Petrobras Loses Importance in Brazil with the Emergence of Multinationals

Experts Say That Petrobras Is Drastically Reducing Its Operations in Brazil as Foreign Companies Acquire Exploration Blocks

Petrobras Produced about 75% in February 2018 and over 92% in 2010, right at the end of former President Luiz Inácio Lula da Silva’s term. This reduction began when pre-salt activities were starting, already under Dilma Rousseff’s governance. When Michel Temer assumed the presidency of Brazil in 2016, there was a slight acceleration due to the opening of the market to foreign companies, which resulted in a 7-point reduction in Petrobras’s market participation.

According to experts, Petrobras tends to reduce its operations as other oil multinationals occupy the market, among the main ones, Statoil, Total, ExxonMobil, and Shell, which are already in a true marathon to secure as many pre-salt participations as possible, which is actually one of the planet’s most promising oil assets found, very extensive and that a single company cannot explore alone.

Since September 2017 until now, Brazil has promoted three auctions of exploratory blocks with one more scheduled in 2 monthss. Petrobras sees this as a double-edged sword: it loses the monopoly on operational productivity within the national territory, but it can incorporate new technologies and gain financial momentum by partnering with multinationals.

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Nelson Silva, Petrobras’s Strategy Director, said that the situation is unfortunately a necessary evil, but it is of utmost importance for other oil companies to operate in the country at this time. Since many of the state-owned company’s projects were frozen due to the Lava Jato issue, there have been significant losses, in the order of billions in commercial dollars with low oil barrel prices.

With each passing day, foreign companies are expanding their businesses in Brazil; for illustration, we can mention Exxon, which injected over US$ billions by partnering to acquire 22 offshore operational permits in recent months. Samuel Pessoa, an economist at FGV, states that the entry of foreign oil companies into our market is essential for Brazil to return to producing at least 4 million barrels daily and ensure a certain “stability.”

Many say that Petrobras is Treading an Inevitable Path to Privatization by Handing Over Its Service Portfolio to Foreign Companies, while others argue that the state-owned company lacks the cash and technology to explore all of the country’s oil blocks. One thing is certain, Brazil has one of the most significant hydrocarbon potentials in the country, and exploiting it is necessary to ensure taxes and economic robustness.