Page 5 - LatAmOil Week 28

LatAmOil COMMENTARY LatAmOil
 Additionally, they were accompanied by reports that Colombian oil output had risen to 883,000 bpd by November 2018 – still shy of the 1mn bpd mark reported in 2015, but de nitely above the previous level of 800,000 bpd.
More ambiguous signs
Nevertheless, there are still signs of lingering uncertainty. For example, Duque’s position on unconventional oil and gas development has not always been consistent.
During the campaign, the president said he wanted to see Ecopetrol and other investors con- centrate on Colombia’s conventional oil and gas reserves instead of turning to unconventional shale elds that cannot be exploited pro tably without special equipment and drilling tech- niques such as hydraulic fracturing (fracking). He may have taken this stance partly in the hope of placating Pedro’s supporters, who generally opposed fracking. But he also appears to have done so out of concern that the NOC was less likely to make a pro t on fracking projects, since unconventional elds are more costly and risky to develop.
At the same time, though, some of Duque’s allies are strongly in favour of fracking. Maria Fernandez Suarez, the Minister of Mines and Energy, devoted a great deal of time to promot- ing the potential of unconventional elds during the president’s rst few weeks in o ce.
For his part, the president has warmed up to fracking, at least a little. Last week, for example, he said his government wanted to see whether unconventional oil and gas projects might help expand Colombia’s reserves without putting too much stress on the environment. (See: Colom- bian environmental agency puts up new obsta- cle to Ecopetrol’s fracking plans, page ???.)
Uncertainty in other areas
Meanwhile, the Colombian oil and gas sector is facing uncertainty elsewhere. It is still trying to optimise the value-added tax (VAT) regime for retail fuel prices, and it is at odds with regional leaders and with its political opponents a er mooting plans to allow the federal government to keep a larger share of oil and gas revenues for itself.
ese wrangles are probably a sign of con- tinued uncertainty over the question of which priorities the Colombian government ought to follow in the hydrocarbon sector. But they may also be a hint that change is likely to be a slow process in this country.
If so, Duque may have difficulty bringing oil output back up to the level of 1 million bpd before the end of his current four-year term. But if the president’s e orts to attract new invest- ment for exploration projects succeed, Colom- bia should be on track to meet this milestone by the middle of the next decade.™
Petrobras’ next moves
The Brazilian NOC is gearing up to sell assets that will signi cantly reduce its downstream pro le
WHAT:
Petrobras has formally launched the sale of four re neries and is preparing to hive off its gas distribution unit.
WHY:
Reducing vertical integration should free up resources for investment in the more lucrative upstream sector.
WHAT NEXT:
Divestment will include a substantial chunk of Petrobras’ midstream portfolio, but this part of the privatisation process is not likely to gain much momentum before 2020 or 2021.
BRAZIL’S national oil company (NOC) Petro- bras has continued to forge ahead with its divest- ment programme this year and is due to begin selling o key sections of its downstream port- folio before the end of this month. is process is likely to pave the way for additional sell-o s that will signi cantly change the rm’s pro le.
This essay will identify the assets that are coming up for sale in the near future and specu- late about future privatisation targets.
Oil processing
One round of sell-o s is already under way. On July 15, Petrobras con rmed that it had o cially launched the process of hiving o four oil re n- eries with a combined processing capacity of nearly 900,000 barrels per day (bpd).
In a stock exchange filing, the company named the facilities slated for sale as Re naria Landulpho Alves (RLAM), a 376,650 bpd plant in Bahia State; Re naria Presidente Get- ulio Vargas (REPAR), a 208,990 bpd plant in Parana; Re naria Alberto Pasqualini (REFAP), a 189,600 bpd plant in Rio Grande do Sul; and Re naria do Nordeste (RNEST), a 115,000 bpd plant in Pernambuco.
It con rmed that it was divesting the plants along with associated infrastructure, including terminals and pipelines.
Petrobras also stated that it was ready to send out “a descriptive memorandum contain- ing more detailed information on the assets” to potential investors that met all requirements for participation in this phase of the sale. It did not name any potential investors but noted that this part of the process was non-binding.
e company has said it intends to complete the sale of the re neries by the end of this year. It will have just three months to negotiate all of these deals, since would-be buyers must con rm their interest in taking part in the bidding pro- cess by August 16 and then sign con dentiality agreements by September 27, prior to starting talks on the assets.
Gas distribution
e next round of divestment will then begin on July 23. According to a prospectus released in late June, Petrobras is due to begin selling o at least 25% of shares in Petrobras Distribuidora, its natural gas distribution subsidiary, on that date.

Week 28 17•July•2019 w w w . N E W S B A S E . c o m
P5