Tag Archives: Petrobras

Brazil taps ex-Bunge boss Parente as Petrobras CEO, replaces Bendine

Brazil’s interim President Michel Temer named Pedro Parente chief executive officer of state-led oil company Petroleo Brasileiro SA on Thursday as his government tries to kick-start a shrinking economy and shore up the debt-laden oil producer.Parente, an engineer, former Bunge Ltd executive and one-time chief of staff to former President Fernando Henrique Cardoso, replaces Aldemir Bendine, according to the president’s office. Bendine had been running Petrobras, as the company is known, for the last 15 months.

Petrobras did not immediately reply to a request for comment on the appointment.

Parente, 63, will be charged with efforts to rescue Petrobras from financial crisis brought on by low world oil prices, crippling debt and a massive corruption scandal.

Parente is best known for his role as chairman of the Brazil unit of agribusiness and commodities-trading giant Bunge Ltd from 2010 to 2014. Bunge is Brazil’s largest grains exporter.

The appointment also marks Parente’s return to Petrobras after 14 years. He sat on Petrobras’ board under former Brazilian President Cardoso. Parente was a key player in opening Petrobras to competition and international investment after the Cardoso administration ended Petrobras’ monopoly over exploration and production in 1997.

From 1999-2002 he also served as Cardoso’s chief of staff and managed a severe energy crisis that required electricity rationing and the quick building of supplementary power stations. He also helped manage a reduction of the government’s stake in Petrobras.

The Petrobras he will take over, pending approval by the company’s board of directors, will be quite different than the one he left. Petrobras invested $4.91 billion in 2002, Parente’s last year on the board. A decade later Petrobras was investing nearly $50 billion a year and despite major cutbacks still plans to spend $19 billion this year.

Despite the nearly ten-fold increase in investment, Petrobras has struggled in recent years to increase domestic oil production as much as expected, missing annual targets for 12 straight years.

Meanwhile, its total debt soared faster than output to about 450 billion reais, or nearly $130 billion, at the end of the first quarter from 33 billion reais ($9.32 billion) in 2002. Petrobras is now the most indebted oil company in the world. Plans to sell $14 billion of assets have stalled, forcing more cuts.

Temer, who replaced suspended President Dilma Rousseff last week while she faces an impeachment trial, chose Parente on Monday, according to a report on the Web site of the O Globo daily newspaper.

Oil Workers Strike in Brazil for Wages, Investments, Assets

Twelve oil work unions which are part of the Oil Workers Federation (FUP) in Brazil began on November 1st, a strike at Petrobras refineries all over the country. According to union officials, strikers are protesting against Petrobras’ asset sales, investment cuts, project suspensions, and reduction of some workers’ rights.
“The strike was agreed upon more than 45 days ago. We did try negotiating with Petrobras and the major shareholder, i.e. the federal government, before stopping working, but our demands were not met,” said Simão Zanardi Filho, of the Union of Oil Workers of Duque de Caxias, Rio de Janeiro state, and FUP director in an interview to Agencia Brasil.

In a statement, Brazil’s oil giant says the company is willing to sit down at the negotiations table and discuss pay raises with union leaders. According to company officials Petrobras has offered an 8.11 percent pay raise, while workers want 18 percent.

In addition to the pay increase, unions are against the sale of assets and the reduction in investments announced by the company. According to the Federation of Oil Workers ‘cuts in investments, sales of assets, interruption of construction and halt in projects impact the country’s development and national sovereignty.

Last month Petrobras’ Council approved the sale of 49 percent of the stocks of subsidiary Gaspetro to Mitsui Gas and Energy Brasil for R$1.9 billion. The sale is part of Petrobras’ corporate plan, announced in the first semester of this year, to improve the company’s financial situation. In August the state-owned oil company authorized the sale of 25 percent of stock from another subsidiary, BR Distribuidora.

In addition to the sale of some of its assets, Petrobras also announced this year it was reducing investments from US$37.1 billion in 2014 to US$25 billion in 2015.

Petrobras to Pay R$ 2.2 billion to ANP – National Oil Agency

Petrobras (PBR) reported today, after the market close, that the Arbitration Court issued on July 2nd, an interim decision on the arbitration proposal by Petrobras regarding the resolution of ANP (National Agency of Petroleum, Natural Gas and Biofuels), which considers the concessions Baleia Anã, Baleia Azul, Baleia Franca, Cachalote, Caxaréu, Jubarte and Pirambu as a single field from the second quarter of 2014.

The interim decision determines that Petrobras starts to deposit quarterly, on behalf of ANP, the controversial “special participations”. Based on the current price of oil and the current production in the field, this amount will be approximately R$ 350 million per quarter. “Although the amount is pending confirmation by the parties, the value previously estimated by the ANP is R$ 2.2 billion”, Petrobras said, stressing that “it is a decision of preliminary nature, given that the arbitrage has not decided on the merits of the matter yet”.

More on Petrobras

Petrobras Plans to Raise US$ 6 Billion with Sale of its Distributor, BR Distribuidora

The sale of a slice of BR Distribuidora or attracting a private partner for the company will be the first step in Petrobras’ (PBR) asset sale plan, necessary to reduce the company’s debt level. Last night, the company officially announced this intention. The plan is to try and complete the operation this semester.

BR Distribuidora Gas StationThe state-controlled company considers the possibility of two operations: an IPO (initial public offering) and/ or to attract a partner. The IPO would promote a ‘governance shock’ in the company, which is now a wholly owned subsidiary of Petrobras. The ‘benchmark’ is Ultra Group – Ultrapar (UGP).”

