Why Brazil is a long-term commitment for Petrobras

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Dec. 4 2020, Updated 10:52 a.m. ET

Why Brazil is a long-term commitment

Petrobras’ (PBR) oil and gas production from Brazil was more than 90% of its total upstream energy production. In 2013, ~96% of its total reserves were in Brazil. This made Brazil the single-most important country in its portfolio. PBR engages in 17 other countries in Latin America, the Gulf of Mexico, and Africa for oil and gas production.

Oil accounted for ~90% of PBR’s 2013 total production in Brazil.

Proved reserves are the quantities of oil and gas that are estimated to be economically producible—under existing economic conditions—from known reservoirs. Existing economic conditions include oil and gas prices and costs.

The Campos Basin and the Santos Basins are the two most prolific basins in Brazil. PBR is active in Brazil.

As of March 31, 2014, PBR had 147 exploration agreements. It had exclusive rights to explore 38 exploratory blocks. It was conducting 17 evaluation plans in Brazil.

Other major integrated energy producers that have a significant presence in the upstream operations in Brazil include BP Plc. (BP), Royal Dutch Shell (RDS.A), and ExxonMobil (XOM). XOM is a component of the Energy Select Sector SPDR ETF (XLE).

PBR has the rights to explore in some of the biggest liquid reservoirs in Brazil. It has contracts from the government that span the last two decades and more. This means PBR’s long-term cash flows will be stable—unless there’s a policy change.

It would also be easier for the company to invest heavily in some of these basins. PBR has exclusive rights. This mean it has an assured supply source.

During 2013, sales of oil products, natural gas, and other products in Brazil accounted for ~75% of PBR’s revenues—compared to ~70% in 2012 and ~68% in 2011.

Despite the huge potential, oil and gas production in Brazil has been slow. We’ll discuss this more in the next part of the series.

Visit the Market Realist Upstream Oil & Gas page to learn more.

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