Petrobras is wrestling with its local and global ambitions. To play on the world stage, Brazil's oil champion must extend beyond its own shores. That may be why it seems reluctant to sell its Gulf of Mexico assets. Yet the company also needs cash for a domestic agenda that includes a $237-billion (U.S.) capital expenditure plan. With Brasilia's meddling, Petrobras can't have it all.
Its lofty aspirations are self-evident. The company's $70-billion equity capital hike in 2010 was the largest in nearly a quarter century. Its five-year corporate investment program, meanwhile, intends to develop more than 50 billion barrels of pre-salt oil reserves, in what is also a global superlative.
The realities for now are harsher. Brasilia forces Petrobras to sell imported fuel at a loss. Its oil output is also dwindling. The 2.6 million barrel-a-day average output in October was 1.3 per cent less than a year ago. Production from the largest pre-salt fields won't come online until 2016, assuming it can find the cash to proceed.
Plans to offload nearly $15-billion of assets this year would help. But Petrobras has had trouble letting go of oil real estate in the Gulf of Mexico, the largest chunk of assets for sale. Initially, it sought a single investor willing to take a 50-per-cent stake in all 190 or so of its exploration and production wells. This notion didn't entice potential buyers. After more than a year of deliberating over the sale, Petrobras may be coming around to the idea it will need to sell assets piecemeal and surrender larger stakes.
The reluctance is somewhat understandable. For starters, the Petrobras mindset has been one of growing not shrinking. That means it has little experience parting with perceived jewels. Moreover, any oil company with global aspirations needs to diversify. Selling areas of development before extracting from them isn't necessarily the best strategic move.
In the end, though, Petrobras can't realistically satisfy both aspirations right now. The company is already borrowing heavily and government-imposed subsidies are costly. Top executives, politicians and ultimately Petrobras shareholders will have to come to grips with the idea that until the company can succeed locally, it will have to withdraw globally.