Brazil to auction rights to largest oil prospect

Jeff Fick – The Wall Street Journal, 05/23/2013

Brazil plans to auction off its largest-ever offshore oil discovery in October, selling exploration and production rights for a single prospect that is estimated to hold between eight billion and 12 billion barrels of recoverable crude oil at the country’s first presalt-bid round, regulators said Thursday.

The presalt region lies in deep Atlantic Ocean waters off Brazil’s southeast coast, with large deposits of oil trapped beneath a salt layer several miles below the surface.

Libra, as the prospect is known, is larger than the Lula field that started Brazil’s presalt craze when it was announced in 2007, said Magda Chambriard, director of Brazil’s National Petroleum Agency, or ANP. Lula is estimated to hold recoverable reserves of between five billion and eight billion barrels, Ms. Chambriard said.

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Rousseff expands Brazil oil auction to raise up to $4.9 billion

Mario Sergio Lima, Peter Millard – Bloomberg, 01/23/2013

President Dilma Rousseff expanded by 68 percent the amount of acreage offered in Brazil’s first oil exploration auction since 2008 in a move that will help relieve pent-up demand and increase the government’s auction revenue by raising as much as 10 billion reais ($4.9 billion).

Brazil will auction 289 licenses onshore and off the coast of northeastern Brazil on May 14 and May 15, Marco Antonio Almeida, the secretary of oil and natural gas at the Energy Ministry, told reporters in Brasilia today. Brazil also plans to auction areas in the so-called pre-salt region that holds the country’s largest deposits on Nov. 28 and Nov. 29 and shale onshore gas blocks on Dec. 11 and Dec. 12, he said.

Petroleo Brasileiro SA (PETR4), the world’s biggest producer in deep waters, has discovered high-quality oil in the Ceara and Sergipe basins, where new blocks will be available. The geology along Brazil’s equator also mirrors recent discoveries near the coast of Africa.

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Petrobras aspires to be world’s biggest oil producer

Tim Webb – The Guardian, 11/15/2010

Petrobras aims to be the world’s largest oil producer as soon as 2015, according to the Brazilian energy group’s chief financial officer.

A series of huge recent “pre-salt” finds off the coast of Brazil have transformed the fortunes of the company and catapulted Brazil into one of the world’s leading energy and economic powerhouses.

In one of his first interviews with a British newspaper, Almir Guilherme Barbassa told the Guardian that Petrobras would be one of the biggest beneficiaries of new legislation that will grant the company a minimum 30% stake in each new discovery and will also be the lead operator in all new projects.

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Petrobras offering raises $70bn

Jonathan Wheatley – Financial Times, 09/22/2010

Petrobras, Brazil’s national oil company, has raised about $70bn in the biggest share issue in corporate history, according to a person familiar with the operation.

The person said on Thursday night that demand for the new shares was double that amount.

The price for new voting shares was set at R$29.65 on Thursday compared with the closing price of R$30.25 in São Paulo, which rose 1.9 per cent during the day in frenetic trading versus a wider market that was up just 0.69 per cent.

New non-voting shares – the kind that are more heavily traded – were priced at R$26.30, compared with the closing price of R$26.80.

Of the proceeds, about $43bn would go to the government, the company’s majority shareholder, in exchange for the rights to 5bn barrels of oil in Brazil’s newly discovered pre-salt oilfields, so called because they are trapped under several kilometres of seawater, rock and a hard-to-penetrate layer of salt.

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Over a barrel: Brazil’s oil giant may be paying too much to pump the stuff

The Economist, 09/02/2010

FOUR years ago Brazil struck oil—up to 350km (220 miles) offshore and buried under deep water and thick layers of rock, sand and corrosive salt. In places, the oil fields are 7km below the surface, so getting the black stuff out was always going to be hard. Now it looks like finding the funding will be tricky too.

On September 1st, two months later than planned, Brazil’s government made public the price it will demand for an estimated 5 billion barrels, mostly in the Franco field off the coast of Rio de Janeiro. Petrobras, the national oil company that was partially privatised in 1997 (Brazil’s government still owns 40% and a majority of voting rights), will have to pay $8.51 a barrel. Analysts frown that $6 would be more reasonable. Oil is $74 a barrel, on the surface, but is worth much less underground.

Petrobras is Latin America’s largest company by market value, but it is short of cash and its feud with the government has helped to wipe 25% off its shares since the start of the year. Setting the price for those reserves is the first step in a complex plan to raise badly needed capital. It will pay in shares, not cash. This will allow the government to bolster its stake. On September 30th Petrobras is expected to hold a rights offering, in which minority shareholders can participate. It was hoping to raise $25 billion, but that will now be hard.

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Petrobras, Brazil said to agree on oil reserves price

Carla Simoes and Peter Millard – Bloomberg Businessweek, 09/01/2010

Petroleo Brasileiro SA, Latin America’s largest company by market value, agreed in a meeting today on a price for oil reserves that it plans to buy from Brazil’s government in exchange for new stock, according to an Energy Ministry official briefed on the negotiations.

