Shell Adds New, Deep-water Production In Brazil

(Oil & Gas Technoloy, Mark Venables, 13.Nov.2018) — New, deep-water production is underway at Lula Extreme South in the Brazilian Santos Basin. Royal Dutch Shell plc, through its subsidiary Shell Brasil Petróleo and consortium partners, announces that the FPSO P-69 is now producing.

The FPSO P-69 is a standardized production vessel offshore Brazil with a capacity for 150,000 barrels of oil and 6 million cubic meters of natural gas a day.

Operated by Petrobras, P-69 is a standardized vessel that can process up to 150,000 barrels of oil and 6 million cubic meters of natural gas daily. It will ramp up production through eight producing and seven injection wells.

“The Brazilian pre-salt fields are some of the best deep-water provinces in the world,” said Andy Brown, Upstream Director for Shell. “With significant flow rates, deep-water Brazil projects are breaking even under $40 per barrel. We commend Petrobras on this production milestone, and we look forward to progressing additional development plans with our consortium partners as well as for our recently-acquired, deep-water Brazil blocks.”

Following Lula Extreme South, the next FPSO is P-67 for Lula North. The Libra product sharing agreement continues to progress with an extended well test as well as the Mero 1 FPSO, and additional FPSOs are planned. Shell also has development drilling planned for its operated, Gato do Mato South field in 2019.

Shell has a 25 percent stake in the Lula consortium, operated by Petrobras (65 percent). Galp, through its subsidiary Petrogal Brasil, holds the remaining 10 percent interest.

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Petrobras Announces Calling Of Extraordinary General Meeting

(Petrobras, 9.Nov.2018) — Petrobras announced, according to the CVM and B3 rules to Level 2 of corporate governance listed companies, calling of General Extraordinary Meeting on Dec. 11, 2018, observed 30 days in advance, to deliberate on the following matters:

1. Proposal to amend Petrobras’ Bylaws to adjust Articles 23, 28 and 30, and consequent consolidation of the Bylaws, which deal with compensatory remuneration in the quarantine period and the indemnity agreement of senior management;

2. Proposal for the incorporation of PDET Offshore S.A. by Petrobras.

The Call Notice and the Handbook for Shareholder Participation can be accessed through the internet on the CVM website (www.cvm.gov.br) or the company’s website (http://www.petrobras.com.br/ri).

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Brazil VP-elect ‘Impressed’ After Meeting With Petrobras Executives

(Reuters, Rodrigo Viga Gaier, Marta Nogueira, 9.Nov.2018) — Brazil’s Vice-President-elect Hamilton Mourão said on Twitter he was “very much impressed” after meeting on Friday with top executives at state-run oil company Petroleo Brasileiro SA , in the midst of uncertainty over the company’s future leadership.

The meeting came as President-elect Jair Bolsonaro is still making decisions over who will take up key posts in his future government. Petrobras Chief Executive Ivan Monteiro said this week that he has not talked with Bolsonaro about whether or not he will stay in the job, but he would be willing to discuss staying on if he were invited to do so.

Investors are closely watching to see if heavily indebted Petrobras will build on a turnaround that is already underway, as Bolsonaro sends conflicting messages promoting both free-market policies and a nationalist economic vision.

Continuity with Petrobras’ top brass could soothe investor concerns about excessive government interference in the company.

“This morning, I had the pleasure of visiting Petrobras and hearing, alongside CEO Ivan Monteiro, a presentation by the management about the situation of the company,” Mourao wrote. “I came out very much impressed.”

On Wednesday, Brazilian television channel GloboNews said Bolsonaro had decided to keep Monteiro as the CEO of the world’s most indebted listed oil company. But Bolsonaro said later on Wednesday that his future economy minister, Paulo Guedes, will make that decision.

In October, Bolsonaro’s transition team informally sounded out Roberto Castello Branco, a former Petrobras board member and ex-chairman of iron ore miner Vale SA, about his interest in the post, Reuters reported, citing sources.

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Weatherford Awarded Drillpipe Riser Contract With Petrobras

(Weatherford International, 7.Nov.2018) — Weatherford International announced it has been awarded a four-year contract with a one-year optional extension to provide drillpipe riser (DPR) intervention systems and services for Petróleo Brasileiro S.A. in Brazil.

This contract is expected to yield approximately $80 million in revenue during the initial four-year period. It will replace a current five-system contract that began in May 2009.

Weatherford commenced its DPR operations in Brazil in 2003 by closely cooperating with Petrobras to develop a system that runs completions and land trees in deep water. ­As a prominent provider of subsea intervention and commissioning services with significant operational infrastructure and execution capability today, Weatherford has secured premium market share in the country with 16 working DPR systems operating under three separate contracts exclusively with Petrobras in the Santos and Campos Basins.

“We are very pleased that Petrobras has once again selected Weatherford for our expertise in subsea intervention services to extend the productive life of their assets. Winning this contract is a testament to the operational and safety performance of our Brazilian operations,” said Mark A. McCollum, President and Chief Executive Officer of Weatherford. “We are encouraged by the improving outlook in the deepwater market, particularly in Brazil, and look forward to continuing our longstanding partnership with Petrobras.”

The Company’s industry-leading DPR subsea services and intervention services offer comprehensive solutions through riser-based and open-water modes. The primary applications include landing subsea completion equipment and performing well intervention. To position customers for success, the DPR services leverage an experienced Brazilian workforce of approximately 700 employees and a state-of-the-art tubular inspection and maintenance center in Macaé.

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Braskem Plans Initiatives To Promote The Circular Economy

(Braskem, 7.Nov.2018) Braskem has defined a series of global initiatives to boost the Circular Economy in the production chain of manufactured plastic goods.

“We are firmly committed to the goal of helping to transform the linear economy into a Circular Economy, effectively demonstrating our commitment to sustainable development,” said Fernando Musa, Braskem’s CEO. “By establishing a series of global initiatives, engaging in voluntary commitments and expressing publicly its global positioning for the Circular Economy, Braskem is inviting clients, its partners in the value chain, its Team Members and society in general to intensify their joint quest for innovative and sustainable solutions using plastic.”

Entitled “Braskem’s Positioning for the Circular Economy,” the document establishes initiatives for forging partnerships with clients to conceive new products that will extend and facilitate the recycling and reuse of plastic packaging, especially single-use packaging. It also establishes higher investments in new resins derived from renewable resources, such as Green Plastic made from sugar cane, and support for new technologies, business models and systems for collecting, picking, recycling and recovering materials.

The initiatives also include encouraging consumers to get involved in recycling programs through educational actions on conscientious consumerism, the use of life cycle assessment tools and support for actions that improve solid waste management to prevent the disposal of debris in the oceans.

In addition to these initiatives, Braskem also has undertaken a voluntary commitment to adopt best practices for further reducing the loss of pellets (the raw material used to make plastic packaging) in its industrial processes by 2020, and has joined industry commitments to work towards having all plastic packaging reused, recycled or recovered by 2040.

Braskem also undertakes to report on the progress made in these initiatives in its annual report.

“Plastic plays a critical role in sustainable development because it prevents waste and increases efficiency in various sectors of the economy, such as agriculture and the auto industry. It is a material that contributes to food safety and hospital hygiene and that is part of people’s daily lives through its many different applications,” said Fernando Musa. “When incorporated into the circular economy, its potential for generating benefits with lower impact is further expanded.”

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Petrobras Invites Investors And Analyst To Participate In 3Q:18 Webcast

(Petrobras, 6.Nov.2018) — Petrobras will disclose its 2018 Third Quarter Results on Tuesday, November 6, 2018, before the opening of the market.

The company would like to invite investors and analysts for the conference call/webcast, with broadcast in Portuguese and simultaneous translation to English, as follow:

November 6, 2018 (Tuesday)

2:00 pm (Brasília)

11:00 am (New York)

4:00 pm (Londres)

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Petrobras BOD Approves Payment Of Interest On Capital

(Petrobras, 6.Nov.2018) — Petrobras announced its Board of Directors approved in a meeting held yesterday distribution of early remuneration to shareholders as Interest on Capital (IOC), as defined in art. 9, sole paragraph of its bylaws and in article 9 of Law 9.249/95.

The value to be distributed, in the amount of R$1.3 billion, corresponds to a gross amount of R$0.10/share, to be paid on December 3, 2018 proportional to each shareholder’s stake and to be provisioned in the 4Q:18 financial statements, based on shareholding positions as of November 21, 2018.

Starting from the first business day after the cut-off date (Nov. 22, 2018), shares will be traded ex-interest on capital at B3 and other stock exchanges where the company is listed.

This IOC advance will be imputed to the mandatory minimum dividend (article 53, paragraph 4, of the Bylaws) including for the purpose of payment of priority minimum dividends of preferred shares.

The amount of R$0.10/common share or preferred share related to the IOC will be subject to income tax, by applying the applicable tax rate. Income tax withholdings will not be applied to shareholders whose registered data proves to be immune or exempt, or shareholders domiciled in countries or jurisdictions for which the law establishes different treatment.

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Petrobras Reports Net Income Of R$23,677 Million In 9M-2018

(Petrobras, 6.Nov.2018) — Petrobras reported net income of R$ 23,677 million in 9M-2018, the best result since 2011 and a growth of 371% compared to the 9M-2017, determined by:

– Higher margins in the sales of oil products in Brazil and in exports, both driven by the increase in Brent and the depreciation of the Brazilian Real;
– Increase in diesel sales with expansion of market share;
– Lower general and administrative expenses, keeping the cost control discipline; and
– Reduction of interest expenses due to the decrease in indebtedness.

In September, agreements with DOJ and SEC were signed to close the investigation of the US authorities, totaling R$ 3.5 billion and reducing the risk for the company. Excluding these agreements, as well as the Class Action Agreement effects, the net profit would be R$ 10,269 million in the quarter and R$ 28,012 million in the accumulated of the year.

Adjusted EBITDA* was R$ 85,691 million, 35% higher than in 9M-2017, due to the increase in the sales margins of oil products in Brazil and exports. Adjusted EBITDA margin was 33%

Free Cash Flow * remained positive for the fourteenth consecutive quarter, reaching R$ 37,481 million in 9M-2018, same level as in the previous year, due to the increase in operating cash generation, despite the payments related to the Class Action agreement, and higher investments.

Considering the accumulated profit, the reduction of uncertainties with the Class Action agreements and with the DOJ / SEC and the financial leverage target, a higher anticipation of Interest on Shareholder’s Equity was approved, totaling R$ 0.10 per share, to preferred and common shares, adding to R$ 1,304.4 million. As a result, the anticipation totaled R $ 2,608.8 million.

Top Metrics

TRI: After a significant reduction since 2015, the TRI (total recordable injuries per million man-hours) remained at 1.06, same level as in the previous quarter. The company works for the continuous improvement of culture and safety conditions and adopts the alert limit of 1.0

Financial Leverage: Gross debt reached US$ 88,115 million, while Net debt reached US$ 72,888 million, a reduction of 19% and 14%, respectively, compared to December 2017. The liability management led to the increase in the weighted average maturity to 9 years, with average interest rate of 6.2%. The Net Debt/LTM Adjusted EBITDA* ratio decreased to 2.96 in September 2018, compared to 3.67 in 2017. Leverage* decreased to 50% in this period. Excluding the Class Action agreement, the company would present the ratio of 2.66, on a converging path to the target of 2.5.

Other highlights

– Started production through the FPSOs Cidade Campos dos Goytacazes in the field of Tartaruga Verde,P-74 in the field of Búzios and P-69 in the field of Lula (October)
– Acquisition of the Block of Sudoeste de Tartaruga Verde, in the 5th bidding round of Production Sharing Agreement promoted by the ANP
– Celebration of partnerships with Equinor for business in the offshore wind energy segment in Brazil, with Total in the renewable energy segment, with CNPC in the Comperj project and Marlim cluster and with Murphy in the Gulf of Mexico
– The company maintained its position as a net exporter, with a balance of 272 thousand bpd in 9M-2018
– Received a total of R$1.6 billion related to the second phase of the diesel subsidy program
– Adopted the complementary hedge mechanism for gasoline, allowing for less frequent price readjustments
– The company received R$1.7 billion recovered by the ”CarWash” operation
– Signed an Integrity Pact to improve transparency and corruption prevention measures
– Adopted the new Employee Carrer and Compensation Plan, to improve mobility and meritocracy
– Resumed the operation of the Paulínia refinery (Replan) with 50% of its capacity, following an accident without victims.*

Access the information about our Quarterly Results

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Five Groups May Join Eletronuclear Complete Power Plant Project

(Reuters, 6.Nov.2018) — Five groups are considering whether to partner with Brazil’s state-controlled Eletronuclear to resume construction of nuclear power plant Angra III, already partially built by the government, newspaper Valor Econômico reported on Tuesday, citing unidentified sources.

The foreign companies’ interest in the venture grew after a government agency raised the price of the energy produced at the plant to 480 reais per megawatts per hour from 250 reais, Valor reported.

The interested groups are China’s National Nuclear Corporation and State Power Investment Corporation, South Korea’s Kepco Engineering and Construction, Russia’s State Atomic Energy Corporation, known as Rosatom, and a consortium comprised of France’s Electricité de France and Japan’s Mitsubishi Heavy Industries , the paper said.

Current Brazilian President Michel Temer’s government is organizing the process, but contracts would probably be signed under the administration of President-elect Jair Bolsonaro, who will take office in January.

Eletronuclear has said it wants to resume construction in 2020, so the official rules for the choice of a partner should be published early next year, according to the paper, citing a source with knowledge of the matter.

The companies said to be interested in the venture did not immediately reply to requests for comment.

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World’s Most Indebted Oil Company Reports 20-Fold Increase In Profit

(Oilprice.com, Tsvetana Paraskova, 6.Nov.2018) — Brazilian state-run oil firm Petrobras reported on Tuesday a net income for Q3 surging more than 20 times compared to the profit for the same quarter last year on the back of higher oil prices.

Petrobras reported a consolidated net income of US$1.77 billion (6.644 billion Brazilian reais) for Q3 2018, up from just US$70 million (266 million reais) for Q3 2017. Compared to the second quarter of 2018, Petrobras’s net income dropped by 34 percent, due to higher net financial expenses and increased income tax expenses, the company said in its earnings release. In the second quarter of 2018, Petrobras had reported an even stronger surge in earnings, as net income jumped thirty-fold on the year, benefiting from the rising oil prices.

The third quarter this year was the third consecutive quarter in which Petrobras has booked a profit, it said.

Petrobras’s domestic crude oil and natural gas liquids (NGLs) production, however, dropped in the third quarter—at 1.937 million bpd, it was 6 percent lower compared to Q2 2018 and lower than the 2.134 million bpd production in Q3 2017.

The company attributed the lower production of oil, NGLs, and natural gas mostly to maintenance and the sale of a 25 percent stake in the Roncador field, partially offset by the start of production of the FPSO Cidade dos Campos dos Goytacazes in the Tartaruga Verde Field.
For the nine months January to September, Petrobras’s crude oil and NGL production in Brazil declined by 6 percent to 2.028 million bpd.

For the nine months to September, Petrobras reported a net income of US$6.3 billion (23.677 billion reais), the best result since 2011 and a 371-percent surge compared to the same period of 2017, thanks to higher oil prices, the depreciation of the Brazilian currency, higher diesel sales, and lower general and administrative expenses.

Petrobras, considered the most indebted oil company in the world, said that its net debt was US$72.888 billion at end-September, down by 14 percent compared to end-2017, and down from the US$73.662 billion net debt at end-June 2018.

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Argus Launches Series Of Daily Jet Fuel Prices In Brazil

(Argus, 5.Nov.2018) — Global energy and commodity price reporting agency Argus has launched a series of daily jet fuel prices for the aviation fuel market in Brazil.

Local and international airlines continue to invest in the growing Brazilian aviation market, driving the need for an independent reference for delivered jet fuel costs in the country.

Key trading and aviation activity centres on Brazil’s four largest, most liquid hubs — Itaqui, Suape, Rio de Janeiro and Santos. While liquidity is still gathering pace in these locations, Argus has developed a series of constructed daily prices showing the cost of delivering jet fuel from the US Gulf coast to these hubs, which supply Brazil’s largest, busiest airports.

The new delivered prices take into account jet fuel assessments at the US Gulf coast, freight rates, insurance, losses, demurrage costs, port waiting times and maritime tax to applicable ports.

“Argus is pleased to be the first global price reporting organisation to publish a Brazil jet fuel price, bringing transparency to the rapidly growing Latin American aviation markets,” Argus Media chairman and chief executive Adrian Binks said.

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FMC Corporation Updates On Ag Solutions In Brazil

(FMC Corporation, 5.Nov.2018) — FMC delivered another very strong quarter.

“In Ag Solutions, we executed our commercial strategy particularly well in Brazil, where we implemented significant price increases to largely offset FX headwinds,” said FMC CEO and chairman Pierre Brondeau.

FMC Agricultural Solutions reported third quarter revenue of approximately $924 million, an increase of 67 percent year-over-year due to the strength of the DuPont acquisition. On a pro forma basis, revenue increased 5 percent, with particularly strong demand and higher prices in Brazil. Segment earnings before interest, tax, depreciation and amortization (EBITDA) of $216 million increased 57 percent year-over-year and were $11 million above the midpoint of the prior guidance range. In the important Brazil market, higher prices and hedging were able to offset 100 percent of the FX impact on earnings in the quarter.

Full-year 2018 revenue for Agricultural Solutions is still forecasted to be in the range of $4.2 billion to $4.26 billion. At the midpoint, this implies 10 percent year-over-year growth on a pro forma basis. Full-year segment EBITDA is expected to be in the range of $1.195 billion to $1.215 billion, which is an increase of $5 million at the midpoint versus prior guidance. In the fourth quarter, the company is expecting 12 percent year-over-year growth on a pro forma basis, driven by Brazil and Europe; segment revenue is forecasted to be in the range of $1.015 billion to $1.075 billion, and segment EBITDA is expected to be in the range of $280 million to $300 million.

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Bolsonaro To Push Forward Giant Brazil Oil Sale, Adviser Says

(Bloomberg, Sabrina Valle, 4.Nov.2018) — Jair Bolsonaro’s energy team is keen to push for the sale of prized Brazilian crude deposits in an auction that could give Big Oil access to more black gold than all of Mexico’s proved reserves.

The plan would be to take bids in mid-2019 to help raise billions of dollars needed to reduce the South American country’s ballooning budget deficit, said Luciano de Castro, an adviser to the president-elect who’s leaving the faculty of the University of Iowa to join Bolsonaro’s transition team. The current administration estimates the sale could raise as much as 100 billion reais ($27 billion).

“The auction would bring valuable resources to Brazil and to the government, and help on the fiscal deficit,” Castro said by phone from Iowa City, where he taught as an associate economics professor until last week.

The plan further confirms that Bolsonaro will seek energy asset sales to raise cash as he enlists pro-market hawks for his team — a stark contrast to his past views in favor of state control before running for president. Bolsonaro was elected on Oct. 28 promising to welcome foreign producers, but his closeness to nationalist military leaders cast some doubt over those pledges.

Potential …..

A bill authorizing the sale, which had stalled in congress because of Brazil’s unpredictable presidential race, is expected to be voted by the Senate this week.

Unlike other Brazilian oil auctions offering exploration rights to high-risk areas with no guarantee of commercial reserves, this sale would be for an area where state-run Petroleo Brasileiro SA has already made major discoveries. The so-called transfer-of-rights area is part of Brazil’s giant pre-salt reserves in the Atlantic Ocean.

The government transferred 5 billion barrels of those deposits to Petrobras in 2010, but the country’s oil regulator later found they hold more crude than initially estimated. The surplus that would be offered to oil majors could amount to as much as 15 billion barrels. If such volumes turn out to be commercially recoverable, it would represent about twice the proved reserves of Mexico or Norway.

The bill authorizing the sale also aims to remove the obligation for Petrobras to develop the offshore region by itself, a legacy of the leftist Workers’ Party that governed Brazil for 13 years through 2016. The party, which tried a comeback but finished second in the elections, viewed oil as a strategic industry where foreign control should be limited.

