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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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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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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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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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…

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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 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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Mexico And Brazil’s Crude Politics

(Foreign Policy, Lisa Viscidi, .16.Oct.2018) — A potential return to resource nationalism could set both countries back.

Until this year, resource nationalism—when a government asserts its control over a country’s natural resources—seemed to be on the wane in Latin America. With oil prices low, state oil companies were struggling, and market-friendly governments had started opening their energy industries to private investment.

In the coming months, though, the region’s two largest economies may both have new leaders who came to power on promises of a return to the old days. In Mexico, President-elect Andrés Manuel López Obrador’s vow to restore Mexico’s state energy companies to their glory days and his emphasis on energy independence from the United States were central to his campaign. Similarly, Brazilian presidential candidate Fernando Haddad (who is polling well behind his rival, Jair Bolsonaro, but could still eke out a win later this month) wants to reassert state oil and power companies’ dominant positions in Brazilian energy markets. Both López Obrador and Haddad have argued that the current Mexican and Brazilian governments, in trying to open energy sectors to private investment, have effectively handed over state assets to foreign companies.

This is not the first time Latin American countries have flip-flopped on resource nationalism. The idea was initially championed in the 1950s and ’60s by Juan Pablo Pérez Alfonzo, the Venezuelan oil minister who helped found OPEC, and Getúlio Vargas, the Brazilian president who created the state oil company Petrobras in 1953. The slogan he gave it: “O petróleo é nosso,” or “The oil is ours.”

In the 1990s, historically low oil prices pushed Latin America’s energy sectors toward privatization. Petrobras shares were floated on the São Paulo and New York stock exchanges. Argentina’s state oil company, YPF, was sold off to private investors entirely. Then, in the early 2000s, as oil prices rose again, governments across the region began expropriating energy assets. A wave of recent reforms, again tied to low prices, encouraged private investment once more. In Mexico and Brazil, however, these reforms were never popular. And so, in both countries, the idea of energy sovereignty, part of a broader economic nationalist and protectionist approach, is again taking root.

For his part, López Obrador has long criticized the energy reform that the current president, Enrique Peña Nieto, signed into law in December 2013. That reform revised the constitution to open the oil and power sectors to greater private investment, creating competition for state monopolies. As a presidential candidate, López Obrador condemned the opening as putting the country’s riches into foreign rather than Mexican hands. Now, he wants to strengthen the state oil company, Pemex. He has vowed to increase Pemex’s investment budget to boost oil production, which has plummeted to 1.8 million barrels per day from a peak of 3.4 million barrels per day in 2004. His goal of 2.6 million barrels per day by the end of his term in 2024 is ambitious.

In order to end imports of gasoline from the United States by 2022, another of the president-elect’s goals, López Obrador plans to build a new refinery in his home state of Tabasco and upgrade six existing refineries, which would add over 1 million barrels per day in output if all existing refineries ran at full capacity. Mexico produces mostly heavy crude oil, much of which it ships to the United States for refining. It then imports about 1.3 million barrels per day of refined products back from the United States for domestic consumption. At the same time, López Obrador has promised Mexican voters a decrease in gasoline prices. The Peña Nieto government had cut gasoline subsidies just as international oil prices started to rise again, causing a 20 percent bump in fuel prices.

In the power sector, López Obrador plans to strengthen the state utility company and expand hydroelectric capacity in Mexico to slash imports of natural gas. In recent years, Mexico has become a critical market for U.S. shale gas as the pipeline infrastructure between the two countries has been beefed up. Cheap U.S. natural gas has also lowered the cost of electricity generation in Mexico, so tapering off the imports could hurt on both sides of the border.

In Brazil, the polarizing right-wing candidate Bolsonaro, who won 46 percent of the vote in the country’s first-round presidential election on Oct. 7, will face Haddad, a left-wing candidate from the Workers’ Party, in a second round later this month.

Bolsonaro has said that he is open to foreign investment, privatizing state companies, and creating more competition in oil and gas markets. He would likely push onward with the Petrobras divestment plan that was started under the current center-right president, Michel Temer. As part of that plan, which was designed to reduce Petrobras’s enormous debt, the company has sold off assets in refining, logistics, and transport to focus on its more profitable core business of oil exploration and production. Continued privatization is worthwhile, but beyond his support for it, Bolsonaro has been widely criticized for lacking any specific energy plan or even a detailed economic agenda.

Haddad, meanwhile, is fairly clear in his support for a return to the resource nationalism favored by his fellow Workers’ Party member former President Luiz Inácio Lula da Silva. Following the 2007 discovery of vast deepwater oil reserves, Lula introduced reforms that increased the government’s stake in Petrobras and made the state company the exclusive operator of the new fields. Temer later signed a law that reversed Lula’s bill, creating more opportunities for private investment in the sector. Haddad has promised to reverse Temer’s reversal and recover the oil to benefit the people. He has also pledged to strengthen Petrobras and to support the development of local industries by increasing local content requirements in oil exploitation and production. In short, Haddad would likely look to slow Petrobras’s divestment to keep energy assets in the state company’s hands and reassert its role as a driver of economic development.

Once in office, the new leaders of Mexico and Brazil will inevitably face challenges to implementing many of their plans. It is unlikely that Brazil’s next president will have enough support in Congress to overturn Temer’s law, for example. Likewise, in Mexico, although the president has broad powers to roll back aspects of the energy reform, only a two-thirds congressional majority—which López Obrador is unlikely to secure—can undo a constitutional reform. And in both countries, the administrations would face major legal challenges if they tried to unilaterally change existing contracts with private energy companies.

