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Challenges to Set up Securities in the Brazilian Oil & Gas Market

João Luis Ribeiro De Almeida, Antonio Giglio, 2015 International Mining and Oil & Gas Law, Development, and Investment

The purpose of this paper is to present a general overview of the challenges to set up securities in the Brazilian oil and gas market. The sector is extreme capital intensive and in Brazil the scenario is not different. Most of the local production comes from offshore fields, some of them with deep water and difficult challenges to overcome.

Financing is a constant need of the oil companies and follows certain worldwide standards of the industry with the peculiarities of the local market and regulation. Regarding the alternatives for financing, the forms vary depending on the companies involved and the specific projects. Large international oil companies will be in better position to negotiate with banks the costs of financing and the extent of security. On the other hand, small companies and project finance will involve larger costs and a full set of security.

In terms of sources of funding, the players have the alternatives of equity offered in capital market or privately placed and “industry finance” with part of the assets sold through farm-in transactions or with carried interests. These are not in the scope of this paper which intends to discuss the creation of security in the context of debt financing. The forms of debt financing could be segregated into capital market debt issuance, bank debt and lease finance.3 All three categories could involve the f