Daily Talks

Castro said he’s having daily talks with Paulo Guedes, appointed to be Bolsonaro’s finance minister, and with a group of generals gathered in Brasilia to set up the government’s agenda.

This week, he starts working with Bolsonaro’s transition team as they prepare to take office on Jan. 1. Castro, a former Brazilian Air Force lieutenant turned academic, says he will be focused on the new government’s energy program full-time, but that no official invitation for a position in the new administration has been made.

Among the energy team’s top priorities for the next weeks, Castro said, is finding a solution to keep a steady power supply for consumers in northern states served by state-controlled utility holding company Centrais Eletricas Brasileiras SA.

Eletrobras, as the holding company is known, recently sold four regional power providers buried in debt, in an attempt to improve its balance sheet. But it failed to sell power distributors Ceal and Amazonas Distribuidora, which run the risk of being shut.

“There is a chance we have a huge problem. There is a lot of concern about what will happen with these distributors,” Castro said.

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Royal Dutch Shell Provides 3Q:18 Highlights For Brazil And Argentina

(Energy Analytics Institute, Jared Yamin, 2.Nov.2018) — Royal Dutch Shell provided an update related to portfolio developments in Brazil and Argentina during the third quarter 2018.

Third Quarter 2018 Portfolio Developments

Upstream

During the quarter, Shell and its partner Chevron won a 35-year production-sharing contract for the Saturno pre-salt block located off the coast of Brazil in the Santos Basin (Shell interest 50%).

In October, Shell and its partners announced first production at the Lula Extreme South deep-water development in the Brazilian pre-salt Santos Basin (Shell pre-unitisation interest 25%).

Downstream

In October, Shell completed the sale of its Downstream business in Argentina to Raízen. The business acquired by Raízen will continue the relationship with Shell through various commercial agreements, including long-term brand licence agreements as well as products supply and offtake contracts.

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YPFB Makes Initial Shipment Of Nitrogen Fertilizer To Brazil

(Energy Analytics Institute, Aaron Simonsky and Ian Silverman, 2.Nov.2018) — YPFB made its initial shipment of nitrogen fertilizer from Puerto Quijarro, in late October, to Baurú, a city located in the state of Sao Paulo in Brazil.

“The importance of this milestone lies in the speed with which YPFB’s urea was placed in new markets,” announced Yacimientos Petrolíferos Fiscales Bolivianos (YPFB) President Óscar Barriga in an official company statement.

“New Brazilian states beyond Mato Grosso and Mato Grosso do Sul, where the YPFB urea was initially marketed, are also demanding Bolivian urea,” added Barriga.

In addition to Sao Paulo, the states in Brazil where Bolivia’s granulated urea is being commercialized include: Mato Groso, Mato Grosso do Sul, Sao Paulo, Minas Gerais, Rondonopolis, Goias and Paraná.

To date in 2018, Bolivia has exported a total of 177,000 tons of granulated urea, equivalent to more than $50 million in revenues. Markets that currently consume Bolivian urea include: Brazil (65% of the 177,000 tons exported), Argentina (26%), Paraguay (8%) and Uruguay (1%), according to the YPFB statement.

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Petrobras Inks Deal to Divest Of Petrobras Oil & Gas B.V.

(Petrobras, 31.Oct.2018) — Petrobras, following up on the release disclosed on 3/8/2018, announces that its subsidiary Petrobras International Braspetro B.V. (PIBBV) signed a Sale and Purchase Agreement (SPA), related to the full sale of its 50% interest in Petrobras Oil & Gas B.V. (PO&GBV) to Petrovida Holding B.V., a company formed by the partners Vitol Investment Partnership II Ltd, Africa Oil Corp and Delonex Energy Ltd.

PO&GBV is a joint venture in the Netherlands formed by PIBBV (50%) and BTG Pactual E&P B.V. (50%), with assets located in Nigeria. It has an 8% stake in the OML 127 block, where the Agbami producing field is located, and a 16% stake in the OML 130 block, with the Akpo producing field and the Egina field, in final stage of development, without the operatorship of any field. The current production of the PO&GBV assets is about 21 thousand boe/day (Petrobras share).

The transaction will involve a total amount of up to $1.530 billion, with a cash payment of $1.407 billion, subject to adjustments until the closing of the transaction, and a deferred payment of up to $123 million, to be settled as soon as the Agbami field redetermination process is implemented.

The closing of the transaction is subject to the fulfillment of usual precedent conditions, such as obtaining approvals by relevant Nigerian government bodies.

The sale of PO&GBV was the result of a competitive process and is part of the Petrobras Partnership and Divestment Program, in line with the 2018-2022 Business and Management Plan and its ongoing portfolio management, with focus on pre-salt investments in Brazil.

This disclosure is in line with Petrobras’ disinvestment methodology.

Petrovida Partners

Vitol has a 50% interest in Petrovida. Vitol is a Dutch energy and commodities company and its primary business is the trading and distribution of energy products globally – it trades over seven million barrels per day of crude oil and products and, at any time, has 250 ships transporting its cargoes. Vitol’s clients include national and international companies from the sector, including the world’s largest airlines. It is also invested in energy assets globally including storage, refining capacity and service stations.

Africa Oil has a 25% interest in Petrovida. Africa Oil is a Canadian publicly traded oil and gas exploration and development company, primarily focused in Africa. The company’s assets include a twenty-five percent working interest in the South Lokichar oil development project (Kenya) and a portfolio of interest in Africa, focused on oil and gas exploration companies.

Delonex, also with a 25% interest in Petrovida, is a leading sub-Saharan oil and gas company focused on exploration, development and production with operations in Chad, Kenya and Ethiopia.

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Petrobras Postpones Mothballing Of Sergipe And Bahia Fertilizer Plants

(Petrobras, 31.Oct.2018) — Petrobras, following up on the release disclosed on Mar. 28, 2018, informs that it postponed until Jan. 31, 2019 the mothballing of the fertilizer plants located in Sergipe (Fafen-SE) and Bahia (Fafen-BA).

The company continues to evaluate alternatives to the mothballing with government representatives and industry federations of the states of Sergipe and Bahia and other participants, so this additional time is necessary to complete the analysis of the alternatives to the mothballing, provided that the minimum levels of profitability of Petrobras are maintained. Among these alternatives, leasing the plants to third parties is being considered.

Future steps in the analyses development will be communicated to the market.

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Petrobras Updates On Debt Pre-Payment With Banco Santander

(Petrobras, 31.Oct.2018) — Petrobras prepaid a debt with Banco Santander in the amount of $1 billion, due 2023. Simultaneously, it signed with the same institution a new line of credit worth $750 million, due October 2028 and with more competitive financial costs.

These transactions are in line with the company’s liability management strategy, which aims to improve the amortization profile and the cost of debt, taking into account the deleveraging target set forth in its 2018-2022 Business and Management Plan.

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AMLO’s Bad Start: Fitch Revises Mexico Outlook To Negative

(Forbes, Kenneth Rapoza, 31.Oct.2018) — Prognosis negative for Mexico. So says Fitch Ratings.

After a no vote on a new airport was reached yesterday in a referendum that president-elect Andrés Manuel López Obrador (aka AMLO) put on a special ballot, investors turned a bit sour. Elected this summer, AMLO takes over the presidency in December.

Mexico’s sovereign credit rating is still investment grade, but the outlook has slipped from stable to negative, the rating agency said on Wednesday. The stalled Mexico City airport project, one AMLO says is mired in dirty money, is just part of the problem.

There are risks that the follow-through on previously approved reforms, for example in the energy sector, could also stall and that other policy proposals will result in lower investment and growth than currently expected. His sole decision to cancel the construction of a new airport for Mexico City and potentially build one elsewhere—a failing bid—sent a negative signal to investors.

MSCI Mexico is down around 8% in the last five days.

Also, new proposals for large investments by state-owned oil company Pemex, whose creditworthiness have been under pressure due to debt burdens, are adding to the growing risk related to state liabilities, say Fitch analysts led by Charles Seville in New York.

AMLO’s election landslide was a strong mandate to tackle corruption, something that is also reverberating in other major Latin American countries like Brazil. AMLO also promised a significant shift in policy priorities and a different style of governing. His Morena party won a majority in both houses of Congress, which started work in September, enhancing his ability to push through his agenda once he starts the job on December 1.

A new budget is expected shortly after, together with a medium-term growth plan for Mexico. Similar to the existing government of Enrique Peña Nieto, the AMLO budget will likely see public sector borrowing requirements of 2.5% of GDP. So more bonds to be issued to Wall Street.

The incoming administration has pledged not to raise taxes for the first three years of the administration, a plus for pro-growth equity in Mexico. The current fiscal responsibility law limits growth in current spending, but AMLO can change that and put it to social use.

“After a lackluster second quarter which saw an outright contraction in activity, growth in Mexico is normalizing and moving back toward trend,” says Arthur Carvalho, an economist with Morgan Stanley. “Consumers appear to be in good shape.”

Continued export demand from the U.S. also keeps Mexican manufacturers happy, and services associated with external trade are doing well with room to move if the U.S. continues on its current trajectory.

As much as the recent growth normalization is welcome news, the more relevant debate is around the long-term prospects for Mexico—a country that has succeeded in delivering broad macro stability over a long period, but as an emerging market tied to the biggest consumer economy in the world, Mexico could be doing much better.

Expectations for Mexico’s interest rates went from no hikes to more hikes once the airport deal lost at the polls. The referendum sent the peso to its biggest decline in two years, pushing it back over 20 to 1.

JPMorgan Chase and Itau of Brazil say interest rates will go up on November 15 after the central bank policy meeting there in order to contain fallout from the peso. They previously forecasted no change. JPMorgan analysts think Banxico won’t stop there and will hike again in December, a negative for Mexico ETF investors.

If the transition period is any indication, AMLO’s road to “national redemption” will be a long and tricky one, Slate magazine wrote on Tuesday. AMLO has already made a number of “uncharacteristically ham-fisted choices,” wrote Leon Krauze, a news anchor for Univision in Los Angeles, in Slate.

Three weeks after his July 1 election, AMLO picked Manuel Bartlett from Peña Nieto’s party, a man he once accused of fraud, to be Mexico’s electric power commissioner.  That same day, he named Octavio Romero, an agricultural engineer, and his close personal friend, to run … an oil company, Pemex. Either this proves Mexico has very few of the best and brightest to pick from in government, or AMLO is confusing corn oil for crude. Either one could be right.

Meanwhile, some promises contained in the transition team, like increasing social welfare and government pensions, may be difficult to pull off within the budget framework. AMLO has said in the past that cutting government waste and graft would give him the money to transfer some wealth down-market.

This will surely take time and is not something Mexicans, or AMLO, should count on in year one of his presidency. The cost in doing so could exceed the amount of savings that have been proposed so far, savings such as restrictions to federal fund transfers to the states and cutting inefficient social programs.

Proposals that Pemex invest in new refining capacity to substitute for gasoline imports would entail higher borrowing and larger contingent liabilities to the government. AMLO said he would honor plans to open Mexican deepwater oil to foreign investors.

It was the airport deal that surprised markets yesterday and may have pushed credit watchdogs over the edge.

It should not have come as too much of a surprise, however. AMLO always said he was against the project due to corruption and overspending, and promised to put a new project up for a vote. He also said that investors such as debtholders and contractors in the now abandoned Mexico City airport project will be protected.

AMLO was once viewed as Mexico’s anti-Trump and compared by some to Brazil’s Luiz Inacio Lula da Silva. AMLO has reached out to Trump to help him stop a central American caravan of mostly men looking for jobs in the U.S., and eked out a better deal for Mexican autoworkers in the new NAFTA. For AMLO, comparisons to Lula are best forgotten. Lula is serving a 12-year prison sentence for his role in Operation Car Wash, Brazil’s largest ever bribery scandal, affiliated with state-run oil firm Petrobras.

I’ve spent 20 years as a reporter for the best in the business, including as a Brazil-based staffer for WSJ. Since 2011, I focus on business and investing in the big emerging markets exclusively for Forbes. My work has appeared in The Boston Globe, The Nation, Salon and U…

For media or event bookings related to Brazil, Russia, India or China, contact Forbes directly or find me on Twitter at @BRICBreaker

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Petrobras Announces $1.4bn Sale Of African Oil Business

(Ft.com, Andres Schipani, Neil Hume, 31.Oct.2018) — Brazil’s state-controlled oil company Petrobras agreed to sell its 50 per cent stake in an African enterprise to a consortium led by trader Vitol, the world’s biggest independent energy trader.

Vitol and its partners, Africa Oil Corp and Delonex Energy, will pay $1.4bn for the Brazilian company’s 50 per cent holding in Petrobras Oil and Gas BV (POGBV).

“Vitol has a long history of investing in Nigeria’s energy sector. We are pleased and proud to add this significant upstream asset to our infrastructure and downstream Nigerian investments,” said Vitol chief executive Russell Hardy in a statement. “POGBV has a strong non-operated portfolio, managed by Chevron and Total, and which represents circa 20 per cent of Nigerian production.”

The Brazilian national oil company owns 50 per cent of the Netherlands-based Petrobras Oil & Gas B.V, while BTG Pactual SA and the UK-based Helios Investment Partners hold the remaining stake in the venture.

The sale is part of the Brazilian company’s plan to offload $21bn assets by the end of this year to help cut one of the oil industries highest debt piles. Petrobras’s net debt stood at $73.66bn by the end of June 2018, down 13 per cent from $84.87bn at the end of last year. For Vitol, the deal marks a rare investment in the upstream oil sector.

POGBV has a participation in deepwater oil exploration blocks offshore in Nigeria — that include two producing fields, Agbami and Akpo -, that provide an average production of around 21,000 barrels of oil per day to the Brazilian giant. It also contains the Engina field, the largest ongoing oil development in the west African country, as well as the Preowei discovery.

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Petrobras Stops Chevron Plan To Drill In Brazil Offshore Block: Sources

(Reuters, Alexandra Alper, Marta Nogueira, 30.Oct.2018) — A decision by Petrobras not to invest in drilling new wells has derailed Chevron Corp’s plan to resume exploration in a Brazilian offshore field, people familiar with the matter said.

Chevron, which operates the field with a 52 percent stake, approved the drilling plan but Petrobras, which holds a 30 percent stake nixed the move, according to two people close to the talks.

Brazil’s state-controlled oil company, officially known as Petroleo Brasileiro, is prioritizing development of pre-salt offshore resources where billions of barrels of oil lie under a thick layer of salt below the ocean floor, the two people said. The Frade field is post salt and has less oil than pre-salt fields.

Petrobras and Schlumberger NV, which planned to drill six wells for some $20 million, could not immediately be reached for comment. Chevron declined to comment.

Brazilian energy company Petro Rio SA said on Monday it bought the remaining 12 percent from Frade Japao. Petro Rio SA CEO Nelson Queiroz told Reuters in an interview on Tuesday the company would be interested in buying Petrobras’ stake.

“We see extending the life of the field as a positive, drilling new wells,” he said.

Chevron and Petrobras halted exploration in the Frade field after a 2011 spill that led to criminal charges and a civil lawsuit.

Petrobras, one of the world’s most indebted oil companies, has slashed outlays and focused its shrunken capital expenditure budget on developing stakes in the world class pre-salt play in Latin America’s top producer. Other oil majors are also spending top dollar to lock in stakes to the area to replenish shrunken reserves amid rising oil prices.

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Petrobras Updates On Diesel Price Subvention Program

(Petrobras, 29.Oct.2018) — Petrobras, following up on the release disclosed on Sep. 28, 2018, informs that, due to the methodology determined in the National Petroleum Agency (ANP) Resolution nº 743, of Aug. 27, 2018, the average price of diesel established by the company in its refineries and terminals will be R$2.1228/liter from Oct. 30, 2018 to Nov. 28, 2018, which represents a reduction of 10.1% compared to the current average price.

The company will continue the economic analysis of the subvention program for the subsequent periods.

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Weatherford Reports Higher Activity Levels In Argentina and Mexico

(Energy Analytics Institute, Ian Silverman, 29.Oct.2018) — Weatherford International plc reported Western Hemisphere 3Q:18 revenues of $762 million were down $7 million, or 1%, sequentially, and down $5 million, or 1%, year-over-year, the company reported in an official statement.

Compared to the second quarter of 2018, revenues in Canada improved seasonally as the rig count increased following the spring breakup, but were offset by lower results in the United States and negative foreign exchange impacts in Latin America.

Year-over-year revenue increases from integrated service projects in Latin America were offset by lower activity levels in Canada as crude differentials expanded, which reduced demand for Completions and Production services and products.

Third quarter segment operating income of $78 million was up $28 million sequentially and up $75 million year-over-year. The sequential increase benefited from lower expenses and improved operating efficiencies mainly associated with the transformation. The year-over-year improvements were driven by a combination of higher activity levels in Argentina and Mexico and the positive impacts from our transformation efforts, which overcame lower operating results in Canada and foreign exchange effects in Latin America, the company said.

Operational highlights in Latin America during the quarter include:

— In Mexico, Weatherford replaced an incumbent’s system with the Magnus RSS, which ran onshore alongside the RipTide® drilling reamer to drill and enlarge a directional well with a 42° profile.

— Weatherford displaced an incumbent in Brazil by signing a new tubular running contract with Petrobras. The contract awards Weatherford work on 14 deepwater rigs, which represents significant market share.

— Working in collaboration with a customer, Weatherford devised an integrated solution that included logging, pressure pumping services, and the FracAdvisor® workflow to execute the first documented multistage frac job in the Jurassic Superior Pimienta Shale in Mexico. The large-scale solution complied with new government regulations and overcame significant logistical issues to fracture 17 stages in less time than allotted.

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Bolsonaro Gets Brazilian Oil Windfall With Output Poised To Soar

(Bloomberg, Sabrina Valle, 29.Oct.2018) — Brazil’s President-elect Jair Bolsonaro is staring at an oil windfall.

After a decade of stagnant production, Brazil’s offshore mega-projects are about to deliver a double whammy with exports set to surge and Brent prices comfortably above $70 a barrel. This means more revenue for a country beset with fiscal deficits, and more activity in a key industry, said Decio Oddone, the head of Brazil’s National Petroleum Agency.

The oil turnaround gives the government more than just cash — it promises to revive the fortunes of Petrobras, the much-maligned state-controlled state oil company that’s a source of pride for many Brazilians but which has spent the past few years mired in scandal.

Brazil Swings Right With Jair Bolsonaro’s Commanding Victory

It takes years to get a deep-water project flowing in Brazil, and Bolsonaro is likely to get all the credit from investment decisions made in the past.

“A lot of Brazilians may see it as the effect of a policy or stance that he implemented and not necessarily the continuation of existing policies,” said Roberta Braga, an associate director who focuses on Latin America for the Atlantic Council, a Washington-based think tank. “If this pays off, his image would be improved significantly.”

Petrobras Chief Executive Officer Ivan Monteiro has said production will increase “spectacularly” in 2019 and that the company is re-opening an office in Singapore to help market the boost in exports.

Petrobras’s production is expected to rise 9 percent in 2019, from 2 million barrels a day to 2.4 million, according to UBS Group AG. Morgan Stanley expects and even greater increase of 12 percent. While Petrobras hasn’t announced an official target for 2019 yet, a record eight production vessels have started to be installed this year and will gradually ramp up throughout next year. Together, the floating platforms have the potential to nearly double Petrobras’s oil output capacity.

The increase is thanks to large deposits of oil found a decade ago in deep waters of the Atlantic. The so-called pre-salt – reserves trapped under a thick layer of salt – is now responsible for more than half of the country’s production and is attracting growing investments by oil majors.

This region the main source of value for Petroleo Brasileiro SA, as the company is formally known, with unparalleled productivity and low-risk exploration, Morgan Stanley analysts Bruno Montanari and Guilherme Levy said in an Oct. 23. report.

Even though production has been flat in 2018, the combination of higher oil prices and a stronger real are already delivering a windfall. Petrobras paid 28 percent more in taxes and royalties in the first half of 2018, or 75 billion reais, compared with the year-earlier period. Petrobras publishes third-quarter earnings on Nov. 6.

