Petrobras' Safety Net Explained
05/30/08 - 01:02 PM EDT
Knowledge @Wharton
Moutinho has a similar outlook, envisaging strong growth in the coming decades. "If you have some savings, here's some friendly advice: There's nothing better you can leave your kids than Petrobrás shares."
At present, the Brazilian multinational operates in 27 countries (including Brazil), with a presence on four continents: Angola, Libya, Mozambique, Nigeria, Senegal and Tanzania (Africa); China, Singapore, India, Iran, Japan and Pakistan (Asia); Portugal, United Kingdom and Turkey (Europe); and the United States, Mexico, Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay and Venezuela (Americas). The strategic plan of the company forecasts investments of $15 billion in the international arena up to 2012. Diversification The conquest of the Southern Cone is taking place on various fronts. In Paraguay, Petrobrás is the leader in the distribution market. In Colombia it operates in distribution and exploitation and in Uruguay it is involved in gas. Argentina represents the company's second largest volume of production (only below that in Brazil). Even in Venezuela, which is member of OPEC, the company is involved in oil exploitation and the production of petroleum, and will soon install a refinery in the region. However, none of this is on the scale of the investments in Bolivia. In 1991, Petrobrás signed a "Letter of Intention of Energy Integration" with the Bolivian government for the construction of a bi-national gas-duct. A heavy investment of almost $1.5 billion in recent years has made it possible to bring gas extracted in the Andes to Brazil. To get a better idea of its importance, the company has a presence in six of the nine Bolivian provinces -- where the gigantic fields of San Antonio and San Alberto stand out -- and accounts for a quarter of all taxes collected in that country. However, the relationship has experienced difficulties due to the policies applied since Evo Morales became President of Bolivia in 2006. In May of that year, the army occupied foreign companies' fields. The issue was settled last October when Petrobrás signed an agreement with the Bolivian government accepting a reduction in its profit margins
. Similar negotiations were held with other companies operating in the country.
At present, Brazil imports about 30 million cubic meters of natural gas a day from Bolivia -- consumption needs are at around 51 million cubic meters a day. These numbers highlight the importance of the hydrocarbon operations in Bolivia, but political disagreements have set off alarm signals for similar operations with neighboring countries, according to the experts. However, they point out that recent finds have placed the country in a more comfortable position.
"To be honest, in the long term we won't need Bolivia," states Moutinho, author of the book Natural Gas: Strategies for a New Energy in Brazil. The reason is that given the depth which the reserves are at, it is anticipated that they will contain significant quantities of gas. And to exploit petroleum, this gas has to come out. "It's a lot of gas for many years," says the academic, who calls for an immediate reflection on the role of this source of energy in supplying the country.
At the same time, Brazil stands out in the development of biodiesel. Petrobrás has promised to supply the product to the market, participating in ANP auctions where producers, volumes and prices are defined. The company thus fixed its sights on land, just as it had gone to the sea for oil and gas. At present, it produces raw material on a semi-industrial scale in the localities of Montes Claros (MG, Minas Gerais), Candeias (BA, Bahía) and Quixadá (CE, Ceará.) It is estimated that each locality produces around 50,000 cubic meters a year.
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