Brazil’s state-run oil giant Petrobras should cede some of its drilling rights to foreign companies, the Royal Dutch Shell CEO, Ben van Beurden, said, according to Merco Press, the South Atlantic News Agency.
Shell argues for larger private investments in Brazil’s precious offshore oil fields in the Atlantic Ocean, unlike the current regulations stipulating that 50% ownership of offshore stakes is to be held by Petrobras. According to Shell CEO, this step would not eliminate government royalties, but rather generate incentives for foreign firms to explore and develop deep water oil fields.
The Brazilian government was reported to be considering these changes in an effort to take some debt pressure off Petrobras, the most heavily indebted company in Latin America, and start selling what the market seems to want most – the pre-salt level oil fields.
With oil prices as low as they are now, it appears that things may become worse as Petrobras, implicated in a massive corruption scandal, had completely stalled development of offshore wells. This means that Brazil is unable to earn royalties from oil produced offshore and the country is facing further economic difficulties such as rapid currency devaluation and rising unemployment, wrote Oil Price.
Shell, already the second largest oil and gas producer in Brazil, made the comments following upon firm’s $52b takeover of BG Group in January 2016. Earlier in February, Shell announced that it would be cancelling the sale of $150m in Brazilian oil assets, initially expected to come into effect this year after having been negotiated already in January 2015. Shell stated no reason behind such an abrupt decision.
Previously, in order to ameliorate its burden and to tackle its short and mid-term debt obligations, Petrobras promised in 2015 to sell upwards of $14b assets. Petrobras had completed its divestment plan for 2015, as Reuters reported.