And then there’s the budget to think of. New refineries cost billions of dollars, are highly susceptible to corruption, and ultimately won’t lower gasoline prices for consumers. Expanding large hydroelectric dams also takes money, and it presents tremendous social and environmental challenges. Forcing a state oil company to operate all exploration and production projects risks massive corporate debt and a credit rating downgrade—precisely what happened to Petrobras under Lula and his successor, Dilma Rousseff. Meanwhile, strict local content requirements that are not coupled with programs to modernize local suppliers merely slow the development of oil and gas reserves. Despite the discovery of the undersea reserves in 2007—one of the most significant oil finds in the world in years—Brazil’s oil production remained nearly flat for years.

State-led development of energy resources can be very successful. Witness Saudi Aramco, the state oil company that has made Saudi Arabia one of the largest oil producers in the world. But experience in Latin America suggests that giving state companies a monopoly over energy production tends to restrict the industry rather than boosting it. And beyond that, it is worth considering whether it is wise to continue depending on oil to float the economy at all. As many other countries around the world, from nearby Colombia to Saudi Arabia, debate whether the time has come to transition the economy away from dependence on fossil fuels, in Mexico and Brazil, debates over energy policy continue to focus on nationalization versus privatization.

Considering resource nationalism’s poor track record in actually benefiting most citizens, it is time for these countries to shift the focus of policy discussions toward addressing today’s more pressing problems.

Lisa Viscidi is the director of the Energy, Climate Change, and Extractive Industries Program at the Inter-American Dialogue.

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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.”

***

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.

***

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.

***

#LatAmNRG

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.

***

#LatAmNRG

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.

***

#LatAmNRG

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.

***

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)

***

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.

***

#LatAmNRG

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.

***

#LatAmNRG

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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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.

***

Petrobras Bolivia Spuds Deep Caranda X1005 Well in Santa Cruz

(Energy Analytics Institute, Jared Yamin, 27.Sep.2018) —The well was spud in the Caranda Field inthe  presence of Bolivia’s President Evo Morales.

The field is located in the Ichilo province of the department of Santa Cruz and is operated by Petrobras Bolivia.

The Deep Caranda exploration well (Car-X1005) will require an investment of $47 million and has potential to produce 35 million cubic feet per day (MMcf/d) of natural gas, reported the daily newspaper La Razón.

“If gas is confirmed, additional investments of $184 million could be made to drill two other wells in the area,” reported the daily, citing Morales.

With drilling of the Car-X1005 well the company aims to certify a potential resource of approximately 0.6 trillion cubic feet (Tcf) of natural gas, which could translate into revenues of $600 million over the next 20 years, reported the daily.

Additionally, the exploratory project, if successful, could lead to the revitalization of a mature field (the Colpa Caranda area), and could generate a new perspective regarding developments, investments, and other activities aimed at boosting gas production.

***

Venezuela Faces Fresh Blow With Ship-Fuel Rules Threatening Exports

(Bloomberg, 27.Sep.2018) — New rules forcing ships to use cleaner marine fuels may deal yet another blow to cash-strapped Petroleos de Venezuela SA, an exporter of high-sulfur fuel oil.

From Jan. 1, 2020, vessels will have to switch to less-polluting bunker fuel or be fitted with equipment to curb emissions, under new International Maritime Organization rules. That’s expected to weaken demand for the high-sulfur residual fuel oil produced by PDVSA, pushing prices lower at the same time that the cost of importing clean fuels rises, said Mel Larson, a consultant at KBC Advanced Technologies Inc.

As refiners prepare to produce IMO-compliant fuels that rely on low-sulfur crude oils, sour crude produced by Venezuela and Mexico may be sold at deeper discounts. Meanwhile, demand for lighter distillates, including diesel, is expected to increase. That ultimately will take a toll on the economies of Venezuela, Mexico and Ecuador that rely on imported diesel and gasoline.

“IMO 2020 has the potential to hurt GDP growth in most Latin American economies, especially the ones that subsidize fuel prices,” Larson said by email. “As the cost of imported fuels rise, subsidizing gasoline and diesel will only serve to expand a country’s or company’s debt load.”

Most refiners in Latin America haven’t invested in units that can remove sulfur or crack residuals into more valuable molecules. That puts them at a disadvantage ahead of the rule, which is expected to slash global demand for high-sulfur bunker fuel to as low as 1 million barrels daily from 4 million barrels currently.

By this measure, Petroleos Mexicanos and PDVSA, respectively Latin America’s largest and second-largest exporters of fuel oil, are the ones who have most to lose.

Petroleo Brasileiro SA, on the other hand, is set to take advantage of the fuel shift, according to Guilherme Franca, executive manager of commercialization. Petrobras already exports IMO-compliant fuels and is exploring the re-opening of fuel oil storage tanks in Singapore to better supply bunker fuel markets in Asia.

***

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)

***

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)

***

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.

***

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)

***

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.

***

Ecopetrol: Fracking Likely In Colombia, Business Prospects Are Positive

(Seeking Alpha, Dylan Quintilone, 14.Sep.2018) — Ecopetrol SA is a Colombian oil and gas company with headquarters in Bogotá, Colombia. The company is listed by Forbes as the 300th largest enterprise by profits and is the second oil company in South America behind Petrobras from Brazil.

Ecopetrol’s operations are divided between exploration and production; Refining, Petrochemical & Biofuels, Oil Transportation and Logistics. The company has around 8,500 kilometers of transportation pipelines which commercializes crude oil and all kinds of derivatives such as fuel oil, aviation gasoline, cracked naphtha, virgin naphtha, polypropylene resin, and masterbatches. The company offers refined and petrochemical products to multiple markets and has a large presence in Colombia.

