February 20, 2014
Keith Johnson – Foreign Policy, 2/19/2014
Brazil, the old joke goes, is the country of the future — and always will be. Unfortunately, when it comes to fulfilling the promise of the country’s rich energy resources, the joke rings only too true.
Brazil’s transformation into an energy powerhouse, seemingly so close just a few years ago, has been hobbled by politics. The country’s ability to take advantage of massive offshore oil resources is increasingly questioned, its once-vaunted biofuels industry is reeling, and there are even concerns this year about keeping the lights on and power companies solvent.
There are plenty of things to blame for the hiccups, starting with a severe drought that has hamstrung Brazil’s ability to generate electricity from hydroelectric power, which in turn as led to a spike in fuel imports to run other power plants.
January 23, 2014
Jeb Blount – Reuters, 1/22/2014
In October 2007, Brazilian President Dilma Rousseff, then chairwoman of state-run petroleum company Petrobras, proudly predicted that giant new offshore oil fields would usher in an age of Brazilian energy independence.
Six years on, the opposite has occurred. Rousseff’s push to develop offshore crude, her fuel-price controls and other energy policies have hobbled the country’s refining sector, robbing it of funds for expansion. As a result, Petroleo Brasileiro SA (PETR4.SA), as Petrobras is formally known, has been forced to look abroad for fuel.
With a dozen decades-old domestic refineries running at what experts say are dangerously high rates to keep pace with expanding demand, Brazil’s cars and trucks are increasingly powered by gasoline and diesel refined in the United States or India. Imports likely reached a record last year, meeting about a fifth of local needs.
January 22, 2014
Alison Sider – Wall Street Journal, 1/21/2014
For the services companies that help drill for oil, the water off Brazil is feeling chilly.
Brazil has been home to some of the largest oil discoveries in recent decades, and oilfield services companies, which provide the equipment and technical know-how to help extract that oil, have bid aggressively to work there. Halliburton Co.HAL +0.38%, one of the largest such companies, has won major contracts with Brazil’s state-run energy giant, Petroleo Brasileiro SAPETR4.BR +2.28%.
But work in new fields has been slower to start up than expected, leaving Halliburton on the hook for high infrastructure and personnel costs that it says are weighing on its otherwise robust earnings. On Tuesday the company reported that its fourth quarter profits rose 19% to $793 million on $7.6 billion in revenue, boosted by growing revenue from the company’s international operations.
January 16, 2014
The Economist, 1/16/2014
THE year did not begin well for Dilma Rousseff. The real ended 2013 one-third weaker against the dollar than when she took office as Brazil’s president three years ago. Car sales were down for the first time in a decade. More dollars flowed out of the country than at any time since 2002.
Most perniciously, on January 12th the bean-counters announced that inflation hit 0.92% in December, the highest monthly rise in ten years. That pushed the annual figure to 5.91%, above market expectations. The jump prompted the Central Bank to raise the main interest rate on January 15th, not—as analysts had long forecast—by a quarter of a percentage point, but by half a point, to 10.5%.
Inflation is a Brazilian bugbear. The economic costs are clear: high inflation hits both the poor, struggling to make ends meet, and the indebted middle classes as interest rates rise. But it is also a political issue. Most adults recall the hyperinflationary era of the early 1990s, when shopkeepers would adjust prices each morning, and then change them again in the afternoon.
January 14, 2014
Rodrigo Orihuela – Bloomberg, 1/13/2014
Petroleo Brasileiro SA (PETR4)’s two refinery fires in five weeks are darkening its profit outlook as the state-run oil producer may be forced to slow down fuel output and increase imports resold at subsidized prices.
Petrobras, as the world’s most indebted oil company is known, had its 2014 earnings-per-share estimates cut 5 percent by analysts in the past four weeks, the most among the 11 most valuable oil companies, data compiled by Bloomberg show.
The producer, which hasn’t expanded refining in Brazil since the 1980s and last year ran units at almost full capacity, is coming under pressure from labor unions that blame the strain on aging plants and worker shortages for the fires. Output constraints worsen its earnings outlook as the government has Petrobras selling fuel below import costs in a bid to keep inflation below the 6.5 percent upper limit of its target range.