Petrobras also resumed paying dividends and the second quarter was its most profitable since 2011. This contrasts sharply with the multi-billion dollar writedowns it posted in during Brazil’s biggest graft scandal, known as Carwash, a pay-to-play scheme where a group of company executives colluded with suppliers to inflate contracts.

One source of uncertainty is who will lead Petrobras under Bolsonaro, who takes office on Jan. 1. He hasn’t named his energy team, which includes the energy minister, or possible recommendations for the board and top management at Petrobras.

“With elections behind us, eyes now turn to the transition government and the selection of the names for the next cabinet,” Bradesco analyst Fernando Barbosa said in a note to clients on Monday.

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Petrobras Reports Oil And Gas Out For Sep. 2018

(Petrobras, 26.Oct.2018) — Petróleo Brasileiro S.A. (Petrobras) announced that in September its total production of oil and gas, including natural gas liquids (NGL), was 2.47 million barrels of oil equivalent per day (boed), 2.35 million boed produced in Brazil and 125 thousand boed abroad.

The total operated production of the company (Petrobras and partners’ share) was 3.18 million boed, with 3.02 million boed in Brazil.

Total oil and gas production remained stable compared to the previous month, with a reduction in the oil production mainly due to the maintenance stoppage of the P-57 platform, located in the Jubarte field, and P-52, located in the Roncador field, both located in the Campos Basin, which was compensated with an increase in gas production mainly due to the production normalization of the Mexilhão platform.

It should be noted that the company achieved the monthly record of utilization of the gas produced of 97.1%.

The tables below detail the production values.

Petrobras maintains its commitment to the production target disclosed in the 2018-2022 Business and Management Plan, considering the ramp-up production of the platforms that have already started operations this year (P-74, in the Búzios field, FPSO Cidade de Campos, in the Tartaruga Verde field and P-69, in Lula field) and the beginning of the production of new systems expected until the end of 2018.

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Petrobras Updates On Reduction Of Relevant Shareholding Interest

(Petrobras, 25.Oct.2018) — Petrobras, in compliance with article 12 of CVM Instruction Nº358 of January 3, 2002 and Circular Letter CVM/SEP/Nº002/2018, informs that it was notified by Caixa de Previdência dos Funcionários do Banco do Brasil (PREVI) that PREVI sold preferred shares issued by Petrobras, so that the institution manages shareholding interest lower than 5% of the preferred shares issued by Petrobras,  as per the information below.

I. PREVI, on Oct. 8, 2018, changed its preferred shareholding position to 277,709,475, reducing its share participation from 5.04% to 4.96% of the total preferred shares issued by Petrobras;

II. The participation reduction is not related to any specific objective;

III. PREVI did not celebrate any contracts or agreements governing the exercise of voting rights or the purchase and sale of securities issued by Petrobras;

IV. PREVI, a closed supplementary pension entity, enrolled with CNPJ under Nº 33.754.482/0001-24, has registered headquarters at Praia de Botafogo, 501, 3rd and 4th floors in the city of Rio de Janeiro, State of Rio de Janeiro.

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P-69 Starts Operation In Lula Field, Pre-salt Of Santos Basin

(Petrobras, 24.Oct.2018) — Petrobras, with its partners in the BM-S-11 Consortium, started production of oil and natural gas in the Lula Extremo Sul area, in the pre-salt of Santos Basin, by means of platform P-69, eighth unit installed in the Lula field.

The FPSO (floating production, storage, and offloading unit of oil and gas) is located approximately 290 km off the coast of the state of Rio de Janeiro, in water depth of 2,150 meters. With a daily capacity to process up to 150 thousand barrels of oil and compress up to 6 million cubic meters of natural gas, P-69 will produce through eight producing wells, also using seven injection wells.

The hull construction was completed at the Cosco shipyard in China and the integration of the modules and the final commissioning of the unit were carried out at the Brasfels shipyard in Brazil.

P-69 will contribute to the increase of Petrobras’ production in the horizon of the 2018-2022 Business and Management Plan.

Lula Field

Discovered in 2006, Lula is the largest producing field in the country, responsible for 30% of the national production. Relief vessels are used to offload the oil, while gas is drained through the pre-salt pipeline routes.

Lula field is located in the BM-S-11 concession operated by Petrobras (65%), in partnership with Shell Brasil Petróleo Ltda. (25%) and Petrogal Brasil S.A. (10%)

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Petrobras Fires Up New Platform In Offshore Lula Field

(Reuters, 24.Oct.2018) — State-controlled oil company Petroleo Brasileiro said on Wednesday it had started production on its eighth platform in the offshore Lula field, Brazil’s most productive, as it ramps up output from the Santos basin in the coveted pre-salt oil play.

Platform 69 will be able to produce up to 150,000 barrels of oil per day and 6 million cubic meters of gas from the field, which already accounts for 30 percent of production in Brazil, now Latin America’s top producer.

The platform features eight production wells and seven injection wells to extract oil and gas from the field, which was discovered in 2006 and where production began four years later.

Petrobras operates the field and owns a 65 percent stake. Royal Dutch Shell and Galp have 25 and 10 percent stakes respectively.

In the pre-salt offshore area, billions of barrels of oil are trapped beneath a thick layer of salt under the ocean floor. The Santos basin already accounts for over half of production in Brazil.

A Shell executive told Reuters last month that Lula should hit peak production in 2020 or 2021, after reaching 1 million barrels of oil and gas per day next year.

(Reporting by Marta Nogueira and Jose Roberto Gomes, Writing by Alexandra Alper Editing by Marguerita Choy)

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Petrobras Stock Upgraded: What You Need to Know

(The Motley Fool, Rich Smith, 23.Oct.2018) — Does Brazilian oil major Petroleo Brasileiro make for a good investment?

There are a lot of reasons to answer, “No.” From 2014 to 2017, Petrobras stock lost money for its shareholders. This $100 billion company carries a $96 billion debt load (admittedly offset somewhat by nearly $19 billion in cash, according to data from S&P Global Market Intelligence). Unusual for an oil major, Petrobras doesn’t even pay much of a dividend to its shareholders — a mere 0.8%, or less than half the average dividend yield on the S&P 500.

And yet, despite losing money as GAAP defines the idea of profitability, Petroleo Brasileiro is now entering its fourth straight year of positive free cash flow production — and as it turns out, free cash flow is a key reason why one banker is making a big bet on Petrobras stock.

Here’s what you need to know.

With elections looming, Morgan Stanley has Brazil — and Petrobras stock — on its mind today.

Upgrading Petrobras

Analysts at investment bank Morgan Stanley announced they’upgrading shares of Petrobras to overweight and hiking their price target to $21.50, as reported by StreetInsider.com this morning. That’s nearly a 60% bump from Morgan Stanley’s previous $13.50 price target. It promises as much as a 37% profit to new investors buying in at today’s share price of just $15 and change.

As many reasons as there may be to be skeptical of Petrobras stock as an investment, Morgan Stanley sees opportunities for investors to profit from it. For example, Petrobras boasts proven reserves of 8.4 billion barrels of oil, and a further 7.9 trillion cubic feet of proven natural gas reserves, an “oil equivalent. With Brent crude prices around $76 a barrel today, and WTI crude north of $66, Morgan Stanley believes that Petrobras’ “asset base is undervalued.”

Defusing concerns

Granted, there’s still the debt load to worry about, but even that doesn’t concern Morgan Stanley overmuch. Pointing to Petrobras’ recent history of strong free cash flow generation — $3.9 billion in cash profits thrown off in 2014, growing to $12.4 billion in 2015, $12.9 billion in 2016, and holding pretty steady at $12.6 billion over the past 12 months — Morgan Stanley argues that the high price of oil is “taking care of the balance sheet” at Petrobras, and that the company’s strong FCF “will lead to rapid deleveraging,” enabling Petrobras to pay down its debt in short order.

Helping with that mission, the analyst notes (as summarized by TheFly.com) that Petrobras’ refining business is “no longer destroying value.” There’s even the potential for Petrobras to raise even more cash, potentially accelerating the process of paying down debt by selling off assets — which should fetch higher prices in the current expensive oil environment.

What it means for investors

Of course, $96 billion in debt won’t vanish in a day. This is a process that will take time — probably a lot of time. Even if Petrobras were to devote every penny of free cash flow that it generates to paying down debt — $12.6 billion in annual cash generation, for example — it would require more than 7.5 years to pay off the company’s debt in full. (Becoming net debt-free — with cash levels equaling indebtedness — could be accomplished in a little over six years, and asset sales could accelerate the process even further.)

Looking at Petrobras as it stands today, though, is the stock a buy? Here’s how I look at it.

With $100 billion in market cap, $19 billion in cash, and $96 billion in debt, Petrobras carries an enterprise value of roughly $177 billion. Against that valuation, the company is generating $12.6 billion in free cash flow, resulting in an EV-to-FCF ratio of 14. Analysts who follow the stock expect profits to grow rapidly at the company as oil prices remain high — as much as 20% annually over the next five years.

If they’re right, then paying 14 times FCF for 20% growth seems like a fair price to me. And as Morgan Stanley points out, investors are likely to “shift back” to valuing Brazilian stocks such as Petrobras based on their “fundamentals” after the country has successfully picked a new president next week. Once that happens, I’d expect to see Petrobras shareholders richly rewarded.

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Brazil Reserves And Production Update, H1 2018

(Seeking Alpha, George Kaplan, 19.Oct.2018) — Brazil and Petrobras show something in common with US LTO: even with a lot of debt and desire, and a strong resource base, it is difficult to raise production in the face of high decline rates. It may also be a lesson for the world as oil prices rise and activity picks up; it is by far the most active conventional oil region with many major projects at various stages of completion, but facing delays and schedule crowding so oil production has continued a slow decline, contrary to expectations from last year. In July, new production again did not quite match overall decline, mostly because of delays in start-ups of FPSOs planned for this year, and at 2575 kbpd was down 14 kbpd or 0.5% m-o-m and 48 kbpd or 1.8% y-o-y (data from ANP).

Two FPSOs were started in 2017: Lula Extension Sul (P-66) at 150 kbpd nameplate and Pioneiro de Libra, an extended well test project on the Mero field, at 50 kbpd. Both are now about at design throughput. Two other FPSOs completed ramp-up in 2017. In 2018, three FPSOs have started up: Atlanta a small early production system at 20 kbpd, Bezios-1 (P-74) in the Santos basin at 150 kbpd and FPSO Cidade de Campos dos Goytacazes on the Tartaruga Verde field in Campos, also at 150 kbpd. There were three other FPSOs due for the Buzios field (P-75, 76 and 77) but at least one is delayed till next year. There are now four planned FPSOs remaining to be started up this year, all in the fourth quarter: P-75 and P-76 plus P-67 (Lula Norte) and P-69 (Lula Extremo Sul) in the Lula field (each 150 kbpd nameplate). Even for a company the size of Petrobras that seems a very tight schedule for commissioning large, complex plant, so one or two may slip to next year and all may be so late as to make little difference to this year’s numbers.

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Petrobras Announces Resignation Of Board Member Christian Alejandro Queipo

(Petrobras, 19.Oct.2018) — Petrobras announced Mr. Christian Alejandro Queipo presented his resignation from the position as member of the company’s Board of Directors, for personal reasons.

As a member representing the company’s employees, his succession will follow the procedures established in paragraph 2 of article 25 of Petrobras’ Bylaws, observing the previous analysis by the Nominating, Compensation and Succession Committee.

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Petrobras Reveals Release Date For 3Q:18 Results

(Petrobras, 19.Oct.2018) — Petrobras will release its 2018 third quarter results on November 6, 2018, before the market opens.

Therefore, between Oct. 22, 2018 and Nov. 6, 2018, the company will be in quiet period, during which it is not able to comment or provide clarifications related to its results and perspectives.

This initiative aims at meeting the best Corporate Governance practices, thus ensuring fair disclosure of information with its stakeholders.

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Petrobras and CNPC Define Business Model For COMPERJ, Marlim Partnership

(Hydrocarbon Engineering, Alex Hithersay, 18.Oct.2018) — Petrobras has announced that it has signed an integrated project business model agreement (IPBMA) with China National Oil and Gas Exploration and Development Co. (CNODC), a subsidiary of CNPC, advancing towards their strategic partnership, as disclosed to the market on July 4, 2018.

The IPBMA details the steps of a feasibility study to evaluate COMPERJ refinery’s current technical status, its investment case and the remaining scope to conclude the refinery and the business valuation. A joint team composed by CNPC and Petrobras specialists and external consultants will conduct the studies.

Once the full benefits and costs of this project are quantified, the next step is to create a joint venture (JV) between Petrobras (80%) and CNPC (20%) to conclude and operate the refinery.

The integrated project also includes 20% participation of CNPC in Marlim cluster, which is composed by Marlim, Voador, Marlim Sul and Marlim Leste fields. Petrobras will have 80% and will keep the operatorship of all these fields.

Marlim crude oil production perfectly fits the design crude slate to be processed in COMPERJ refinery, a high conversion heavy oil refinery.

The JV’s effective implementation depends on the successful results of COMPERJ feasibility study with the respective investment decision by the parties, as well as the negotiation of final agreements.

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Petrobras Updates On Beginning Of Binding Phase Of Ceará Cluster

(Petrobras, 18.Oct.2018) — Petrobras, following up on the release disclosed on Oct. 4, 2017, informs the beginning of the binding phase regarding the sale of its entire stake in the Ceará cluster, located in shallow waters in the Ceará basin.

At this stage of the project, process letters are issued to qualified interested parties with detailed instructions about the divestment process, in addition to guidelines to conduct due diligence and submit binding proposals.

This disclosure to the market is in compliance with Petrobras’ divestment methodology and aligned with the provisions of the special procedure for the sale of the rights to exploration, development and production of oil, natural gas and other fluid hydrocarbons, provided for in Decree 9.355/2018.

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Petrobras LSFO Offer Sparks Fears Of Length In Europe

(S&P Global Platts, 18.Oct.2018) — Brazil’s Petrobras is offering 50,000 mt of 0.6% cracked low sulfur fuel oil from Brazil for delivery into Europe during the first decade of November, fuel oil traders said Thursday.

The cargo from Petrobras, Brazil’s biggest refiner, is not good news for European LSFO after a period of steady demand in the Mediterranean, as this additional cargo will add length in Europe.

“This is the last thing we want in Europe,” a fuel oil trader said.

The LSFO market tightened through September and early October as the Mediterranean continued to demand 1% fuel oil for utilities, but traders expect this to soften in the coming weeks as the extended summer air-conditioning demand dips.

“The market seems oversupplied now, all the key refineries are coming back from maintenance, the summer demand is gone,” a second fuel oil trader said.

The 0.6% sulfur Petrobras cargo will likely go into the blending pool, and a possible destination could be the Algeciras blending hub, a source said.

Last winter, the European LSFO market benefited from some additional non-EU demand from Brazil’s Petrobras to fulfill a shortfall in requirements due to a drought. This combined with maintenance at a key LNG import facility necessitated oil imports for power generation as Brazil’s 70% of electricity is hydropower.

Petrobras could not be reached for comment to confirm the cargo or the purpose of the export.

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Engie And Caisse Said To Plan $9B Pipeline Bid

(Bloomberg, Cristiane Lucchesi, Francois Beaupuy, Scott Deveau, 15.Oct.2018) — French utility Engie SA and a Canadian pension fund plan to offer as much as $9 billion (34 billion reals) for Petrobras’s natural gas pipeline network, potentially a $1 billion boost from their initial bid, according to people with knowledge of the matter.

Petroleo Brasileiro SA is now finalizing terms with Engie and the Canadian fund, Caisse de Depot et Placement du Quebec, the people said, asking not to be named because the talks are private. Petrobras then plans to touch base with other groups for a second round of bids that must meet the terms agreed to with Engie. In April, Mubadala Development, in a consortium with EIG Global Energy Partners, and Macquarie Group Ltd. presented two separate bids, people said at the time.

Spokesmen from Engie, Caisse and Petrobras declined to comment.

The 2,800-mile (4,500 kilometer) pipeline network, Transportadora Associada de Gas, or TAG, spans ten states in northeastern Brazil. It’s being sold as part of a wider push by Petrobras to sell $21 billion in assets to slash debt. If consummated, it would be the company’s biggest divestment ever.

Engie, whose initial $8 billion bid including debt was the highest, is planning to raise its offer to ensure it prevails at a time when cheap credit is available to help finance the acquisition, the people with knowledge of the talks said.

Petrobras aims to conclude a deal this year, the people said, but the divestment program still faces uncertainty. In July, Ricardo Lewandowski, a Supreme Court judge, ruled that the sale of any government-owned company asset, including subsidiaries, must be approved by Congress.

Petrobras will try to resume negotiations over TAG even without a final decision from the court, Valor newspaper reported Oct. 10.

In 2017, Petrobras sold Nova Transportadora do Sudeste, a similar but smaller pipeline network in Brazil’s southeast, to a consortium led by Brookfield Asset Management for $5.2 billion.

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Petrobras Expects To Revive TAG Deal Over The Next Month: Sources

(Reuters, Tatiana Bautzer, 15.Oct.2018) — Brazil’s state-controlled oil company Petroleo Brasileiro SA expects to revive the sale of its pipeline operator TAG over the next month, if it can get a Supreme Court injunction lifted, with the support of the country’s solicitor-general, a person with knowledge of the matter said.

In July, Petrobras, as the oil company is known, was wrapping up exclusive talks with France’s Engie SA when the process was blocked by a Supreme Court injunction ordering asset sales by state companies be approved by Congress.[nL1N1TZ0IO]

The source, who asked for anonymity to discuss the matter, said Petrobras plans to use a section of Brazil’s 1997 oil law regarding privatizations in an appeal before the Supreme Court.

The company is not planning to circumvent the injunction, the source said, contradicting local media reports.

Petrobras did not immediately respond to a request for comment.

If Petrobras is allowed to proceed with the deal, the company will finish drafting the sale contract with Engie and then allow new bids from the other two groups interested in the gas pipeline network.

However, Petrobras and Engie have not yet restarted talks, which are currently forbidden by the Supreme Court injunction, the source added.

Engie may have to beat bids from two rival consortia after its exclusivity period ends.

One is led by investor EIG Global Energy Partners and United Arab Emirates’ sovereign wealth fund Mubadala Development Co PJSC. The second is led by Australia’s Macquarie Bank Ltd.

The competing consortia have not yet been contacted by Petrobras, two other people with knowledge of the matter added.

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Analysis: Brazil Presidential Frontrunner’s Advisers Clash Over Petrobras

(Reuters, Alexandra Alper, Tatiana Bautzer, Rodrigo Viga Gaier, 12.Oct.2018) — Nationalistic and free market advisers to Brazil’s right-wing presidential frontrunner are deeply split about the future of state-run oil company Petroleo Brasileiro, foreshadowing a showdown over divestments and fuel subsidies.

University of Chicago-educated banker Paulo Guedes, economic adviser to frontrunner Jair Bolsonaro, has said he favors full privatization of Petrobras. Failing that, investors hope he can promote a business-friendly agenda such as asset sales to reduce the company’s $74 billion net debt.

Federal prosecutors in Brazil said on Wednesday that Guedes was being investigated over accusations of fraud tied to the pension funds of state-run companies, and Bolsonaro has rejected one of his policy recommendations.

Meanwhile, an increasingly vocal cadre of military generals stressing the importance of maintaining Petrobras as a strategic asset have shown growing influence.

Bolsonaro himself was an early supporter of a truckers’ strike this year over rising diesel prices. The government ultimately ended the strike by meddling in Petrobras’ ability to set prices at the pump, another policy that investors would like to see the government end.

Petrobras shares spiked 10 percent on Monday as investors bet a Bolsonaro administration would mostly give the company free rein in terms of selling off units to cut debt or setting fuel prices according to market forces.

The former army captain’s surge in the polls, topped by his win in the first round of voting, sparked a rally that has added $18 billion to the state oil company’s market value this month. But tensions between the two wings of Bolsonaro’s campaign threaten to cut the euphoria short.

One senior member of Bolsonaro’s entourage, who declined to be identified because of the sensitivity of the issues, said he had called for Petrobras to be broken into four companies and for three to be sold off.

“Now the final word on all this will rest with Bolsonaro,” he said. “I don’t think he really wants to.”

