Petrobras, Total Finalize Strategic Alliance

Instant Max AI

(Petrobras, 1.Mar.2017) – Petrobras and Total signed the sales contracts for the assets in the Strategic Alliance, as set out in the Master Agreement signed on the 21st of December, 2016.

The contracts signed yesterday form a Strategic Alliance between both companies creating new partnerships in the Upstream and Downstream segments, and they reinforce technical cooperation in operations, research and technology. This alliance should allow both companies to bring together their internationally recognized expertise in all segments of the oil and gas value chain in Brazil and abroad.

Through these contracts:

– Petrobras will transfer 22.5% of the rights to Total in the concession area called Iara (comprising Sururu, Berbigão and Oeste de Atapu fields, which are subject to unitization agreements with the area called Entorno de Iara, a transfer of rights area in which Petrobras holds a 100% stake), in the Block BM-S-11. Petrobras will continue as operator and hold the largest stake, with 42.5%. The partnership with Total will allow Petrobras to reduce its investment and will benefit from technological solutions for its development that will be jointly studied by Petrobras and Total, maximizing profitability and the volume of oil to be recovered. BG E&P Brasil, a subsidiary of Royal Dutch Shell plc, with 25%, and Petrogal Brasil, with 10%, are also part of the consortium.

– Petrobras will transfer 35% of the rights to Total, along with its operation, in the Lapa field concession area, in Block BM-S-9. Petrobras will keep 10%. The Lapa field is in the production phase and came onstream in December 2016. Total, as the new operator of this field, will benefit the Consortium by incorporating valuable experience in deepwater projects for the next phases of the challenging Lapa project, which has distinct characteristics from other operating pre-salt fields. BG E&P Brasil, a subsidiary of Royal Dutch Shell plc, with 30%, and Repsol-Sinopec Brasil, with 25%, are also part of this consortium.

– Sale of Petrobras’ 50% stake to Total in Termobahia, which includes two cogeneration plants, Rômulo de Almeida and Celso Furtado, located in Bahia. Both plants are connected to the regasification terminal located in São Francisco do Conde, Bahia, where Total will take the regasification capacity to supply gas to the thermoelectric plants. This initiative constitutes an innovative partnership in the Brazilian thermal market.

The above contracts are in addition to other agreements already entered into on the 21st of December, namely: (i) Letter granting Petrobras the option to purchase a 20% stake in block 2 of the Perdido Foldbelt area, in the Mexican sector of the Gulf of Mexico, only taking on future obligations in proportion to its stake (ii) Letter of intent for joint exploration studies in the exploratory areas of the Equatorial Margin and the Santos Basin; and (iii) Technological partnership agreement in digital petrophysics, geological processing and subsea production systems.

The deal includes Total paying $2,225 million to Petrobras, made up of $1,675 million in cash for assets and services, a $400 million line of credit that could be triggered by Petrobras for part of their investment in the Iara development fields and $150 million for contingent payments.

After signing the contracts, Pedro Parente, CEO of Petrobras and Patrick Pouyanné, Chairman and CEO of Total, have declared: “We are delighted today to see our Strategic Alliance becoming reality. These new partnerships together with a reinforced technological cooperation should create significant synergies and values, mutualizing our operational excellence and further reducing costs on our joint projects for the benefit of both companies”

The deal is subject to the approval of the relevant regulatory entities, the potential exercise of preemptive rights by current Iara partners in addition to other preceding conditions.

For Petrobras, this Strategic Alliance is an important part of the Petrobras 2017-2021 Business and Management Plan. It increases information, experience, and technology sharing, which strengthens corporate governance, and improves the company’s financeability through mitigation of risks, cash inflows, and the release of investments.

For Total, these new partnerships with Petrobras reinforce Total’s position in Brazil through the access to new fields in the Santos Basin while entering a promising gas value chain.

Total and Petrobras

Currently, Petrobras and Total jointly participate in 19 Exploration and Production consortiums worldwide. In Brazil, the companies are partners in the development of the giant Libra field, which is the first Production Sharing Contract in the Brazilian pre-salt Santos basin. Outside Brazil, Petrobras and Total are partners in the Chinook field in the US Gulf of Mexico, in the deep-water Akpo field in Nigeria and in the gas fields of San Alberto and San Antonio/Itau in Bolivia, as well as in the Bolivia-Brazil gas pipeline.

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