Petrobras divestment plan gaining momentum

OREANDA-NEWS. August 11, 2016. Brazil's state-controlled Petrobras' plan to unload \\$14.4bn in non-core assets this year appears to be gaining traction after little movement in the first half of the year.

Grappling from lower oil prices and the fallout from a colossal corruption investigation, the heavily indebted company announced in 2015 that it would unload \\$15.1bn over 2015-16.

Petrobras met its \\$700mn 2015 divestment goal mainly through the \\$490mn sale of a 49pc stake in its gas distribution subsidiary Gaspetro to Japanese trading house Mitsui, although local legal wrangling surrounding the sale is still unresolved.

In the first half of 2016 the company finalized agreements for around \\$1.4bn in assets in Argentina and Chile. And last week, Petrobras concluded an agreement for its 66pc operating stake in the BM-S-8 exploration block in the Santos Basin with Norway's Statoil, an asset containing sub-salt reservoirs. The deal is valued at around \\$2.5bn.

Negotiations for other upstream assets are advancing. The company's offer of 104 onshore and nine shallow-water exploration and production assets in the northeast has sparked interest from Brazilian independents, and drawn the ire of labor unions opposed to privatizing state-held assets.

Deepwater assets on offer have caught the interest of larger local independents such as PetroRio, Ouro Preto and QGEP as well as their foreign counterparts looking to bulk up their reserves.

Petrobras is nearing a farm-in deal valued at more than \\$500mn for the deepwater Ba?na and Golfinho fields with PetroAtlantico, a new independent established by former directors of Portugal's Galp, two executives with knowledge of the talks tell Argus.

Galp was one of the early movers into Brazil's sub-salt play.

In June, Ba?na, located in the Santos basin, produced around 48,000 b/d of 33°API crude, and Golfinho, in Esp?rito Santo basin, produced 28,000 b/d of 28°API crude, according to oil regulator ANP.

Petrobras and PetroAtlantico were not available to comment. The ANP says PetroAtlantico has not applied for an operator license, but could obtain one following a farm-in if all legal requirements are met.

The fields are among three deepwater assets Petrobras has been trying to sell since last year. The third, Tartaruga Verde, is still awaiting offers.

Petrobras has said it hopes to emerge as a leaner upstream-focused company after it completes a major restructuring that will see the divestiture of most midstream assets.

An agreement with a consortium including Canadian asset management firm Brookfield for the sale of southeast pipeline network NTS, which receives gas piped from Bolivia, should be finalized this week. The 2,727km (1,694mi) network connecting the populated southeastern states of Rio de Janeiro, S?o Paulo, Minas Gerais and Esp?rito Santo has an estimated value of around \\$6bn.

Downstream assets have posed more of the challenge. Last month, Petrobras said it would sell a controlling voting stake in its fuel distribution subsidiary Petrobras Distribuidora (BR), abandoning previous unsuccessful plans to sell a minority stake.

Recently appointed chief executive Pedro Parente says the company will receive offers for the BR stake by November. BR has an estimated value of around \\$8bn-\\$10bn.

Petrobras also plans to sell two of its three LNG terminals and associated power stations, in addition to fertilizer assets.

Under its 2015-19 business plan, Petrobras said divestments and a corporate reorganization would generate around \\$42bn in 2017-18. That amount is expected to be expanded under the company's forthcoming five-year business plan, which should be released by October.