Petrobras is working feverishly to develop the presalt region

Shareholders of Brazilian state-run energy giant Petroleo Brasileiro SA (PBR, PETR4.BR), or Petrobras, approved a capital increase Tuesday, clearing the way for what’s expected to be one of the world’s largest-ever share offers.

Shareholders granted the company’s request to increase capital by up to 150 billion Brazilian reals ($84.8 billion) via the sale of up to 3.2 billion common shares and 2.4 billion preferred shares.

Petrobras needs the cash raised from the share sale, which analysts have estimated could be valued at between $50 billion and $60 billion, to pay for the company’s investment plans and rights to produce 5 billion barrels of crude oil from government-held areas in the offshore presalt region.
Chief Executive Jose Sergio Gabrielli downplayed vocal minority shareholder opposition to the capital increase at the shareholders’ meeting, as well as the likelihood of possible lawsuits to block the proposed share sale, according to local news agency Estado.

“It’s par for the course that whomever can’t take part will be feeling slighted. But this process is absolutely transparent and within the rules,” Gabrielli was quoted by Estado as saying.

The planned share offer was expected to be completed by the end of July, but Petrobras officials were guarded about that possibility in conference calls with analysts on Tuesday. Petrobras’s Gabrielli said that the company would now wait for the country’s National Petroleum Agency to receive a certification of the government-held oil reserves before moving forward.

Petrobras has aimed to complete the share offer before summer vacations in the Northern Hemisphere affect market activity in the U.S. and Europe.

The shareholders’ approval followed the release Monday of Petrobras’s investment plans for 2010-14, which called for investments of $224 billion over the next five years.

Petrobras is working feverishly to develop the presalt region, where oil was discovered under a thick layer of salt off the coast of Sao Paulo and Rio de Janeiro states. The oil lies under more than 2,000 meters of water and a further 5,000 meters of sand, rock and a shifting layer of salt.

The federal oil company faces a stiff financial challenge to develop the ultra-deepwater fields. Petrobras needs to raise $58 billion from the proposed share offer and new debt issues to finance the investment plan, as well as an additional $38 billion to cover amortization expenses on current debt, Petrobras officials said.

Petrobras’s net debt-to-market capitalization was 32% at the end of the first quarter, dangerously close to the self-imposed 35% limit needed to comfortably maintain the company’s investment-grade credit rating.

After the share offer, Petrobras expects the company’s leverage to slide toward the lower end of the company’s 25%-to-35% target range–once again opening up global capital markets to the fresh bond issues.

The share offer was first announced last year as part of an overhaul of Brazil’s oil legislation proposed by President Luiz Inacio Lula da Silva. One of the proposals includes a complicated capitalization plan for Petrobras.

Under the plan, Petrobras was to receive the rights to explore and produce up to 5 billion barrels of crude oil from government-held areas. Petrobras would pay for the rights with new shares, with minority shareholders also accompanying the offer. The offer to minority shareholders was expected to generate at least $25 billion in fresh cash.
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By Jeff Fick, Dow Jones Newswires

The Brazilian company will present biofuels initiatives and a methodology to prepare sustainability reports

Petrobras will showcase its experience in sustainability initiatives in the Amsterdam Global Conference on Sustainability and Transparency, from May 26 to 28, in Amsterdam, the Netherlands. The event is organized by the Global

Reporting Initiative (GRI), an entity that is a global reference in guidelines

for organizational economic, social, and environmental reporting. The exclusive

sponsor of the GRI Readers’ Choice Awards 2010, in which readers from around the world choose the mostcomprehensive and transparent sustainability reports, the Company will participate, Thursday (05/27), in plenary sessions to discuss the direction sustainability is expected to take in the upcoming years.

Petrobras Biocombustível’s manager for Safety, Environment and Health, Fernando Toledo Pierre, will participate in the Business session, at 2 PM (local time), and will talk about strategies for the sustainable production of biofuels.