Bolsonaro voted as a legislator to preserve the state oil company’s monopoly on exploration and production and as a candidate he has taken a wide range of stances. Mirroring the views of some of the generals close to him, he has described Petrobras as a strategic asset.

“I believe we need to keep the core of Petrobras,” he said in an interview with TV station Band on Wednesday night. “The question of refining, refineries, I think that you can move gradually toward privatizations.”

In another recent interview he said he opposed privatizing Petrobras but still could reluctantly move to end the oil company’s “monopoly” in Brazil that he said gave it excessive pricing power.

Some 49.6 percent of Petrobras’ stock is traded on the stock exchange.

A key adviser on infrastructure and energy issues, General Oswaldo de Jesus Ferreira, has described the company as a strategic asset that must stay in state hands.

“Given Jair Bolsonaro’s history of voting in his nearly 30-years in congress, his connection with statist military sectors and the contradictory statements of his campaign leaders on the subject, it is hard to believe that he will include Petrobras in a program of privatizations,” said Ricardo Lacerda, chief executive at investment bank BR Partners. “The market seems overly optimistic about this issue.”

Fuel subsidies are another flashpoint. In May, Bolsonaro reacted to the strike by truckers angry about rising diesel prices. He enthusiastically backed the strike, tweeting that the movement showed “how the people are robbed for the benefit of a political caste, which for decades has enslaved everyone.”

The strike brought Brazil’s economy to a standstill. To mollify the truckers, President Michel Temer’s government dismantled a free-market fuel pricing policy and reintroduced fuel subsidies. This prompted Petrobras’ market friendly CEO Pedro Parente to quit, and its share price tumbled.

Oil prices have risen further since May, but subsidies are due to expire in December. Whether to maintain the subsidies could present the first test of Bolsonaro’s free market inclinations, if he wins the election and is inaugurated on Jan. 1.

Bolsonaro’s platform, written by Guedes, among others, states that Petrobras should be able to follow international pricing but ease short-term volatility with hedges. Yet the candidate has declined to say definitively whether he would extend the diesel subsidy.

It is hard to know how a potential Bolsonaro government would handle issues like the truckers strike, said Edmar Almeida, an energy professor at the Federal University of Rio de Janeiro. “Lots of contradictions still exist between Paulo Guedes’ neo-liberal vision and the military’s nationalist vision.”

DEEP DIVIDES

Investors may be more realistic to hope for sales of Petrobras assets to relieve its hefty debt load, which Moody’s Investors Service has said represents one-third of all Latin America’s rated corporate debt.

Bolsonaro’s party platform says the company should be able to sell substantial stakes in refining, wholesale, transport and other areas where it has market power.

Currently, a Supreme Court injunction triggered by a union lawsuit has halted sales of subsidiaries like its $7 billion TAG pipeline.

Some observers fear Guedes’ influence is on the wane. His uneasy alliance with Bolsonaro appeared to fray last month when Guedes proposed reviving an unpopular financial transactions tax known as the CPMF to raise government revenue. That idea was swiftly shot down by Bolsonaro and the once loquacious Guedes has barely been heard from since.

Still, Bolsonaro confirmed on Thursday that he would name Guedes to oversee a “super ministry” combining the current finance, planning and development portfolios.

Despite the tug of war between his advisers, Bolsonaro’s energy policies are more investor friendly than those of Workers Party standard-bearer Fernando Haddad, who will take him on in the second round on Oct. 28.

Haddad’s oil policy guru is former Petrobras CEO Sergio Gabrielli, whom many see as having presided over an era of corruption and mismanagement at the company.

“For now, what Petrobras’ share price reflects is simply a company which could remain free of the kind of intervention which the PT once promoted,” said Marcio Correia, who manages 14 billion reais in equities at JGP Asset Management in Rio de Janeiro.

“But Petrobras shares could still appreciate more depending on what a potential Bolsonaro government does.”

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Energy Analytics Institute (EAI): #LatAmNRG

Petrobras, Murphy Oil Create US Gulf Joint Venture

(S&P Global Platts, 11.Oct.2018) — Brazilian state-led oil company Petrobras and Murphy Oil will combine production assets in the US Gulf of Mexico in a joint venture that will produce about 75,000 barrels of oil equivalent/day in the fourth quarter of 2018.

“The joint venture will be formed by the combination of all of both companies’ production assets in the Gulf of Mexico, with Murphy the operator with 80% participation and Petrobras America Inc. 20%,” Petrobras said in a filing with the Brazilian stock regulator after markets closed Wednesday.

The deal continued recent trends for both companies, with Petrobras retreating from international projects to focus on the subsalt at home and Murphy expanding its presence in US Gulf plays where the company sees cheap growth opportunities. Petrobras has also focused on the sale of international assets under its $21 billion divestment plan for 2017-2018 after facing legal hurdles to the sale of refineries, oil fields and other assets in Brazil.

Petrobras previously sold off its stake in Petrobras Argentina, exploration and production assets in Colombia and distribution assets in Chile and Paraguay. The company is currently trying to sell off its stakes in exploration and production assets in Africa.

The deepwater fields that will form the production foundation for the JV include Cascade, Chinook, St. Malo, Lucius, Hadrian North, Hadrian South, Cottonwood, Dalmatian, Front Runner, Clipper, Habanero, Kodiak, Medusa and Thunder Hawk, Petrobras said. In addition, the shallow-water fields South Marsh Island 280, Garden Banks 200/201 and Tahoe were also part of the portfolio of combined assets, Petrobras said.

Petrobras will receive a total of $1.1 billion as part of the deal because of the higher value of its production contributions, including $900 million in cash, the company said. A $150 million contingency payment is also on tap for 2025 as well as $50 million worth of development costs at the St. Malo Field that will be paid for by Murphy on behalf of Petrobras, should several enhanced oil-recovery projects currently being studied for the field move forward, the company said.

The cash will be used to pay down debt and fund Petrobras’ investments, which are currently expected to be about $16 billion in 2019 under the company’s 2018-2022 investment plan. Most of Petrobras’ investment cash is earmarked for subsalt fields, where the company holds a dominant position in the deepwater frontier and operates about 1.5 million b/d of output.

Murphy, meanwhile, is part of a shift in the US Gulf after several large independents such as Apache, Devon Energy and ConocoPhillips left the play. Murphy is part of a series of relative newcomers including Talos Energy and Kosmos Energy to snap up opportunities in a region that operators say delivers high margins even at oil prices at or below $40/b.

The company seeks out mature fields with opportunities to tie back fresh wells to existing production facilities. A tieback project will cost about $660 million and take 18 months to complete, but break even at about $32/boe, according to Murphy.

The deal with Petrobras also represents an expansion of Murphy’s ties to Brazil, where the El Dorado, Arkansas-based company purchased stakes in several blocks at recent licensing sales. The biggest opportunity is in the Sergipe-Alagoas Basin, where the company teamed up with ExxonMobil and Brazil’s QGEP Participacoes on several blocks next to a region where Petrobras made 12 separate deepwater discoveries.

Petrobras expects to start a long-term well test in the area in the fourth quarter of 2018.

Brazil also needs companies with Murphy’s expertise in mature field revitalization, which could create additional opportunities for the US company off the coast of South America. The Campos Basin, where many shallow-water and early deepwater developments are approaching the end of their working lives, needs fresh investment aimed at boosting recovery rates to the industry standard of 30%-35% from the current 24%.

Petrobras currently has more than 100 onshore and offshore mature fields in Brazil up for sale under its divestment program. Brazil’s National Petroleum Agency (ANP) is pushing Petrobras to determine which of the fields the company wants to extend concession contracts for and to return the rest to the regulator for resale.

The ANP recently implemented a program aimed at boosting investment in mature fields by reducing royalty rates on incremental production increases to 5% from the current 10% in exchange for investment that extends the assets’ working lives, boosts recovery rates and increases production. The program covers more than 200 of Brazil’s 241 offshore fields, according to ANP officials.

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Energy Analytics Institute (EAI): #LatAmNRG

Petrobras Updates On Sale Of Onshore Fields Opportunity Disclosure

(Petrobras, 8.Oct.2018) — Petrobras announced the beginning of the opportunity disclosure stage (Teaser) related to the sale of its entire equity share in three onshore production fields (Lagoa Parda, Lagoa Parda Norte and Lagoa Piabanha), located in the state of Espírito Santo, Brazil, close to the municipality of Linhares, jointly designated as Lagoa Parda Cluster.

Petrobras is the operator with 100% interest in the three fields. The Cluster average production in 2017 was approximately 266 barrels of oil per day (bpd) and 20 thousand m3/day of gas.

The Teaser containing key information about the opportunity, as well as the objective criteria for the selection of prospective purchasers, is available at Petrobras’ website: http://www.investidorpetrobras.com.br/en/press-releases.

Besides the Teaser, the main subsequent phases of each divestment project will be disclosed, as detailed below:

• Start of the non-binding phase (if applicable);
• Start of the binding phase;
• Granting of exclusive negotiation (if applicable);
• Transaction approval by Senior Management (Executive Board and Board of Directors) and signature of contracts;
• Closing.

The disclosure to the market herein is in compliance with Petrobras’ divestment methodology and is aligned with the provisions of the special procedure for the sale of exploration, development and production of petroleum, natural gas and other fluid hydrocarbons rights, provided for in Decree 9.355/2018.

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Petrobras Prepays Debt With Banco do Brasil

(Petrobras, 5.Oct.2018) — Petrobras prepaid a debt with Banco do Brasil, in the amount of R$2 billion, whose maturity would occur in 2020. Simultaneously, Petrobras has signed with the same institution and the same amount a revolving credit facility, with maturity in October 2025.

The revolving credit facility represents an additional source of liquidity available for the company to be used according to its needs. As such, Petrobras may use its cash for early repayment of current debts, allowing for the reduction of interest rates without loss of liquidity.

It is noteworthy that with this new credit facility, Petrobras has available to withdraw a total amount of R$6 billion hired from Brazilian banks and $4.35 billion hired from international banks under revolving credit facilities.

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Petrobras Offers Clarification On ‘Car Wash’ News

(Petrobras, 5.Oct.2018) — Petrobras reports that it received the Official Letter No. 369/2018/CVM/SEP/GEA-1, which requests the following clarification:

Official Letter No. 369/2018/CVM/SEP/GEA-1

“Mr. Director,

  1. We refer to the news published on 09/28/2018 in Veja magazine, Brazil section, under the title: “CAR WASH – ARMADILLO IN THE HOLE,” which includes the following statements:

Contrary to the opinion of technicians, Petrobras entered a confidential and unnecessary arbitration that cost it 150 million reais to Schahin’s benefit.

Along its four years of existence, Car Wash has opened a scheme of corruption of +42 billion reais that almost broke Petrobras and engulfed a good part of the Brazilian political class. But not all the suspicious transactions involving the state-owned company have gone through the magnifying glass of the operation. The one that poured 150 million reais into the coffers of the contractor Schahin is one of them. The transfer, featured as additives to a work that had been completed almost three years before by the contractor, was against the recommendation of two technical committees of the state-owned company and was never investigated by Car Wash.

The 150 million payment was made only because Petrobras agreed to participate in an arbitration process filed by Schahin, hired by the state-owned company to build a 96-kilometer pipeline in São Paulo. Petrobras’ technical area argued that the contractor’s claim was unsuitable, and the matter was a “sure win” case. Therefore, it should be dealt with in ordinary courts, without the need for arbitration, an instrument used to accelerate conflict resolution among private companies. But a sketch of the directors – led by Graça Foster, including the person in charge of the works, José Antônio de Figueiredo, Engineering Director, and Alcides Santoro, Gas and Energy Director – placed Petrobras in the arbitration, which ended up deciding for the benefit of Schahin. The multimillion transfer to the contractor began at the end of 2013 and was completed by early 2014.

  1. In this regard, we request a statement from the company on whether the news is true and, if that’s the case, explain the reasons why it understood that it is not a material fact, as well as comment on other information considered relevant on the matter.”
Clarification

Petrobras informs that its participation in the arbitration procedure mentioned in the news, as a way of solving the deadlock with Schahin, was preceded by technical analysis, as it usually occurs in other arbitration proceedings established by the company, through which legal, contractual, commercial and other aspects were evaluated.

In this sense, the company clarifies that, upon entering the arbitration, it acted according to its technical area opinion, which had pointed to the existence of good arguments to dismiss the lawsuits filed by Schahin.

Despite the arguments presented by Petrobras in the arbitration, an unfavorable decision was rendered against the company, after the review of expert evidence, by an Arbitral Court that was legally established and held recognized qualification, and Petrobras complied with the payment of the amounts determined in said decision.

It is important to clarify that, according to the laws in force, the arbitration awards have the power of an enforceable decision and can only be void in the ordinary courts according to the exhaustive cases provided by laws, which, according to the technical evaluations carried out, were not present in the said case.

Finally, in assessing the materiality of this arbitration, the company understood that it is not a material event that could be disclosed pursuant to CVM Instruction 358/02.

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Aker Solutions Wins Subsea Order for Libra’s Mero Field Offshore Brazil

(Aker Solutions, 5.Oct.2018) — Aker Solutions has signed a contract with Petrobras to provide a subsea production system and related services for the Mero 1 project within the Mero field development, one of the largest oil discoveries in Brazil’s pre-salt area.

The subsea production system will consist of 12 vertical subsea trees designed for Brazil’s pre-salt, four subsea distribution units, three topside master control stations for the Mero 1 Guanabara FPSO and spare parts. The order also includes installation and commissioning support services.

“We’re pleased to become a key supplier to Petrobras and its partners for the first full production project of this major development,” said Luis Araujo, chief executive officer of Aker Solutions. “We have an extensive local workforce and over 40 years’ experience in Brazil and look forward to continuing to play an important role in the development of the country’s pre-salt resources,” he added.

Aker Solutions’ subsea manufacturing facility in São José dos Pinhais and its subsea services base in Rio das Ostras will carry out the work.

The work has already started and deliveries are scheduled for 2020. Installations are scheduled between 2020 and 2023.

The subsea production system will be hooked up to the first full-scale floating production, storage and offloading (FPSO) vessel for Mero, known as the Guanabara FPSO. The FPSO is scheduled to come on stream in 2021 and will have capacity to process up to 180,000 barrels of oil a day and 12 million cubic meters of gas a day.

The ultra-deepwater Mero field is located in the northwestern area of the original Libra block, which is about 180 kilometers south of Rio de Janeiro. First oil was produced in November last year.

Petrobras is the operator of the consortium developing the Libra area. Shell, Total, CNPC and CNOOC Limited are partners. Pre-Sal Petróleo S.A (PPSA) manages the Production Sharing Contract.

The companies are not disclosing the value of the contract. The order will be booked in the third quarter of 2018.

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Baker Hughes to Bid for Petrobras PSC -Baker Hughes Executive

(Reuters, Marta Nogueira, Alexandra Alper, 2.Oct.2018) — General Electric Co’s unit Baker Hughes is preparing an offer for a production-sharing deal with Brazil’s Petrobras, a Baker Hughes executive said on Tuesday, as the state-run oil company seeks creative ways to boost output from mature fields.

Reuters reported in June that Baker Hughes was considering a bid, while Halliburton Co and Schlumberger NV were already preparing them, seeking to clinch Petrobras’ first-ever tender for a production sharing deal with an oil services company.

“It’s a lot of work. Anything that is the first time requires lots of work,” Alejandro Duran, Baker Hughes’ Brazil country manager, told Reuters in an interview. He added that talks with Petrobras were already under way.

He said Baker Hughes will host additional meetings in Houston soon to discuss the issue.

“It is interesting, Petrobras coming to the market with a new thing. It has to be a win-win. That is the most important thing now.”

Petrobras did not immediately respond to a request for comment.

Petrobras, the world’s most indebted oil company, is looking for ways to squeeze better returns from some of its aging fields as it focuses its limited capital budget on developing the country’s prolific pre-salt fields, where billions of barrels of oil are trapped under a thick layer of salt offshore.

A deal would represent a novel way for it to boost output from mature fields without losing control or risking capital, by partnering with one of the world’s largest oil service providers.

It would also allow services companies to put to use expensive equipment idled for years as Brazil’s oil industry was hammered by low oil prices and a massive investigation into corruption at Petrobras.

The state-owned oil company is paying an $853 million fine to the U.S. Justice Department to settle charges related to that probe, which found evidence that political appointees on its board and elsewhere handed overpriced contracts to engineering firms in return for illicit party funding and bribes.

The oil services companies are expected to compete in the tender by promising to boost production from the Potiguar basin’s waning Canto do Amaro field in northern Brazil, where production began in 1986, and offering a bigger share of output to Petrobras, sources said in June.

Based on the results from the project, Petrobras will decide whether to apply this model in other areas, the oil company said in July, confirming the Reuters story.

Proposals were originally due in June, but at least one company sought an extension.

Duran said he thought proposals were due this month but could be extended again.

The winner would be responsible for investment and operation and maintenance costs for the wells. The tender includes a 15-year contract and Petrobras would remain the operator.

GE’s Baker Hughes has not typically taken stakes in customer projects. However, last year it announced a deal with Twinza Oil Limited to provide a range of services for the development of an offshore gas field in Papua New Guinea.

(Reporting by Marta Nogueira and Alexandra Alper in Rio de Janeiro Writing by Alexandra Alper Editing by Christian Plumb and Matthew Lewis)

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Why Companhia Energetica, and Petrobras Stocks All Popped Today

(The Motley Fool, Rich Smith, 2.Oct.2018) — Investors are upbeat facing the upcoming Brazilian presidential election.

What happened

Brazilian oil giant Petroleo Brasileiro (Petrobras) saw its stock surge 8.9% in Tuesday trading, while its preferred “A-shares” — Petroleo Brasileiro — did even better, closing up 10.2%.

Shares of Brazilian electric utility Companhia Energetica de Minas Gerais gained 9.4% on the day.

Companhia de Saneamento Basico do Estado de Sao Paulo, a Brazilian wastewater treatment company, closed 9.6% higher.

What do these three companies have in common? They’re all based in Brazil, naturally — and they’re all benefiting from positive sentiment about the upcoming Brazilian presidential election.

So what

On Sunday, Oct. 7, Brazil will hold the first round of voting for its new president. At least eight different candidates are competing for the post, but the two leading candidates today are former paratrooper Jair Bolsonaro from the conservative Social Liberal Party and Fernando Haddad from the more liberal Workers’ Party. As the two most likely top vote getters in Round 1, these two candidates are expected to face off in a second round of voting on Oct. 28.

That’s where today’s news comes in. A new poll released by Brazilian media company Ibope Monday showed Bolsonaro, who suffered an assassination attempt earlier this year, closing the gap with his rival Haddad — who, up to last week, had been leading in the polls for likely second-round voting. As of this week, the two candidates appear to be tied, which, according to analysts at Goldman Sachs, should be good news for business (and stocks), because Bolsonaro is believed to support more market-friendly moves such as deregulation and balanced budgets than is his opponent.

Now what

I see two risks here, however. First, polls can be wrong. Investors hanging their hopes on the results of just one poll — and one saying Bolsonaro has only tied his opponent and not that he’s moved into the lead, no less — are at risk of being disappointed if voters end up voting differently than they told pollsters they would.

Second, most of the attention here is being focused on the likely results of a second round of voting that is still four weeks away — before the first round has even been conducted. Until investors know for certain who the runoff candidates will be, it might be unwise to place bets on one of two unknowns beating a second unknown.

If you absolutely, positively have to place a bet, though … my advice would be to focus your examination on Companhia de Saneamento Basico do Estado de Sao Paulo. Its P/E ratio is the lowest of the three stocks that leapt today — a mere 7.3 times earnings even after the pop. Also, one thing’s for certain: Regardless of who wins the election in October, people in Brazil are going to continue drinking water. Seems to me that makes Companhia de Saneamento Basico a safe stock to bet on.

