By Sam Fletcher
Senior Writer
HOUSTON, Apr. 2 -- Petroleo Brasiliero SA (Petrobras) plans to expand its oil and gas production both at home and abroad; maintain a lead, but not a monopoly, in domestic refining and marketing; and help develop a natural gas market in Brazil by participating in electric power generation, said Pres. and CEO Francisco Gros at an energy conference last week in Houston.
At that meeting, organized by the American Chamber of Commerce-Brazil and the InterAmerican Chamber of Commerce in Houston, Gros seemed still committed to his earlier pledge to "basically follow the policies" of his predecessor, Henri Philippe Reichstul, who resigned for health and personal reasons at the end of 2001 (OGJ Online, Dec. 5, 2001). Gros is the former president of Brazil's National Economic and Development Bank (BNDES), that country's largest investment bank.
Revenues, resources for growth
Petrobras has both the revenue and the resources to increase its domestic oil production to 1.9 million b/d by 2005, up from 1.49 million b/d at present, said Gros. Two stock offerings in August 2000 and July 2001 raised almost $5 billion total, he said. Petrobras also reported a record net profit of $5 billion in 2000 that it nearly matched in 2001 (OGJ Online, Dec. 26, 2001)
Earlier this year, Petrobras reported that it produced a record 1,507,532 b/d of oil in December, up 6% from November. Most of that production was in Brazil, but some 38,414 b/d came from overseas operations through its international subsidiary Braspetro (OGJ Online, Jan. 14, 2002). Petrobras also produced 40.516 million cu m of natural gas in December.
As additional wells come on stream, especially in Marlim Sul field, Petrobras expects new oil output records. Officials earlier predicted Marlim Sul will produce 150,000 b/d by December 2002, vs. 78,000 b/d at the start of this year.
Reichstul earlier announced plans to spend $31.7 billion to boost Petrobras's total production to 2.57 million b/d and maintain it at that level to 2005. That would be accomplished in part by buying either companies or properties in the Gulf of Mexico, Latin America, and Africa, officials said.
Gros said 77% of that budget will be spent in Brazil, with the bulk, $15 billion, earmarked for oil exploration and production. Only 9% of Brazil's sedimentary basins have yet been explored, said company officials.
The fall-off of oil and gas investments and activity in troubled Venezuela and Argentina has spotlighted Petrobras's leadership in South American operations, say industry observers. The South American offshore drilling market is "almost entirely driven by Petrobras," said Dennis Heagney, chief operating officer of Transocean Sedco Forex Inc., Houston, at a recent conference sponsored by the International Association of Drilling Contractors in Houston (OGJ Online, Feb. 6, 2002).
Petrobras also plans to "diversify into new international core areas," Gros said.
Company officials late last year said they were ready to spend some $3 billion to purchase a medium-sized oil company with production of 100,000 boe/d from the Gulf of Mexico.
Such an acquisition would help Petrobras in its goal to boost production outside Brazil to 300,000 boe/d by 2005. Braspetro sources said at that time they were targeting the gulf because they had invested comparatively little so far in that high-potential area (OGJ Online, Dec. 26, 2001).
Refining, gas plans
In addition, Petrobras is shopping for more refining capacity in the US and the Caribbean region, said Gros. It also is seeking partners for its refining operations in Brazil.
Petrobras earlier announced plans to invest a record $8.9 billion in its Brazilian refining operations between through 2010, as it revamps eight of its refineries. That will be the biggest capital investment in Brazil's refining sector since the 1970s, when most of the company's 11 refineries were built. There are 13 refineries in Brazil now (OGJ Online, Dec. 3, 2001).
Brazil needs more domestic refining capacity to reduce the amount of crude oil that it's forced to export, said Gros. That will require investments in technology for processing heavy oil.
However, Gros said, Petrobras does not want to increase its current dominance of 98% of Brazil's existing refining capacity. The company is working with government officials "to find out what it will take to attract foreign investment in partnerships or greenfield new refineries," he said.
To retain its leadership against increased competition in marketing refined products in Brazil, Petrobras must improve its quality standards, Gros said. That involves "an ongoing legal battle with fly-by-night distributors" that obtain gasoline from Petrobras, dilute it to increase volume, and resell the adulterated product.
Meanwhile, government deregulation has already opened access to Petrobras's pipeline infrastructure for crude and refined products. Open-access legislation for natural gas pipelines is pending.
"We want to develop a gas market in Brazil with both firm and interruptible supply, said Gros. As part of that program, he said, Petrobras will pursue a leadership position in the gas distribution market and participate in the power generation business.
Overall, Petrobras is continuing its metamorphosis from a state-owned to a fully privatized and internationally competitive major oil and gas company, said the US-educated Gros. "Our challenge and goal is to manage this organization for profitability," he said.