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Petroleo Brasileiro, or Petrobras, Brazil’s state-controlled oil company, will sell its minority share in a gas distribution concern to the Japanese petrochemical trading firm Mitsui & Co. for $490 million as a step towards paying off its huge debt.
Mitsui Gas e Energia do Brasil will buy Petrobras’ 49 percent stake in Gaspetro of Rio de Janiero, an investment holding company that handles Petrobras’ gas-distribution business. The transaction, if approved by Brazilian regulators, is expected to close by year’s end. With approval, Gaspetro would be broken into two firms, one handling natural gas and the other, logistics.
The sale is part of Petrobras’ program to shed non-essential assets to help the financially struggling oil company reduce its debt, which totals about $110 billion at a time of severely depressed oil prices. The effort by Petrobras to divest more than $13.7 billion in properties is expected to be complete by 2019.
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The program would divest businesses engaged in fuel distribution, transport equipment and biofuels. Petrobras exploration and production holdings both in Brazil and in other countries are expected to total about 30 percent of asset sales during this year and 2016 alone.
Petrobras issued a statement saying, “This plan is part of Petrobras’s financial planning aimed at reducing leverage, preserving cash and focusing on priority investments, mainly oil and gas production in Brazil in areas of high productivity and return.”
One priority investment is offshore oil. Petrobras CEO Aldemir Bendine says he believes reducing the company’s debt will help accelerate the development of huge oil fields in the Atlantic Ocean off Brazil’s coast. The fields, known as the Subsalt Polygon, contain at least 176 billion barrels of recoverable oil and natural gas, according to a study published in August.
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The study, written by the National Institute of Oil and Gas at Rio de Janeiro-State University, notes that the Subsalt Polygon’s reserves, if confirmed, would dwarf the amount of oil and oil equivalent already found off Brazil’s coast.
Mitsui, based in Tokyo, has been seen as a good match for a deal with Petrobras because of Mitsui’s experience operating in Brazil, including its minority stakes in large businesses and enterprises there. Already Mitsui is a partner with Petrobras in eight gas-distribution companies operating in Brazil.
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At the same time, selling an asset such as its stake in Gaspetro became more important for Petrobras given that, on Oct. 15, the company said it was indefinitely postponing an offer to sell at least $790 million worth of debentures. Petrobras attributed the problem to “adverse conditions in the Brazilian capital markets.”
Among the assets that weren’t sold at the time was BR Distribuidora, Petrobras’ petroleum-distribution subsidiary. As a result, Petrobras said, it began looking for a “strategic partner” for BR Distribuidora.
Petrobras may have found more than one potential partner. A source close to its board of directors told Reuters that more than 30 companies have expressed an interest in buying shares in its fuel-distribution unit.
By Andy Tully of Oilprice.com
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Andy Tully is a veteran news reporter who is now the news editor for Oilprice.com