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Petrobras Offers Clarification On Valor Econômico News

(Petrobras, 1.Oct.2018) — Petrobras received the Official Letter No. 363/2018/CVM/SEP/GEA-1, which requests the following clarification:

Official Letter No. 363/2018/CVM/SEP/GEA-1

“Mr. Director,

1. We refer to the news published on this date, in the newspaper “Valor Econômico”, Companies section, under the title: “Petrobras estimates that it would have from R$20 billion to R$ 30 billion yet to be reimbursed,” which includes the following statements: Negotiated three years ago, the agreement between Petrobras, the SEC and the DoJ has stalled in the last two months due to the determination by the company, which was ultimately successful, in being considered a victim rather than a beneficiary of the corruption process.
[…]
Internal calculations indicate that the company has from R$20 billion to R$30 billion to be reimbursed.

  1. In this regard, we request a company’s statement as a verification of such news, notably as to the existence of estimates of amounts to be reimbursed, and if that’s the case, an explanation of the reasons why it was not considered a material fact, as well as comments on other information considered relevant on the matter.”
Clarification

The company clarifies that it does not recognize the existence of internal valuations that indicate the amounts mentioned in the news by “Valor Econômico”, in the amount ranging from R$20 billion to R$30 billion, to be reimbursed under the scope of Operation “Car Wash.”

Petrobras has been reporting to the market in a timely manner about the actions it has been taking and the amounts that have been recovered under the scope of the Operation, in order to provide its shareholders and other stakeholders with a more detailed view of the efforts made to protect the interests of the company.

In this regard, on August 28, 2018, Petrobras issued a Notice to the Market in which it was informed that, as a result of Cooperation and Leniency Agreements and repatriation, it has already recovered over R$2.5 billion. It also reported on 16 administrative misconduct lawsuits seeking compensation of R$10.9 billion as indemnity, and R$31.2 billion in connection with potential fines to be applied, as well as 53 criminal lawsuits in which Petrobras acts as assistant prosecutor, on account of the damage it suffered.

The company, which is recognized by the authorities as a victim of the acts unveiled by the Operation, will continue to take appropriate actions against companies and individuals that have caused it damages.

***

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Brazil Says to Suspend Energy Imports from Venezuela

(Energy Analytics Institute, Ian Silverman, 28.Sep.2018) — The Brazilian government announced it would suspend, until further notice, the importation of Venezuelan energy to supply Roraima, a state in northern Brazil on the border with Venezuela.

The decision was taken after the Brazilian government announced it considered it more reliable to meet regional demand with electricity produced by four national thermoelectric plants, , reported the Venezuelan daily La Patilla.

Suspension of electricity imports from Venezuela was decided on by members of the Electricity Sector Surveillance Committee, a sector body coordinated by the Ministry of Mines and Energy, the ministry confirmed in a statement.

Venezuelan energy imports had already been temporarily suspended on September 16, 2018 as the Brazilian government further analyzed whether it had the capacity to adequately supply Roraima with its thermoelectric plants in the region.

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Petrobras Reports On Adjustment Of Sale Prices

(Petrobras, 28.Sep.2018) — Petrobras, following up on the releases disclosed on Aug. 7, 2018 and Aug. 31, 2018, informs that, due to the methodology established in the National Petroleum Agency (ANP) Resolution no. 743 of Aug. 27, 2018, the average price of diesel will be R$ 2.3606 per liter as of Sep. 30, 2018, which represents a 2.8% adjustment.

The value corresponds to the arithmetic average of road diesel prices free of taxes charged by Petrobras at its refineries and terminals in the Brazilian territory for the 3rd period of the 3rd phase of the Diesel Economic Subvention Program (Sep. 30, 2018 to Oct. 29, 2018).

This new period in the Program provides for adjustment in regional average prices and maintains the condition that the subsidy will be paid against proof that the prices charged by qualified companies are lower than the sale prices defined by ANP for the five regions (South, Southeast, Mid-West, North without Tocantins and Northeast with Tocantins).

The company will continue the economic analysis of the subvention program for the subsequent periods.

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Shell Adds Material Acreage To Its Deep-water Position In Brazil

(Shell, 28.Sep2018) — Shell Brasil Petróleo Ltda, a subsidiary of Royal Dutch Shell plc, and its bid consortium member Chevron Brasil Óleo & Gás Ltda, won a 35-year production sharing contract for the Saturno pre-salt block located off the coast of Brazil in the Santos Basin. Shell will pay its share of the total signing bonus for the block, equating to approximately $390 million [R$ 1,562 billion].

“We are pleased to add another material, operated exploration position to our leading portfolio in one of the world’s most prolific deep-water areas,” said Andy Brown, Upstream Director, Royal Dutch Shell. “We continue to grow an exciting and resilient Upstream business of long-term competitive positions in our heartlands while maintaining strong, capital discipline.”

With the addition of the Saturno block (Shell 50% operating, Chevron 50%) won at the Fifth Pre-Salt Bid Round, Shell increases its total net acreage off the coast of Brazil to approximately 2.7 million acres. Shell will engage with Chevron to define specific plans for exploration drilling in the area just won.

Shell is a major oil and gas producer in Brazil with a clear strategy to continue developing an industry-leading portfolio of pre-salt acreage through exploration. The company plans to drill the Alto de Cabo Frio West and South Gato do Mato pre-salt fields in the Santos Basin next year and is proceeding with seismic studies to mature two exploration blocks awarded earlier this year.

Since 2014, Shell has more than doubled its global, deep-water production and expects to exceed 900,000 barrels of oil equivalent by 2020, coming from previously discovered areas in Brazil, the U.S. Gulf of Mexico, Nigeria, and Malaysia. The company is also developing deep-water, exploration plans for its acreage off the coast of Mexico, Mauritania, and in the Western Black Sea.

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Transocean Extends Contract for Petrobras 10000 Through 2021

(Transocean Ltd., 28.Sep.2018) — Transocean Ltd. announced the ultra-deepwater drillship Petrobras 10000 was awarded a 790-day contract extension offshore Brazil with Petrobras.

The contract is extended through October 2021, and includes a blend and extend modification to the previous contract dayrate, effective September 2018. The additional net contract backlog is approximately $185 million, including cost escalations.

Additionally, Transocean will receive a 5% royalty per day, totaling approximately $16 million, estimated to be from October 2018 to October 2021 associated with the use in Brazil of the company’s patented dual-activity technology on the Petrobras 10000.

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ExxonMobil Grabs Additional Acreage in Brazil’s 5th Pre-Salt Bid Round

(ExxonMobil, 28.Sep.2018) — Irving, Texas-based ExxonMobil increased its holdings in Brazil’s pre-salt basins after it won the Titã exploration block with co-venturer Qatar Petroleum during Brazil’s 5th pre-salt bid round.

The block awarded added more than 71,500 net acres to the ExxonMobil portfolio, expanding the company’s total position in the country to approximately 2.3 million net acres.

“With the acquisition of this block, we continue to increase our holdings in Brazil’s pre-salt basins, which are high-quality opportunities that enhance ExxonMobil’s global portfolio,” said Steve Greenlee, president of ExxonMobil Exploration Company. “These resources will benefit from ExxonMobil’s considerable capabilities, which we will employ as we explore and develop them with our co-venturers and the government.”

Equity interest in the block will be 64 percent for ExxonMobil and 36 percent for Qatar Petroleum. ExxonMobil will be the operator.

Through the remainder of 2018 and into 2019, ExxonMobil will continue to obtain 3-D seismic coverage, as well as continue to progress work on regulatory requirements for exploration drilling by 2020. Development work is also ongoing in the Equinor-operated Carcara field, which contains an estimated recoverable resource of more than 2 billion barrels of high-quality oil.

ExxonMobil subsidiary ExxonMobil Exploração Brasil Ltda. has interests in a total of 26 blocks offshore Brazil and is operator of 66 percent of its net acreage. The company has had business activities in Brazil for more than 100 years and has about 1,300 employees in the country across its upstream, chemical and business service center operations.

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Equinor and Petrobras Sign Brazilian Offshore MOU

(WindPowerOffshore, Craig Richard, 28.Sep.2018) — State-owned oil majors Equinor and Petrobras have signed a three-year memorandum of understanding (MoU) to develop the country’s offshore wind sector.

The two companies have already been investigating other potential areas of cooperation, including the development of renewable energy projects, they stated.

Petrobras has four wind farms installed in the state of Rio Grande do Norte in north-eastern Brazil with a combined capacity of 104MW, while Equinor — formerly known as Statoil — operates three wind farms off the coast of the UK, and is developing further offshore sites in Germany and the United States.

The MoU, signed at a conference in Rio de Janeiro, does not oblige either company to undertake any business, they announced.

However, it “indicates the intention of the companies to work together to develop projects in the offshore wind energy segment,” Equinor and Petrobras added.

“Brazil has huge potential for offshore wind power generation and we want to take advantage of this potential together,” said Petrobras’ director of strategy, organisation and management system, Nelson Silva.

Brazil currently has just under 13.9GW of operational wind capacity, according to Windpower Intelligence, the research and data division of Windpower Monthly — all of which is onshore.

Corruption probe

Meanwhile, Petrobras has agreed to pay $853 million to the US Department of Justice (DoJ) and Securities and Exchange Commission, and the Brazilian Federal Prosecutor’s Office, following a long-running corruption investigation.

The US and Brazilian governments had launched the probe in connection with Petrobras’ role in facilitating the bribing of politicians and political parties.

The Brazilian state oil giant admitted it had failed to make and keep accurate and fair accounts, and that the company’s contractors had generated bribes with the cooperation of Petrobras executives.

US authorities agreed not to prosecute in exchange for the funds. The DoJ stressed that Petrobras was a victim of an “embezzlement scheme” carried out by former executives.

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Petrobras, Equinor Ink 3-Year Deal for Wind Energy Projects

(Reuters, 26.Sep.2018) — Norway’s Equinor ASA and Brazil’s Petrobras agreed to jointly seek out offshore wind projects together for the next three years, executives from the two companies said on Wednesday.

Equinor’s Executive Vice President Anders Opedal and Petrobras’s Chief Strategy Officer Nelson Silva did not offer details on the amount to be invested.

The project comes after Petrobras released plans for Brazil’s first offshore wind project, a pilot plant offshore from Rio Grande do Norte state that should begin operations in 2022 and produce about 6 to 10 megawatts. (Reporting by Alexandra Alper and Marta Nogueira; editing by Diane Craft)

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Petrobras Cuts Gasoline Refinery Price After Pump Record

(Reuters, 24.Sep.2018) — Brazil’s state-owned oil company Petroleo Brasileiro SA said on Monday that it would cut the average price of gasoline at its refineries by 0.59 percent after pump prices hit record levels in the country last week.

Petrobras, as the company is known, said the price reduction to 2.2381 reais ($0.5476) per liter will go into effect on Tuesday.

That’s a decline from the previous fixing of 2.2514 reais per liter, the highest refinery price since Petrobras began nearly daily price adjustments last year.

Gasoline prices at the pump hit an average price of 4.652 reais per liter last week, a record when not accounting for inflation, according to a survey conducted by industry regulator ANP.

Petrobras’ move to cut its refinery rate is at odds with global oil prices, which rose more than 3 percent on Monday to four-year highs after Saudi Arabia and Russia said they would not immediately act to increase production, despite appeals from U.S. President Donald Trump.

Earlier this month, Petrobras unveiled a program that would allow it to hedge against gasoline price moves, allowing it to reduce volatility in refinery fuel prices.

The mechanism will permit Petrobras to maintain prices at a set level for up to 15 days without incurring losses, reducing the frequency of adjustments, according to the company.

Petrobras shares fell 0.74 percent by late afternoon trading on Monday to 19.99 reais. ($1 = 4.0868 reais) (Reporting by Roberto Samora Writing by Jake Spring; Editing by Sandra Maler)

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Alvopetro Announces Gas Treatment Facility Construction in Bahia

(Alvopetro Energy Ltd., 21.Sep.2018) — Alvopetro Energy Ltd. announced award of the contract for the construction of its Natural Gas Treatment Facility in the state of Bahia in Northeast Brazil.

This facility is the key strategic asset underpinning the company’s natural gas development project and will be the first 100% independently owned treatment facility in Brazil capable of delivering sales specification natural gas.

Natural Gas Treatment Facility Contract

Following an extensive competitive bidding process, Alvopetro has awarded a 10-year contract to Enerflex Ltd. to build, own, operate and maintain the Facility. Enerflex is a global leader in the natural gas industry providing integrated gas compression and processing solutions with an established Brazilian operating presence.

Under the terms of our agreement, Enerflex will construct the Facility using a mechanical refrigeration unit (the MRU) as the main processing element. The MRU technology was selected by Alvopetro based on the ability to manage a broader range of inlet natural gas specifications, making it ideal for accommodating the richer Gomo natural gas and natural gas from future discoveries and projects. Enerflex will construct and own the Facility providing operations and maintenance, while warrantying the delivery schedule and on-stream availability. The Facility is scheduled to begin commissioning in November 2019 and be operational by the end of 2019. Alvopetro will pay an integrated service fee for the Facility of $2.9 million per year over the 10-year term of the agreement.

Operational Update

The execution of this agreement for construction of the natural gas treatment facility, the key strategic asset in Alvopetro’s natural gas development in Bahia State in Brazil, builds off the momentum achieved over the past five months with the finalization of the unitization agreement for the company’s Caburé natural gas field in April 2018 and its long-term gas sales agreement with Bahiagás in May 2018.

The Caburé and Gomo natural gas assets in Brazil were evaluated by GLJ Petroleum Consultants as of May 31, 2018 with total proved plus probable (2P) reserves of 5.7 MMboe assigned with a before tax value discounted at 10% of $124.0 million.

Over the next few weeks Alvopetro expects to award the turnkey contract for the construction of the 11-kilometre transfer pipeline from the Caburé unit to the Facility. Alvopetro has secured land for the Facility, completed all field survey and initial permitting work, and application for construction of the pipeline and the Facility was submitted for regulatory approval in April 2018. The company’s Gomo natural gas project will also connect to the company’s 11-kilometer transfer pipeline via an 8-km transfer pipeline to be built in 2019, following stimulation of the 183(1) well planned near the end of 2018.

Alvopetro anticipates approximately $1.4 million of capital expenditures for the Caburé and Gomo development later in 2018 and $6 million in 2019, and are in the process of securing the remainder of the project financing for this development.

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Brazil Presidential Hopeful Vows to Create 2 Million Green-Energy Jobs

(Efe, 21.Sep.2018) — Environmentalist Marina Silva said on Friday that if elected next month as Brazil’s president, she will create 2 million jobs through programs to promote use of renewable energy.

Silva, who finished third in the 2014 and 2010 contests, is currently at 7 percent in the polls ahead of the Oct. 7 election.

“We will work to fulfill the Paris Agreement (on climate change) and for that, we will launch some programs, such as Sun for Everybody” to reduce CO2 emissions, she told a gathering of environmentalists in Sao Paulo.

A day after appearing in a televised debate, Silva denounced “populisms of left and right” and renewed her plea for an end to the “old polarization” of Brazil amid the country’s most unpredictable electoral campaign in recent decades.

Polls show far-right candidate Jair Bolsonaro in the lead with 28 percent, followed at 19 percent by Workers Party nominee Fernando Haddad, a stand-in for jailed former President Luiz Inacio Lula da Silva, who was barred from running.

Marina Silva is in fifth place, trailing center-left hopeful Ciro Gomes (13 percent) and conservative Geraldo Alckmin (9 percent), but says that she won’t quit the race despite the discouraging outlook.

“If Gandhi had stopped believing India could be free, it would still be a colony today. If (Martin) Luther King had declined to fight racial discrimination in the United States, we would never have had Obama,” she said.

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Petrobras Bondholders Exchange $8.9 Bln Notes for Identical Paper

(Reuters, 21.Sep.2018) — Bondholders in Brazilian state-run oil firm Petroleo Brasileiro SA have accepted the exchange of about $8.9 billion of unregistered notes for identical paper registered with the U.S. Securities and Exchange Commission, the company said in a Friday securities filing.

Of $3.76 billion in 5.299 percent notes maturing in 2025, investors switched $3.51 billion into SEC-registered paper, and of $5.84 billion in 5.999 percent notes maturing in 2028, investors switched $5.4 billion into SEC paper, the firm said.

Petrobras, as the company is known, said the operation will not impact its debt profile. (Reporting by Gram Slattery Editing by Chizu Nomiyama)

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Aker Solutions Wins Major Services Contract in Brazil

(Aker Solutions, 18.Sep.2018) — The Campos Basin extends approximately 100,000 square kilometers. The three-year contract is valued at more than BRL 250 million and includes an option for a two-year extension.

Aker Solutions will be renovating, repairing and upgrading offshore production units for Petrobras’ Campos Basin Operational Unit (UO-BC). The contract will also allow Aker Solutions to demonstrate its value as a full-service provider, and manage the yard where replacement parts and other equipment will be fabricated.

“We are pleased to expand our business in Brazil, a key international market,” said Luis Araujo, chief executive officer of Aker Solutions. “This is the second big contract we have signed after entering the maintenance and modification market in Brazil, reinforcing the importance of having a complete portfolio and being able to provide an integrated solution from concept to decommissioning.”

The company will execute the work from its C.S.E. Mecânica e Instrumentação Ltda (C.S.E.) services base in Macaé, Rio de Janeiro. Aker Solutions acquired a majority stake in C.S.E. in December 2016. Earlier this year Petrobras named C.S.E. the best supplier for onshore and offshore maintenance and HSSE, highlighting its focus on customers and excellence. The company competed against 5,000 suppliers and won 4 of 21 awards.

The work starts in October 2018, with final deliveries scheduled for 2021.

The contract will be booked in the third quarter 2018.

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Petrobras to Boost Oil Output in 2019, Cut Debt $10 Billion – CFO

(Reuters, Devika Krishna Kumar, Simon Webb, 17.Sep.2018) — Brazil’s state-run oil giant Petróleo Brasileiro SA aims to raise output as much as 10 percent to around 2.3 million barrels per day (bpd) in 2019 and cut net debt by $10 billion (7.62 billion pounds), Chief Financial Officer Rafael Grisolia told Reuters.

The world’s most indebted oil company is on course to reduce debt to $69 billion by the end of this year despite falling short of its $21 billion asset sales target, Grisolia told Reuters in an interview in New York late Friday.

The firm has significantly reduced its net debt from the $106 billion it had accumulated in 2014 to finance development of massive deepwater Atlantic oil fields. Then, Petrobras lost investor confidence as oil prices fell, a corruption scandal engulfed the company and losses from government fuel subsidies mounted.

Petrobras aims to cut net debt by a further $10 billion in 2019 to reach a ratio of 2 times net debt-to-EBITDA, he said. The firm will continue cutting debt until the ratio hits 1-1.5 times, he said, which would put it in line with global oil majors.

“If you look at our direct competitors and peers like Chevron, Exxon and BP, we need to look for a more light capital structure,” Grisolia said.

The firm should reach a ratio of 1.5 in 2020 as part of its next five-year business plan, he said, although that would depend on international oil prices and other variables such as foreign exchange rates.

Over the next 5-6 years, once the firm had achieved debt restructuring targets, Petrobras may consider foreign investments to facilitate exports of rising output from the development of the prolific deepwater pre-salt fields, he said.

The firm may invest in terminals abroad to receive liquefied natural gas (LNG), he said. That would help Brazil export more gas, he added.

Exxon Mobil, BP and Royal Dutch Shell RDSA.L are among firms that plan to invest billions of dollars in developing deepwater Brazilian energy reserves in coming years. Brazil is expected to account for a large share of the rise in global oil and gas output from non-OPEC countries.

OIL PRICES HELP

Oil production is expected to rise by about 8-10 percent next year from about 2.1 million barrels per day (bpd) in 2018, Grisolia said. That should contribute to increased revenue, he added.

Crude prices rallied to three-and-a-half year highs this summer as global supplies tightened, leading to higher fuel prices.

Higher oil prices than the company estimated in its 2018 budget have raised revenue and allowed Petrobras to hit its debt reduction target, he said. That compensated for the $7 billion from asset sales that Petrobras expected to receive this year, he added.

The company has already received $5 billion from sales and will receiving another $2 billion before the end of the year, he said.

“All the divestment and cash from divestment will help, but we don’t necessarily need them to achieve the target of $69 billion by the end of the year,” he said.

