January 21, 2019
The year 2019 promises to be of many definitions for Petrobras. The new president of the company, Roberto Castello Branco, will have to deal in the coming months with important guidelines for the future of the state. Transfer of rights Agreement, refining and deciding whether or not to continue in the petrochemical sector are some of the issues on the company’s agenda for the year.
One of the most anticipated issues of the year involves the conclusion of the agreement with the Union to revise the Transfer of Rights contract – which gave the company the right to produce 5 billion barrels in the pre-salt as part of the operation that increased the Union’s share in the company’s capital in 2010. Santander sees the agreement as a “catalyst” for Petrobras in 2019 and believes it is possible to reach a win-win relationship between the parties.
This is because the agreement could represent the influx of billions of reais into the oil deposit while at the same time unlocking the auction of surplus from the Transfer of Rights agreement – oil volumes discovered by the state company and exceeding the 5 billion barrels it is entitled to produce.
“One of the objectives of the newly elected Brazilian government is to reduce the fiscal deficit and an initiative that would help in this front would be the surplus auction of the Transfer of Rights agreement,” cites the report signed by analysts Christian Audi, Gustavo Allevato and Rodrigo Almeida.
Santander estimates that Petrobras will receive between $ 8 billion and $ 12 billion from the Union. Valor found that in one of the scenarios discussed with the government, the state company has to receive about $ 14 billion, plus compensation of up to US $ 10 billion for investments already made in the areas that may be tendered in the surplus auction. The numbers, however, are still under under discussion in the government. Faced with the effort to adjust the public accounts, the economic team of the minister Paulo Guedes seeks to reduce as much as possible the amount to be paid.
“The Transfer of Rights Agreement is the subject of 2019. With this pending matter, the year has not yet started for Petrobras. This is a relevant value that could allow a review of the company’s current business plan, so that it incorporates more investments in the “pre-salt”, comments the research coordinator of FGV Energia, Fernanda Delgado.
The company’s business plan forecasts investments of $ 84.1 billion between 2019 and 2023 and asset sales targets of $ 26.9 billion in the period. The year is expected to be marked by important divestment decisions, including whether to sell its share in Braskem (Petrobras and Odebrecht).
Petrobras is still awaiting progress in negotiations between Odebrecht and the Dutch company LyondellBasell to assess whether it will accompany its partner’s move to sell the asset. In 2017, the state-owned company announced that it would fully exit the petrochemical business, but has recently backtracked by incorporating the area as an integrated refining business into its new business plan.
It will be up to the new management of Petrobras to define the next steps. Upon taking office, Castello Branco announced that he expects to review the current business plan “as soon as possible” and may make “marginal adjustments”, but has not yet given details on the petrochemical segment.
The year also begins with the expectation of resumption of important divestitures, such as that of the refineries and the Transportadora Associada de Gas (TAG). These negotiations had been suspended since mid-2018, but the Federal Supreme Court (STF) injunction barring the sale of state-owned companies and their subsidiaries without congressional approval was overturned. It was partly because of this injunction that the oil company failed to meet its 2017/2018 divestment goal of $ 21 billion.
The year 2019 will be a critical year for the negotiation of mature land and shallow water assets. The National Petroleum Agency (ANP) has decided to press and accelerate negotiations, as divestitures are open since 2016. The regulator has set a deadline until June for Petrobras to complete the ongoing negotiations. The oil company has called for the deadline to be postponed and the agency is still analyzing the request.
“The divestitures were being conducted at the pleasure of Petrobras, following the interests of Petrobras in the time of Petrobras. This is legitimate, but now it is no longer Petrobras that sets a deadline for sale,” the ANP director-general recently said. , Décio Oddone.
The year should also be marked by a 13% jump in oil production, to record levels of 2.3 million barrels a day in Brazil. This growth, driven by the entry of four new platforms, however, must take place in a more challenging environment from the point of view of international prices. According to projections by the United States Energy Information Administration (EIA), Brent’s average price is expected to close 2019 at $60.5 a barrel below $71.0 in 2018.