The company has almost ten thousand employees and is experiencing a rising period of revenues due to the increase in oil prices in the first half of 2018. Ecopetrol has increased production in recent years and the company produces roughly 730 million barrels per year, which is an 83% production increase over 2010 levels. The company expects to surpass the billion barrel mark within the coming years because of additional discovery of oil reserves of the northern coast of Colombia and new exploration/extraction methods.

Fracking in Colombia? Most likely

Fracking in Colombia has been a big debate since the recently inaugurated president Ivan Duque was proposing the possibility during his election campaign. Upon securing the presidency, his fracking project is moving forward with a majority of the senators in the Colombian Congress who are collaborating with him for the proposal. The fracking issue has long been debated and now with the government reaching a consensus and backing the fracking industry, the approval for the controversial extraction method is likely.

***

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.

***

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

***

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.

***

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)

***

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.”

***

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.

***

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)

***

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.

***

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. 

***

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.

***

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.

***

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.

***

Trafigura Seeks to End Ricardo Eliçabe Conflict

(Energy Analytics Institute, Ian Silverman, 28.Jul.2018) – Negotiations continue to advance to overcome a labor related conflict at the Ricardo Eliçabe refinery in Bahía Blanca.

The refinery, acquired last May by the Dutch group Trafigura, has been paralyzed for almost two months, reported the daily newspaper Clarin.

The labor conflict stems from a decision by Trafigura in early June of 2018 to no longer acquire crude for processing. The decision affects an estimated 200 workers.

Recently, in a move to prevent layoffs, the union of Petroleum, Gas and Biofuels Workers has started to accept offers related to voluntary departures and retirements.

“If we can confirm the list of workers who would leave the refinery and it’s accepted by the company, we would close the conflict,” reported the daily, citing union official Fabio Pierdominici.

***

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.

***

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)

***

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.

***

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.

***

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)

***

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

***

Petrobras New CFO Election

(Petrobras, 27.Jun.2018) – Petrobras informs that its Board of Directors, at a meeting held today, appointed the engineer Rafael Salvador Grisolia to the position of Chief Financial and Investor Relations Officer of the company, with an office term until March 26, 2019, the same term of the other officers of the Executive Board.

Rafael Grisolia is a Production Engineer, holding an MBA from Coppead/UFRJ. Has a 30 year extensive career experience having worked at the financial department of Esso – an affiliate of ExxonMobil Corp., and at Cosan Combustíveis e Lubrificantes SA, held a position of Chief Financial Officer (CFO) and Investor Relations Officer (IRO) of Cremer SA, CFO of Grupo Trigo SA, CFO and IRO of Inbrands SA. Since August 2017, as Chief Financial Officer (CFO) and Investor Relations Officer (IRO) at Petrobras Distribuidora SA (BR).

The nomination was subject to prior analysis by the Nominating, Compensation and Succession Committee of Petrobras’ Board of Directors.

***

Tartaruga Verde Field Commences Production

(Petrobras, 25.Jun.2018) – Petrobras started production of Tartaruga Verde field, in deep waters of Campos Basin, by means of FPSO Cidade de Campos dos Goytacazes.

The FPSO is located about 127 km off the coast of the state of Rio de Janeiro, in water depth of 765 meters, with a capacity to process daily up to 150 thousand barrels of oil and 3.5 million cubic meters of gas and 5 million cubic meters of gas compression.

Tartaruga Verde field has good quality oil (27º API) and is located in the southern area of Campos Basin, in the post-salt, in water depth ranging from 700 to 1,300 meters and with reservoirs at 3,000 meters depth. It consists of two reservoirs, Tartaruga Verde, where Petrobras holds 100% interest, and Tartaruga Mestiça, a joint reservoir between the Union, represented by Pre-Sal Petróleo SA – “PPSA”, with a 30.65% interest, and Petrobras with 69.35%. All of the field production will be offloaded by FPSO Cidade de Campos dos Goytacazes.

This is the second platform to start operations this year and will contribute to the increase of Petrobras’ production under the 2018-2022 Business and Management Plan.

***

Brazil Labor Court Rules Against Petrobras

(Reuters, 21.Jun.2018) – Brazil’s top labor court ruled in favor of workers at Brazil’s state-controlled oil giant Petroleo Brasileiro in a wage spat that could cost the world’s most indebted oil company up to 17 billion reais ($4.5 billion).

Petrobras, as the company is known, could still appeal the Superior Labor Court’s ruling in the case, brought by Petrobras workers seeking more pay.
***

Brazil Raises $830 Mln in Pre-Salt Auction

(Efe, 7.Jun.2018) – Brazil raised 3.15 billion reais (around $830 million) in fixed signing bonuses on Thursday in its fourth auction of oil blocks in a deepwater region of the Atlantic Ocean known as the pre-salt.

The winner of the largest and most coveted block – known as Uirapuru – was a consortium made up of Brazilian state oil company Petrobras (30 percent stake), Irving, Texas-based supermajor Exxon Mobil (28 percent), Norway’s Statoil (28 percent) and Portugal’s Petrogal (14 percent).

It won the block after offering the government a record 75.48 percent share of so-called profit oil, more than three times the minimum required by the National Petroleum Agency (ANP, Brazil’s oil regulator).

Two other consortiums also were awarded licenses for blocks in the pre-salt region, so-named because its massive reserves are located under water, rocks and a layer of salt at depths thousands of meters below the surface of the Atlantic.

One of them is made up of Royal Dutch Shell (40 percent), San Ramon, California-based Chevron (30 percent) and Petrobras (30 percent), while the other is led by Petrobras (45 percent) and also includes BP Energy (30 percent) and Statoil (25 percent).

