Petrobras pursues partnership path

Teamwork: Petrobras headquarters in Rio de Janeiro

Petrobras chief executive Pedro Parente has emphasised the importance of partnerships to help drive forward the Brazilian giant’s E&P programme in a cash-constrained environment.

In an exclusive interview with Upstream, the recently appointed Parente stressed that partnerships are nothing new for the company but they have become a crucial tool of governance and good economics in a low-price environment.

On the day that Parente and his counterpart at Total, Patrick Pouyanne, unveiled a new strategic alliance, the Petrobras boss commented: “Partnerships reduce the drain on resources, freeing up capital for other areas, and strengthen governance by institutionalising the business rationale that makes companies act like companies, strictly in line with business interests.”

Petrobras is in ongoing talks with Norway’s Statoil regarding the terms of another recently concluded alliance, primarily involving assets in Brazil’s Campos basin, plus some frontier areas off Espirito Santo.

“Statoil has great experience and technical expertise on improving the recovery factor on reservoirs. We have great fields in the Campos basin and, by boosting recovery, we will add value to the company,” Parente said.

A deleveraging strategy that uses divestments and partnerships is expected to raise $19.5 billion in 2017-18 and $40 billion over the next 10 years. Parente said he expects new investors to take up this slack.

Asked if there might be internal resistance to change at Petrobras, Parente said: “There are those who think that it is not possible to manage corporate culture, but I disagree. I think it is possible and important, especially if you consider recent history and the importance of internal controls.

“You cannot curb initiative and innovation or let corporate processes become too slow or bureaucratic. You need to work to get this balance right,” he said.

Parente also criticised the highly prescriptive nature of recent local content policies, with their focus on penalties rather than incentives. These policies are now under review.

“If you are buying something like an FPSO you have a global requirement then an item-by-item list. You may have to increase local content in one area just to avoid the penalties, without any business logic. I sometimes hear comments that Petrobras is against local industry. This is not true, we are just against poor policy,” he said.

The Petrobras supremo said he hopes Brazil is entering a new phase where federal and state branches of government pursue policies that take account of the business cycles endured by oil sector companies.

“There is an intensive outflow of cash for 10 years and you’re commonly more than 20 years away, with high risks along the way. All we expect is that the authorities create the right conditions to stimulate such a difficult business, without sudden rule changes that wipe out value,” he said.

Parente said Petrobras is on the road to recovery, but he was frank about the challenges ahead.

“We know we want to be producing 3.4 million barrels of oil equivalent per day at the end of five years and that still leaves us a tremendous amount of work to do to keep projects on their timeline,” he stated.

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