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Crisis Overview: Petrobras CRISIS OVERVIEW: PETROBRAS Petrobras is the state oil company in Brazil. Petrobras’s oil production areas are exclusively in South America, but currently have no claims in the Guyana-Suriname Basin. The company also has refineries in Texas and Japan, and joint ventures with multiple countries in West Africa. In May of 2019, Chevron bought a Texas oil refinery from Petrobras for $350 million. The site was the center of the Brazilian government’s corruption investigation into Petrobras, and the company had paid more than $1 billion for the plant before it took over ownership in 2012. Petrobras ended up paying $912 million in restitution to the Brazilian Government, US Government, and the Bill and Melinda Gates Foundation. Going forward, Chevron must monitor the actions of Petrobras as it relates to its past in Brazil and the potential for future conflict in the Guyana-Suriname Basin. GUYANA-SURINAME BASIN OVERVIEW The Guyana-Suriname Basin is the world’s last major unexplored oil basin. The basin has attracted companies such as Shell, Total, and Mobil since the 1940s, who completed major geological surveying and drilled test wells in Guyanese waters. In Suriname’s waters, the state oil company Staatsolie is a dwarf of production, only drilling a little over 16,000 barrels a day. In Guyanese waters alone, Exxon and Hess estimate that reserves in the Stabroek block off Guyana alone possess over 5,000 MMboe (millions of barrel of oil equivalent). These major discoveries have led to international investment in the Guyana-Suriname Basin, reducing the risk of committing great resources to such uncharted territory. The potential for discovery is great, but competition continues to heat up between countries as much of the basin is offshore - stretching across the waters of Guyana, Suriname, and French Guiana. These prospects are exciting for the areas and companies involved, and the possibilities are just beginning to take shape. Discovery of new fields and reserves continues as companies stake their claims and the governments of the “Three Guianas” work to make an agreement to cooperate in the oil & gas sector. As the situation continues to develop, companies will need to decide on their strategy going forward on how they would like to take advantage of what may be the final frontier for oil and natural gas exploration. All of the companies who wish to start new ventures in the Guyana-Suriname Basin will have to go through a different regulatory framework to get a license. The government of Guyana knows the future value of the basin, and therefore has increased the royalty percentage for future deals with major companies. Guyana’s State Assets and Recovery Agency, SARA, is looking into past instances of corruption within the government and the licenses given out. While those contracts and licenses will still be honored, a company which happens to influence the dealmaking process in a corrupt manner may find itself at a disadvantage if not careful. Regardless, there is no question that companies will have to adjust their strategies in order to keep their bottom lines consistent with investor and stakeholder expectations. It is obvious that for many companies, having a contract within this basin could prove to be incredibly profitable, though recent changes threaten to undermine the ability for deals to be agreed upon. Ultimately, Chevron, Petrobras, and PDVSA will be competing for the same resources in this hotly contested oil frontier. COMPANY OVERVIEW Petróleo Brasileiro S.A. — Petrobras, more commonly known as simply Petrobras, is a semi-public Brazilian multinational corporation in the petroleum industry headquartered in Rio de Janeiro, Brazil. The company's name translates to Brazilian Petroleum Corporation — Petrobras. The Brazilian government directly owns 54% of Petrobras' common shares with voting rights, while the Brazilian Development Bank and Brazil's Sovereign Wealth Fund (Fundo Soberano) each control 5%, bringing the State's direct and indirect ownership to 64%. The privately held shares are traded on BM&F Bovespa, where they are part of the Ibovespa index. Petrobras controls significant oil and energy assets in 16 countries in Africa, North America, South America, Europe, and Asia. Reserves held outside of Brazil accounted for 8.4% of production in 2014. The majority of these reserves are in South America; the company has assets in Argentina, Bolivia, Chile, Colombia, Venezuela, Paraguay, and Uruguay. Petrobras owns refineries in Texas (100,000 barrels per day of throughput), Okinawa, Japan (100,000 barrels per day of throughput), and Bahía Blanca, Argentina (30,000 barrels per day of throughput). The company also owns exploration blocks in the Gulf of Mexico and through joint ventures has production in Nigeria, Benin, Gabon, and Namibia. However, Brazil represented 92% of Petrobras' worldwide production in 2014 and accounted for 97% of Petrobras' worldwide reserves on 31 December 2014, when the company had 8,112.8 million barrels of oil equivalent (4.9633×1010 GJ) of proved developed reserves and 4,599.7 million barrels of oil equivalent (2.8140×1010 GJ) of proved undeveloped reserves in Brazil. Of these, 62.7% were located in the offshore Campos Basin. The largest growth prospect for the company is the Lula oil field in the Santos Basin. In 2015, the company produced 2.284 million barrels of oil equivalent (13,970,000 GJ) per day, of which 89% was petroleum and 11% was natural gas. REFERENCES About Us: Get to Know the Profile, History and Performance.” Petrobras. Accessed November 6, 2019. http://www.petrobras.com.br/en/about-us/. Laurentian Research Deep Value. “The Guyana-Suriname Basin: An Emerging Petroleum Province.” Seeking Alpha, February 14, 2019. https://seekingalpha.com/article/4240592-guyana-suriname-basin-emerging-petroleum-provinc e. “Oil Exploration in Guyana-Suriname Basin Heats Up.” Oil exploration in Guyana-Suriname Basin heats up | S&P Global Platts, September 6, 2019. https://www.spglobal.com/platts/en/market-insights/latest-news/oil/090619-oil-exploration-in-gu yana-suriname-basin-heats-up. “Online Journal for E&P Geoscientists.” Datapages, Inc. Accessed November 6, 2019. http://www.searchanddiscovery.com/pdfz/documents/2015/10730workman/ndx_workman.pdf.ht ml. “Petrobras.” Department of Public Information. Accessed November 6, 2019. https://dpi.gov.gy/tag/petrobras/. Stabroek News. “Brazil's Petrobras Presents Strategic Plan for Guyana's Oil and Gas Sector.” Stabroek News. Stabroek News, April 30, 2019. https://www.stabroeknews.com/2019/04/30/news/guyana/brazils-petrobras-presents-strategic-p lan-for-oil-and-gas-sector/. The Editors of Encyclopaedia Britannica. “Petrobras.” Encyclopædia Britannica.Encyclopædia Britannica, inc., April 13, 2015. https://www.britannica.com/topic/Petrobras. “U.S. Department of the Treasury.” Treasury Sanctions Venezuela's State-Owned Oil Company Petroleos de Venezuela, S.A., October 22, 2019. https://home.treasury.gov/news/press-releases/sm594. "Guyana to Raise Gov't Royalties for Future Oil Licenses." Reuters. July 03, 2019. https://www.reuters.com/article/guyana-oil/guyana-to-raise-govt-royalties-for-future-oil-licenses-idU SL8N2442QI. Taylor, Adam. "Analysis | How Citgo, a U.S. Oil Company, Became Venezuela's Lifeline." The Washington Post. January 29, 2019. https://www.washingtonpost.com/world/2019/01/29/how-citgo-us-oil-company-became-venezuelas- lifeline/..
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