Petrobras Surplus in Buzios Area to Cost $900 Million in Fees

Petroleo Brasileiro SA (PETR4), Brazil’s state-controlled oil company, will have to pay 2 billion reais ($900 million) this year to tap more oil at its giant Buzios field and surrounding area than its license authorizes.

The company has discovered as much as four times the amount of crude it’s authorized to produce at an offshore license it bought from the government in 2010, Rio de janeiro-based Petrobras said in statement today.

In 2010, Petrobras paid $42.5 billion in shares and cash for the rights to produce 5 billion barrels at a section of the so-called pre-salt region that holds the giant Buzios field, formerly known as Franco. The area holds 9.8 billion to 15.2 billion barrels of recoverable oil in addition to what Petrobras was authorized to produce under the original contract, Petrobras said.

A government committee authorized Petrobras to produce the additional barrels under a profit-sharing model, Energy Minister Edison Lobao told reporters in Brasilia today.

Petrobras is already struggling to develop all the oil it has found in other sections of the pre-salt region and investors are more eager to see the company increase output than make discoveries after output has remained flat for the past four years.

The company is investing about $100 million a day to expand its capacity to produce and refine crude, contributing to the biggest cash flow deficit of any oil company, according to data compiled by Bloomberg.

Shares of Petrobras fell 1.6 percent to 18 reais at 4:15 p.m. in Sao Paulo after the government’s announcement. The stock earlier gained as much as 3.2 percent.

To contact the reporter on this story: Peter Millard in Rio de Janeiro at pmillard1@bloomberg.net

To contact the editors responsible for this story: James Attwood at jattwood3@bloomberg.net Carlos Caminada

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