Petrobras Downplays Any ‘Government Intervention’ Rumors

Petrobras’ CEO Jean Paul Prates downplayed investor concerns around moves by the Brazilian government to halt the company’s refinery divestment process, saying during CERAWeek by S&P Global that they weren’t “drastic.”

The government only suspended steps related to some refinery divestments in the final stages in order to verify the commercial conditions, Prates told reporters during a March 8 press conference.

“It’s just a last chance to check everything out since we have a change in a major partner, which is the government in Brazil,” Prates said. “It shouldn't sound as an intervention or anything drastic like that. It's just a final look at the assets before they go to adjust the terms to what even sometimes the buyer would like.”

Rio de Janeiro-based Petrobras continues operate in Brazil’s deep- and ultra-deep waters where it sees tremendous growth potential in both reserves and production. As part of its focus in these regions, the company continues to shed refineries and other nonstrategic upstream assets. Petrobras has a number of divestments in the binding phase and others waiting to be signed and closed.

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When questioned by one reporter about import parity, Prates argued that on Brazil, which is self-sufficient in oil and almost self-sufficient in refining capacity, didn’t make sense.

Prates said Petrobras was fully open for imports and that Brazil had other producers and refiners in the markets since the state oil giant was no longer monopolizing the market.

“We have our own policy, which is a commercial policy. We don't receive government orders to practice one price or the other or one parity or the other,” Prates said. “And the only thing we will do is to manage our price the best way for the company… the best way to retain our clients [and] market share in any product in the region. And that's fair.”

Demand for southern cone gas and LNG

Despite an abundance of oil and gas reserves in the Brazilian pre-salt formation offshore, the South American country still relies on imports of piped-gas from Bolivia and LNG when necessary.

Prates said Petrobras would continue to view gas-related opportunities in Bolivia and Argentina to assure Brazil had access to necessary gas supply if needed until its offshore gas started flowing.

“We will go after good business with good opportunities, with good partners,” Prates said, adding that the government of Brazil’s President Luiz Inácio Lula da Silva (“Lula”) was in discussions with Bolivia and Argentina about issues around gas supply, without providing details.

“We are a big market circled by reserves of gas and the challenge we have been facing is to connect to those markets,” Prates said.

The executive said more investment was needed by its neighbors in upstream and pipeline activities. As a result, Brazil would likely rely on a mix of both piped-gas and LNG, although he said it wasn’t a good time to seek LNG due to high prices.

Over the short-to-medium term, it was more likely for Petrobras to turn to LNG than over the long-term because of Brazil’s reserves offshore of pre-salt and non-associated gas in its southwest region, where most consumption is centered, he added.

“We will need the LNG imports to have a balance, but we will have to face the fact that we have our own reserves,” Prates said.