Petrobras recently announced that it will sell the Pasadena Refinery in the United States and its stake in Petrobras Oil & Gas B.V., which owns assets in Africa. Sales, according to the government owned company, are in the divestment plan, which provides for the supply of assets and a partnership goal of $ 21 billion for the 2017–2018 biennium. Assets can generate interest from major oil companies seeking to expand business on the continent and from financial investors.
“The current retreat means the loss of an important instrument of Brazil’s approach to African countries, in which Brazil loses, both due to the reduction of investment in the sector, but also because of the important strategic relations of Africa for the Country, “says Isadora Caminha Coutinho, a researcher at the Brazilian Center for African Studies at the Federal University of Rio Grande do Sul (UFGRS). “African countries are also suffering from the departure of the company, which invests in strategic sectors in that continent,” she added.
An old story
Petrobras has been operating in the African continent since the 1970s, when the company started to establish a solid base in Angola, mainly due to a specific foreign policy context, favorable to this, which sought to strengthen ties with peripheral countries, but also to overcome the global oil crisis, given that Brazil was highly dependent on the import of the resource. At the time, the Brazilian government stimulated the search for national responses, such as investing in a broad developmental economic plan, which was important for Petrobras’ growth and for its international insertion trajectory. Through the state company, the country began to invest in research and technology, leveraging growing advances in this area and enabling the development of technology pioneered by the company.
However, Africa was effectively the focus of Petrobras only in the 2000s, under the Presidency of Luiz Inácio Lula da Silva .”The level of participation was expanded, inserted in a context in which development and foreign policy were acting in greater consonance, with public support for the internationalization of companies such as Petrobras,” explains the researcher. “With the discovery of the pre-salt, there was still greater interest in the African coast, where the existence of similarity with the Brazilian coast in geological aspects indicates that potentially there are oil resources in the pre-salt layer, that is, ideal for the Presence of the state. “ in this context.Petrobras’ performance on the African continent was significantly expanded — not only on the coast of the continent where it was already located in Angola and Nigeria (where the company started in the late 1990s) but also in countries such as Tanzania, Libya , Equatorial Guinea, Mozambique and Senegal.
A complex market
In the last decade, oil production has grown more rapidly in Africa than in any other region. On the other hand, gas production In rapid growth only loses to the Middle East. Output increases came mainly from deep-water oil in Angola and Nigeria, along with new sources in countries such as Chad and Sudan, as well as offshore gas in Egypt. This environment has attracted new players, such as small independent oil companies (such as Addax, Heritage Oil and Tullow Oil), which have made successful discoveries in emerging basins. National oil companies from outside Africa, including China (CNPC, CNOOC, Sinopec), Malaysia (Petronas) and Russia (Gazprom) also aggressively invest in the continent, thanks in particular to the cost competitiveness relative to their own regions.
In the coming years, oil production in deep waters will continue to grow (in the Gulf of Guinea, for example), while the development of new ground gas resources and development of new resources in hydrocarbon producers in East African Uganda) should become the main growth driver. “With almost 12% of world oil production and incorporating new areas of oil and gas research quite favorable, Africa could legitimately occupy the position of the world’s largest producer of hydrocarbons. Separately, African countries are unable to fight on an equal footing against other international players, but with their potential the continent,as a united body has a stature as a global player, “said Mahaman Laouan Gaya, former Executive Secretary of the Association of Petroleum Producers (APPA) and an international expert on energy and oil from the United Nations Development Program (UNDP).
However, oil exporters from sub-Saharan Africa, which account for nearly half of the region’s aggregate output, were hit hard by the sharp decline in oil prices, which fell nearly 50 percent and remained low despite a slow recovery. According to the World Bank projections,an output growth in the region is expected to increase from 2,6% in 2017 to 3,5% in 2019, reflecting a modest recovery in Angola, Nigeria and South Africa. But there are those who make projections even more negative and, therefore, defend more competitiveness in the sector.