FUEL SUBSIDIES

Earlier this year, a nationwide truckers’ protest over rising diesel prices paralysed Latin America’s largest economy and forced the government to lower diesel prices through tax cuts and subsidies.

That hurt Petrobras’ share price as investors worried the firm would again lose cash to subsidize fuel sales.

The firm expected to receive 2 billion reais to 2.5 billion reais from the country’s oil regulator within two weeks to compensate for subsidies, Grisolia said.

Subsidies have made it less profitable for the private sector to import diesel, he said, but some imports continued and he did not foresee any fuel shortages.

“Although the volume of imports to Brazil is lower, they are not zero, they are happening.” he added. “We do recognise that margins are tighter.”

Petrobras is running refineries close to maximum capacity and importing some fuel, he said.

Petrobras has a gasoline hedge in place to cushion the impact of fuel price volatility and is considering a diesel hedge. The cost of the hedge was marginal, Grisolia said.

Banks that Petrobras typically works with for currency operations were executing the fuel hedge, he said, such as Goldman Sachs, Bank of America, Bank of Brazil and Citibank.

Petrobras has hosted meetings with economic advisors to presidential candidates ahead of wide-open elections next month. Grisolia said talks had been positive, but declined to say which teams he had met or comment on their strategies.

Candidates have different plans for the company and the role of the private sector in energy, bringing some uncertainty to investors.

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Petrobras Aims To Cut Debt Further, Boost Oil Production In 2019

(OilPrice.com, Tsvetana Paraskova, 17.Sep.2018) — Brazil’s state-run oil firm Petrobras plans to shave another US$10 billion off its huge net debt and increase oil production by as much as 10 percent to 2.3 million bpd in 2019, chief financial officer Rafael Grisolia told Reuters in an interview published on Monday.

Petrobras benefited from the rising oil prices and reported in early August a thirty-fold yearly jump in its second-quarter net income, which also beat analyst expectations.

The heavily indebted company—the world’s most indebted oil company—cut more of its debt in the first half this year. Petrobras’ net debt stood at US$73.662 billion at the end of June 2018, down by 13 percent compared to the end of December last year.

Petrobras is on track to cut that debt to US$69 billion by the end of 2018, despite the fact that it is lagging behind with its US$21-billion asset sales goal, Grisolia told Reuters in New York.

Next year, the company expects to further reduce its net debt by US$10 billion, according to its CFO. The state-held oil firm, which has started to emerge from the huge corruption scandal, has plans to reach a net debt-to- earnings before interest, tax, depreciation, and amortization (EBITDA) ratio of 2 times in 2019, and to continue slashing debt to reach the net debt-to-EBITDA ratio of 1-1.5 times, on par with the ratios at most international oil majors.

At end-June, Petrobras’ net debt/adjusted EBITDA ratio was 2.5 times.

Petrobras currently aims to hit the 1.5 times net debt/EBITDA ratio in 2020, but reaching the goal would hinge on the price of oil and other variables, including foreign exchange rates for the Brazilian reals, Grisolia told Reuters.

In terms of oil production, the company aims to increase output by between 8 percent and 10 percent in 2019 from the expected 2.1 million bpd production this year, the manager said.

Referring to the early October wide-open presidential elections in Brazil, Petrobras has held meetings with economic advisors to candidates, Grisolia told Reuters, but declined to comment on discussions with the candidates’ representatives or on their energy policy strategies.

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Stena Bulk, Petrobras, Ink Two-Year Contract

(Energy Analytics Institute, Jared Yamin, 8.Sep.2018) — Stena Bulk signed a deal to charter two MR tankers to Petrobras.

Under the deal, Stena Bulk will charter its MR product tankers Stena Conqueror (47,000 dwt, built in 2003) and Stena Conquest (47,000 dwt, built in 2004) to Brazil’s state-owned oil company.

“We have a long-standing, highly-valued relationship with Petrobras when it comes to both Suezmax and MR tankers and we are committed to continue to provide them with safe and efficient deliveries,” said Stena Bulk CEO and President Erik Hånell in an official company statement.

The contract is for a term of two years and includes the option to extend the charters for another 11 months. The vessels will carry refined products along the Brazilian coast.

“We continue to cater for Petrobras’ shipping requirements as a preferred customer and logistical partner of Stena Bulk,” said Stena Bulk Products & Chemicals USA General Manager Claes Leschly Bang.

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Petrobras Unveils Gasoline Hedge in Bid to Weather Volatility

(Reuters, 6.Sep.2018) — Brazil’s state-run oil company Petroleo Brasileiro SA on Thursday unveiled a hedging program for gasoline prices in a bid to boost pricing flexibility and protect its financial results during times of high volatility.

Petrobras, as the company is known, said in a securities filing the program would allow it to change the frequency of pricing adjustments in the domestic market, keeping them stable for up to 15 days at a time.

The logo of Brazil’s state-run Petrobras oil company is seen on a tank in at Petrobras Paulinia refinery in Paulinia, Brazil July 1, 2017. Reuters/Paulo Whitaker

Petrobras will buy gasoline futures in U.S. markets as part of the program, said Chief Financial Officer Rafael Salvador Grisolia at a news conference. He said the policy would go into effect immediately.

The company would only keep prices on hold for two weeks at a time during times of volatility in international markets and would keep daily pricing adjustments as an option, he said.

Preferred shares in Petrobras were down 0.4 percent in mid-morning trading in Sao Paulo, at 18.59 reais, whereas the benchmark Bovespa index was up 0.2 percent.

Itau BBA analysts said there is uncertainty around “how the strategy will be employed”, as the structure of hedge positions while prices are frozen is unknown. Gabriel Francisco, analyst at XP Investimentos, said the hedging policy is negative, as “it may be interpreted as a setback to a market-based pricing policy”.

The move comes after a truckers’ strike over rising diesel prices paralyzed Latin America’s largest economy in May and forced unpopular President Michel Temer to cut diesel costs through a mix of tax breaks and subsidies.

The tumult prompted Petrobras’s chief executive officer to resign and raised fears of government meddling in pricing, which has cost Petrobras billions of dollars in the past. Petrobras has not yet been compensated for the subsidies that took effect in June.

In the meanwhile, there has been speculation over whether the company will face pressure to lower gasoline prices, which have climbed internationally as oil prices have gained ground.

Petrobras said on Thursday it was still committed to allowing gasoline prices to fluctuate in line with international markets and the exchange rate.

It also promised to uphold a policy, in effect since October 2016, of not pricing the fuel below international parity.

Reporting by Marta Nogueira, Alexandra Alper and Paula Laier; Editing by Bernadette Baum and Alistair Bell

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Output from Main Pre-Salt Field to Peak in 2019

(Efe, 6.Sep.2018) — Output from Brazil’s most prolific pre-salt field will climb to a peak of 1 million barrels of oil per day in 2019, according to the executive manager for deep-water exploration and production at state oil company Petrobras.

The Lula field, located in the Santos Basin, will achieve that level after two Floating Production Storage and Offloading (FPSO) units are put into operation this year, Joelson Falcao Mendes said.

“The P69 will start production in October and the P67, which is currently in Guanabara Bay (in southeast Brazil), in December or January,” he added.

Seven FPSO units are currently in operation at the Lula field, each with the daily capacity to process 150,000 barrels of oil and compress 6 million cubic meters (211.5 million cubic feet) of natural gas.

Brazil achieved output of 1.5 million barrels of pre-salt oil per day in 2018, a milestone that comes 10 years after the start of hydrocarbon production in that ultra-deep frontier.

At present, average production at the Lula field amounts to around 850,000 barrels of oil per day.

Petrobras says output at the pre-salt fields is expected to grow steadily through 2022 with the entry into operation of an additional 13 FPSO units and investment outlays totaling $35 billion.

Pre-salt fields are located in ultra-deep water some 300 kilometers off the coast and underneath a layer of salt up to 2 kilometers (1.2 miles) thick.

The Lula field is located in the BM-S-11 block, in which Petrobras has a 65 percent stake and the BG Group and Portugal’s Galp Energia have 25 percent and 10 percent stakes, respectively.

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Brazil Santos Lifting Costs Could Reach $5/bbl

(Reuters, 6.Sep.2018) — Lifting costs for the Santos basin in Brazil’s offshore pre-salt oil play should reach an all time low of $5 per barrel, but the timeline for reaching it will depend on the development of the transfer-of-rights area, an executive of Brazilian oil giant Petroleo Brasileiro told reporters on Wednesday.

Oil majors have plowed big money into Brazil, Latin America’s top producer, to lock in stakes to the offshore pre-salt layer, where billions of barrels of oil are trapped under a thick layer of salt.

The vastness of the resources helps reduce lifting costs, which have already slipped to $6 to $7 per barrel in the Santos basin’s Lula field, according to Joelson Falcao Mendes, Petrobras chief for oil production in ultra deepwaters.

The field, Brazil’s most productive, averages 879,000 barrels of oil per day, and is operated by Petrobras in a consortium with Royal Dutch Shell and Portugal’s Galp.

But reaching $5 in Santos will depend on the pace of development of the transfer-of-rights area, which was transferred by the government in 2010 to Petrobras to extract 5 billion barrels of oil and gas there.

However, the government and Petrobras are still squabbling over the value of the area, also located in the Santos basin.

Mendes, who was named to the committee negotiating the value of the area with the government, did not offer further details about how it would affect lifting costs. He spoke to reporters aboard the P-66 platform in the Lula field.

Mendes made the comments as white-capped waves rocked P-66, which began producing last year and has the capacity to process 150,000 barrels of oil daily.

However, Mendes said that the P-67 platform, which was scheduled to begin production between October and December of this year in the northern part of the Lula field, could be delayed into January.

He defended the time it took Petrobras to develop the logistically complex areas, noting that the consortium was finishing the development phase for Lula, which was discovered in 2006.

‘If there hadn’t been some construction delays for the systems, the timings would be even better. But regardless, they are pretty impressive and extremely competitive internationally,” he said.

(Reporting by Alexandra Alper; Editing by Phil Berlowitz)

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Petro-Victory Purchases Assets in Brazil

(Petro-Victory Energy Corp., 4.Sep.2018) — Petro-Victory Energy Corp. announced a $1.6 million acquisition of production and working interests in 4 oil fields, comprised of 12,850 gross acres, located within three developed onshore basins in Brazil, and commits capital to materially expand production. The acquisition was financed using the company’s existing $10.0 million credit facility.

“These fields are located in mature, oil prone basins, with well understood geology and low geological risk. Reservoirs are of excellent quality and our hydrocarbon pay zones are at shallow depths (1-1.5km) allowing for low cost development drilling. The fields produce excellent quality light sweet crude with no impurities, meaning we can achieve a higher price for crude sold,” said Petro-Victory Chief Operating Officer Richard Lane.

Highlights

— $1.6 million acquisition cost ($125 per acre). $0.375 million paid at signing, $1.225 million paid upon Agencia Nacional do Petroleo Gas Natural e Biocombustiveis of Brazil (ANP) approval.

— Acquisition consists of:

– 100% operating interest in the Andorinha onshore producing oil field in the Potiguar Basin

– 100% operating interest in the Alto Alegre onshore oil field in the Potiguar Basin

– 50% non-operating interest in the Carapitanga producing onshore oil field in the Sergipe-Alagoas Basin

– 50% non-operating interest in the São João onshore oil field in the Barreirinhas Basin

— Existing infrastructure acquired includes 21 drilled wells, pipelines, power generation and electrical lines, pumping units, paved roads, storage tanks, 3D and 2D seismic with a combined estimated cost of > $50 million

— Seismic and well data will be used to construct a new development plan. Initial work has indicated significant upside opportunities.

— Potential for new wells to materially increase production. Management estimates the 4 fields have the potential to achieve >1,000 BOPD.

— Near term well recompletions estimated to increase net production to >100 BOPD

— Q2 2018 average production of 20 BOPD from four mature wells in the two producing fields, Andorinha and Carapitanga

— The company acquired the producing assets from Empresa de Engenharia de Petróleo Ltda. (ENGEPET) and has an operating partnership with ENGEPET to optimize field production for Carapitanga and Sao Joao fields.

— Transaction subject to approval from Agencia Nacional do Petroleo Gas Natural e Biocombustiveis of Brazil (ANP). The Acquisition has been conditionally approved by the TSX Venture Exchange (the TSXV) but is subject to final approval of the TSXV.

“This acquisition positions us in Brazil at a time when onshore oil and gas investment is poised for revitalization. The market opportunity in Brazil has become more attractive with improvements in the economy as well as a move higher in oil prices. We are excited as we leverage long-term relationships within Brazil that present opportunities that fit Petro-Victory’s growth and returns focused strategy. Our acquisition and expected capital costs will generate strong margins and cash flows,” Petro-Victory Chief Executive Officer Richard F. Gonzalez.

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Brazil’s Energy Agency Opts for Argus Prices

(Argus Media, 30.Aug.2018) — Brazil’s National Agency of Petroleum, Natural Gas and Biofuels (ANP) will start using prices published by leading global energy and commodities price reporting and news agency Argus to set a government diesel subsidy.

ANP has announced that it will, from 31 August, adopt Argus delivered prices for diesel in the ports of Itaqui, Suape, Santos and Paranagua to calculate import parity prices as part of a formula that will also take into account local storage and logistics costs.

A countrywide truck drivers’ strike in May sparked by rising diesel prices led the Brazilian government to cap wholesale prices and offer temporary subsidies to diesel producers and importers. The subsidy programme ends on 31 December.

Argus Media chairman and chief executive Adrian Binks said: “We are delighted that ANP has decided to switch to Argus prices to support this important piece of regulation. Staff from our Rio de Janeiro office, which we opened six years ago, have been working with the government and market participants to develop pricing mechanisms suitable for their needs.”

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Golar Power Affiliate CELSE Closes $1.3 Bln Financing

(Golar LNG, 25.Aug.2018) — Golar Power Limited’s affiliate, CELSE, closed a $1.34 billion financing facility for the Sergipe project.

On April 19, CELSE, the 50% Golar Power owned project company responsible for delivering the Sergipe I power project, executed a $1.34 billion non-recourse project finance facility. Excluding the FSRU facility, proceeds will fund remaining interest costs and capital expenditures for the project. Equity contributions from CELSE’s controlling partners, including Golar Power, have also been fully paid in. Assuming no dispatch under the Power Purchase Agreements, forecast annual EBITDA (1) from the power project (of which Golar is entitled to a 25% interest which will be reported as “equity in net earnings of affiliates” in the consolidated statements of income) including inflation uplifts to date is BRL 1.16 billion, equivalent to approximately $306 million at a USD/BRL rate of 3.8. Payments under the executed PPA are inflation indexed over the 25-year term and provide for pass-through of fuel costs when the power plant is called upon to dispatch. Around 94% of the project finance facility is also BRL denominated. This reduces net debt to $1.21 billion at the same USD/BRL rate, thus creating a natural hedge for currency movements.

The project, 66% complete by the end of July, is on schedule to commence operations on January 1, 2020. In excess of 2,000 workers are currently on site which is operating 24/7. Prefabricated GE modules, including generators and boilers, are being installed, transmission lines and pylons are being erected and the pipeline connecting the power station to the FSRU mooring is currently being laid.

Additional to the forecast annual EBITDA from the power project, the FSRU is expected to generate annual US CPI adjusted EBITDA of approximately US$41.0 million (of which Golar is entitled to a 50% interest which will be reported as “equity in net earnings of affiliates” in the consolidated statements of income). A financing commitment for the FSRU Nanook, due to deliver from the yard shortly, has been received and documentation is in its final stages. Net of the final FSRU delivery installment, the facility is expected to release approximately $70 million of cash to Golar Power.

The FSRU Nanook will, when it commences operations in 2019, represent the only entry point for LNG into Brazil outside Petrobras. Access to significant spare FSRU capacity could facilitate the supply of gas directly into the Brazilian grid as well as support a distribution hub for small scale distribution of LNG. The Company sees a number of very attractive opportunities to substitute expensive fuel based energy demand with cheaper and more environmentally friendly LNG solutions. The initial focus will be to target diesel to LNG conversions in the trucking industry as well as tailor-made LNG logistics solutions for the large mining and industrial market. Based on existing infrastructure in Sergipe, Golar Power is also well placed to participate in future Brazilian power auctions, with a clear competitive edge given that capital expenditure linked to the FSRU and grid connection has been substantially covered by the first phase of the project.

Note (1) on EBITDA: EBITDA is a non-GAAP measure. EBITDA is defined as operating income before interest, tax, depreciation and amortization. EBITDA is a non-GAAP financial measure. A non-GAAP financial measure is generally defined by the Securities and Exchange Commission as one that purports to measure historical or future financial performance, financial position or cash flows, but excludes or includes amounts that would not be so adjusted in the most comparable U.S. GAAP measure.

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Golar Applies for FSRU Permits in Brazil

(TO&GY, 24.Aug.2018) — Offshore midstream company Golar LNG has started the process to acquire an environmental permit for its Terminal Gas Sul (TGS) project in the Brazilian state of Santa Catarina, international media reported Thursday.

The project, which entails a new pipeline and FSRU capable of storing 160,000 cubic metres (5.65 mcf) of gas and regasifying 15 mcm (530 mcf) of LNG per day in Babitonga Bay, aims to supplement or even replace gas flowing into southern Brazil from Bolivia.

According Golar’s environmental permit application, the unit would likely receive around two LNG cargoes per month. Gas would move from the FSRU through a 2-kilometre subsea pipeline connected to a 31-kilometre pipeline onshore.

The company expects to receive the project permit in 2018 and approval from Brazil’s National Agency of Petroleum, Natural Gas and Biofuels in 2019. Project construction is scheduled to start in Q3 2019, with the unit coming on line in Q2 2021

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Oil Auction from Brazil Transfer-of-Rights Unlikely in 2018

(Reuters, 23.Aug.2018) — A Brazilian auction of rights to develop additional oil-producing areas in the country’s so-called transfer-of-rights region is unlikely this year, Brazil’s Deputy Mining and Energy Minister Marcio Felix said on Tuesday.

The government in 2010 transferred to state-run oil company Petróleo Brasileiro S.A., known as Petrobras, rights to extract 5 billion barrels of oil and gas in the offshore Santos Basin, at a value based on oil prices at the time. The volumes are now estimated to be much larger, and the cash-strapped government wants to sell the rights to extract the extra oil.

The choice reserves cannot be auctioned off until the government and Petrobras reach a deal over the disputed value of the area. Brazil’s Senate also has to approve legislation already passed the lower house, allowing Petrobras to cede up to a 70 percent stake of the area to other oil companies.

While hopes were high for a deal and an auction this year, prospects are dimming, said Deputy Mining and Energy Minister Marcio Felix, at an event in Rio de Janeiro ahead of hotly contested presidential elections in October.

“It would be hard (to do it in 2018), but we haven’t thrown in the towel yet,” he said, adding that if the legislation is not approved by Sept. 15, an auction cannot happen this year.

The 2010 contract stipulated that costs, among other things, would be reviewed after the area was declared commercially viable in 2014. That has led to years of sparring, as oil prices have fluctuated, with both parties claiming to be owed billions of dollars.

Resolving the spat would let the cash-strapped government raise extra revenue to close a huge budget gap by selling the rights to billions of barrels of oil.

The area lies in Brazil’s pre-salt region, where billions of barrels of oil are buried under thousands of feet of salt beneath the ocean floor.

(Reporting by Rodrigo Viga Gaier; Editing by Richard Chang)

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Petrobras to Start Replan Refinery Reopen in 48 Hours

(Reuters, 22.Aug.2018) — Brazil’s state-run oil company Petróleo Brasileiro SA may begin procedures to reopen its largest refinery, closed after an explosion and fire, in 48 hours, Gustavo Marsaioli, a spokesman for the oil workers’ union, said on Wednesday.

Marsaioli said Petrobras intends to reopen the Paulinia refinery, known as Replan, at half-capacity given the fire early on Monday that affected part of the facility. The unaffected part may go back into production a week after procedures for reopening are completed, Marsaioli said.

Petrobras did not immediately respond to a request for comment.

Replan accounts for about 20 percent of Petrobras’ refining capacity, processing the equivalent of 434,000 barrels of oil per day, according to the company’s website.

