Clarification on News: Information on the Comperj Project

Rio de Janeiro, January 4, 2017 – Petróleo Brasileiro S.A. – Petrobras responds to Official Letter no. 1/2017/CVM/SEP/GEA-1 which requests clarifications, as follows:

Official Letter no. 1/2017/CVM/SEP/GEA-1

“Dear Sir,

We refer to the news published on January 1, 2017, in the newspaper O Estado de São Paulo, Primeiro Caderno section [First Section], under the headline “Projetos inacabados provocam perdas de R$ 2 bi para a Petrobrás” [“Petrobras suffers R$ 2 billion in losses due to unfinished projects”] and in the Economia & Negócios section [“Economy & Business”], under the headline “Sem obra, estatal não terá como escoar gás” [“Without construction works, state-owned company will be unable to offload gas”], which include the following statements, respectively:

“Petrobras begins 2017 with cash flow less compromised by debts than in 2016. In the financial market, shares are in a scale upward. However, on its tracks, there are still R$ 6.25 billion (book value) of unfinished works that no longer correspond to the “new” Petrobras.

Without a set destination, those projects generated R$ 2.05 billion in losses in depreciation over time, as reported by the company in the last financial statement, referring to the period from January to September of this year. Changes in market conditions, such as foreign exchange and oil price, eroded part of the invested money and some of those projects became definitivelly unfeasible. ‘Stopping large construction works such as Comperj (Rio de Janeiro Petrochemical Complex) generate fantastic losses. Any resumption has a high cost. And the work stoppage takes place exactly at a moment when  Brazil needs refining (to reduce the import of fuels)’, assesses Fernando Siqueira, vice president for the Petrobras Engineers Association (Aepet). The list of losses due to the change in the company’s route includes interrupted projects, such as Comperj, where US$ 13 billion have already been invested without the guarantee that it will ever start operating someday, and others definitively abandoned .”

“Petrobras is racing against time to conclude the natural-gas processing unit (UPGN) in the Rio de Janeiro Petrochemical Complex (Comperj), to be able to receive the natural gas that will be produced from 2021 on, in the Libra super area, in the pre-salt layer of Santos’ Basin. Without the unit, Petrobras and its partners in Libra will have nowhere to offload the gas.

Although Comperj has been suspended, the UPGN will surely be put into action so the pre-salt gas can be transformed into petrochemical feedstock. The other option would be to burn the fuel on the platforms, which would bring large environmental and financial losses and would generate a fine by the Brazilian National Agency for Petroleum, Natural Gas and Biofuels (ANP).”

Considering the foregoing, we request the company express itself about the content of the articles and the possible impact on the Company, as well to comment on any other information deemed relevant to the matter.”


Petrobras hereby clarifies that it assesses the recoverability of assets annually on December 31, or whenever there is an indication of devaluation. For certain assets, this indication was confirmed in September 2016, due to changes in the context of the new Business and Management Plan (PNG 2017-2021) for the company, which was completed and approved in the 3Q 2016. Those changes include: reduction in projected expenses on the investment portfolio, to reflect a portfolio optimization and the reduction in the company leveraging, as well as adjustments to medium and long-term economic assumptions used in project cash flows, particularly due to a more moderate recovery expectation for the international price of crude oil, and to the changes in the Brazilian political and economic scenario.

Specifically in connection with Comperj, in the period from January to September 2016, the company acknowledged a loss due to impairment in the amount of R$ 1,186 MM (one billion, one hundred and eighty-six million Brazilian reais). This loss was due to the project’s reassessment carried out in this year’s second quarter, taking into account the current economic assumptions, Comperj’s Refining Stage 1’s entry in operation in 2020, in addition to efforts in seeking partners to continue with investments.

Nevertheless, it is important to clarify that the refinery utilities associated with the Natural-Gas Processing Unit (UPGN) will be continued, as disclosed in PNG 2017-2021, because they are part of the necessary infrastructure to offload and process natural gas from the pre-salt layer of Santos’ Basin.

In parallel, the company has a specific contract in force to preserve the equipment for refining units, until new partners are engaged to conclude the other units.

In connection with the construction works in progress, it should be stated that the company has a R$ 129,174 MM (one hundred twenty-nine billion, one hundred seventy-four million) balance in fixed assets. A breakdown of this balance per business sector is included in explanatory note 28 “Segment Information,” in the Financial Statement report filed at CVM on Nov. 10, 2016.

Petrobras further clarifies that  permanently analyzes the cost-effectiveness of its operations considering several factors in its market service strategy, such as the cost of capital required for investments in downstream, the excess in by-products from the Atlantic Basin, and the capacity to supply the Brazilian market by importing from third parties.

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