Baker Hughes will bid for a production-sharing agreement with Brazil’s Petrobras as the latter seeks to reduce its hefty debt pile by boosting production from mature fields through these agreements. Reuters reported, quoting a Baker Hughes Brazil executive, that in this, Baker Hughes will be joining its direct rivals Halliburton and Schlumberger, which are already preparing their bids.
This will be the first time that Petrobras will launch production-sharing agreements with oilfield service providers. Reuters notes that this kind of a deal would allow Petrobras to squeeze more oil from its mature fields without relinquishing control of them or risking the capital that it has in tight supply because of its debt.
This particular tender is a pilot one: the winner will help Petrobras boost production from the Canto do Amaro field in northern Brazil, which began operation in 1986 and at the same time, offer a bigger share of this higher production to the Brazilian state company. If the mechanism works, Petrobras will use it for other fields as well.
Petrobras, which recently agreed to pay US$853 million in a settlement with the U.S. Department of Justice after charges of misleading shareholders about corruption practices among the senior management of the company, plans to shave another US$10 billion off its huge net debt and increase oil production by as much as 10 percent to 2.3 million bpd in 2019.
Like all other oil players, the Brazilian state giant has benefited from higher oil prices and continues to benefit from them. Petrobras is on track to cut that debt to US$69 billion by the end of 2018, despite the fact that it is lagging behind with its US$21-billion asset sales goal.
Petrobras was one of the highest-profile companies involved in the Operation Car Wash investigation that sent a number of high-ranking executives to jail for corruption, and it will take a lot more for the company to recover from the fallout, but high oil prices and reserves in the pre-salt zone are helping.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.