The state-owned company accounted for 75 percent of Brazil’s production in February, down from 93 percent in 2010, at the end of the Luiz Inácio Lula da Silva administration. The presence began to fall with the production of the pre-salt, in the government Dilma Rousseff. And it has accelerated since Michel Temer took office in 2016 and opened the sector to foreigners. In two years, Petrobras reduced its market share by 7 percentage points, the same share that the company took 13 years to lose since the end of the monopoly 20 years ago.
Government ownership tends to shrink further as oil giants, including Exxon Mobil, Total and Statoil, rush to secure holdings in the pre-salt, one of the most promising oil zones ever discovered in the world, too large for one company.
From September to September, Brazil has held three auctions of oil blocks and another one is scheduled for June. The changes are both a blessing and a curse for Petrobras: the company loses absolute control of the country’s oil production, but gains cash and technology through partnerships with large foreign oil companies. In the last three years, the volume of oil produced by the state company remained practically stable at 2.1 million barrels / day, with slight increases. Further growth is expected for 2019 with the entry of a record number of platforms.
“It’s not that it’s good (Petrobras loses market share), but the arrival of other companies is important,” said Petrobras Strategy Director Nelson Silva. “And you cannot do one thing without the other.”
Petrobras’ relative reduction comes in part from the government’s decision in 2003 to atrophy the company’s cash with investments in refining and to divert the focus of oil production, said Samuel Pessoa, an economist at the Getúlio Vargas Foundation (FGV). Many of these projects became targets for Lava Jato and led to accounting write-offs of tens of billions of dollars amid falling international oil prices.
“The reduction of Petrobras’ role is not bad, it’s good,” Pessoa said in an interview. “The bad thing is that Brazil is not producing the 4 million barrels a day as planned.”
But this may change soon, considering that foreign companies are expanding efforts in the country. Exxon, for example, has invested more than $ 2 billion with partners in acquiring 22 offshore licenses in the last six months alone.
“There has come a time when the opportunity, coupled with the changes brought about by the reforms, has increased attractiveness for us,” Exxon Vice President of Investor Relations Jeffrey J. Woodbury said on February 2 at a conference with analysts.
Brazil overtook Mexico and Venezuela and became the largest producer in Latin America, as well as being one of the main sources of non-OPEC production growth in recent years. Brazil does not release estimates of pre-salt oil reserves, but the National Petroleum Agency (ANP) considers the region the biggest discovery on the planet in the last 50 years.
Other foreign gains are derived from a combination of exploration projects that are reaching the production stage, such as the Sapinhoá offshore fields, in which Petrobras is partnering with Royal Dutch Shell and Galp Energia SGPS, and the sale of fields that are already in the production phase. Total and Statoil have purchased holdings in offshore fields operated by Petrobras in the last two years.
“Petrobras is increasing its production as a whole. The relative loss is a sign that Brazil is diversifying, which is good, “said Jorge Camargo, an oil expert at Cebri and former president of the Brazilian Petroleum Institute (IBP), in an interview.
Source: Bloomberg News
Brazil Energy Insight 
Leave a comment