Although Petrobras initially only was part of that latter consortium, it exercised its right under pre-salt regulations to be an operating partner in the other two consortiums with at least a 30 percent stake.

The ANP received offers that were well above what had been expected for the three most coveted blocks in the auction. The auction of a fourth smaller block, Itaimbezinho, did not attract any bidders and was declared void.

The bid round was among the most successful in recent years, according to ANP director Decio Oddone.

He said that in addition to the proceeds from the fixed signing bonuses the auction also would guarantee some 40 billion reais (some $10.5 billion) in income for the state over the 30-year lifespan of the contracts in the form of profit-sharing arrangements and taxes and royalties.

The consortium led by Shell and Chevron that won the right to develop a pre-salt block known as Tres Marias offered the government 49.95 percent of the profit oil, more than five times the minimum required.

The third block that attracted interest, Dois Irmaos, was awarded to the Petrobras-BP-Statoil consortium, which offered the government a 16.43 percent share of the profit oil, the minimum proportion required.

“It was a very successful auction because it attracted the attention of the world largest oil companies, which made offers that were higher than what we were expecting; it showed how competitive the pre-salt is,” Oddone said.

He said that all told the Brazilian government would have a nearly 90 percent share of liquid revenues from the development of Uirapuru, adding that such a high level was “not even seen in the Middle East.”

The four blocks on offer on Thursday contain roughly 5 billion barrels of oil and natural gas.

Prior to this latest auction Brazil had only awarded licenses to develop six blocks in the pre-salt region, which contains tens of billions of barrels of hydrocarbon reserves.
***

ExxonMobil Wins More Acreage in Brazil Bid Round

(ExxonMobil, 7.Jun.2018) – ExxonMobil has increased its holdings in Brazil’s pre-salt basins after winning the Uirapuru exploration block with co-venturers Equinor and Petrogal Brasil during Brazil’s 4th pre-salt bid round.

The block awarded adds about 88,900 net acres to the ExxonMobil portfolio, expanding the company’s total position in the country to more than 2.2 million net acres.

“Uirapuru is a uniquely valuable block that represents tremendous opportunity for us,” said Steve Greenlee, president of ExxonMobil Exploration Company. “Brazil continues to represent a key investment for ExxonMobil, and we look forward to exploring and developing its world-class resources with our co-venturers and the government.”

Petrobras exercised its right to enter in the consortium and will be the operator. Equity interest in the Uripuru block will be 30 percent for Petrobras, 28 percent for ExxonMobil, 28 percent for Equinor and 14 percent for Petrogal Brasil.

ExxonMobil plans to obtain seismic coverage in 2018 on more than 7,500 square miles. 3-D seismic survey work is already underway on two blocks in the Northern Campos area offshore Brazil. Preparations are under way to obtain the necessary approvals to commence drilling activities.

Development plans are also under way in the Equinor-operated Carcara field, where drilling began in late April. The Carcara field contains an estimated recoverable resource of more than 2 billion barrels of high-quality oil.

ExxonMobil now has interests in a total of 25 blocks offshore Brazil. 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.

***

Brazil Will Strengthen Energy Supply during Soccer World Cup

(Efe, 6.Jun.2018) – Brazil’s Electricity Sector Monitoring Committee (CMSE) announced special operational measures to ensure that the country will not have problems with its energy supply during the 2018 World Cup in Russia, which will begin on June 14, official sources said on Wednesday.

One of the measures announced by the CMSE, which evaluates the conditions of electricity supply throughout the country, is to increase operational security of the National Interconnected System (SIN) during the Brazilian team’s matches in the World Cup, for which a special operation will be carried out.

The operation will begin two hours before and ends two hours after the Brazil matches, and other important events, such as the opening ceremony and the final match, according to a statement released Wednesday by the Ministry of Mines and Energy.

The objective is to reinforce the power supply during the World Cup and avoid possible blackouts, as occurred in March 2017 when 13 states in the north and northeast of Brazil were affected and more than 70 million people were left without electricity.

According to the statement, other measures aimed to increase the security of the system are to have a greater number of energy-generating units synchronized with the hydroelectric system and to reinforce the shift teams in strategic installations.

Brazil, five-time World Cup champion and one of the favorites to win the 2018 World Cup Russia, will play its first match on June 17 against Switzerland in the city of Rostov-on-Don.
***

Petrobras BOD Appoints New CEO

(Energy Analytics Institute, Ian Silverman, 5.Jun.2018) – Ivan de Souza Monteiro is the new president of Petrobras.

Brazil’s state oil company Petrobras announced controlling shareholder informed the company of the appointment of engineer Ivan de Souza Monteiro, current interim CEO, to join Petrobras’ Board of Directors and assume the position of CEO of the company.

***

Petrobras Boss Resigns Amid Truckers’ Strike

(Al Jazeera, Daniel Schweimler, 2.Jun.2018) – Pedro Parente’s resignation was one of the demands of striking workers due to worries that he was going to privatise Brazil’s share of the Latin American oil company.

https://www.aljazeera.com/news/2018/06/brazil-oil-company-petrobras-boss-resigns-truckers-strike-180602120210810.html

The boss of the biggest oil company in Brazil has resigned, driving down the share price of Petrobras by 15 percent.

He’s the highest-profile casualty so far of a truck drivers’ strike that’s virtually paralysed Brazil for nearly two weeks.

***

Petrobras CEO Parente Resigns Post

(Energy Analytics Institute, Ian Silverman, 1.Jun.2018) – Pedro Parente resigned as CEO of Petrobras.

