(Petrobras, 21.Dec.2016) – Petrobras signed a Master Agreement with the French company Total, in connection with the Strategic Alliance established in the Memorandum of Understanding signed on 10/24/2016, as previously announced to the market.
Entering into strategic partnerships is an important part of Petrobras’ 2017-2021 Business and Management Plan, as it contributes to mitigating risks, strengthening corporate governance and sharing information, experiences and technologies, in addition to improving the Company’s financial viability through cash inflows and the release of investments.
Petrobras and Total have strong similarities in the upstream segment, sharing a relevant common base of E&P assets and the search for technological development in similar themes.
The companies jointly participate in 19 consortiums worldwide in exploration and production in key projects such as the Libra area, which is the first production sharing contract in the Brazilian pre-salt in Santos Basin, besides exploration areas in Equatorial Margin, Espírito Santo Basin and Pelotas Basin. In addition, both companies are partners in the Brazil-Bolívia gas pipeline.
With this new agreement, both companies will strongly reinforce their technological cooperation in the areas of geoscience, subsea systems and joint studies in areas of mutual interest, aiming to reduce investment risks and increase the probability of exploratory success over the next years. The companies will also become partners in the Iara and Lapa fields, in the pre-salt Santos Basin, and in two thermal plants, sharing the use of the regasification terminal infrastructure in the state of Bahia.
The companies also undertake to expand their joint activities outside Brazil, with Petrobras having the option of taking a stake in the Perdido Foldbelt area in the Mexican portion of the Gulf of Mexico.
The transaction has a global estimated value of $2.2 billion including cash, contingent payments and the carry of investments in production development of common assets to both companies, to be paid by Total to Petrobras and its subsidiaries as appropriate.
The signing of the relevant Sale and Purchase Agreements (SPA) related to the assets from this Master Agreement is subject to internal and external control and regulatory approvals, including the Brazilian Federal Accounting Court (TCU), potential preemptive rights from the current partners of Iara, plus other precedent conditions. The companies have a mutual commitment to make all the necessary efforts to sign all contracts within 60 days.
The main terms and conditions of this Agreement are as follows:
– the sale of a 22.5% interest to Total, in the Iara area (Sururu, Berbigão and Oeste de Atapu fields) in Block BM-S-11. Petrobras will remain the operator and will keep the largest stake in that consortium, with a 42.5% interest.
– the sale of 35% interest to Total in Lapa field in Block BM-S-9, with transfer of the operation to Total. Petrobras will have a 10% interest in this concession.
– Petrobras’ option to take a 20% participation in block 2 of the Perdido Foldbelt area in the Mexican portion of the Gulf of Mexico, acquired by Total in partnership with Exxon in the round of bidding held by the Mexican government on 12/05/2016.
– shared use of the Bahia regasification terminal, with a capacity of 14 million m3/day.
– partnership, with Total holding a 50% stake, in the thermal plants Rômulo de Almeida and Celso Furtado, located in Bahia, with energy generation capacity of 322 MW.
– joint studies in the exploratory areas in the Equatorial Margin and in the southern area of Santos Basin, taking advantage of the existing synergy between the two companies, since each has outstanding geological knowledge of the oil basins located on both sides of the Atlantic.
– technological partnership agreement in geological processing and subsea engineering, in which the companies have complementary knowledge, which can boost the gains from the application of new technologies in the partnership areas.
The information below refers to the concessions established in the Agreement:
Concessions in Upstream
In the Iara concession, Petrobras holds a 65% interest and is the operator. Shell, with 25%, and Galp with 10%, are partners in this area, which is part of Block BMS-11. The reservoirs of this concession have higher complexity and are in the production development phase. The partnership with Total in this area will bring benefits such as the release of investments and new technological solutions for its development, maximizing profitability and the volume of oil to be recovered.
The limits of this consortium extend into the Entorno de Iara area, from the Transfer of Rights agreement, in which Petrobras holds a 100% interest. The fields Berbigão, Sururu and Oeste de Atapu must enter into Individualization Production Agreements (unitization) with this area of the Transfer of Rights.
In the Lapa field, Petrobras holds a 45% interest and is the operator. Shell, with 30%, and Repsol with 25%, are partners in this field, which is part of BM-S-9 block. The development of the Lapa field is at an advanced stage, with the recent start of production, as announced on 12/20/2016, and presents geological characteristics and oil quality different from other pre-salt fields. Total, as future operator of this field, will bring benefits to the consortium, by incorporating its experience and knowledge in the continuity of its development plan.
The technological partnerships in the Iara and Lapa areas will develop and apply certain subsea technologies in a pioneering manner in Brazil. The efforts to reduce risks and increase the probability and the success in exploration will rely on a 4D seismic application in the context of carbonate reservoirs, with specific studies on CO2 migration and geomechanical studies, in addition to the development of a methodology for the construction of models to support investment decisions.
Gas & Energy Concessions
In the case of the G&E area, Petrobras and Total are forming an innovative partnership in the Brazilian thermal market. The initiative is aligned with the strategies of Petrobras for the Gas and Energy segment in the 2017-2021 Business and Management Plan, which establishes the restructuring of the Energy Businesses and maximizes the value generated in the gas chain. This vision considers a regulatory evolution, that is already under discussion with Brazilian federal authorities, forecasting an improvement of the procurement rules, access to the pipeline network and LNG regasification terminals.
The partnership with Total includes two thermal plants (Rômulo Almeida and Celso Furtado), connected to the Regasification Terminal located in São Francisco do Conde, in Bahia.