March 11, 2019
As the world’s major oil companies diversify and expand their presence in the petrochemicals and renewables segments, Petrobras is moving towards becoming a less and less verticalized company. Owner of one of the industry’s most coveted assets (the pre-salt), the state oil company focuses on oil and gas production and prepares an aggressive asset sale plan to reduce its debt and increase its profitability. At the same time, the company distances itself from promising businesses and has been raising the interest of its global counterparts, in the face of expectations of a fall in fossil fuel consumption in the long run.
Roberto Castello Branco took over Petrobras in January with the speech that the company needs to focus on its core business. In two months, the executive has already expressed his intention to sell Braskem and Liquigás, in addition to reducing the company’s share of the refining and fuel distribution (BR Distribuidora).
“Strategically, we want the company to generate value for the shareholders, for Brazil. To do this, we have to substantially improve the allocation of capital, directing it to the best uses, the assets where we are natural owners, the ones where we get extract the maximum possible return, and this is mainly in the exploration and production of oil and gas, “he told a news conference a few weeks ago.
Analysts consulted by Valor are divided on strategy. For the director of the Brazilian Center for Infrastructure (CBIE), Adriano Pires, the focus on the pre-salt is correct. He points out that the company has gone through a financial crisis and still has a net debt of $ 69.4 billion to reduce.
“Petrobras has left the ICU, but it is still in the hospital. It needs to be rebuilt and this is going through the difficult exercise of getting out of some assets,” says Pires.
The Institute of Petroleum, Natural Gas and Biofuels Strategic Studies (INEEP), Zé Eduardo Dutra , linked to the Federation of Petroleum Workers (FUP), argues that Petrobras has been able to reduce its debt, largely due to the organic generation of cash , without the need to sell all the assets it promised. In 2018, benefited by the rise in oil prices, the company reached its goal of deleveraging, even though it only fulfilled one-third of the divestment plan.
The institute also points out that, while oil remains at the center of its strategies, large global oil companies have expanded their presence in sectors such as petrochemicals (such as ExxonMobil and Shell) and renewable energy (BP, biofuels, Equinor and Total, in solar and wind).
“It may make sense for Petrobras to re-invest in petrochemicals and biofuels in the future, but not today. Petrobras can not have the same investment approach as other oil companies, they are different realities. ” said Pires, who also questioned the quality of the company’s past investments in ethanol and biodiesel. “They were successive losses,” he said.
In December, under the previous management, Petrobras announced plans to invest US $ 400 million in renewables by 2023, but Castello Branco preaches caution. According to him, the company maintains lines of research in renewable, but the perspectives of the company for the sector are of long term. “Our competence is the exploration and production of oil and gas. Nothing indicates that we will have the same advantages in the solar and wind energy business,” he said in the press conference.
Already the discussion about the state’s future in petrochemicals has gone through ups and downs . Still under Pedro Parente’s management, Petrobras expressed its intention to leave the sector fully, but then the company turned back. Castello Branco, meanwhile, has already said that it intends to sell Braskem.
Petrochemicals is a promising business. According to the International Energy Agency (IEA), petrochemicals are becoming the biggest drivers of global oil demand. Faced with the impact of car electrification on fuel consumption, the forecast is that by 2030, one third of the growth in oil demand will come from petrochemicals.
“Several elements of the energy transition will need plastic: wind turbines, fertilizers for biofuels, solar panels, electronics …” said Professor of the Energy Planning Program at Coppe, Federal University of Rio de Janeiro (UFRJ), Alexandre Szklo, this month, in an event in Rio.
Petrobras’ unbundling also involves a reduction in its share of refineries and natural gas. For Adriano Pires, the entry of new agents in the refining can be beneficial to the company, since the presence of competitors would make it difficult to return to possible price control practices.
The INEEP, in turn, highlights the presence in the other links of the oil and gas chain is important, to avoid that the profitability of the company is vulnerable to the oscillations of international oil prices.
On gas, the government, the National Petroleum Agency (ANP) and Petrobras have begun preliminary talks on a broad market opening program that among the proposals put on the table may force the state company to dispose of all their transportation and distribution assets.
Discussing the future of Petrobras as an integrated company is about discussing different views about the company’s social role. For the professor of the Energy Economics Group of UFRJ, Edmar Almeida, it is up to the company to make use of the pre-salt riches. Petrobras estimates that its activities will generate, up to 2023, R $ 600 billion in taxes.
“Petrobras is doing very little in the pre-salt sector,” Petrobras said. “Petrobras’s job is to produce oil, and consequently generate revenues for the shareholders , but for that, it needs to be competitive.”
On the other hand, there are those who understand that the oil company, controlled by the Union, also functions as an instrument of economic policy. INEEP points out that Petrobras is the engine of job creation and that the reduction of investments in recent years has generated losses of 740 thousand jobs between 2016 and 2017, considering the reduction in demand on the supply chain.