In an official statement, Brazil’s state oil company Petrobras confirmed Mr. Parente had resigned his position as CEO of the company.

Petrobras said nomination of an interim CEO will be analyzed by the Board of Directors in due time.

***

Brazil Oil Workers Strike, Defying Court Order

(Efe, 30.May.2018) – Brazilian oil workers defied a court order on Wednesday by launching a three-day strike affecting oil refineries.

The FUP, a federation that assembles most of Brazil’s oil workers’ unions, said in a statement that the top labor court’s decision to declare the strike illegal had not “intimidated” workers.

On Tuesday, a judge declared the strike illegal because it would be “abusive” and be “carried out to disturb” the population, threatening to impose a 500,000-real fine ($135,000) in case the strike broke out.

The oil workers strike was organized to support striking truckers, who have been calling on state oil company Petrobras to lower fuel prices, which have sharply increased due to a rise in international crude prices and to the slide in the value of the Brazilian real.

The strike, according to the FUP, was also organized to demand the resignation of Petrobras CEO Pedro Parente and to denounce a purported plan by the right-wing government to sell company assets to multinational corporations.

The oil workers’ unions said that the 72-hour work stoppage was a “warning” and that an open-ended strike could ensue if their demands were not met.

The FUP, however, said that the strike would not lead to a lack of fuel in the country, at a time when the truck driver’s strike, which is now in its 10th day, has caused a shortage of basic goods such as gasoline and some foodstuffs.

On Sunday, the Brazilian government and truckers’ unions reached an agreement to put an end to the strike, although hundreds of truck drivers have continued to block dozens of roads to demand that the government provide more guarantees that it will lower diesel prices.
***

Petrobras Pricing Pressure Spooks Potential Refinery Buyers

(Reuters, Tatiana Bautzer & Carolina Mandl, 24.May.2018) – A surprise decision by Brazil’s state-controlled oil company Petroleo Brasileiro SA to cut diesel prices in response to truckers’ protests is worrying some potential buyers of Petrobras’ refineries, three people with knowledge of the matter said on Thursday.

Petrobras’ planned sale of a 60 percent stake in four refineries, announced on April 19, is part of a wider effort to unload assets to reduce debt. The refineries will be sold in two regional blocks: one in the northeast and another in the southern region of the country, with two refineries each.

Petrobras has said it will retain around 75 percent of its domestic refining capacity after the privatization of the four units.

Petrobras is hoping to get non-binding proposals in early July, two people with knowledge of the sale process said, asking for anonymity because negotiations are private.

Among the groups Petrobras has invited to bid are buyout firms Patria Investimentos Ltda, which has an investment agreement with Blackstone Group LP, and First Reserve Management LP. Other potential buyers are Brazilian firms Ultrapar Participações SA and Cosan SA Industria e Comercio , the sources said.

The groups are expected to receive the initial invitations to participate in the process next Monday 

But rising pressure on Petrobras to cut fuel prices, sparked by the truckers’ protest this week, has worried some potential acquirers.

Petrobras late on Wednesday said it would slash diesel prices by 10 percent for 15 days to ease pressure while the government tries to reach a permanent deal with truckers to ease price pressure more permanently. The decision triggered a 15 percent plunge in Petrobras shares on Thursday.

Two potential investors told Reuters they worry that changes in Petrobras’ pricing policy would strongly affect private competitors, as the state-controlled company plans to keep most of its refining capacity, especially in southeastern Brazil, the country’s wealthiest region.

Potential pricing changes to appease the government could create unfair competition, the sources added.

Cosan, Pátria, First Reserve did not immediately respond to requests for comment on the matter. Ultrapar declined to comment.

In a conference call with investors on Thursday, Petrobras Chief Executive Officer Pedro Parente, who has insisted that the diesel price cut does not change the company’s overall pricing policy, also said it would not jeopardize the refinery sale plan.

But the sources said investors were likely to demand more guarantees related to pricing policies in the refineries sale process as a result.

***

Bolivia Shifts Gas Investment Plans Amid Protests

(Efe, 4.May.2018) – Bolivia announced on Friday it was halting plans to spend $683 million on natural gas exploration work in an area of the southern province of Tarija due to environmental protests, saying that money would instead be invested elsewhere in the Andean nation.

La Paz said the two fields targeted for exploration had potential reserves of more than 4.21 trillion cubic feet and could have generated some $9 billion in revenue, $1.8 billion of which would have been allocated to that southern province.

In a press conference, Hydrocarbons Minister Luis Alberto Sanchez said some sectors in Tarija did not want the national government to invest there.

On April 7, Bolivia’s government enacted two laws authorizing natural gas exploration and production work at the Astillero and San Telmo fields, located in Tarija’s Tariquia Flora and Fauna National Reserve.

Sanchez said those funds would be allocated to “other places where the state’s work is appreciated.”

The minister said some non-governmental organizations, Tarija’s provincial government and that province’s civic committee were responsible for drumming up resistance to the gas project.

Public opposition to the planned exploratory drilling has become more vehement in recent days, prompting the government to reverse course.

Sanchez said, however, that work at both fields would have had a minimal impact on the national reserve’s 247,000-hectare (950-sq.-mile) area.

Brazilian state-controlled oil giant Petrobras and Bolivian state energy company YPFB’s Chaco and Andina units were to have carried out the work at Astillero and San Telmo.
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Shell Made Mistake Pulling Out of Guyana basin

(CaribbeanLife, Bert Wilkinson, 31.Jan.2018) — Now that Guyana’s oil and gas basin has been deemed as one of the hottest and most exciting prospects in the world, Shell Oil has to be regretting its decision to withdraw as an investment partner with United States giant ExxonMobil, which has so far drilled six successful wells offshore Guyana worth about 3.2 billion barrels of oil, officials said Monday, Jan. 29.