BR Distribuidora is the largest distributor in the country with 7,797 gas stations. It has 36.9% of the fuel market, with sales of R$ 121.7 billion and profit of R$ 1.1 billion in 2014. Ultrapar, which has 7,100 stations, sold R$ 69.7 billion and had a profit of R$ 1.2 billion.

Using the market value of Ultrapar as a reference – today, around 12 times its cash generation (EBITDA) – it is possible to estimate that BR can be worth close to R$ 40 billion. In theory, to sell half of the shares, Petrobras would raise R$ 20 billion (aprox. US 6 billion) However, because it is state owned, investors may demand a reduction in multiples.

In the announced business plan for 2015/2019, Petrobras set a realistic target of increasing oil production – from 2.8 million barrels per day to 4.2 million in 2020. The next step was to announce an ambitious assets sales plan, US$ 58 billion in four years. “We will combine realistic production goal with sale of assets, attract partners, reduce costs and a better way of doing things. We forced this situation on purpose and the announcement about BR is the first major move in that direction”, he said. In the model to attract partners, Petrobras plans to have different partners in different parts of the business.

After the Merge with BG, Shell will have 20% of its Global Production in Brazil

Responsible for the biggest oil industry M&A deal in the past decade, the president of Royal Dutch Shell, Ben van Beurden, does not rule out increasing the company’s exposure in Brazil, expanding the already billionaire investment program that will be put in place following the merger with BG.

After the merger of $ 70 billion is completed, which is expected for early 2016, after regulatory approvals in several countries, Brazil will be the country with the largest stake in Shell’s production portfolio. Even with its partner Petrobras involved in a corruption scandal, the Dutch executive says it is closely watching, but trusts the technical expertise of the state-controlled company.

Beurden estimates that Brazil will account for 20% of global production of the company when some of the projects under development by the two companies

come into operation, including Libra, which Shell has 20%, and the giant pre-salt fields where BG is a partner, like Lula and Sapinhoá, to name a few. The executive points out, however, that the appetite of Shell does not stop there and is willing to increase its presence in Brazil. He does not rule out participating in the 13th Round of the National Petroleum Agency (ANP), scheduled for October.

“I believe that the fundamentals of Brazil are very strong and, particularly, if you look from our perspective, we are investing in a world-class resource. We have to be optimistic. And I am.” he said, concluding that he will “look seriously” to the ANP auction data.

Shell chose Brazil for the annual meeting of its board of directors and the executive committee. A testament to the appetite of the Anglo-Dutch company with the country is that Brazil should stay out of the sale of $ 30 billion of assets, planned program to take place between 2016 and 2018.

Speaking to newspaper Valor Economico, Beurden listed projects in the country, including Raízen distributor partnership with Cosan, and explained that investing in the Libra auction came from the realization that Shell’s participation in E&P was small in the country.

“We always had the perception that our presence was not big enough, considering the size of the country, its reserves, and also due to its geology. We thought we needed to be more exposed to Brazil and the deal with BG will fix it.”

Shell invested $ 35 billion in 2014, largely on the company’s organic growth program. In 2015, the plan is to reduce the investment through cost cutting, forced by falling oil prices.

“We want to take a little advantage of the supply chain weakness. We are putting off investments, renegotiating contracts and, of course, questioning ourselves about some projects”, he said. “But we’re still looking at more than $ 20 billion investment in 2015. In 2016 and beyond it’s hard to predict because we have to consider the portfolio of Shell and BG, combine the two and decide which areas to prioritize.”

It is a fact that Shell will sell some assets, but Beurden ensures that “there will no fire sale”. He said Shell will be investing, with annual program of $35 billion to $40 billion. The expectation for the long term is that oil prices remain in the range of $70 to $90 per barrel. Yesterday a barrel of Brent crude closed at US$ 63.34, for example.

On the asset sale program, the executive said that two main areas, that even justified the merger with BG, will be left out: the areas of exploration and production in deep waters and the integrated gas business, as the company refers to the projects of Liquified Natural Gas (LNG).

The oil and gas projects of unconventional sources should go through further scrutiny. The involvement of Petrobras in what is already one of the biggest investment corruption scandals in the world was discussed before the offer for BG, which is relevant partner of the state-controlled company in the pre-salt.

Beurden says it is “uncomfortable” to read the news involving the Brazilian oil company, but says that as a partner of Petrobras in Libra, Shell did not notice any side effects on the projects.

“Of course when the agreement with BG completes, Petrobras will be an even greater partner. We discussed this a lot with our board before presenting the proposed merger and take a fundamental decision, based on the fact that Petrobras is very important for Brazil. It is a company we know well from a technical and commercial point of view and regard it as a first class company on the technical expertise and competence”, he said.

The executive also said that it was considered the possibility to involve BG in the corruption investigations, since the British company is a partner of the pre-salt areas where took place the projects led by Petrobras’ Service Board, under Renato Duque (arrested by the police) and the snitch Pedro Barusco (head of engineering).

“Up until now, this is clearly not the case. But it is very difficult to have a clear vision. It’s still too soon and you never know what else can come from this investigation”, he said. “We did a due diligence with our counterparts in BG after we discussed the commercial terms and I can say that was the first question we asked. And of course one can only give guarantees based on what they know. And I don’t know what I don’t know. But so far, there is no concrete indication of risk [of BG involvement]”, he said.

Admitting concern over delays in platform delivery schedules, Beurden said the bid for BG suffered a “discount” on the basis of identified problems, which were not enough to stave off Shell. “Our business, in a sense, is risk management. So, we may have surprises, we may have some negative events, but in this context, it’s no different from any other project”.