Biodiesel and ethanol contribute to the diversification of the energy matrix,with positive impact on reducing global warming. Biofuel production also allows for job and income generation on the farmland, taking advantage of Brazil’s favorable conditions, such as its climate, water, and a major agricultural frontier to be explored, without any need to advance into forest areas or demarked reserves.

photo: http://www.wiltonjr.com/tag/meio-ambiente/page/2/

With investments of US$85 millions, Brazilian state controlled Petrobras starts producing ethanol from sugar cane this month. It is the first time the oil giant invests in a domestic ethanol plant, which is located in the state of Minas Gerais, one of the largest producer of sugar cane in Brazil. The plant is part of Petrobras’ Strategic Plan to produce biodiesel and ethanol by 2013, totalling US$ 2.8 billion. With the investment, the plant’s production capacity is going to rise from 100 million litres to 204 million litres per year, by 2012. Brazil is the second largest producer of ethanol in the world, after the US, which makes the product using mainly corn. Ethanol use in the country has grown, with government support, for more than 30 years. Recently, there two big deals in the sector: agribusiness giant Bunge Ltd’s (BG) purchase of Brazilian producer Moema for about $452 million and British oil giant BP plc’s (BP) $1 billion investment in a Brazilian biofuel maker. The country produced about 23.4 billion liters of ethanol in 2009 and has more than 10 million cars running with a blend of gasoline and ethanol.

Petrobras, Brazil’s state-owned oil and gas giant, announced it has just made two separate discoveries of oil in the Campos basin near the country’s coast, with recoverable reserves of 40 million and 25 million barrels. News of offshore discoveries is now a weekly occurrence as companies like Petrobras and OGX, owned by Brazilian billionaire Eike Batista, progress with exploration of offshore blocs.  Brazil’s oil output is expected to rise significantly over the next decade, mainly due to the discovery of the potentially huge pre-salt reserves, which analysts have estimated could contain somewhere between 50 billion and 80 billion barrels of crude.  A few days ago, Petrobras also announced new oil discoveries off shore Angola. The good news coincided with a research by the consulting company PFC on market value it did on several companies, and Petrobras ranked number 4 among the 50 biggest energy companies of the world.

One of the Petrobras platforms

By Juan ForeroWashington Post Foreign Service

Everything about the shipyard here is colossal — the 4,000-man workforce, the billions sunk into it in capital costs, the half-finished 10-story-high production platforms.

But then, so is the challenge facing Brazil’s state-controlled energy company, Petrobras: developing a group of newly discovered deep-sea oil fields that energy analysts say will catapult this country into the ranks of the world’s petro-powers. The oil pools are 200 miles out in the Atlantic and more than four miles down, under freezing seas, rock and a heavy cap of salt.

Petrobras, which until recently was little known outside oil circles, has launched a five-year, $174 billion project to provide platforms, rigs, support vessels and drilling systems to develop tens of billions of barrels of oil. Energy officials here project that Brazil — still an oil importer five years ago — will in the next decade have one of the world’s biggest oil reserves.

“It’s going to change the role of Brazil in the geopolitics of oil,” Petrobras’s president, José Sergio Gabrielli, said in an interview at the company’s headquarters in Rio de Janeiro. “We are going to become a much bigger producer.”

Petrobras estimates that production in Brazil could reach 3.9 million barrels by 2020, up from more than 2 million a day now. Proven oil reserves would rise from 14.4 billion barrels to more than 30 billion barrels, according to government estimates, putting Brazil in the same league as such major oil exporters as Qatar, Canada, Kazakhstan and Nigeria.

The new discoveries in Brazil’s offshore “pre-salt” region do not mean that the country will become a major exporter of crude, according to Gabrielli. He noted that Brazil’s economy, which is the world’s eighth-largest and is steadily growing, is expected to consume much of Petrobras’s projected production. But, he added, as the country meets its own needs, it will also develop for export refined products such as gasoline, diesel and biofuels.

In an era of drum-tight supply, the discoveries off Brazil’s coast and Petrobras’s growing stature are changing the world’s oil balance, because few regions outside the OPEC countries are expected to generate significant growth in crude production, said Michelle Billig Patron, senior director of political risk for the New York-based Pira Energy Group.

“There is really only Canada and Brazil when you’re talking about a million barrels a day more in growth over the next 10 years,” Patron said. 

A firm hits it big  

The engine of that growth is a multinational that, for much of its 56-year history, was little more than a trading company. It pumped a few thousand barrels a day almost as a side note to its real function, overseeing oil imports. Then in 1974 — a time when oil shocks had alarmed Brazilian officials — came a major discovery: the offshore Campos Basin, east of Rio.

“Petrobras, before Campos, produced 180,000 barrels a day,” said João Carlos de Luca, a former Petrobras executive who is president of the Brazilian Petroleum Institute, which represents foreign oil companies here. “After Campos, it was a company that searched for self-sufficiency in production.”

