Brazil’s Petrobras slashes 5-year investment budget

Paul Kiernan – The Wall Street Journal, 6/29/2015

Brazilian state-run oil company Petróleo Brasileiro SA said Monday it plans to slash investments by 37% over the next five years in an urgent effort to reduce its soaring debt load.

Petrobras expects capital spending over the 2015-19 period to total $130.3 billion, the company said in a long-delayed document outlining its five-year business plan. Petrobras’ previous five-year plan foresaw investments of $220.6 billion over the 2014-18 period.

The company also increased its goal for asset sales this year and next, saying it now expects to divest $15.1 billion in 2015-16, up from a previous target of $13.7 billion.

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Brazil ministers rebut new wave of campaign funding allegations

Maria Carolina Marcello and Eduardo Simões – Reuters, 6/26/2015

Two Brazilian ministers denied on Friday that there was anything illegal about campaign donations made in recent years by a businessman allegedly involved in massive corruption scandal at state-run oil company Petrobras.

President Dilma Rousseff’s chief of staff, Aloizio Mercadante, denied that 500,000 reais ($159,908) in campaign donations made to him in 2010 by companies owned by Ricardo Pessoa were linked to kickbacks at Petrobras.

Social Communications Minister Edinho Silva said in a separate statement that 7.5 million reais donated by Pessoa to Rousseff’s presidential campaign last year were legal and approved by Brazil’s Supreme Electoral Court. Silva was the treasurer of Rousseff’s campaign.

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US court to hear arguments that Brazil oil giant should stand trial for corruption

Rupert Neate – The Guardian, 6/25/2015

A US court will hear arguments on Thursday that oil giant Petrobras should stand trial for a culture of bribery and corruption that has rocked Brazilian businesses and political elite and lowered the company’s value by $90bn.

Investors, led by the UK Universities Superannuation Scheme, which manages the pension funds of British academics, claim they lost billions as a result of the huge money laundering and corruption scheme. The investors, which also include the retirement funds of state workers in Ohio, Idaho and Hawaii, claim in court filings that Petrobras was “rotten to the core”.

The scandal, which has been dubbed “operation carwash” because huge amounts of money were allegedly laundered through a money exchange in a nondescript gas station in the Brazilian capital, has already led to the indictment of more than 40 Brazilian executives allegedly involved in the bribery scheme dating back to 2006.

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Brazil probe sweeps up corporate magnates

Will Connors – The Wall Street Journal, 6/19/2015

Brazilian officials arrested the heads of two Latin American construction giants, alleging they helped to mastermind a cartel that stole billions of dollars from state-run oil company Petrobras with the help of corrupt politicians to whom they paid kickbacks.

Friday’s arrests are an exclamation point to a wide-ranging graft probe that has shaken Brazil’s business and political establishment for more than a year, now ensnaring the chiefs of Odebrecht SA and Andrade Gutierrez, who stand accused of money laundering and corruption.

Odebrecht is Latin America’s largest construction conglomerate, with business in the U.S., Europe and Africa, and whose head, Marcelo Odebrecht, is a household name in Brazil. Andrade Gutierrez has business in 40 countries. The privately owned companies are deeply involved in the development of stadiums and infrastructure for the 2016 Summer Olympics in Rio de Janeiro.

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Roots of a Brazilian scandal that weighs heavily on the nation’s economy, politics

Marla Dickerson – The Wall Street Journal, 6/19/2015

Brazilian prosecutors allege that for at least a decade up until 2014, some of the country’s largest construction firms colluded to inflate the cost of contracts at state-owned oil giant Petróleo Brasileiro SA by an average of about 3%.

Crooked Petrobras executives who brokered the deals got a portion of the ill-gotten gains, authorities say, funneling the rest to a slush fund for lawmakers and political parties, the prosecutors say. A web of money launderers allegedly helped them hide the money overseas.

The criminal investigation, dubbed Operation Car Wash after a gas station that was allegedly used to launder money, came about almost by accident. In 2013, investigators in southern Brazil were tracking the movements of an admitted money launderer named Alberto Youssef. Their curiosity was piqued when Mr. Youssef gave a $78,000 Land Rover to a former Petrobras executive name Paulo Roberto Costa. Authorities said that break helped them uncover one of the largest corruption scandals in Brazilian history.

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Brazil arrests powerful Odebrecht CEO in Petrobras probe -media

Caroline Stauffer and Walter Brandimarte – Reuters, 6/19/2015

Brazilian police on Friday arrested Marcelo Odebrecht, the head of Latin America’s largest engineering and construction company Odebrecht SA, local media said, pulling the most high-profile executive into the corruption investigation at state-run oil firm Petrobras.

Federal officers had orders to arrest a total of 12 people in four states and bring them to the southern city of Curitiba where the investigation is based, according to a federal police statement that did not give the names of the detained.

Odebrecht, which has 200,000 workers and a presence in 21 countries, said in a statement police had raided its offices in Sao Paulo and Rio de Janeiro and made arrests, but did not confirm any names. The company said the arrests were “unnecessary” because it was collaborating with investigators.

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How important is Brazil to the world’s oil market?

Kenneth Rapoza – Forbes, 6/15/2015

Two things put Brazil’s oil wealth in the public eye again this year. One good. One not so good. First the not so good: Petrobras. The state-owned oil firm is up to its eyeballs in scandal. It’s led to the bankruptcy of around four Petrobras partner firms, and the arrest of dozens of executives, including high level Petrobras managers implicated in money laundering and accounting fraud. So that’s the bad side of Brazil’s oil business.

Then the good side. That was brought to light recently when Shell Oil bought out the BG Group, a U.K. driller that partners with Petrobras on four wells in the Atlantic Ocean. Shell’s CEO Ben van Beurden said that one of the most attractive aspects of the BG deal was Petrobras. Before BG, Shell had drilling rights to just one field. It now has rights to four more. Buying BG was like buying Brazilian oil and buying Brazilian oil, for Shell, was a good idea.

Here’s why the oil industry watches Brazil’s lucrative deep water projects closely.

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