Sub-Saharan Africa, which currently produces nearly five million barrels per day, can see output drop to 2.6 million by 2030 due to the divestment of large producers. “ Cutting in the exploration in the region will also contribute to a long-term decline in production, as producers companies have moved away from new discoveries, preferring to focus on existing ones,” said Femi Oso, principal researcher or Wood Mackenzie consultancy in the region. However, she points out that “the recent confirmation of the gigantic Owowo discovery (estimated at 1 billion barrels) in Nigeria shows well the quality of the natural resources that sub-Saharan Africa has yet to offer.” According to the consultancy, Angola and Nigeria will be the countries most affected by the drop in investment in the oil sector, because oil exploration in these countries is carried out in ultra-deep waters, thus having a higher cost. “Governments in sub-Saharan Africa have to revive the oil exploration industry by offering attractive fiscal advantages rather than seeking to raise tax revenues in the current context,” says Oso.
Brazil should consolidate its position as an oil exporter
Based on expectations of rising fuel demand in the coming years,Brazil could consolidate its position of net exporter of oil and net importer of derivatives, mainly diesel and aviation fuel. This is the opinion of José Mauro Coelho, director of Petroleum, Natural Gas and Biofuels Studies at the Energy Research Company (EPE), expressed at the company’s event in Rio de Janeiro last June.
In the evaluation of EPE, a company linked to the Ministry of Mines and Energy of Brazil, the exploratory success and high productivity of the pre-salt area can determine production growth in the coming years. “Effectively, our oil production will increase greatly and is expected to reach 2026 with the extraction of about 4.5 to 5 million barrels of oil equivalent per day, practically doubling production over a 10 year horizon — which is very significant”,said Coelho.
Passadena — Currency evasion
The acquisition by Petrobras of the oil refinery in Pasadena, Texas, in 2006, is investigated for overbilling and currency evasion. In 2006, Petrobras paid US $ 360 million for 50% of the refinery. The amount was higher than the one paid by Belgium’s Astra Oil for the entire refinery, totaling US $ 42.5 million. Because of the terms of the contract, the state-owned company was forced to buy the whole unit, which resulted in a total expense of $ 1.18 billion. In 2013, Brazilian authorities began a investigation on suspicions of irregularities in the purchase. In the following year, the court ordered the return of US $ 792.3 million to Petrobras to offset losses caused to the company’s equity due to the business.
How Petrobras works in Africa
“Petrobras operates in Africa through a 50% stake in Petrobras Oil and Gas (PO &G). The company’s activities are mainly concentrated in Nigeria, in the Akpo and Agbami fields. We also have the project to develop production in the Aegina field and exploratory activity in the Aegina South and Preowei fields, all under the contractual arrangement of production sharing. “ Informs the company in a statement sent to ATLANTICO. Petrobras declined to comment on the divestment plan.
Withdrawal of Ecopetrol
Following the same steps as Petrobras, Colombian oil company Ecopetrol has also announced that it will cease oil exploration in Africa. The company ceded to Statoil, Norway, its stake in two oil production blocks in the Angolan offshore three years after it was bought from the Norwegians. The company had the intention to enter the Angolan market to diversify the international activity, including with the establishment of a local branch. However, the drop in the price of the barrel of crude in the international market brought disinterest in prospecting in the African country, currently the largest oil producer on the continent. Ecopetrol is Colombia’s largest oil company and one of the top four in Latin America.
New Brazilian legislation
The discovery of the pre-salt by the state-owned company on Brazilian territory prompted the approval of the new oil law in 2010. “It was a substantial change from the 1997 concession regime, which had annulled Petrobras’ monopoly on oil exploration” , Observes researcher Isadora Coutinho. “From the changes that were imposed, the state guaranteed the power to better control the pace of production, to manage the sale of oil abroad, and to plan an autonomous national development project in which the oil sector became the main mechanism of a broader industrial policy. “
With a look at the socioeconomic development of the country, the law allowed the creation of a Social Fund for the management of pre-salt resources, which would be invested in education and health.