In its drive to produce, Petrobras became a leader in offshore production. The Rio-based company is now responsible for more than a fifth of the world’s deep-sea operations, more than any other company, Gabrielli said. It operates in 26 countries and drills off the African coast and in the Gulf of Mexico.

With a market capitalization of more than $220 billion, Petrobras is one of the world’s 10 biggest companies. Over the past two years, it has been the most frequently traded foreign company on the New York Stock Exchange, trade data show. Among investors bullish on Petrobras is George Soros, who last year made the oil company the largest single holding in his investment fund, according to Bloomberg.

Still, the company remains firmly under the control of the state, with President Luiz Inácio Lula da Silva calling it a national icon whose fortunes are intertwined with Brazil’s.

Though private investors control nearly 60 percent of Petrobras stock, the Brazilian government has 56 percent of the voting rights. Seven of its nine directors are from the government. The board’s chairwoman is Dilma Rousseff, a Lula confidant who is expected to be the ruling party’s candidate in next year’s presidential elections.

The Lula government is now seeking passage of a law to give Petrobras control over future projects in the newly discovered fields. Foreign companies have explored for oil in Brazil since 1997, but the proposed regulations would limit their ability to make major decisions involving the new oil pools.

Gabrielli said it is logical to make Petrobras the operator, with a mandatory 30 percent stake in each project, because Brazil took the risks to drill for oil in the pre-salt. But he noted that companies such as Exxon Mobil, Britain’s BG Group, Royal Dutch Shell and Spain’s Repsol are investing billions to develop their share of the new projects.

Luca, the president of the association representing foreign companies, said Petrobras may overextend itself. “We could be limiting the development,” he said.

Far out and deep down

The entire pre-salt region is laced with “elephant fields,” pools holding at least a billion barrels of oil each. Tupi, which in 2006 was the first field found, holds up to 8 billion barrels.

Despite the optimism that Petrobras officials display for visitors, they reel off the challenges: shifting salt, 6,500 feet of it, and working fields so far from the coast that they cannot be reached by helicopter.

Much of the new infrastructure needed to develop the pre-salt is being built here at Angra, and at other shipyards dotting the coast. On a recent day, decked out in a bright-orange jumpsuit and helmet, Roberto Moro, a mechanical engineer, strolled amid giant pontoons weighing 6,000 tons each. He explained how they would be latched together, then topped with a 14,000-ton deck the size of a football field.

The final product, a platform called P-56, will cost $1 billion, he said. And Petrobras will need a fleet of them. “Each platform we are building here, like P-56, represents 10 percent of national oil production,” Moro, 46, explained. That is the equivalent of 180,000 barrels.

The magazine highlighted the issues of pré-sal wealth are “nice problems to have”, once that “Brazil is better placed to deal with them than many other countries”.

The new fields are called pré-sal because they lie beneath a shifting layer of salt. Officials believe that in all there may be up to 50 billion barrels of oil and gas offshore, enough to turn the country into an oil giant.

It is still uncertain the share the government will have of this oil. But it is indeed a “crucial test of Brazil’s moral fibre”.

Read the full article here.

The NREL/Petrobras agreement will help achieve the goals of the United States and Brazil memorandum of understanding to advance cooperation on biofuels signed by the U.S. Secretary of State Condoleezza Rice and Brazil Foreign Minister Celso Amorim on March 9, 2007. “

By bringing Brazilian expertise together with some of the leading U.S. biofuels researchers at NREL, we will increase our knowledge and be able to more quickly commercialize renewable biofuels in the global marketplace,” said NREL Director Dan E. Arvizu.

Petrobras and NREL have common interests in the development of advanced next generation biofuels technologies through biochemical and thermochemical routes from biomass.  NREL conducts R&D related to technoeconomic, environmental and sustainability evaluation of advanced biofuels in support of the U.S. Department of Energy’s Office of Energy Efficiency and Renewable Energy (EERE) and other partners.

Petrobras’ research and development center (CENPES) conducts research on bagasse to ethanol, vegetable oil conversion to diesel oil components (H-Bio) and production of biomass-derived petroleum-like fuels using thermochemical technologies.

“The use of residues can substantially increase ethanol production without a correspondent increase of the planted area, boosting the existing process’ production by using its own residues,” said CENPES Executive Manager, Carlos Tadeu da Costa Fraga.

The agreement identifies four major areas of advanced biofuels research collaboration: biochemical production processes, thermochemical processes, economic and sustainability analysis from lignocellulosic biomass and evaluation of intermediate blends of ethanol and gasoline. (source: National Renewable Energy Laboratory)