Minister of Natural Resources Raphael Trotman said Exxon’s mid 2015 “world class” oil and gas find has clearly taken away all the fears and apprehensions about wasting investor dollars exploring offshore Guyana and Shell is one company which has missed out on the chance to cash in on one of the world’s largest oil finds in more than a decade. Exxon plans to begin producing about 120,000 barrels of oil daily in early 2020. This will make Guyana the largest producer in the Caribbean Community. The others are Trinidad, Suriname and Barbados.

“Shell was with Exxon on the Stabroek block and pulled out. They now maybe rue the day that they ever did that. Now, Shell has signaled that it wants to come back to Guyana,” Trotman noted, saying that all the major oil and gas companies in the world are either vying for their own offshore blocs or buying into smaller companies which have deep water concessions near Exxon’s highly successful offshore fields.

Exxon spokeswoman Kimberly Brasington Monday confirmed that Shell was the original partner with Exxon in the six million acre-plus concession area after Exxon had signed its exploration agreement with Guyana back in 1999 “but chose to pull out. They made the decision not to take the risk. We therefore had to go out there and look for new partners in Hess Oil and Nexen (of China). Yes that was indeed the case,” she said.

Geology and Mines Commissioner Newell Dennison said Shell pulled out about a decade ago and has been sending signals about coming back into the basin but he has seen no paper work regarding this so far.

Exxon and its partners plan to drill 17 wells in the first phase of their offshore venture and up to 40 others ion phase two. The company has already filed paperwork for permission to begin preparations for phase two of its offshore operations and has begun public consultations about this phase.

Spain’s Repsol, Tullow Oil of the United Kingdom, Chevron, Brazil’s Petrobras, Eni of Italy, TOTAL of France and British Petroleum are among big oil players all vying for participation in the country’s fledgling oil and gas sector.

“These companies are only expressing interest because ExxonMobil has de-risked the basin. Zero from zero is nothing. If you have oil and no one is troubling it, then it is worth zero. The oil may be worth a lot, but only if it is produced. We are moving to production, but it took ExxonMobil to find what others have been looking for,” Trotman said.

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ANP Notice on Participation in Lula Field

(Petrobras, 1.Apr.2017) – Petrobras announced that, on March 30, 2017, Consortium BM-S-11 received a notice of violation issued by the National Petroleum, Natural Gas and Biofuels Agency (ANP), relating to the Lula Field in the Santos Basin pre-salt, for the amount of R$2.6 billion. This notice is due to the variance in applying oil prices used to calculate the governmental share from May 2013 to December 2016. The consortium will contest the ANP notice and, if necessary, adopt all judicial measures to defend its interests.

Consortium members understand that they have acted according to the legislation which has been in force since 2000. The change in the interpretation of the rules applicable to the concession contract by the regulatory agency directly affects the economic and technical assumptions that support investment decisions.

Consortium BM-S-11 is formed by Petrobras (65% WI), as operator, in partnership with BG E&P Brasil – a subsidiary company of Royal Dutch Shell plc (25% WI) – and Petrogal Brasil (10% WI).

Consortium BM-S-11 will contest the notice.

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Petrobras Says P-69 Arrives in Brazil

(Petrobras, 30.Mar.2017) – Platform is now at Brasfels shipyard in Angra dos Reis

On March 28, the hull of floating production, storage and offloading vessel (FPSO) P-69 arrived at the Brasfels shipyard in Angra dos Reis, in the state of Rio de Janeiro. This shipyard will do the platform’s integration work, encompassing the installation of modules on the hull, the interconnection of all equipment, and the commissioning of operating systems (a series of tests to check whether the systems have turned out as planned and are able to function properly). Each of the platform’s 18 modules has a specific function, such as generating power, supplying and treating water, producing oil, and offloading gas.

The hull is 288 meters long, 54 meters wide, and 31.5 meters tall (from the bottom of its tanks to the main deck). It was built at the Cosco shipyard in Zhoushan, China. After it has been integrated, the platform will be capable of processing 150,000 barrels of oil and 6 million cubic meters of natural gas per day. Able to store 1.6 million barrels of oil, it will operate at a water depth of 2,200 meters.

P-69 will be installed in Lula field, in the Far South Lula module, in the Santos Basin pre-salt. This field is operated and 65% owned by Petrobras, in partnership with Royal Dutch Shell plc subsidiary BG E&P Brasil (25% WI) and Petrogal Brasil (10% WI). Start up is scheduled for 2018.

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Petrobras Updates on Baúna, Tartaruga Verde

(Petrobras, 30.Mar.2017) – Petrobras, in continuation to the material facts of 10/6/2016, 12/20/2016, and 3/15/2017 and to the press release of 11/21/2016, clarifies that it has notified the Federal Supreme Court of the impossibility to proceed with the divestment process for the transfer of rights relating to the fields of Baúna and Tartaruga Verde.

Furthermore on today’s date the company submitted the same information to the Federal Court of Aracaju, requesting the termination of court proceedings.

On March 15, as disclosed by Petrobras, TCU revoked the preventive order and, among other measures, upheld the permission to proceed with this sale process for being in advanced stage of negotiation, with the determination of compliance with the Court´s rules. In the face of this decision, the lack of conditions presented in the acquisition proposal and the maintenance of the effects of the judicial injunction, the continuation of this divestment process proved to be unfeasible, given the negotiation or procedural impossibility of resuming negotiations.

