerous consequences for the environment and public health. With the dramatic expansion of renewable energy technologies over the last decade, power sources like wind, solar, and geothermal have offered a more sustainable—and increasingly more affordable—path forward.

Several factors contribute to the expansion of clean energy. For one, technological advancement in renewables has made energy production and storage more efficient than ever before. The renewables industry has also received a boost from public policies and investments enacted by governments worldwide seeking to decarbonize in response to the threat of climate change. These developments have helped bring down renewable energy production costs over time, allowing market forces to spur continued growth in the sector. In all, electric power generated from renewables in the U.S. has grown by more than 70 percent since 2010.

And although growth is occurring across many renewable sources, wind and solar have been the most prominent success stories of recent years. In 2007, wind accounted for about 35 million Megawatt-hours (MWh) of electricity produced in the U.S.; since then, wind production has increased by an average of around 20 million MWh per year, rising to nearly 295 million in 2019. Meanwhile, solar is the fastest-growing of all renewables. Solar production constituted less than 1 percent of renewable energy until around 2010, but experts now project that by 2050, solar and photovoltaic energy will account for nearly half of all renewable electricity production.


Growth in renewable energy production in the U.S. is widespread, but unique features of each region mean that the transition to renewables looks different from state to state. Measured by the proportion of total electricity generated from renewable sources, states in New England and the Western U.S. surpass the rest of the country, largely as a result of renewable-friendly state policies. Vermont generates a remarkable 99.9 percent of its electricity from renewables.

In terms of total electricity produced from renewables, California (97 million MWh), Texas (91 million MWh), and Washington (74 million MWh) are the national leaders. Physical geography explains much of these three states’ strength in renewables. California is the largest producer of geothermal (with the world’s largest geothermal field) and solar (due in part to large installations in the Mojave Desert). With plenty of cheap land and strong wind in many of its regions, Texas dominates the U.S. in wind production. And in Washington, major water features like the Columbia and Snake Rivers provide the basis for the nation’s strongest hydropower sector.

To identify the states with the fastest-growing renewable energy sector, researchers at FilterBuy used data from the U.S. Energy Information Administration to calculate the percentage change in renewable electricity production between 2010 and 2019. The researchers also calculated what percentage of total electricity production is accounted for by renewables, as well as the largest renewable energy source currently.

Here are the states with the largest increase in renewable energy production.

State Rank Percentage change in renewable energy production (2010-2019) Total renewable energy production 2019 (MWh) Total renewable energy production 2010 (MWh) Renewable energy share of total production 2019 Renewable energy share of total production 2010 Largest renewable energy source

 

 
Kansas     1      511.0% 21,218,058 3,472,565 41.7% 7.2% Wind
Nebraska     2      379.7% 8,667,568 1,807,009 23.2% 4.9% Wind
Oklahoma     3      377.6% 33,281,621 6,968,743 39.1% 9.6% Wind
New Mexico     4      310.1% 8,496,851 2,071,802 24.2% 5.7% Wind
Rhode Island     5      228.5% 472,344 143,779 6.2% 1.9% Biomass
Texas     6      213.9% 90,922,198 28,966,660 18.8% 7.0% Wind
Ohio     7      189.8% 3,272,411 1,129,113 2.7% 0.8% Wind
Utah     8      188.6% 4,261,269 1,476,479 10.9% 3.5% Solar
Illinois     9      186.4% 15,057,518 5,256,702 8.2% 2.6% Wind
Colorado     10      173.6% 14,043,640 5,132,797 24.9% 10.1% Wind
Iowa     11      155.7% 26,356,275 10,308,651 42.7% 17.9% Wind
Nevada     12      155.3% 11,345,373 4,443,943 28.4% 12.6% Solar
North Carolina     13      144.3% 16,709,383 6,839,691 12.7% 5.3% Solar
Michigan     14      143.3% 9,932,713 4,083,005 8.5% 3.7% Wind
North Dakota     15      134.0% 14,392,502 6,150,146 35.0% 17.7% Wind
United States     –      70.3% 727,696,543 427,376,077 17.6% 10.4% Wind

