Business

Brazil Gives Petrobras Added Rights for Billions in Advance Payments

Brazil's government agreed Tuesday to sign over additional production rights for potentially huge oil fields to state-run oil company Petróleo Brasileiro SA, or Petrobras, in exchange for billions of dollars in advance payments.

The Wall Street Journal
25/06/2014 15:10
Visualizações: 2031 (0) (0) (0) (0)

Brazil's government agreed Tuesday(June 24) to sign over additional production rights for potentially huge oil fields to state-run oil company Petróleo Brasileiro SA, or Petrobras, in exchange for billions of dollars in advance payments.

Petrobras will receive expanded production rights to four oil fields off the coast of Brazil that it acquired from the government in 2010. But the company will have to pay a "signing bonus" of two billion Brazilian reais ($898 million) to the government in 2014, plus an estimated BRL13 billion in oil during the following four years.

 

The unexpected deal came as Brazil's federal government is looking for ways to meet its budget goals this year. Economists say slowing growth, high inflation and election-year spending will likely drive authorities to seek revenue from so-called nonrecurring sources to meet its 1.9% primary surplus target for 2014.

 

News of the agreement, which will likely increase Petrobras's investment burden as it seeks to drastically increase production in coming years, weighed on the company's shares. Petrobras's stock declined 3.6% to close 17.64 reais Tuesday.

 

The company, for its part, tried to paint the deal in a positive light, saying it will reduce oil-exploration risk.

 

"Petrobras doesn't have the least doubt that this is an exceptional opportunity," Chief Executive Maria das Graças Silva Foster said at a news conference late Tuesday.

 

The agreement gives Petrobras the right to increase output of hydrocarbons from the Buzios, Entorno de Iara, Florim and Nordeste de Tupi oil fields.

 

Brazil's national petroleum agency, which carries out exploration activities, has increased its estimates for the fields' potential oil reserves since Petrobras originally acquired production rights in 2010. As a result of Tuesday's agreement, Petrobras will have the right to produce between 9.8 billion and 15.2 billion barrels of oil at the fields through 2051, in addition to an initial contract for five billion barrels. The oil is located thousands of feet below the seafloor in the difficult-to-reach "pre-salt" layer.

 

Ms. Graça Foster stressed that the numbers are government estimates for the fields' potential. Petrobras's total proven oil reserves—calculated using more stringent criteria—amount to 16 billion barrels.

 

Production from the fields should begin in 2021 and peak at around one million barrels of oil a day in 2026, Ms. Graça Foster said.

 

She also played down the immediate impact of the deal on Petrobras's already stretched finances and ruled out the need to take on more debt to finance the signing bonus it will have to pay this year. Ms. Graça Foster said Petrobras will have to increase its 2014-18 investment budget by around 3%.

 

"This is an enormous satisfaction for me," she said. "There is no oil company in the world I know of that has had such an opportunity to exploit such large oil reserves in areas that it knows so well—like the back of its hand, in fact."

 

Most Read Today
see see
People
Patricia Pradal Appointed as New President of Chevron So...
30/06/25
Results
ANP Releases Consolidated Data for the Regulated Sector ...
30/06/25
Ethanol
Ethanol Prices Rise in the Last Week of June
30/06/25
People
Fulkrum appoints Louisa Poole as Chief Financial Officer
26/06/25
International Company News
Johan Castberg producing at full capacity
25/06/25
Decarbonization
EPE to Launch Analysis on Decarbonization of Brazilian E...
13/06/25
FIRJAN
At the Launch of the Rio Oil Yearbook, Business Leaders ...
13/06/25
Permanent Offer
ANP to Hold 5th Cycle of the Permanent Concession Offer ...
13/06/25
Award
Unique Group Celebrates Prestigious Wins at 2025 cHeRrie...
13/06/25
Business
ANP to Hold Public Consultation and Hearing on Update of...
12/06/25
RenovaBio
ANP Approves New Regulation for Biofuels Certification
12/06/25
E&P
ANP Approves Resolution Establishing Requirements for Fu...
12/06/25
Bahiagás
Luiz Gavazza Highlights Bahiagás’ Expansion and Bahia’s ...
12/06/25
Event
SP Offshore 2025: Second Edition Boosts a New Phase for ...
12/06/25
Bahia Oil & Gas Energy 2025
Innovation in Its DNA: How Comquality Is Revolutionizing...
04/06/25
Bahia Oil & Gas Energy 2025
Oil States Showcases Commitment to Innovation and Energy...
04/06/25
Permanent Offer
Permanent Offer Auction Notice and Environmental Licensi...
04/06/25
Environment
Supergasbras Expands Actions to Reduce CO₂ Emissions in ...
04/06/25
Sergipe Oil & Gas 2025
Sergipe Oil & Gas 2025 Launched with Focus on Innovation...
04/06/25
Marginal Fields
Fiscal Measures with Disproportionate Impact on Independ...
04/06/25
Investments
Transpetro launches tender to enter barge operation segment
30/05/25
VEJA MAIS
Newsletter TN

Contact us

We use cookies to ensure you have the best experience on our website. If you continue to use this site, we will assume that you agree with our Privacy Policy, terms of use and cookies.

2