As a consequence of the gradual deregulation of the Brazilian oil and natural gas sector, the company expects to be able to compete in all areas of its operations.

In the exploration and production segment, the Federal Government’s procedures for holding tender bids for the exploration of new areas allow various regional and multinational companies to begin prospecting for oil in Brazil. Should these companies be successful in discovering negotiable quantities of crude oil and have the capacity to process it on an economically viable basis, then this will increase the competition with the company’s production activities.

In the downstream segment, there has not been strong competition yet, since the end of the state monopoly. With the sector’s deregulation, other companies earned the right to transport and trade oil derivatives in Brazil. As a consequence, since these companies can import refined products, oil derivatives produced by the domestic refineries and those the company imports will face more competition in the market. The company needs to compete with the global imports at international prices. This competition influences the prices the company charges for its products, by this affecting the company’s income.

Additionally, the company expects there will be increased growth in the competition it faces in distribution. Among all of the company’s operation segments, this is the one that currently faces the most competition. The reason for this is that the Brazilian distribution market is undergoing a consolidation process that has already led to a few mergers and annexations, which also involves the entry of new players with expertise in the distribution business and even in the ethanol business, the product that currently grows the most in this market.  In this new configuration, the Distribution market is expected to become even more competitive.

In the natural gas segment, the company believes there will be more competitiveness on account of the establishment of the new regulatory framework, the Gas Law, which intends to encourage the arrival of new players and/or investments in the sector, in addition to increasing the natural gas supply produced by third parties in Brazil.  The company intends to expand its participation in the power segment, even performing in an environment where it will compete with other sources of energy, such as hydroelectric, coal, and biomass generation.

The company hopes to expand its operations in the international segment, although it expects to continue facing competition in regions where it already has operations, including the Gulf of Mexico, Africa, and the Southern Cone. Specifically in the distribution segment, where the competition is more intense, we face strong positions held by competitors in the Argentine and Colombian markets , and we are better positioned in Paraguay and Uruguay. Because of the peculiarities found in each market (legal, competitive, and geographic), the characteristic of being an integrated company is a strong competitive advantage on account of the possibility of seizing synergies.