 

For more information, a detailed methodology, and complete results, you can find the original report on Filterbuy’s website: https://filterbuy.com/resources/states-largest-increase-renewable-energy/

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Brazil’s Electric Power Transmission Auction Paves the Way in Economic Recovery and Foreign Investment

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On December 17th, Brazil will kick off its upcoming Electric Power Transmission Auction. This event, which will take place in São Paulo, is critical for Brazil’s forward-movement in economic recovery since the pandemic. ANEEL – the Brazilian Electricity Regulatory Agency, will be hosting the auction to attract investments to the energy sector, and ultimately create jobs. Global Trade Magazine heard directly from Roberto Escoto, Investment Manager of Apex-Brasil (the Brazilian Trade and Investment Promotion Agency) to learn more about the event and its importance in the foreign investment arena.

 

 

 

 

Discuss the goals for the upcoming Electric Power Transmission Auction and the issues it’s aiming to solve.

The upcoming Electric Power Transmission Auction will be held on December 17, 2020 by the Brazilian Electricity Regulatory Agency (ANEEL) at B3 S/A – Brasil, headquartered in São Paulo.

There are 11 lots of projects, covering 1,940 km of transmission lines and substations with a transformation capacity of 6,420 MVA. The transmission facilities that will be auctioned involve investments of about BRL $7.4 billion, with the potential of generating 15,434 thousand jobs during construction of the projects.

The term for commercial operation of the facilities varies from 42 to 60 months, for concessions of 30 years valid from the signing date of the contracts. Concessions will be tendered for the construction, operation, and maintenance of 16 transmission lines and 12 substations.

Brazil’s main transmission network, the National Interconnected System (Sistema Interligado Nacional – or SIN), consists of four interconnected subsystems (North, Northeast, Southeast and Center-West, and South). Together, this makes up one of the largest interconnected subsystems in the world. The Brazilian network has interconnections with neighboring Paraguay (through the Itaipu Binational project), as well as with Uruguay, Argentina, and Venezuela.

The system operator (ONS) expects the Brazilian transmission network to grow extensively by 2024.  More specifically, ONS envisages an extension of the grid towards the less well-connected regions of Brazil, as well as work to make further improvements to the existing grid in other parts of the country. The upcoming Electric Power Transmission Auction in December 2020 aims to assist in achieving these goals.

How does the region create and maintain a competitive environment for initiatives in the energy sector and foreign investment?

The electricity sector in Brazil – in generation, transmission, and distribution – is now one of the largest destinations of foreign direct investment in the world. The growing interest from foreign investors is driven by strong business opportunities, with private players having the chance to compete in all segments of the sector, combined with the strengthening of Brazil’s regulatory framework.

What major companies are already benefiting from investment opportunities/energy sector in this region? 

Companies from all around the world are benefiting from the investment opportunities within Brazil’s energy sector, including but not limited to Iberdrola, Enel, EDP, Engie, EDF, EDP, Statkraft, Equinor, State Grid, China Three Gorges, CGN, Brookfield, Suncor, Canadian Solar, and more.

Discuss how you identify and lead multi-sector business development opportunities? 

Apex-Brasil has an extensive international network of partner organizations, associations, and companies. We have offices in the U.S. (Miami and San Francisco), Europe (Brussels), Israel (Jerusalem), Russia (Moscow), China (Shanghai and Beijing), the United Arab Emirates (Dubai), and Colombia (Bogota). Additionally, since we work in close partnership with the Brazilian Ministry of Foreign Affairs, we have access to over 100 Embassies around the world. Finally, we have a market intelligence unit that supports our efforts with relevant information on the international economy, business, and key players.

This global reach and intelligence allow us to map and prospect the right investors, as well as introduce Brazilian companies to foreign investors on international business trips.

How is the workforce prepared for incoming investors? How about for current investors?