A Petrobras executive said the incident was serious but that the company had enough stocks to cover Replan halting operations for 15 days.

(Reporting by Roberto Samora; Writing by Tatiana Bautzer and Alexandra Alper; editing by Jonathan Oatis and Susan Thomas)

***

Brazil’s Opposing Energy Views

(OilPrice.com, Haley Zaremba, 21.Aug.2018) – Brazil’s energy industry seems to be caught in a moment of deep ambivalence–on one side of the issue, they are breaking records in terms of renewable resources and green energy; on the other, they are pushing hard revive fossil fuels and bring hundreds of thousands of jobs back to the struggling oil and gas industry.

This month the Brazilian Ministry of Mines and Energy released astonishing figures that put Brazil right at the forefront of the green energy movement. The Boletim de Monitoramento do Sistema Elétrico (Electric System Monitoring Report) shows that renewable energy sources made up 81.9 percent of the country’s installed capacity for energy production (160,381 megawatts in total), and a whopping 87.8 percent of total Brazilian energy production in the month of June.

The vast majority of Brazil’s energy production is hydropower, clocking in at 63.7 percent of the total energy generated in June. The second biggest source of renewable energy comes from biofuels produced at biomass plants which use materials such as sugarcane bagasse, rice husk, and wood waste to make organic fuels. Wind farms accounted for another 8.1 percent of the energy produced in June, and solar clocked in at just one percent (although the solar sector is already showing signs of growth).

Despite these amazing figures, Brazil is not leaning into their success in the field of green energy. The nation’s oil and gas industry is finally showing signs that it is coming out the other side of an economic crisis brought on by recession, low oil prices, and reduced investment. Now, as economic conditions improve, foreign investors are returning to the fold and analysts are predicting a major turnaround is just around the corner for Brazilian fossil fuels.

Half a million new jobs are going to be added in the oil and gas industry by 2020, according to a study carried out by the Brazil Development Bank. A separate study conducted by the Federation of Industries of the State of Rio de Janeiro said that thanks to greater flexibility in local regulations, several new projects will be able to take off, creating more activity and a further increase in jobs in the oil and gas industry.

Particularly large growth is predicted in Brazil’s upstream exploration and production sector (E&P), with 44 offshore productions systems slated to begin operations in by 2030. Just one of these units, located in the south eastern state of Espirito Santo will create around 1,000 when assembly begins under Petrobras, Brazil’s largest oil company, in 2020. Another major site of a potential employment boost is the city of Macaé, located at the heart of the Brazilian offshore drilling industry. Several international oil and gas companies had backed off their activity in the area when gas prices were at their lowest, but now they are likely to ramp up production once again.

Brazil’s position on the precipice between two opposing visions for energy–renewable and traditional–is representative of a larger conflict in today’s energy industry. We’re in a strange and unprecedented moment where even Big Oil is acknowledging and in many ways preparing for a world that is moving away from fossil fuels, while simultaneously we are facing more demand for oil, gas, and coal in this decade than ever before.

Just look at the headlines: scientists are making major biofuel breakthroughs while the U.S. turns its back on biomass, Asia is leading the renewable energy race as Japan re-embraces coal, India and China are facing unprecedented numbers of cars on the road and ever-higher demand for gasoline but are leading the charge for electric cars. Everywhere you look in the energy sector, contradiction rules. Brazil is not the exception, but the rule.

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Petrobras Sees No Fuel Supply Shortage After Replan Fire

(Reuters, 20.Aug.2018) – A director at Brazilian state-run oil company Petroleo Brasileiro SA said on Monday a fire at the company’s largest refinery Replan, in the state of São Paulo, is not expected to compromise fuel supplies in the short run.

Jorge Celestino Ramos, the company’s refining and natural gas director, said fuel supplies are guaranteed for 15 days as other refineries may compensate any shortfall at Replan, where production remains halted since the early hours of the day.

(Reporting by Rodrigo Viga Gaier Writing by Ana Mano Editing by Chizu Nomiyama)

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Oceaneering Subsidiary Secures Contract with Petrobras

(Oceaneering International, Inc., 20.Aug.2018) – Marine Production Systems do Brasil Ltda., one of Oceaneering International, Inc.’s wholly owned subsidiaries, has secured a four-year contract with a one-year optional extension period from Petróleo Brasileiro S.A. (Petrobras) in Brazil.

“We are excited by this Petrobras award and the opportunity to expand our portfolio of service and product offerings in the growing Brazilian market,” announced Oceaneering President and Chief Executive Officer Roderick A. Larson in an official statement released by the company.

The contract will support intervention and completion operations in Brazil, announced Oceaneering in an official statement.

Under the terms of the contract, Oceaneering will supply and operate three drill pipe riser (DPR) systems with installation workover control systems, or IWOCS, along with project management, engineering and support services. The company plans to manufacture the associated umbilicals for the DPR systems at its facility in Niteroi, Brazil. Oceaneering will start constructing and building the assets in the third quarter of 2018, and expects work under the contract to commence in the third quarter of 2019. The contract value is expected to exceed $50 million in revenue during the initial four-year period.

“We look forward to supporting Petrobras in connection with this and future projects,” said Larson.

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Guyana to Become 5th Largest Oil Producer in LAC Region

(Energy Analytics Institute, Piero Stewart, 15.Aug.2018) – If all goes off as planned, by 2025, Guyana will be the 5th largest oil producer in the Latin American and Caribbean region.

Source: Trading Economics

That’s according to an analysis of data posted by Trading Economics, and extrapolation of estimates of Guyana’s future oil production, as announced by Kevin Ramnarine, the former Energy Minister of Trinidad and Tobago.

“Oil production in Guyana is expected to come online at 120,000 barrels per day in 2020 and peak at 750,000 barrels per day by 2025, according to Exxon,” said Ramnarine, now an international petroleum consultant, during a webinar with Guyana’s Minister of Finance, the Honorable Winston Jordan and hosted by Caribbean Economist Marla Dukharan.

Considering initial production of 120,000 barrels per day in 2020, Guyana will first occupy the spot as the 7th largest oil producer in the LAC region, assuming no drastic changes in the other countries’ production profiles over the next couple of years.

However, in the process, by the time peak production is reached five years latter, Guyana will have surpassed OPEC producer Ecuador, assuming production in that country, as well as others, doesn’t experience a drastic decline, as has been the case in Venezuela in recent years.

***

 

Colombia Says Odebrecht Bribes Larger Than Previously Known

(Bloomberg, Ezra Fieser, 15.Aug.2018) – Odebrecht SA, the Brazilian construction giant, paid at least $32.5 million in bribes in Colombia — three times the amount it confessed to almost two years ago when it admitted to carrying out one of the largest graft schemes in corporate history, Colombia’s attorney general said.

Nestor Humberto Martinez speaks to the press in Cali, Colombia. Photographer: Luis Robayo/AFP via Getty Images

In an interview in his Bogota office, Attorney General Nestor Humberto Martinez described a deeper and more pervasive scandal than the one Odebrecht admitted to in a 2016 plea agreement with Brazilian and U.S. authorities. That agreement listed $11.1 million in bribes paid to win two Colombian infrastructure projects as part of a plot that reached a dozen countries in the Americas and Africa. Martinez said the $11.1 million came from Brazil and the rest from Colombian contracts, making a new total of $32.5 million.

Odebrecht bribed dozens of Colombian officials and executives to win six government contracts from 2009 to 2014, Martinez said. Almost three dozen people have already been indicted and five convicted, including an ex-senator and a former deputy minister. The prosecutor’s office has also submitted evidence to the supreme court against an additional nine politicians.

$3.5 billion

The exceptional global scope of Odebrecht’s bribery emerged in 2016 when the company reached a $3.5 billion settlement with U.S., Brazilian and Swiss authorities. It admitted to having paid $788 million in a dozen countries for more than 100 contracts in what the U.S. Justice Department called the largest foreign graft case in history.

The company has since reached settlements with several Latin American governments, including the Dominican Republic, Peru and Panama. In Colombia, the case has dragged on and Odebrecht has implied that the delay is a result of self-protective foot-dragging. In addition, Odebrecht is seeking compensation of as much as $1.3 billion for the work it did on the nation’s biggest highway before the bribery scandal stopped it. Hearings in that case have been delayed until Sept. 11.

Martinez said the probe has taken so long because it’s complex and deep, and Colombia wanted to do its own investigation. Alone in the region, Colombia rejected offers from Brazil to share evidence because they came with the condition that neither Odebrecht nor its executives could be implicated in the crimes.

“Colombia was the only country that did not agree to receive evidence from the Brazilian prosecutors,” he said. “That’s why we were able to get this investigation to the point where it is. That’s why there are three Brazilians indicted with arrest orders pending.”

The three — Amilton Hideaki Sendai, Eder Paolo Ferracuti and Marcio Marangoni — all held positions with Odebrecht or a subsidiary and are believed to be in Brazil, prosecutors said.

Calls to Odebrecht Colombia seeking comment have gone unanswered.

Conflict of Interest?

Martinez, a cabinet member in three Colombian governments, has been accused of conflict of interest in the case because before becoming attorney general in 2016, he was a key lawyer for Grupo Aval, the parent company of Odebrecht’s Colombia partner on one of its contracts. The implication has been that he’s protecting his previous employer.

Grupo Aval, Colombia’s biggest banking group and controlled by Luis Carlos Sarmiento Angulo, partnered in 2010 with Odebrecht to build a section of a 1,000-km (621-mile) road called Ruta del Sol connecting the Bogota region with the Caribbean coast. It did so through Corficolombiana SA, which it controls. A family-held construction company, Solarte Group, also took a minority stake.

Martinez rejected the conflict-of-interest accusation. He said that on the two occasions that Odebrecht cases came across his desk, he recused himself, with court permission. He showed a copy of one such court decision, dated June 21. Martinez said he would similarly step aside for any future Odebrecht cases.

Maria Paulina Riveros, the deputy attorney general who has stood in for Martinez, said one of those arrested is Jose Elias Melo, former chief executive officer of Corficolombiana. The trial against Melo, who is under house arrest, is expected to begin this month.

“It surprises me that there’s a perception of different treatment for those linked to the case,” Riveros said. Prosecutors have charged “well-known people such as Mr. Melo, as well as members of congress.”

Final Stretch

Riveros said the case against Odebrecht is in its final stretch, and most of the investigation should conclude before the end of the year.

Odebrecht was building Ruta del Sol and had five other contracts in Colombia. Prosecutors said it set up shell companies that submitted invoices for work they never did, used the proceeds to pay expenses and middle men, and channeled whatever was left over into bribes.

The scheme began to unravel when prosecutors received cooperation from former Senator Otto Nicolas Bula Bula and ex-Deputy Minister of Transportation Gabriel Garcia Morales, both of whom were charged.

“It was like a chain,” Riveros said. “When they began to cooperate, all of these other lines of the investigation started to unfold.”

— With assistance by Matthew Bristow, and Jose Enrique Arrioja

***

Technology, New Innovations and the LatAm Energy Sector

(Energy Analytics Institute, Pietro D. Pitts, 14.Aug.2018) – The ability to use hydraulic fracturing to tap shale formations, to remotely monitor and manage assets, and use advanced technology to heat reservoirs, are a few of the many new innovations used in the capital intense hydrocarbon sector.

Faced with rising competition worldwide for conventional crude oil and natural gas reserves, both of which are limited and depleting resource bases, the global hydrocarbon sector has in general gravitated towards a common goal, maximizing oil and gas reserve recoveries, while at the same time maintaining or preferable reducing operating costs.

While advanced oil-field technologies such as three-dimensional (3D) and four-dimensional (4D) seismic have been used globally for many years, the varying complexities of today’s hydrocarbon sector require ever more sophisticated technologies with capabilities to process data in real-time, among other advances, and that help international oil companies (IOCs) and national oil companies (NOCs) to make rapid and most importantly, accurate decisions.

Still, the global hydrocarbon sector has been slow to embrace the use of Information Technology (IT) to assist in the collection, processing, analysis and distribution of data in real-time. But, this case has been especially true in the Latin American and Caribbean (LAC) region.

Regional NOCs have slowly taken to incorporate IT into their operations as they have come to realize the advantages outweigh the proposed disadvantages, which include but are not limited to giving access to sensitive information to third-party companies from countries that often do not share the same political or economic ideologies.

Today’s advanced and innovative technologies, including but not limited to: sensors, automated valves, and remote satellites, now help IOCs, and increasingly more regional NOCs, monitor producing fields and wells and any number of assets from remote centralized control centers in cities such as Mexico City, Sao Paulo, Caracas or Buenos Aires.

In essence, these technologies help the companies streamline their processes with the ultimate aim to increase oil and gas recovery factors and production, monitor assets for potential accidents or thefts, while helping to reduce time needed to gather information on their assets while also reducing personnel excesses. The bottom line is that the incorporation of certain technologies has assisted companies to reduce operating costs.

The ability to use hydraulic fracturing to tap shale formations, to remotely monitor and manage assets, and use advanced technology to heat reservoirs, are a few of the many new innovations in use in today’s hydrocarbon sector.

***

Andrade Calls Out to Duque Over Odebrecht Case

(TheAndradeStory.com, 13.Aug.2018 – On Thursday (8/9) afternoon, the Office of the Attorney General of Colombia announced two new charges against the former head of the National Infrastructure Agency (“ANI”), Luis F. Andrade. These are in addition to eight previous charges placed against him last year related to the Odebrecht corruption scandal.

Mr. Andrade, a U.S. citizen, led the creation of ANI in 2011 and served as its President for six years. Previously, he was a Senior Partner at McKinsey & Co., where he worked for 25 years. Since December, Mr. Andrade has been serving in preventive detention with a possible sentence of up to 30 years. In the meantime, the executives of Odebrecht and Grupo AVAL, who might have authorized or might have known about the illegal payments are not being charged or being charged with lesser offenses by the Prosecutor.

The Attorney General, the nation’s highest legal officer, has close ties to Odebrecht and its local partner, Grupo AVAL. He worked as external counsel for the Odebrecht PPPs in Colombia and for two decades was external counsel to Grupo AVAL. At the time he issued a favorable legal opinion for the decision, which is the main object of charges against Andrade. Then, as President Santos’s Chief of staff, he participated in the approval process for which Andrade is being charged. The Attorney General’s close involvement in the charges involving Mr. Andrade’s case make him uniquely unqualified to render legal judgement absent of bias. An independent investigator is needed to oversee all cases and charges involving Odebreht or Grupo AVAL.

With the new charges, Andrade continues to fall victim to an aggressive persecution by the Attorney General’s office and its conflicted interests. For this, Mr. Andrade is calling for newly elected President Duque to appoint an independent investigator to oversee the cases involving Odebrecht and Grupo AVAL. It is only tenable to investigate thoroughly those who might have authorized or might have known about the illegal payments through an independent investigator given the evident conflicts of interest in the Attorney General’s office.

The following statement can be attributed to Mr. Luis F. Andrade:

“I am concerned for my family and Colombia. The aggressive persecution by the Attorney General’s office is founded in bias and contrary interests. I believe an independent and thorough investigation into the Odebrecht contracts in Colombia – including my case – is necessary. Transparency is required to strengthen Colombia’s institutions if the United States and Colombia want to achieve the mutual interest of putting an end to drug-trafficking and organized crime. I look forward to continuing to correct the record as my reputation and innocence are besmirched – this is why I chose to launch a website with the facts of the case as they occurred.”

More details here: http://www.theandradestory.com/

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Mexico’s CNH to Speak at EnerCom Conference

(Energy Analytics Institute, Jared Yamin, 9.Aug2018) – The 23rd annual EnerCom conference will take place in the Denver Downtown Westin Hotel on Aug. 19-22, 2018.

Companies with exposure to Latin America that will participate in special panels during the event include the following:

Oil & Gas in Mexico Panel

— Talos Energy Inc. – Gulf Coast region and Gulf of Mexico offshore operations

— International Frontier Resources – drilling the Tecolutla Block onshore Mexico

— Mexican Commission National Hydrocarbons (CNH) – Mexico’s national oil and gas regulator

International Panel

— Jadestone Energy, Inc. – Asia Pacific E&P

— Valeura Energy Inc. – Canadian E&P with principal operations in Turkey

— GeoPark – Latin oil and gas company developing assets in Chile, Colombia, Brazil, Peru and Argentina

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Petrobras Receives Over R$ 1 Bln from Operation Car Wash

(Petrobras, 9.Aug.2018) – Petrobras informs that it has received a return of R$ 1.034 billion through cooperation and leniency agreements signed with individuals and legal entities by the Federal Public Prosecutor’s Office in Curitiba and by the Office of the Attorney General in Brasília under Operation Car Wash.

This is the highest refund received by Petrobras in a single period, which added to the resources already transferred to the company since the beginning of the Operation exceeds the amount of R$ 2.5 billion.

The company, which is recognized by the authorities as a victim of the acts unraveled by the Operation, will continue to adopt applicable measures against companies and individuals who have caused damage to the company. Petrobras acts as co-author with the Federal Prosecutor’s Office and the Federal Government in 16 administrative improbable lawsuits in progress, in addition to being a prosecution assistant in 51 criminal lawsuits.

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Petrobras Approves Pmt of Interest on Capital

(Petrobras, 6.Aug.2018) – Petrobras reports that its Board of Directors approved in a meeting held yesterday the distribution of early remuneration to shareholders as Interest on Capital (IOC), as defined in art. 9, sole paragraph of its bylaws and in article 9 of Law 9.249/95.

The value to be distributed, totaling R$652.2 million, corresponds to a gross amount of R$0.05 per share, to be paid on August 23, 2018 proportional to each shareholder’s stake and to be provisioned in the 3Q 2018 financial statements, based on shareholding positions as of August 13, 2018.

Starting from the first business day after the cut-off date (August 14, 2018), shares will be traded ex-interest on capital at B3 and other stock exchanges where the company is listed.

This IOC advance will be imputed to the mandatory minimum dividend (article 53, paragraph 4, of the Bylaws) including for the purpose of payment of priority minimum dividends of preferred shares.

The amount of R$ 0.05 per common share or preferred share related to the JCP will be subject to income tax, by applying the applicable tax rate. Income tax withholdings will not be applied to shareholders whose registered data proves to be immune or exempt, or shareholders domiciled in countries or jurisdictions for which the law establishes different treatment.

The Shareholder Compensation Policy can be accessed on the Internet at the company’s website. 

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Petrobras Posts 1H:18 Profit, Reduces Debt

(Petrobras, 3.Aug.2018) – Petrobras reported net income of R$ 17 billion in the first half of 2018. The positive result was mainly influenced by the increase in international oil prices, associated with the depreciation of the  Brazilian Real against the US dollar. In the same period, net debt fell 13% compared to December 2017, to US$ 73.66 billion.

Operating income and cash inflows of US$ 5 billion from divestments in the first half were the main factors for reducing net debt, which totaled 3.23 times earnings before interest, taxes, depreciation and amortization (adjusted Ebitda), compared to 3.67 at the end of 2017. Without the provision for the Class Action agreement, the indicator would have been 2.86. As a result, Petrobras remains committed to reaching the goal of 2.5 by the end of this year. The indicator for the top metric, the Total Recordable Injuries (TRI) was 1.06 per million man-hours at the end of June. Petrobras remains committed to the already announced metric of 1.0.

With the reduction and liability management, Petrobras reduced its financial expenses (most interest) by R$ 1.6 billion in the first half and extended its debt, without having to pay a higher price. The average term maturity increased from 8.62 to 9.11 years and the average interest rate remained around 6%.

The performance of the company’s operations maintained a positive trend, which had already been recorded in previous quarters, with an operating income 18% higher than the first half of 2017, totaling R$ 34.5 billion, with lower general and administrative expenses and lower equipment idleness expenses. Total oil and gas production was 2.7 million barrels of oil equivalent per day (boed) in the first half, in line with the target set for 2018.

The operational highlights included the start-up of the first production system in Transfer of Rights area, the P-74, in the Búzios field, and a new production system in the Campos Basin, with the FPSO Cidade Campos dos Goytacazes, in Tartaruga Verde field. Another highlight was the arrival of the P-67 to Brazil, which will be the eighth platform to operate in the Lula / Cernambi fields. Since 2017, Petrobras has increased its exploration area by 31%, with acquisitions in the bidding rounds of the National Petroleum, Natural Gas and Biofuels Agency (ANP), prioritizing those with greater potential in the Campos and Santos Basins.

