Investors in Brazil can expect a continuity of policy aimed at supporting oil and gas development despite recent election turbulence, and will see further decisions on the gas and refining segments in the months ahead, the CEO of state-controlled Petrobras told S&P Global Platts in an interview.
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Pedro Parente, interviewed at Brazil's embassy in London, said he expected the country's net oil exports -- currently around 400,000 b/d -- to keep rising, with the Lula field reaching 1 million b/d of output early next year as two production units are added.
Petrobras's own oil and gas output should reach 3.5 million b/d of oil equivalent in 2021, up from 2.77 million boe/d last year, and Brazil's total oil and gas production could be 5 million boe/d in 2027, Parente said in the interview, days after a successful 15th bid round.
Following the arrest of ex-president Luiz Inacio Lula da Silva, "the situation is totally unclear...We have a spectrum of candidates from far right to far left," Parente said of the October elections to choose a new president and two thirds of the Congress.
Parente noted that during Brazil's only previous major electoral shift in 2002, when Lula took office, contracts were respected and the new government stuck to existing policies on oil and gas. He forecast that Congress would be a source of moderation, as would continuity of leadership at industry regulator the ANP.
"Of course a new government will have its own views on how to manage the country. I do not see that they would have different views in relation to the rule of law, especially respecting contracts -- and if that happened you will see that the Congress would not allow this," Parente said.
"You can bet the composition of the Congress will not be a majority of the far right or far left...The Congress will be a very well-balanced Congress."
Parente voiced confidence in Petrobras's recovery following the 'Car Wash' corruption scandal and a company debt crisis, along with a class action law suit in the US, expected to cost it nearly $3 billion.
Brazil has organized a series of bid rounds to revive the sector after a near-collapse in exploration drilling. A sub-salt round is due on June 7 and another round may be held this year combining the Saturno and adjacent fields, Parente said. Petrobras aims to cut its net debt to $77 billion by the end of this year, from $100 billion at the end of 2015, on the back of cash flows and asset sales.
The company has an average interest rate on its debt instruments of just over 6%, and $20 billion of debt due for repayment in the next three years.
Parente played down doubts about Petrobras's $21 billion divestment program, which includes the Nigerian fields Agbami and Akpo, nearly 100 Brazilian shallow-water and offshore fields, a gas pipeline network and a retail business in Paraguay.
Brazil's audit court has imposed additional checks, slowing the process, and last year just $4.5 billion of the planned $21 billion of assets were sold. The process will be completed this year, however, Parente said.
Last year "we prepared the company and fulfilled many steps for a number of assets, however the actual signing of the contracts we will see this year," he said, noting other assets that could be included, such as a refinery in Pasadena, Texas. "We are very confident we will reach the target."
Parente underlined that foreign investors would be chosen purely on their track record and the size of their bids, and said attracting medium-sized and smaller buyers of onshore and offshore assets would create more jobs in the regions than could Petrobras, with its centralized hiring.
"It is only a matter of the track record and the price, not the so-called nationality of the company. What is really important is to generate jobs in Brazil and income in Brazil."
Parente confirmed that under its five-year plan Petrobras has no interest in investing in west Africa, as Angola looks to revive its deepwater sector. Brazil's sub-salt fields have lessened its need to import lighter oil, but the strategy may change after the current, domestically focused plan expires in 2021, he said.
"For the time being we are not interested [in Angola], except if there is a very good opportunity, we would look at it."
GAS, REFINING RETHINK
Parente said Petrobras would frame a policy on gas by the middle of this year, possibly involving increasing the share of gas in its production through foreign purchases.
He highlighted the award of a contract last month to build a gas processing plant near the Comperj refinery. Targeted at industrial users of gas, the plant is needed to handle associated gas from Brazil's sub-salt fields and without it oil output would have to be curbed due to flaring regulations, Parente said, noting the construction timeframe was 2-3 years.
Parente also highlighted a planned rethink of Petrobras' refining role. The company has put on hold two refinery expansions, at Comperj, near Rio, and RNEST near Recife, but seeks partners to resume them.
Petrobras is likely to remain responsible for "almost 100%" of Brazil's refineries and does not plan to close any, as it strives for a "comfortable" market share, but does need partners, he said.
"It is important to reduce the practical monopoly Petrobras has in the refining area. We are discussing what would be the model. It is very important for the country and Petrobras, and for the suppliers to have not just one player."
A new model should be agreed by Petrobras's leadership as soon as possible and have "its own track, regardless of the electoral period," Parente said.
Petrobras will maintain its retail prices close to those of imported products to preserve market share following a surge in imports last year, in which its share of the diesel market fell to under 70%, he said. Diesel accounts for 35% of Petrobras's refining output, reflecting mainly trucking demand.
"It is really important that we keep a comfortable market share for the company considering the refinery park we have," Parente said.