Petrobras, as the state-controlled oil producer is known, may give the price in a regulatory filing today after a meeting of the National Council for Energy Policy, said the person, who declined to be identified because an official announcement hasn’t yet been made. The official didn’t know what price Petrobras and President Luiz Inacio Lula da Silva agreed on.

Brazil will set an oil price “in the middle” of a $5-to- $12 a barrel price range after studying two reserve studies by independent auditing firms, Senator Delcidio Amaral said today in a telephone interview. Brazil will set a “fair” price for the oil, Lula said today during a speech in Brasilia.

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Brazil needs billions to drill really deep

Mac Margolis – Newsweek, 08/29/2010

Brazil has a sunken-treasure problem. The discovery three years ago of a huge offshore stash of oil unleashed a gusher of nationalist euphoria. At somewhere between 9 billion and 15 billion barrels, it was the largest find in the Western Hemisphere in more than a quarter century. President Luiz Inácio Lula da Silva hailed the find as a ticket to Brazil’s “second independence,” and called on the country’s legislators to tighten state control over the oil industry.

Since then, things have become more difficult. Brazil’s treasure lies deeper (4.5 miles) and farther from shore (200 miles) than any oil being commercially exploited today. To tap that undersea wealth, state oil company Petrobras says it needs cash up front: some $224 billion over the next five years. It has planned a massive stock offering for September. Problem is, the complicated financial transaction will only add to Petrobras’s already heavy debt load (34 percent of net assets), which could move ratings firms to downgrade the company. That would drive up borrowing costs and sour the deal. Brazil could share the burden by calling on international oil majors as risk investors, but that would mean easing its grip on the industry. In the run-up to the Oct. 3 presidential elections, that’s not happening.

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Brazil controls mean Petrobras can’t turn oil price surge into profit gain

Peter Millard – Bloomberg, 08/12/2010

Petroleo Brasileiro SA, which lost a quarter of its market value this year, is set to post the smallest profit gain among the world’s largest oil producers because of government controls on fuel prices.

The Rio de Janeiro-based company will report tomorrow that profit was little changed at 89 centavos a share in the three months through June, according to the average of four estimates in a Bloomberg survey. That would be the worst performance of any of the top ten major oil companies with the exception of BP Plc., whose earnings were hurt by the Gulf of Mexico oil spill.

While competitors Exxon Mobil Corp. and Royal Dutch Shell Plc are free to pass on rising oil prices to consumers at the pump, state-controlled Petrobras is constrained by government caps on how much it can charge consumers in Brazil. Petrobras cut gasoline prices by 4.5 percent and diesel 15 percent in June 2009 and hasn’t increased them since. Oil in New York averaged 31 percent higher in the second quarter than a year earlier.

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Oil euphoria puts Lula’s legacy at risk

Norman Gall – Financial Times, 08/11/2010

Brazil is flying high. Having emerged unscathed from the financial crisis, its economy has been growing at 9 per cent a year. Its hugely popular president, Luiz Inácio Lula da Silva, now in his last months in office, seemed set to retire with a chorus of praise – until he plunged into the complications of deep-water oil. Just as Icarus saw his wings of wax melt as he flew too close to the sun, so Mr Lula is risking his legacy as controversies multiply over his petroleum policies.

The April blowout of BP’s Macondo well in the Gulf of Mexico dramatised the difficulties of oil exploration in deep waters. The next phase in that drama could come in giant fields recently discovered byPetrobras, Brazil’s state-controlled oil company. They lie 7,000 metres below the Atlantic, beneath unstable salt beds up to 2,200 metres thick, far deeper than the layer of salt capping the Macondo.

These discoveries come with formidable production problems. But they also fed Mr Lula’s geopolitical ambitions, while fuelling election fever in the months before his successor is chosen in October. Banned from re-election by the constitution, Mr Lula is using the image of Brazil as a rising oil power as a political weapon, invoking feelings of triumphalism to help his Workers party to victory.

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Can Brazil live up to its promise as a ‘natural knowledge economy’?

Damian Carrington – The Guardian, 08/10/2010

Outside Dr Gilberto Cãmara’s office, there is a beautiful satellite map ofBrazil. From the fractal elegance of the Amazon and its tributaries to the twinkling mega-cities of Sao Paolo and Rio de Janeiro, the map shows why he thinks Brazil can be the world’s first environmental superpower.

He leads Brazil’s National Institute for Space Research (Inpe), one of the top 50 research organisations in the world. His startling claim, he explains in his easy English, rests on turning a piece of standard economic theory on its head. Nations develop their economies by moving up the value chain, away from churning out commodities and towards manufacturing, say the textbooks. Brazil has abundant natural resources, so the key to prosperity is to start making stuff, right? Wrong, he says, because of the “China effect”.

China mass manufactures at rock-bottom prices, with the consequence that over the past two decades the cost of manufactured goods has fallen fast, while demand has pushed up the cost of the commodities used to make the goods. This leads Camara to his slogan: “Brazil – the natural knowledge economy“. He describes this as applying knowledge and technology to commodities to boost their value, and reels off examples: biofuels, in which Brazil leads thanks to its sugar cane ethanol and growing biodiesel production; renewable energy – 47% of the country’s energy is already green, a world record; and climate change – Brazil’s Amazon is vital to the planet’s health.

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