January 7, 2014
Jeff Fick – The Wall Street Journal, 01/06/2014
Brazil’s state-owned energy giant has suffered a series of industrial accidents in recent weeks as it strives to meet the country’s growing fuel needs.
Petróleo Brasileiro’s most recent accident set a fuel refinery ablaze outside Rio de Janeiro on Saturday. No one was injured in that event, but workers have suffered burns and other injuries in incidents at the same refinery and others, union officials say.
Petrobras, as the company is known, has pushed its refineries to their limits, union officials and industry experts say, in an effort to reduce expensive fuel imports that have eroded the company’s profits and Brazil’s trade surplus in recent years.
January 7, 2014
Juan Forero – The Washington Post, 01/06/2014
When fields said to hold billions of barrels of oil were discovered off the coast here, exuberant government officials said the deep-sea prize would turn Brazil into a major energy player.
More than six years later, the outlook for Brazil’s oil industry, much like the Brazilian economy itself, is more sobering. Oil production is stagnant, the state-controlled oil company, Petrobras, is hobbled by debt, and foreign oil companies are wary of investing here.
“It’s funny, a few years ago, everybody loved Brazil,” said Roger Tissot, a longtime consultant on Latin American energy. “And now it seems the love is gone.”
December 17, 2013
Jeff Fick – The Wall Street Journal, 12/17/2013
Brazil will get more than $400 billion in royalties and crude oil over the next 35 years from its share of the massive Libra offshore oil prospect, President Dilma Rousseff said Tuesday.
In her weekly question-and-answer column with Brazilians, Ms. Rousseff said that new production-sharing agreements for Brazil’s offshore oil discoveries ensured the country’s “sovereignty over this treasure, with great benefits for the population and our economy.”
Ms. Rousseff’s administration has faced criticism from Brazilians who viewed the sale of the field as delivering Brazil’s natural resources into the hands of foreign companies. Protests marred the October auction, which featured heavy security by soldiers who fired tear gas in an attempt to disperse the crowd gathered outside the hotel where the sale was held.
December 11, 2013
Anderson Antunes – Forbes, 12/10/2013
Three years after raising almost $70 billion in the largest share issue ever, Brazil’s state-owned oil and gas Petrobras PBR -3.72% is in the midst of an unprecedented financial crisis. As the company approaches its 60th anniversary, it has seen its market capitalization drop 45% since its peak in 2010, from $196.21 billion to the current $103.9 billion. At the same time, Petrobras’ debt soared to over 2.5 times before earnings, taxes, depreciation and amortization (EBITDA), totaling $112.4 billion as of June 30, 17% more than a year earlier. Net debt, or debt minus cash and marketable securities, was $79.6 billion, resulting in the company’s recent downgrading by Moody’s on concern that fuel subsidies and huge investment commitments will cause its debt to grow until at least 2015.
But why has Petrobras — whose CEO Maria das Graças Silva Foster is one of FORBES’ Most Powerful Women — gone from heaven to hell at the very moment when it is announcing some of its biggest oil discoveries, including those in its Libra field, whose estimates for production were recently updated to as much as 12 billion barrels, twice previous estimates?
Simply put, for Petrobras — as for any other oil company out there in the world, and Brazil’s own bankrupt OGX is an example of that — more oil means more investments and debt. Considering that Petrobras also has the world’s largest corporate spending program, valued at $237 billion, it also means more trouble.
December 2, 2013
Rodrigo Orihuela & Denyse Godoy – Bloomberg, 12/02/2013
Petroleo Brasileiro SA (PETR4) fell the most in 17 months after the government failed to meet a request by the state-run company to disclose a clear policy for phasing out fuel subsidies that have cut earnings and increased debt.
Shares in Petrobras, as the Rio de Janeiro-based crude producer is known, lost as much as 7.2 percent, the steepest intraday decline since June 25, 2012, and the most among members of the Dow Jones Oil & Gas Titans 30 Index.
While President Dilma Rousseff allowed Petrobras to raise prices for the first time since March, the Nov. 29 statement fell short of disclosing details of the methodology for future adjustments. Selling imported gasoline below cost drove down profit the most among major producers last quarter. The fuel losses, a controversial capital increase and record-high debt have made Petrobras, once the sixth most valuable company, the worst-performing major oil stock in the past five years.