Page 4 - LatAmOil Week 25 2022

LatAmOil COMMENTARY LatAmOil

(Photo: Sembcorp Marine)
Petrobras’ balancing act

High oil prices are shining the spotlight on the contradiction between the NOC’s

upstream goals and the government’s hopes of support for policy objectives

HIGH oil prices ought to be good news for Bra- own operations. And sure enough, its managers
zil’s national oil company (NOC) Petrobras. have indicated that they want to use additional
WHAT: After all, Petrobras is not just a caretaker revenues to support long-term business devel-
Brazilian President Jair NOC, making certain that the interests of the opment strategies.
Bolsonaro has once again state are looked after while international oil Most of all, they want to direct the money
blasted Petrobras for its companies (IOCs) provide the money, expertise into exploration and development work in pre-
decision to hike domestic and technology needed to explore, develop and salt areas, which are expected to account for the
gasoline and diesel otherwise handle Brazil’s hydrocarbons. Instead, bulk of reserve replacement and new produc-
prices. it is an operator in its own right. It may not have tion over the new few decades.
resources identical in calibre to super-majors But Petrobras has a problem. It does not
WHY: such as Shell (UK) or ExxonMobil (US), but it function like a caretaker NOC, and it does have
The president’s com- has an extensive upstream portfolio and is more certain legal protections against being forced
plaint is part of a debate than capable of sustaining crude oil and natural to do so. (For example, under Brazilian law, the
over the NOC’s role and gas production on a large scale. It is active both government cannot require the company to
obligations.
onshore and offshore, and it has accumulated change its pricing regime to satisfy policy objec-
WHAT NEXT: valuable experience in the geologically complex tives.) However, it is still majority-owned by the
Privatisation is on the ho- deepwater and ultra-deepwater pre-salt zones. Brazilian government, and it is still expected to
rizon, though the timing In short, Petrobras has plenty of reasons answer to the state to some degree. For instance,
is not yet certain. to put the extra money it earns from high oil it must appoint a CEO selected by Brazil’s presi-
prices to direct use – not by channelling it into dent, and the government can set limits on divi-
the state budget but by investing it back into its dend payments to shareholders.

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