For this reason, the company waived the appeal before the Federal Supreme Court, which aimed to reverse the Court injunction.

Finally, Petrobras informs that requested in all judicial instances for granting judicial secrecy, considering the need to preserve its own interests and third parties interests.

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Petrobras Requests for Replacement of Substitute Candidate

(Petrobras, 27.Mar.2017) – Petrobras, as stated in Circular Letter CVM/SEP/01/2017, reported that it has received a request for the replacement of the substitute candidate to the Fiscal Council (FC) nominated by preferred shareholders Leblon Previdência Fundo de Investimento Multimercado and Ataulfo LLC, whose elections will take place at the Annual Shareholders Meeting to be held on April 27, 2017.

Candidates nominated by preferred shareholders Leblon Previdência Fundo de Investimento Multimercado and Ataulfo LLC

Candidate —————————— Position

Sonia Julia Sulzbeck Villalobos —- Member of FC – preferred (full member)

Roberto Lamb ————————- Member of FC – preferred (alternate)

Below are the resumes of the nominated candidates:

Sonia Julia Sulzbeck Villalobos, Brazilian citizen, married, administrator, Bachelor of Public Administration (1985) from EAESP – Getúlio Vargas Foundation and Master of Business Administration with specialization in Finance (2005) from EAESP – Getúlio Vargas Foundation. In 1994, she was the First Person in South America to receive the Chartered Financial Analyst – CFA credential, by the CFA Institute. She is Professor of Post-Graduation Lato Sensu, in the matters of Asset Management and Analysis of Financial Statements by Insper. He holds positions on the Boards of Directors of CEG – Distribuidora de Gas do Rio de Janeiro SA and Telefônica do Brasil SA. He has extensive experience in the financial market, having served as Head of the investment analysis department of Banco de Investimentos Garantia SA (1989 to 1996), Where he was voted Best Analyst in Brazil by Institutional Investor magazine in 1992, 1993 and 1994. He served as Senior Vice President of Bassini, Playfair & Associates, LLC (1996 to 2002) and Latin America Manager of Larrain Vial SA (2005 to 2011). She was the founding Partner and Manager of Lanin Partners Ltd., responsible for Long / short and long-only funds of Latin American stocks (2012 to 2016).

Roberto Lamb, Brazilian, physicist. Specialized in Monetary Economics and a holds a Master’s degree in Financial Management. Former career employee at Banco do Brasil, he has served as standing Audit Committee member for several Brazilian companies, among which Marcopolo, Gerdau and AES Eletropaulo, AES Tiete Energia, and MARFRIG. Board of Directors member for CADAM S.A. based in Belém, PA, a company whose purpose is the extraction and processing of ultrafine kaolin. It is controlled by KaMin, a company that operates in the kaolin extraction and processing segment, based in the state of Georgia, USA. He is a Certified Counselor by IBGC, where he coordinated the guidelines for best practices of the Audit Committee and the Auditing Committee and participated in the development of the handbook on best practices in Risk Management. He is a professor of Financial Management at UFRGS. He is the author of the Brazilian version of the book “Fundamentals of Financial Management” by Ross, Westerfield, and Jordan (McGraw Hill-Bookman, 2013) and of the Brazilian version of “Financial Administration” by Ross, Westerfield, and Jaffe (McGraw Hill-Bookman, 2015).

The names nominated above:

— In the last 5 years, they have not been subjected to criminal conviction, conviction in an administrative proceeding of the CVM and a final and unappealable conviction, in the judicial or administrative sphere, that has suspended or disqualified them for practicing professional or commercial activity;

— Do not have a marital relationship, stable union or informationable parentage according to item 12.9 of the Reference Form;

— They have no relationship of subordination with related parties of the Company.

— Meet the independence criteria of the Brazilian Institute of Corporate Governance (IBGC).

— They had the information provided by the “Fiscal Counselor Registry of the Ministry of Planning, Development and Management” analyzed by Petrobras and the Ministry of Finance, which concluded that the nominees are not subject to any impediment and have all the requirements set forth in the Law 6,404/1976, Law 13303/2016 and Decree 8.945/2016, according to the minutes of the Temporary Eligibility Committee of Petrobras, which will be disclosed at http://www.investidorpetrobras.com.br/en/governancacorporativa/Governing bodies/committees, up to the date of the Annual General Meeting.

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Petrobras Updates on Shareholders Meeting

(Petrobras, 27.Mar.2017) – Petrobras informed that the Extraordinary General Shareholders Meeting, held in the Auditorium of the company’s headquarters on Avenida Republic of Chile nº 65-1st floor, in the city of Rio de Janeiro (RJ), decided, by the majority, and has adopted the following:

  1. Election of Mr. Adriano Pereira de Paula as a member of the Fiscal Council appointed by the controlling shareholder, and;
  2. Approval of the sale of 100% (one hundred percent) of the shares held by Petróleo Brasileiro S.A. – PETROBRAS of Petroquímica Suape and CITEPE, to GRUPO PETROTEMEX, S.A. DE C.V. and DAK AMERICAS EXTERIOR, S.L., subsidiaries of Alpek, S.A.B. de C.V., for the amount, in Reais, equivalent to $385,000,000.00 (three hundred and eighty five million dollars).

Federal Government, as the controlling shareholder, voted on item II of the agenda, considering a manifestation of the STN – Secretariat of the National Treasury that there may have been possible irregularities in the companies of the PQS Complex, and has determined that Petrobras promotes due determination of the facts, as well as to adopt any and all legal measures necessary accountability of the agents responsible for damages and also to recover the damages caused to them.