Brazil is a populous country with a workforce of over 100 million people. The sectors that usually gather the largest number of Brazilian workers, according to IBGE’s statistic report (PNAD), are retail and mechanic workshops, public administration, defense, education, health, social services, information and communications services, financial activities, realty, and administration.

In 2017, Brazil’s Congress approved a reform in the country’s work legislation, known as the Consolidation of Labor Laws (CLT). The main goal of this reform was to make the laws more flexible, with a specific focus on negotiations between employers and employees.

As a result, new rules have emerged, allowing for outsourcing of labor in a company’s main activity, home-office regulation, and more accountability for employees in lawsuits against employers. That said, collective bargaining agreements between employers and unions may offset some points written in the law, adjusting the terms to the necessities of the workers. Some of these topics include working hours, profit sharing, and sanitary standards (which were previously established only by the employer).

However, this does not mean that workers are left unprotected, as their fundamental rights cannot be negotiated under CLT. These rights include maternity and paternity leave, holidays, minimum wage, 13th salary, retirement, and the Guarantee Fund for Continuing Service (FGTS), which is a type of savings account taken directly from workers’ salaries that aims to protect the worker’s subsistence in case of dismissal but can also be used to buy residential properties.

Also, Brazil has first-rank universities and engineers with expertise in onshore and offshore technologies, as well as in EPC entrepreneurships.

Brazil has a skilled and diversified labor market, as well as favorable labor framework conditions for investors.

Let’s discuss how the region has managed the energy sector climate during the pandemic and other disruptions. What should companies know and how are you addressing it?

Brazil is taking concrete actions to combat the Covid-19 pandemic and still remain globally competitive. Among other measures, the Brazilian government has launched a package to protect both workers, especially the most vulnerable people, and SMEs.

When it comes to the power sector specifically, several initiatives have been introduced since the start of the pandemic. This includes but is not limited to the following measures:

First, a Committee of Crisis and Monitoring, composed of the Ministry of Mines and Energy (MME), and other authorities and experts, has been established to map and act quickly on the challenges that the pandemic has imposed.

Second, MME and ANEEL, along with banks, have designed and implemented the “COVID account,” which offers loans of a total of USD $16.1 billion for energy companies, with the goal of providing liquidity to the sector, especially in the key segment of distribution.

Finally, MME has launched the green bonds program, which is favorable for obtaining financing for new energy projects, with an estimated gradual release of USD $250 by 2030. It is envisioned that this particular program will contribute to expanding 25 GW for new wind energy, 8GW for solar and energy, and 3 GW for small hydro plants.

Please share anything else you’d like the readers to know about Brazil’s investment climate.

Brazil has one of the cleanest electric matrices in the world, with over 80% of our electricity coming from renewable sources. Currently, hydro represents 58% of the Brazilian power generation mix, while biomass, wind, and solar have a share of 11%, 9%, and 2%, respectively. In 2029, it is expected that these sources will represent 42%, 10%, 16%, and 8%, respectively, of our power generation mix. With this forecast in mind, it is clear that wind and solar energies are increasing fast and constantly, underscoring their importance now and in the future. That said, this growth is not a surprise: Solar and wind are very competitive areas, and Brazil offers unique differentiators for investors to consider.

For example, Brazil has one of the highest capacity factors for wind energy in the world, with an average above 40%. Brazil also has the highest growth rate for wind in Latin America over the last 10 years. Additionally, our solar irradiation is higher than those of other counties, such as Spain, France, and Germany. What’s more, the power generation segment has opportunities in auctions, free market (Corporate Power Purchase Agreements model), and distributed market (i.e. type of net metering model) – these are all important drivers for the growth of these two sources.

To conclude, Brazil´s energy sector has a successful regulatory framework that is prime for foreign direct investment. Additionally, all of the energy segments in Brazil (generation, transmission, and distribution) are open to private investors. Lastly, Brazil has a solid track record of success and growth in this sector, which is the reason why the power sector attracted so much foreign investment in 2019, as well as why we expect this growth to continue in the coming years.