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Brazil's Petrobras to receive at least $14 billion in transfer-of-rights deal

Rio de Janeiro — Petrobras could receive at least $14 billion from the Brazilian government as part of the final price adjustment for the transfer-of-rights areas, it said Tuesday.

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Brazil's Federal Audit Court, known as the TCU, is analyzing the final terms of the agreement, Petrobras said.

"This scenario, after the TCU's evaluation and approval by all of the parties, could result in a credit in favor of Petrobras of approximately $14 billion," the company said.

The administration of President Jair Bolsonaro, which took power January 1, is working quickly to complete the final price adjustment for the transfer-of-rights areas, which would then allow the government to sell development rights to the additional barrels Petrobras discovered in the subsalt acreage.

The auction, which would sell rights to pump 5.1 billion barrels-15.2 billion barrels of recoverable crude, could generate signing bonuses of up to $100 billion for Brazil's cash-strapped federal government.

Petrobras received the rights to pump 5 billion barrels of crude from subsalt acreage owned by the government in a 2010 oil-for-shares swap. The agreement included a final price adjustment based on oil prices and other factors after the areas were declared commercially viable for development, but the 2014-2016 collapse in oil prices complicated the talks. In addition, Petrobras found much more oil than the 5 billion barrels it was set to receive under the deal.

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Mines and Energy Minister Bento Albuquerque said last week that the administration wanted to conclude the price talks in the government's first 100 days in office, with the auction likely to be scheduled for the second half of 2019. The auction is expected to be hotly contested, with most of the oil reserves already drilled, delimited and certified.

The final price agreement, however, still needs to be approved by the TCU, the National Energy Policy Council (CNPE), government entities and Petrobras' board of directors, the company said.

"Any value to be received by Petrobras can only be confirmed and the market informed when these steps have been finalized," it said.

Brazil's Senate is also debating a bill left over from the previous session that would help facilitate a final price agreement, but it is unclear whether the new administration is willing to bargain with lawmakers to finalize a vote on the new law. In addition to establishing payment parameters for Petrobras, the bill would also allow the company to sell up to a 70% minority share in areas Petrobras is developing and reduce requirements to use locally produced goods and services, or local content.

OLIVEIRA PROMOTED TO E&P CHIEF

Petrobras' new CEO, Roberto Castello Branco, also continued to make changes to its management team. In a surprise move announced late Monday, Petrobras said Carlos Alberto Pereira de Oliveira would become exploration and production director. Oliveira replaces Solange Guedes, who had held the role since 2015.

Oliveira previously served as the head of portfolio management and partnerships in the E&P department.

Guedes' firing was a bit of a surprise to the industry, sources told S&P Global Platts. Guedes was highly respected in the industry and led Petrobras through a rapid expansion of its fleet of floating production units, including four coming online in 2018.

Castello Branco and the Bolsonaro administration have replaced most of Petrobras' executive leadership since late December, including then downstream director Jorge Celestino and strategy director Nelson Silva.

The changes were in line with comments from officials since Bolsonaro was elected in late October.

Castello Branco, Bolsonaro and Albuquerque have been vocal about their plans for Petrobras, including hefty asset sales aimed at streamlining the company. The officials have openly discussed their desire to end Petrobras' monopoly in refining, distribution, logistics and transportation.

-- Jeff Fick, newsdesk@spglobal.com

-- Edited by Keiron Greenhalgh, newsdesk@spglobal.com