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Reelection of Petrobras CEO

(Petrobras, 27.Mar.2017) – Petrobras reports that in the meeting held yesterday Petrobras’ Board of Directors approved the reelection of CEO Pedro Pullen Parente for a two-year term in the company’s Executive Office.

Mr. Pedro Parente had been elected CEO as of May 31, 2016, following the term in office of the previous CEO, Mr. Aldemir Bendine. A new two-year term begins with this reelection.

The election process followed the rules of Petrobras Nomination Policy for the Members of the Fiscal Council, Board of Directors and Executive Office, including the review of integrity analyzes and the fulfillment of such other requirements for the position. The Nominating, Compensation and Succession Committee of Petrobras’ Board of Directors evaluated all relevant documentation and recommended the approval of the new term in office to the Company’s Board of Directors.

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Petrobras’ Sale of PetroquímicaSuape and Citepe

(Petrobras, 27.Mar.2017) – Petrobras, in continuation to the material fact disclosed on December 28, 2016, informed that, the Shareholders’ Extraordinary General Meeting approved the sale of 100% of the shares held by Petrobras in PetroquímicaSuape and Citepe to Grupo Petrotemex S.A. de C.V. and Dak Americas Exterior, S.L, subsidiaries of Alpek, S.A.B. de C.V., for the amount of $385 million, which will be paid on the closing date, and it is subject to working capital, net debt, and recoverable taxes adjustments.

This transaction is part of the 2015-2016 partnership and divestment program, that reached $13.6 billion in the biennium, and it is still subject to the fulfillment of usual precedent conditions, among them the approval of the operation by the Administrative Council for Economic Defense (CADE). The sale is aligned to Petrobras Strategic Plan, which provides for business portfolio optimization with full withdrawal from petrochemical interests.

Furthermore, at the moment, there is no restriction to continuing this transaction, since the Regional Federal Court revoked the injunction that suspended the operation, as disclosed on the material fact of February 22, 2017.

Petrobras also clarifies that the decision of the Brazilian Federal Accounting Court (TCU), issued and announced on March 15, 2017, does not interfere in this sale process, due to the fact that the purchase and sale agreement of PetroquímicaSuape and Citepe was already signed on December 28, 2016, prior to the publication of said decision.

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Petrobras Offers Clarification: CARF Ruling

(Petrobras, 24.Mar.2017) – Petrobras informed that the Administrative Board of Tax Appeals (CARF) issued on 3/22/17 a decision in favor of the Company, in the administrative proceeding that addresses the deductibility of expenses incurred by Petrobras in the development of oil and gas production, for the purposes of calculating the Income Tax for Legal Entities (IRPJ) and Social Contribution on Net Profits (CSLL) for the 2009 period. However, the Company has not yet been notified of the content of the decision, so that its legal department can proceed to an appropriate analysis. It should be noted that the National Treasury may still appeal the decision. In such a case, if the appeal is accepted, Petrobras may apply to the courts to defend their rights. Therefore, this is not a final decision in favor of the company.

The information pertaining to this proceeding has been incorporated in the 2014 financial statements, the year of sanction, and remained reflected therein in the Company’s financial statements for the 2015 and 2016 fiscal years, in explanatory note 30 (Judicial proceedings and contingencies – item 30.3 – taxation proceedings).

Petrobras did not consider the information to be suitable to the effect that it could impact investor decisions in relation to Company securities.

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Petrobras Reports 2016 Results

(Petrobras, 23.Mar.2017) – Petrobras’ results in 2016 were marked by a significant improvement in its operational performance over the course of the year, reflected in a reversal from the loss posted in 3Q16 to a net profit of R$2.51 billion in 4Q16, and a reduction in indebtedness.

Despite lower oil prices in 2016, an 8% decline in sales of oil products in the Brazilian market, and reduced power generation, the company obtained higher diesel and gasoline margins than in 2015. It also cut its spending on imports, royalties, sales, general and administrative expenses, and net financial expenses.

Exports increased 12% in 4Q16, amounting to 634,000 barrels per day of oil and oil products. Most notably, oil exports rose 14%, making the company a net exporter from Brazil in 2016.

In operational terms, Petrobras also achieved its production target for the second year in a row, producing 2.144 million barrels per day of oil in Brazil, and in December it set a new monthly record by producing 2.9 million barrels of oil equivalent per day, including oil and gas, in Brazil and abroad.

Thanks to higher operating cash generation and a 32% reduction in investment, the company achieved free cash flow of R$41.57 billion. 4Q16 was the seventh consecutive quarter of positive free cash flow, demonstrating the greater capital discipline the company has been pursuing.

Petrobras’ net debt declined 20%, to R$314 billion or $96.4 billion, due to the amortization and early payment of debts using resources from disposals and cash flow, as well as the appreciation of the Brazilian real. Debt management also enabled an increase in the average debt term, from 7.14 to 7.46 years.

EBITDA, an indicator widely used in the financial markets as a yardstick for cash flow, was R$24.8 billion in 4Q16 and R$88.7 billion in 2016, up 16% from the previous year.

As a result, the net debt to EBITDA ratio fell from 5.11 at the end of 2015 to 3.54 at the end of 2016. The target established in the company’s Business and Management Plan is to reach 2.5 by the end of 2018.

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Petrobras Announces Resignation of Council Member

(Petrobras, 23.Mar.2017) – Petrobras informed that Mr. Paulo José dos Reis Souza, member of the Fiscal Council, submitted his resignation to the post, effective on March 27, 2017.

The election of the new member of the Fiscal Council appointed by the controlling shareholder will be in the Extraordinary General Meeting, on March 27, 2017.

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