Weekly Report - 21 March 2013 (WR-13-11)

BRAZIL-ARGENTINA | Petrobras revises five-year investment plan. On 16 March Brazil’s state oil company, Petrobras, released its revised 2013-2017 business plan. The plan calls for US$236.7bn in investments for the period. This as the firm seeks to increase its crude oil production from 2m barrels per day (bpd) currently to 3m bpd by 2017 and 4.2m bpd by 2020. However, the investment figure is only 0.8% higher than the amount cited in the previous 2012-2016 business plan.
   Petrobras’ financial results last year were disappointing and the company has been forced to revise its investments so as to address this. Petrobras revealed that approximately US$147.5bn, or 62% of the total investment figure, will be destined for exploration and production efforts. Meanwhile US$64.8bn (or 27%) has been earmarked for investment in refineries, transportation and distribution; US$9.9bn (4%) will be spent on gas and other energy sources; and US$2.9bn (1%) will be invested in the production of bio fuels.
    The overall investment in refineries, transport and distribution is lower than the US$77.4bn presented in the previous business plan, which the company explained by pointing out that some of the investment in this area has already taken place. In contrast, the figure for exploration and production investment increased from US$131.6bn in the previous business plan. The majority of this (68%) will be destined for the development of the vast pre-salt oil deposits off the coast of Brazil in a bid to increase oil production in the area from 7% currently to 35% by 2017. Indeed, this appears to represent the main change in the new plan - the concentration of investments in the development of projects in Brazil at the expense of projects elsewhere. Only 2% of the total (US$5.1bn) will be spent on projects abroad.
   Days after the plan was released on 19 March Petrobras CEO, María das Graças Foster, provided some more details on the company’s divestment plans, particularly those affecting assets abroad. Foster explained that the previous business plan called for the sale of Petrobras’ refineries in Japan and Pasadena, California; its exploration and exploitation concessions in the Gulf of Mexico and Tanzania; and its production assets in Argentina - all this in a bid to raise some US$14.8bn. However, Foster said that the new plan has scrapped the offloading of the refinery at Pasadena. Foster added that the company was currently negotiating the sale of its assets in Argentina which she described as “a complicated process”. 
    Petrobras’ assets in Argentina include a refinery in Bahía Blanca, a number of gas pipelines, electricity production assets, and a stake in an oil distribution network it shares with local firm, Refinor. Although various Argentine oil firms such as Oil Combustibles, Tecpetrol and even the now state-controlled, YPF, had previously expressed an interest in acquiring these assets, it is not clear whether Petrobras’ divestment in Argentina has been positively or negatively viewed by the Argentine government, which is already unhappy with the decision by Brazil’s mining giant, Vale, to suspend the Río Colorado potassium project [WR-13-10].