• 5 minutes Rage Without Proof: Maduro Accuses U.S. Official Of Plotting Venezuela Invasion
  • 11 minutes IEA Sees Global Oil Supply Tightening More Quickly In 2019
  • 14 minutes Paris Is Burning Over Climate Change Taxes -- Is America Next?
  • 2 mins Alberta govt to construct another WCS processing refinery
  • 11 hours Let's Just Block the Sun, Shall We?
  • 1 day U.S. Senate Advances Resolution To End Military Support For Saudis In Yemen
  • 1 day Waste-to-Energy Chugging Along
  • 1 day What will the future hold for nations dependent on high oil prices.
  • 7 hours What Can Bring Oil Down to $20?
  • 1 day Venezuela continues to sink in misery
  • 2 days UK Power and loss of power stations
  • 1 day Contradictory: Euro Zone Takes Step To Deeper Integration, Key Issues Unresolved
  • 1 day Regular Gas dropped to $2.21 per gallon today
  • 2 days No, The U.S. Is Not A Net Exporter Of Crude Oil
  • 2 days EPA To Roll Back Carbon Rule On New Coal Plants
  • 19 hours Sleeping Hydrocarbon Giant
  • 21 hours Sane Take on the Russia-Ukraine Case
Alt Text

What Would A New OPEC Look Like?

The global oil markets could…

Alt Text

Big Oil Doubles Down On Shale Despite Price Drop

Despite depressed crude oil prices…

Irina Slav

Irina Slav

Irina is a writer for the U.S.-based Divergente LLC consulting firm with over a decade of experience writing on the oil and gas industry.

More Info

Trending Discussions

Petrobras Offloads $1.4B In Assets Amidst Political Turmoil

Petroleo Brasileiro, Brazil’s state-owned, heavily indebted oil giant, has closed the sell-off of its Argentinean business to local Pampa Energia for US$892 million and its Chilean subsidiary to investment firm Southern Cross for $490 million.

The combined value of the deals represents a small portion of its $15-billion divestment plan for this year, but they are certainly a start.

Petrobras, which is struggling under a debt burden of $100 billion, also announced a $1-billion loan taken from China’s Exim Bank, which will be used to cover payments for “equipment and goods”. Related: A Glimpse Into What Saudi Arabia’s New Oil Policy Will Look Like

Petrobras is in a difficult place right now. It’s under investigation as part of the largest corruption scandal to hit Brazil in recent memory. Operation “Carwash,” as the investigation is known, has revealed that members of the company’s senior management were involved in graft practices along with government officials, which resulted in Petrobras bleeding cash for years.

It has also shared the fate of some peers, which slipped into a loss because of the continued oil price rout. Like them, it expanded aggressively before prices started going down. Unlike most, however, it was also consistently mismanaged, which resulted in the huge debt pile it now has to start reducing, and quickly. This task is being made all the more difficult due to growing debt-servicing costs—another consequence of the oil market depression.

Over the next two years, Petrobras has to repay $24 billion. To meet these payments, Petrobras plans to sell off assets, cut capex, and lay off staff. The capex cut should yield savings of $32 billion through 2019. This is not an insubstantial sum, especially when coupled with asset sales worth $15 billion, although there are questions about whether the company can raise that much in sales. Layoffs are expected to save a further $9.2 billion until 2020. Related: Saudi Arabia To List Aramco Shares In New York, London, Hong Kong 

Meanwhile, debt-servicing costs are highly unlikely to start declining.

And all of this against the backdrop of political and economic turmoil in Brazil. Petrobras is one of its biggest milk cows, but it seems that this cow has been milked too much. The possibility of letting the company go under is unthinkable, but there aren’t a lot of resources for a bailout, either, to put it mildly. Privatization seems the most sensible thing to do, but this will face strong opposition from trade unions, which organized a massive strike late last year in protest against what they called “creeping privatization”.

The next national elections in Brazil will be held in two years. Chances are that the ruling Workers’ Party will lose—what with the bribery scandal, the recession and the jobless rates— and PSDB, which is currently in opposition, will take the helm. Related: Oil Reverses As Stronger Dollar Offsets Canadian Concerns

PSDB is in favor of Petrobras’ privatization and it has two years to figure out how to handle trade union opposition to such a development. Because, unless oil prices spike back to 2013 levels before 2016 is over and stay there (seriously unlikely), Petrobras will still be hanging on by its teeth in 2018.

In the meantime, a very dynamic drama is playing out at the highest levels, concerning the impeachment of Brazilian President Dilma Rousseff. On Monday, the new speaker of the lower house of Congress had vowed to annul the impeachment process, but only a day later, he has changed his mind and the process is back on track, making it possible that the president will be impeached as early as this week, according to the New York Times.

By Irina Slav for Oilprice.com

More Top Reads From Oilprice.com:




Back to homepage

Trending Discussions


Leave a comment

Leave a comment




Oilprice - The No. 1 Source for Oil & Energy News