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Petrobras seen struggling to meet crude targets by Odebrecht

BY JUAN PABLO SPINETTO

RIO DE JANEIRO, Brazil (Bloomberg) -- Petroleo Brasileiro SA, the most indebted oil company, is facing difficulties meeting its goal of doubling output by 2020, said supplier Odebrecht Oleo & Gas SA.

Petrobras, as Brazil’s state-run producer is known, has a “full plate” and may face financial limitations to speed up development, Roberto Ramos, head of Odebrecht’s oil equipment unit, said Jan. 30 during an investment opportunities meeting organized by the Norwegian-Brazilian Chamber of Commerce, or NBCC, according to remarks posted on the NBCC website.

“Petrobras is doing what they can to mobilize gear, equipment and capex, and an enormous concentration of FPSOs are coming into production in 2014 and 2015, but is it soon enough?” Ramos told the Rio de Janeiro event. “The Petrobras balance sheet could also limit the increase of development speed.

Odebrecht, the third-largest supplier of offshore rigs to Petrobras, referred questions to the NBCC website presentation in an emailed response sent by external public relations representatives. In a statement today, the company said it trusts and relies on Petrobras’s capacities. NBCC declined to make the audio of the meeting available to Bloomberg News, saying the event was for members only. Petrobras declined to comment.

Shares of Petrobras slumped to the lowest in more than eight years last week as refining losses mount on government’s demands to keep gasoline prices below purchase costs at a time the Rio-based company’s oil output misses estimates. The stock rose 0.6 percent to 14.70 reais at 11:17 a.m. in Sao Paulo.

Petrobras’s refining division has lost $35 billion since 2011 when Brazil, which controls the company through a majority of voting stock, started using it to subsidize domestic fuel.

Petrobras is among the biggest investors among global producers and, with the new capacity, expects to reach positive cash flow by 2016, the company’s press office in Rio de Janeiro said Feb. 3 in an emailed statement.

The state-run company is shifting its focus from exploration drilling to developing existing discoveries. It has added six new production platforms since November. The number of offshore rigs in Brazil fell in December to the lowest since 2010, according to data compiled by Baker Hughes Inc.

For providers of deepwater services and equipment, Brazil offers ‘‘huge” opportunities, Ramos was quoted as saying.

Petrobras, the biggest producer in waters deeper than 1,000 ft, needs to deliver on its business plan for Brazil to recover investor credibility, Ramos said, according to the NBCC website. Improvements may not be seen before 2016, he said.

“What is lacking the most in Brazil, is confidence,” he was quoted as saying. “To get confidence back, Petrobras has to deliver. 2014 is not a year to rock the boat. 2015 will be a year for adjustments. From 2016, we might see improvements. The question is how Petrobras will handle this.”

OOG, as the company that started offshore drilling operations in 1979 is known, supplies seven offshore rigs to Petrobras, according to data published by Rigzone. Diamond Offshore Drilling Inc. is the largest of Petrobras’s 16 offshore rig suppliers, followed by Queiroz Galvao Oleo & Gas SA, the data show.

Odebrecht SA, the holding controlling OOG, is Brazil’s biggest construction company and had gross revenues of 84.4 billion reais ($35 billion) in 2012.

To meet its targets, Petrobras will need more rigs, Ramos said. Logistics is another bottleneck, he said.

“The current logistic systems can’t cope and won’t be able to cope as Petrobras doubles its production, let alone accommodate other demands created by” development of the Libra offshore discovery, he said.

02/11/2014

 

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