Petroleo Brasileiro SA is considering including fields from its fastest-growing deepwater oil region in a divestment plan to raise money for expenditures and debt payments, six people with knowledge of the proposal said.
The move would mark a shift from economic nationalism to pragmatism at a time of low oil prices, ratings downgrades and difficult access to credit. If any deals materialize, they would be the first time Petrobras reduces exposure to the so-called pre-salt region it heralded as the world’s next oil frontier nearly a decade ago.
Petrobras, based in Rio de Janeiro, chose Bank of America Corp. as an adviser for potential sales of stakes in the area, three of the people said. They asked not to be identified because the process is in preliminary stages and may not proceed.
Neither Petrobras nor the Brazilian presidency responded to requests for comment. Bank of America declined to comment.
Petrobras will need to consider Royal Dutch Shell Plc.’s pledge to sell $30 billion of assets globally as part of its planned purchase of BG Group Plc before pursuing sales in a crowded market, two of the people said. No decision has been made on how much Petrobras could reduce its equity, they said.
A Way Out
Apart from the abundance of oil assets for sale, Petrobras will face political headwinds before completing any pre-salt divestments, Pedro Zalan, a consultant who worked for three decades at Petrobras, said in a phone interview from Rio.
“Nationalists would complain about a more liberal decision, but it might be a good way out for a company that needs to raise cash and is having difficulties with the credit market,” Zalan said. “It would be a political change.”
Petrobras’s interest in monetizing part of the biggest group of crude discoveries this century goes against the government’s policy objectives in recent years. In 2010, Congress approved a bill that requires Petrobras to operate all new pre-salt projects with a minimum 30 percent stake, while respecting the terms of existing blocks offered under a concession regime where Petrobras isn’t legally required to control operations.
In her 2010 and 2014 election campaigns, President Dilma Rousseff cited the billions in future pre-salt tax revenues that would pave Brazil’s path to developed nation status, making the obscure geologic term a household name in Brazil.
“Selling minority stakes would be legal and doesn’t require regulatory changes,” Zalan said. “It doesn’t need to be from the producing fields.”
Petrobras is looking to raise nearly $14 billion from a divestment program in a market where global competitors including Chevron Corp. and ENI Spa have put billions of exploration and production assets up for sale. It is common of oil companies to sell stakes in projects to partners to dilute development costs, a process known as farm outs.
Petrobras needs to offer some of its more attractive assets to find buyers in the current market, said one of the people with knowledge of the discussions. The most productive of its pre-salt wells pumps 35,000 barrels of crude a day. At the Bakken shale formation in North Dakota it takes more than 300 wells to pump that much.
Shell will become Petrobras’s biggest partner in the pre-salt region after it completes a $70 billion purchase of BG, and it plans to sell assets to help finance the purchase. Other partners at pre-salt projects include Galp Energia SGPS SA and Repsol SA, which operates the Pao de Acucar discovery in a joint venture with China Petroleum & Chemical Corp., or Sinopec.
“Unfortunately the oil market is down, but if Petrobras gets a good price for it could be a good deal,” Zalan said.