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By Jorge Piñón

“…Petrobras has more to gain from organically growing its position in Brazil than going abroad to expand production”. Petrobras CFO Almhir Guilherme Barbassa (Forbes magazine, February 28, 2011)

More than 80 percent of the world’s crude oil production is in the hands of national oil companies (NOCs), the majority with a good track record of managing their national patrimony. But only a handful have been able to keep an arms-length relationship from their country’s politics du jour.

Many governments treat their NOCs’ coffers as a petty cash box to finance their political or social agendas, without taking into consideration the huge amounts of capital that have to be reinvested, in order to maximize the NOCs’ return on assets and the life span of their hydrocarbon resources.

A rare exception is Brazil’s Petrobras, which has demonstrated an envious independence from the central government’s politics. This oil company is marching to the beat of its own drummer. 

In September of last year, Petrobras announced the sale of $67 billion worth of shares to finance its ambitious $224 billion, five-year investment plan, which is aimed at nearly doubling its current domestic crude oil production to 3.9 million barrels a day by 2014. 

The transaction generated $25.4 billion from the sale of preferred shares, giving the Brazilian government 55.6 percent of the voting shares; and another $39.2 billion from the sale of common shares, giving the government 48 percent of the common shares of Petrobras.  

The results of the sale demonstrated private investors’ trust in Petrobras future performance.

Projects by political allies Hugo Chávez of Venezuela and former Brazilian President Inácio Lula da Silva such as the Gasoducto del Sur, the Abreu e Lima refinery, and the Carabobo heavy oil project have failed to materialize, because they were not able to meet Petrobras’ profitability and strategic thresholds.

In December of 2010, Petrobras executive Paulo Roberto Costa was quoted in the Oil & Gas Journal as saying that “Petrobras was willing to build the Abreu e Lima alone if Venezuelan state oil company PdVSA did not meet its financial terms and conditions,” thus underscoring the national oil company’s independence.  

Now, to Cuba. In October 2008, Petrobras was awarded, under a two-year exploration concession, the 1,600 km² Block 37, located in Cuba’s Strait of Florida just 12 miles north of the island’s north coast between La Habana and Matanzas.

After spending more than $8 million in seismic and geological work, Petrobras last fall determined that the hydrocarbon potential of the block did not warrant the additional expense of exploratory drilling and did not seek an extension of the concession.

This was the second time that Petrobras attempts to develop Cuba’s oil and natural gas resources. In 1998, Braspetro, Petrobras’ former international subsidiary, drilled two dry holes in the area of Cayo Coco and Cayo Guillermo at a cost of over $15 million. The Cuban government awarded this area — today Block L — to Russia’s Zarubezhneft oil company last year; it is just south of The Bahamas’ Andros Island, were British and Norwegian oil companies are conducting seismic studies.  

The recent departure by Petrobras from Cuba should not be taken as a final verdict on Cuba’s oil and gas potential, or as a signal on possible strained political relations between the governments of Cuba and Brazil.

It was simply an economic and strategic decision by Petrobras, following their long term-vision of focusing resources on developing its recently found 10 billion barrels of deepwater offshore oil and natural gas at the Santos and Campos basins, along the Atlantic coast. As Petrobras CFO Almhir Guilherme Barbassa recently stated in a Forbes interview: “…Petrobras has more to gain from organically growing its position in Brazil than going abroad to expand production.”

Jorge R. Piñón was president of Amoco Corporate Development Company Latin America from 1991 to 1994; in this role he was responsible for managing the business relationship between Amoco Corp. and regional state oil companies, energy ministries and energy regulatory agencies.


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