Lula government wants more funding for oil – 10/25/2023 – Market

Despite emphasizing the importance of the energy transition, the Luiz Inácio Lula da Silva (PT) government allocates more resources in the PPA (Multi-Year Plan) for actions in the oil and gas sector than what was proposed by the Jair Bolsonaro (PL) administration.

The text is being processed in Congress and may change. However, the current administration wants to spend R$479 billion in the area, between 2024 and 2027. The previous government predicted, from 2020 to 2023, R$434 billion, already adjusted for inflation.

The analysis was carried out by Inesc (Institute of Socioeconomic Studies) and confirmed by Sheetbased on the PPA prepared by the Ministry of Planning and presented to the Legislature at the end of August.

The proposal, according to Inesc, converges with Petrobras’ interest, for example, in drilling a well in the Foz do Amazonas basin in search of oil reserves. The research depends on approval from Ibama (Brazilian Institute of the Environment and Renewable Natural Resources), which did not occur.

In detailing the PPA’s oil, gas, derivatives and biofuels program, the government says it is necessary to increase investments in the exploration and production of oil and natural gas, in the infrastructure for the flow and processing of natural gas, in the supply of fuels and in reducing external dependence on derivatives.

Of the R$479 billion foreseen by the government, R$472 billion are budgetary resources. In other words, the amount that comes from the government or state-owned funds — in this case, almost everything will come from Petrobras.

Of the amount foreseen in the PPA, the smallest part deals with non-budgetary resources, linked to tax subsidies, credit and credits from financial institutions, for example.

When contacted, the state-owned company says that the matter is the responsibility of the government. The Ministry of Mines and Energy states, in turn, that the investments “are coherent” and that the country will depend on fossil fuels for a decade.

The Ministry of Planning highlights that the energy transition is a transversal agenda. Marina Silva’s department did not respond to the report until the publication of this text.

In the case of budgetary resources, the government needs to detail in the PLOA (Annual Budget Bill) the exact allocation of the funds.

In 2024, for example, the Executive wants to carry out around 25 actions. The most expensive would be the implementation of complementary maritime infrastructure for oil and natural gas production in the Santos Basin (R$39 billion) — also a resource from Petrobras.

In the list of planned actions, only the maintenance and adaptation of the operational infrastructure of biodiesel plants is directly linked to biofuels. If the expense is approved by Congress, Petrobras will allocate R$32.6 million to the initiative.

“It should be noted that the program’s general objective is to consider greater emphasis on the energy transition. However, when analyzing the specific objectives, it is observed that they all deal with the expansion of fossil fuels (oil and natural gas), without taking taking biofuels into account”, says a technical note from Inesc.

“The contradiction in objectives exposes the false narrative of ‘guaranteeing the country’s energy security, with the expansion of clean and renewable sources’, present in its strategic objective”, states the institute.

The Lula government’s PPA, however, creates the energy transition program, which does not exist in the Bolsonaro administration’s project.

The program foresees R$938 million — equivalent to 0.2% of that allocated to operations basically involving oil and gas. Furthermore, all resources reserved for the energy transition program are non-budgetary.

If approved, the Union and state-owned companies will not need to take funds from the coffers to finance these actions; Resources may come from subsidies. As they are non-budgetary, the amount does not need to be detailed in the PLOA, which makes monitoring actions difficult.

The program, according to the Executive, seeks to decarbonize the transport matrix, via biofuels; expand the supply of strategic minerals for the energy transition; promote energy efficiency in the final use of energy; increase the participation of clean energy sources in the Brazilian energy matrix; enable the expansion of the basic energy transmission network; reduce the share of diesel power generation in isolated systems; ensure energy and power supply from the national interconnected system and interconnect isolated systems.

The PPA also establishes the electrical energy program, which already existed during the Bolsonaro administration.

In it, the government intends to reserve R$92 billion to ensure the supply of electricity to the Brazilian market with “social justice and economic and environmental sustainability”.

Among the specific objectives of the program, however, there are no actions that involve, at least directly, the diversification of energy sources in the country.

On the contrary: the 2024 PLOA foresees expenses of R$1 billion to maintain the operational infrastructure of Petrobras’ thermoelectric park. The operation of thermoelectric plants releases CO_two in the atmosphere and contributes to global warming.

According to Inesc, the Lula government removed from the electricity program the only action that was intended exclusively for energy transition efforts, more specifically for encouraging the generation of renewable electricity. This action was present in the Bolsonaro government’s PPA, even though during his government no amount was committed.

“The government’s narrative is very good, both internally and externally. President Lula, especially on his last trip to New York [para participar da Assembleia Geral da ONU], said that Brazil will be a protagonist in the energy transition, and we are excited about that. However, when we analyze what is being built in practice, we see that this is not quite the case”, says Cássio Cardoso Carvalho, political advisor at Inesc.

Recently, Lula praised, at an event celebrating Petrobras’ 70th anniversary, the company’s role in the energy transition. “Petrobras has everything it takes to lead the energy transition and take advantage of the unique opportunity of Brazil being the largest renewable energy center in the world,” he said, on October 3.

When questioned, the Ministry of Planning says that the energy transition program encompasses the reduction to zero of federal tax rates on wind turbines, in addition to emphasizing the transversality of the actions.

The ministry points out that part of the R$900 billion (mainly made up of tax benefits) allocated to industrial development policy will be applied to energy transition initiatives, as well as R$97 billion will be allocated to research into the low-carbon economy.

“The environmental agenda is in 50 of the 88 PPA programs, which reinforces the complexity of the treatment received by the topic in both the presented plan”, says the ministry.

The MME also states in a note that the plan addresses other points of energy transition and says that Petrobras’ investments of around R$472 billion are in a “capital-intensive sector that generates hundreds of thousands of jobs.”

“It is worth noting that investments for the energy transition do not eliminate those focused on oil and gas, since, according to market estimates, the country will still depend on fossil fuels for at least the next ten years”, states the ministry.

The values ​​stipulated by the government in both the PPA and PLOA can still be changed by Congress. In 2019, for example, Congress transformed the R$434 billion proposed by the Bolsonaro administration for the oil, gas and biofuels program into R$736 billion — values ​​already corrected.