There was also a reduction in sales volume in Brazil (mainly gasoline, due to increased ethanol competition) and a drop in the volume of exported oil. Petrobras’ share of the diesel market increased from 74% in 2017 to 87% in June 2018. In gasoline, the increase was 83% in 2017 to 85% in June 2018.

Positive results lead to the collection of R$ 75.2 billion in taxes and government participation

In the first half of 2018, Petrobras generated R$ 75.2 billion in taxes and government participation, including royalties in Brazil, for the three federative levels: the Union, states and municipalities. The rise in international oil prices from US$ 51.81 in the first half of 2017 to US$ 70.55 this year was the main factor contributing to this increase of 28% over the first half of 2017.

Remuneration to shareholders

Petrobras will anticipate payment to shareholders in the form of interest on capital (JCP) in the amount of R$ 0.05 / share for both classes of shares. The payment, in the total amount of R$ 652.2 million, will occur on 08/23/2018. The accumulated amount of prepayments in the first half is R$ 1.3 billion.

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Shell Offers 1H:18 LatAm Updates

(Energy Analytics Institute, Jared Yamin, 1.Aug.2018) – Royal Dutch Shell plc announced the following updates during the first half of 2018.

Mexico

In the deep-water bid round in Mexico in January for the Gulf of Mexico, Shell won four exploration blocks on its own, four with its partner Qatar Petroleum and one with its partner Pemex Exploración y Producción. Shell will be the operator of all nine blocks.

Brazil

Shell won four additional deep-water exploration blocks in Brazil, one block on its own, and three in joint bids with Chevron, Petrobras and Galp. Shell will be the operator of two blocks.

Argentina

In April, Shell signed an agreement to sell its Downstream business in Argentina to Raízen. The sale includes the Buenos Aires refinery, around 645 retail stations, the global commercial businesses, as well as supply and distribution activities in the country. The businesses acquired by Raízen will continue the relationship with Shell through various commercial agreements.

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Shell Provides 3Q:18 Outlook Update

(Energy Analytics Institute, Jared Yamin, 1.Aug.2018) – Royal Dutch Shell plc offered the following outlook for the third quarter of 2018.

Compared with the third quarter 2017, Integrated Gas production is expected to be 40 – 70 thousand boe/d lower, mainly due to divestments and higher maintenance. LNG liquefaction volumes are expected to be at a similar level.

Compared with the third quarter 2017, Upstream production is expected to be 210 – 240 thousand boe/d lower, mainly due to divestments, field decline and higher maintenance, partly offset by volumes from new fields.

Given the unplanned downtime events in the third quarter 2017, refinery availability is expected to increase in the third quarter 2018 compared with the same period a year ago. This will be partly offset by higher planned maintenance.

Oil products sales volumes are expected to be at a similar level compared with the same period a year ago.

Given the unplanned downtime events in the third quarter 2017, chemicals availability is expected to increase in the third quarter 2018 compared with the same period a year ago. This will be partly offset by higher planned maintenance from the turnaround season.

Corporate earnings excluding identified items are expected to be a net charge of $ 400 – 450 million in the third quarter and a net charge of around $1.4 – 1.6 billion for the full year 2018. This excludes the impact of currency exchange effects.

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Shell Brazil Invests in FPSO Tanks Solution

(World Oil, 31.Jul.2018) – Aberdeen-based inspection technology and service provider for the oil and gas industry, Innospection, Shell Brazil and SENAI CIMATEC technology institute in Salvador, Brazil, have recently signed a partnership agreement to develop a robot-based technology for in-service inspection of cargo oil tanks of FPSOs.

This robot system called MCCR (MEC Combi Crawler Robot) will be deployed externally to the hull of Shell-operated and non-operated FPSOs worldwide. The robot will be able to clean marine fouling on ship hull, detect defect size and depth, among other features. This will allow for a potential increase in tank inspection efficiency, thus improving integrity and increasing safety for FPSOs. This solution is expected to allow for cost savings of 20% to 30% in tank inspections, when used in combination with other robotic inspection tools like aerial drones.

Shell Brasil Technology Manager Jose Ferrari said: “We are very excited with this promising partnership, which will lead to an optimized inspection process for our FPSOs, further contributing to streamlining the structural integrity management of our assets. We also look forward to having two important partners, Innospection and SENAI CIMATEC, who have previously worked for Shell in Brazil and abroad.”

Innospection, CEO, Andreas Boenisch said: “In several aspects this project has already achieved great milestones, from R&D collaboration between an Operator an Institute and a commercial technology company, to the high end robotic integration of various inspection technologies and surface cleaning into an almost autonomous subsea operating system, to a major cost saving aspect ofthe asset deployment and operation. We are excited to work with a great team on a great industry solution.”

SENAI CIMATEC Technology and Innovation Manager Daniel Motta adds that the project consolidates a partnership with Shell, started with the development of autonomous underwater vehicle (AUV) FlatFish. “We will be developing one more highly relevant project with Shell to boost its oil and gas exploration to even higher levels. It is a project that strengthens Brazil’s technology capabilities, thanks to a combination of resources from the Brazilian Oil and Gas Agency (ANP), Embrapii and our international partner Innospection.”

The project will cost approximately $9 million, from which $4.5 million will be funded by Shell Brasil through the ANP research levy on oil and gas revenues.

***

Peregrino Module Sails to Brazilian Platform

(Energy Voice, David McPhee, 31.Jul.2018) – Watch as Equinor’s Peregrino modules set sail en route to the platform in Brazil to begin Phase 2 of the project.

Watch: Equinor Peregrino modules sail to Brazilian platform

The modules for the drilling facility have already been delivered but will now undergo stacking and testing.

Equinor said today that the platform and corresponding drilling facility will see installation in late 2019.

The offshore structure is set to begin production in 2020 and will produce for 20 years.

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Petrobras Targets China with New Crude Oil

(Reuters, Florence Tan and Alexandra Alper, 27.Jul.2018) – Brazil’s state-controlled energy company Petrobras plans to push more crude oil to top importer China by marketing a new medium-sweet grade that could be shipped from October, two sources with knowledge of the matter said.

Petrobras expects to start pumping pre-salt oil from new platforms in the fourth quarter that would add to output from Latin America’s biggest producer and lift its exports.

The new supply could enlarge Brazil’s market share in China as buyers there cut oil imports from the United States following Beijing’s announcement it would impose tariffs on U.S. crude in retaliation against similar moves by Washington.

“Petrobras’ oil export curve is increasing and China is currently the company’s main market,” a Petrobras spokesman said in an e-mail.

“With (Chinese) refineries’ growing interest in buying oil directly from producers … Petrobras will grow its presence with these refiners.”

Petrobras started production in April at its wholly-owned Buzios pre-salt field in the Santos basin from platform P-74, located about 200 km off the Rio de Janeiro coast in water depths of 2,000 metres, according to the company’s website.

Two more platforms, P-75 and P-76, are to come online in the fourth quarter. Total Buzios output is expected to grow to 750,000 bpd by 2021, once an additional four platforms come online, the company said.

Buzios crude has API gravity of 28.4 degrees and contains about 0.31 percent sulphur, similar in quality to Brazil’s Lula crude, one of the most popular oils in China, the company said.

The new supply could help lift Petrobras’ crude oil exports, which dropped 53.8 percent in June from a year ago to 696,000 barrels per day (2.86 million tonnes) as the company hiked its refinery output.

Petrobras’ overall production in June stood at 2.03 million bpd, down 1.5 percent from May.

Brazil’s oil liquids output, including biofuels, is expected to rise by 200,000 bpd to 3.5 million bpd in 2019, after holding steady in 2018, according to consultancy Energy Aspects.

CHINA RISING

China’s demand for low-sulphur crude, such as oil from Angola and Brazil, jumped over the past two years after its independent refiners, also known as teapots, were allowed to import crude.

That has moved Brazil up two notches since 2017 to fifth on China’s supplier list, with 657,000 bpd in the first quarter this year, according to data from China customs.

The teapots’ oil imports from Brazil more than doubled in the first half of 2018 to 350,000 bpd compared with the same period a year ago, according to Beijing consultancy SIA Energy.

More than half of Brazil’s shipments to China went through ports in Shandong province, home to most of China’s independent refiners, according to Thomson Reuters Eikon data.

Petrobras also supplied the first crude cargo to Chinese chemical producer Hengli Group for the start-up of its new refinery in northeast China in the fourth quarter of this year. New Brazilian crude Mero was also delivered to Shandong in June.

Petrobras has expanded its trading team in Singapore to step up marketing efforts in China, the two sources familiar with the matter said. The company has appointed a business development person from within the company and hired a crude trader from a Chinese refiner who will join in September, the sources said.

“In order to improve market share in China, and considering the entry of the teapots in the international market, Petrobras considers that it is necessary to have a professional fluent in Mandarin for the specific development of this market,” the company said, without confirming the new hire.

Asia’s largest refiner Sinopec bought a third of China’s Brazilian oil imports in the first half of 2018, up 13 percent from a year ago, SIA Energy analyst Seng Yick Tee said.

“Sinopec and independents have the appetite for additional crude imports from Brazil, and the potential tariffs on U.S. crude is one of the reasons,” Tee said.

Trade flow data on Eikon, however, shows Brazilian exports to Shandong look set to drop in the third quarter – before the additional Buzios platforms start up – as poor margins and tighter credit have forced teapots to cut runs.

The tough environment is expected to push independents to seek more competitive oil supplies, Tee said.

Other sellers of Brazilian crude include Royal Dutch Shell and Equinor. State-owned China National Petroleum Corp (CNPC) and CNOOC Ltd also have equity stakes in Brazilian oilfields.

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EIA Beta Interactive Data Analysis

(Energy Analytics Institute, Ian Silverman, 26.Jul.2018) – Beta data from the EIA provide users with an interactive way to analyze multiple petroleum data.

According to the most recent beta crude oil reserve data provided by the US-based Energy Information Administration, two countries in the Latin American region make the list and rank among the top 15 countries worldwide in terms of these reserves. To no surprise, Venezuela tops the list and Brazil ranks 15th, according to the data.

In terms of natural gas reserves, again Venezuela tops the list among the top 15 countries worldwide, but this time the South American country ranks 8th, according to the data.

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Petrobras says Entorno de Sapinhoá Block Viable

(Reuters, 20.Jul.2018) – Brazil’s state-controlled oil company Petróleo Brasileiro SA said that areas it operates adjacent to the Entorno de Sapinhoá block in the Santos basin are commercially viable, according to a securities filing on Friday.

Petrobras has a 45 percent stake in Sapinhoá, while Shell Plc has a 30 percent stake and Repsol Sinopec has a 25 percent stake. (Reporting by Carolina Mandl Editing by Chizu Nomiyama)

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Petrobras to Start Up 4 New Platforms in 4Q

(Reuters, 18.Jul.2018) – Brazil’s state-controlled oil company Petrobras will start pumping pre-salt oil from four new platforms between October and December, the company’s director for production and technology development Hugo Repsold said.

Speaking to reporters at an oil industry event, he said Petrobras could study building its own platforms after 2022 and predicted the company would head toward sustainable growth of oil production in the next few years.

The four new platforms in the Santos basin are the P-67 and P-69 in the Lula oil field, and the P-75 and P-76 in the Buzios fields. A fifth platform planned for this year, the P-68 in the Berbigão field, will start in 2019.

Repsold said Petrobras was well on the road to recovery and was starting up platforms that had been delayed in recent years and which will now ensure continued growth in output.

He said the drop in Petrobras oil production in June to 2.03 million barrels per day – 1.5 percent less than May – was due to maintenance work on some platforms.

A revised business plan that should be published in the third quarter, he said, will include having the company’s own platforms that would enter production from 2023 onwards.

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Total Advances Renewable Projects in Brazil

(UPI, Daniel J. Graeber, 18.Jul.2018) – A renewable energy division of French supermajor Total said Wednesday it was moving forward with new solar power developments in Brazil.

Total in September paid about $275 million to acquire a 23 percent stake in renewable energy company Eren, naming the new entity Total Eren. The renewable energy division announced Wednesday it was financing and building a combined 140 megawatts of nominal power in Brazil, roughly enough power for at least 100,000 homes.

Of the three projects either in the finance or construction phase, a project dubbed BJL 11 is the company’s first ever in Brazil. With close to 78,000 panels, the French company said it could generate enough power for 23,000 homes.

The move into Brazilian renewables follows the formation of a strategic partnership between Total and Petróleo Brasileiro, known commonly as Petrobras. The 2016 partnership reinforced operations at oil fields off the Brazilian coast, thermal plants and infrastructure associated with liquefied natural gas.

Last week, Petrobras signed a memorandum of understanding to examine solar and wind energy segments in the Brazilian market with Total Eren.

“The recently announced agreement with Petrobras and Total, two major players in the energy sector, makes me very much enthusiastic about future growth prospects in renewables in the country,” Fabienne Demol, the global head of business development of Total Eren, said in a statement.

Petrobas has 104 MW of wind power and 1.1 MW of solar power already in its portfolio in the Brazilian market.

Brazil generates about three quarters of its electricity from renewable energy resources. According to the U.S. Commerce Department, it’s the best renewable energy market in Latin America.

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Petrobras Output in Campos Drops

(Reuters, Marta Nogueira, 17.Jul.2018) – Oil production by Brazilian state-led Petroleo Brasileiro SA in the Campos basin fell 1.4 percent in June over the previous month to 1.042 million barrels a day, its lowest level since 2001, as mature fields decline, according to company data.

Output has dropped 15.8 percent in 12 months due to the ageing of fields off-shore from Rio de Janeiro and Espirito Santo that account for almost half of the crude pumped by Petrobras. The decline has offset rising output from new platforms in the pre-salt region of the Santos basin.

Petrobras has looked at creative ways to handle mature fields by either selling them or entering partnerships to boost recovery efforts.

On June 14 it concluded the sale of a 25 percent stake worth $2.9 billion in the Roncador field to Equinor.

The partnership with the Norwegian company formerly known as Statoil will include measures to slow the decline of production in Roncador and raise the recovery factor.

In a move by private equity firms to gain a foothold in Brazil, Warburg Pincus and EIG Global Energy have placed bids for shallow water mature oilfields being sold by Petrobras, industry sources told Reuters last month.

The clusters located in the Campos basin off the coast of Rio de Janeiro state are likely to fetch proposals of around $1 billion in total, which would help boost a wider effort by Petrobras to sell assets and reduce debt. (Reporting by Marta Nogueira Editing by Leslie Adler)

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FDI in LAC Region Falls for Third Straight Year

(Energy Analytics Institute, Ian Silverman, 12.Jul.2018) – Foreign Direct Investment (FDI) in Latin America and the Caribbean fell for a third straight year in 2017, reported the Economic Commission for Latin America and the Caribbean or CEPAL by its Spanish acronym.

The details were revealed in CEPAL’s annual report titled “FDI in Latin America and the Caribbean 2018.”

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Petrobras, CNPC to Finish Rio Refinery

(Efe, 4.Jul.2018) – Brazilian state oil company Petrobras and China’s state-owned China National Petroleum Corporation signed a letter of intent to conclude construction of a refinery in Rio de Janeiro, the South American company said.

Work on the refinery, known as the Rio de Janeiro Petrochemical Complex (Comperj), has been stalled since 2015 due to the sprawling Car Wash probe, initially focused on a massive bribes-for-inflated contracts scandal centered on Petrobras

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ISA CTEEP Awarded $1.7 Bln Projects in Brazil

(Energy Analytics Institute, Ian Silverman, 30.Jun.2018) – The company was awarded two areas that total 2,560 kilometers of transmission lines, and substations with transformation capacity of 12,230 mega-volt amperes.

The announcement came as part of an auction of 20 energy transmission projects carried out by the National Agency of Electric Power of Brazil (Aneel by its Portuguese acronym) with the aim to strengthen Brazil’s national interconnected system, reported the daily El Tiempo.

“The company will invest close to $1.680 billion in the next five years,” reported the daily, citing Reynaldo Passanezi Filho, president of ISA CTEEP, an affiliate of Interconexión Eléctrica S.A. (ISA).

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Brazil Deep-water Competitiveness: José Firmo

(Energy Analytics Institute, Aaron Simonsky, 29.Jun.2018) – “Today Brazil is the most competitive in all of deepwater and ultra-deepwater,” José Firmo, Brazilian Petroleum Institute, said during a debate hosted by Washington, DC-based Inter-American Dialogue.

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Sterlite, State Grid Win Brazil Power Licenses

(Reuters, 29.Jun.2018) – India’s Sterlite, China’s State Grid, and Colombia’s Isa clinched licenses to build power transmission lines in Brazil in a government auction on Thursday that is expected to draw a total of 6 billion reais ($1.55 billion) in investment.

Some 47 companies and consortia registered to present bids at the auction at Sao Paulo’s stock exchange B3, which led to a competitive round.

Under auction rules, the companies that offered the biggest discounts in the tariffs would win. Brazil’s electricity regulator, Aneel, registered a 55 percent fall in average tariffs the companies will be allowed to charge.

Sterlite, which debuted in Brazil last year, clinched six projects that will require around 3.6 billion reais to build, according to Aneel.

Cteep, a unit of Colombia’s Isa, won two projects, with projected investments of 880 million reais, while CPFL, a subsidiary of China’s State Grid, was granted a project that is slated to cost about 102 million reais.

Electricity heavyweights such as Portugal’s EDP and Spain’s Iberdrola, bidding through their joint venture Neoenergia, left empty-handed, amid the hot competition.

The licenses include a 30-year contract to operate the lines, with pre-defined annual revenues coming from the tariffs to be charged for the service.

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EDP Introduces Blockchain Solution in Brazil

(Renewables Now, 28.Jun.2018) – Energias de Portugal SA (ELI:EDP) announced on Thursday it has become the first to use blockchain technology to measure and record energy consumption and distributed generation (DG) coming from its consumers in Brazil.

EDP’s new solution simplifies the process of managing the energy produced and consumed by its clients’ solar arrays. The initiative is a partnership with the Austrian Riddle & Code.

The new system is a non-removable cryptographic tag that is attached to domestic energy meters to measure the co-consumption of each user. It facilitates transactions and calculations for charging and taxing, EDP said.

This project follows the introduction of Brazil’s legislation on remote consumption of distributed energy, in which consumers can rent a quota from a solar plant that is not allocated on their land, the company noted.

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Brazil to Auction 20 Transmission Lines

(RioTimes, Lise Alves, Senior Contributing Reporter, 28.Jun.2018) – ANEEL (Electric Energy Regulator) in Brazil will conduct the first energy transmission auction of the year on Thursday (June 28th) with twenty lots of transmission lines up for sale. According to officials the sale of these lots will generate R$6 billion in investments and approximately 13,600 jobs.

“Twenty lots of new concessions will be auctioned, totaling 2,563 km of transmission lines and 12,200 MVA [megavolt-ampere] of transformation capacity in substations,” said the Minister of Mines and Energy, Wellington Moreira Franco on Wednesday.

According to Moreira Franco, the lots to be auctioned are distributed in sixteen states: Santa Catarina, Rio de Janeiro, Ceará, Rio Grande do Norte , Paraíba, Bahia, Sergipe, Alagoas, São Paulo, Tocantins, Goiás, Rio Grande do Sul, Pará, Piauí, Maranhão and Minas Gerais.

“The projects being implemented, for the period 2018 to 2022, will add a total of 34,000 km to our transmission network. This equals to an annual average of 6,800 km. We are talking about R$60 billion in investments,” added the Energy and Mines Minister.

According to Aneel, the transmission facilities must enter into commercial operation within 36 to 63 months from the signing of the concession agreements. and the winning concessionaire shall be entitled to receive revenues from energy produced by the facilities for the next thirty years.

In 2017, there were two auctions, the first in April, when 31 lots were sold, with an estimated investment of R$12.7 billion, and the second in December, when eleven lots were sold, with a planned investment of R$8.7 billion.

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