Brazil’s Petrobras Looks to Chinese Financing

Brazil’s oil giant Petrobras is taking advantage of the BRIC country summit in China to test the waters for Chinese financing.

Per-Anders Pettersson | Getty Images

Neyde Safadi, Petrobras general manager for corporate finance, said her CFO, Almir Guilherme Barbassa, traveled to China this week with Brazilian officials and will be looking for future financing, as the company tries to raise funds for an ambitious drilling program off Brazil’s Atlantic coast.

Brazilian President Dilma Rousseff and other officials are visiting China to meet leaders of the other BRIC counties - Russia, China and India. South Africa is also joining them.

Petrobras, which has a capital investment plan of $224.1 billion through 2014, has already completed financing for this year, but will be back in the market seeking to borrow $12 billion next year, Safadi said.

“China is one possibility,” she said Monday, speaking to the Financial Women’s Association of New York, which was winding down a three-city tour of Brazil. Petrobras made history with its record $70 billion IPO in 2010.

Safadi later explained in a brief interview that Petrobras routinely seeks out global sources of financing and is looking at opportunities ahead of next year.

As Brazil stands in the ranks of the BRICs, perhaps no Brazilian company is watched as closely as Petrobras because of the huge promise of future reserves which could help the country’s transformation to a developed nation.

Petrobras’ ambitious deep water drilling plans will potentially lift the state-controlled oil company’s proven reserves to 29 billion barrels, nearly double the current 15.9 billion barrels, on par with the world’s major oil producers.

Of its current reserves, 32 percent are in ultra deepwater and 50 pecent in deepwater. It is the world’s fifth largest oil and gas producer after Exxon Mobil, BP, Shell and Chevron and the fourth in terms of proven reserve.

Petrobras now conducts 20 percent of the world’s deep water production, followed by Exxon which does 13 percent.

Safadi said Petrobras expects to be producing 2.98 million barrels per day in 2014, up from its current 2.5 million barrels. By 2020, it expects to produce 5.4 million barrels a day, she said.

The company’s efforts to tap into the ‘pre-salt’ or a salt formation that rests a top oil deposits is the key to its production plans. The salt formation , created when South America and Africa split apart millions of years ago, is 300 kilometers from the shoreline.

“The salt behaves like tooth paste because of the pressure and the temperature so drilling through is not easy,” said Enrique Sira, director of research for Latin America for I H S Cera in Rio in a separate interview this week.

“We think Brazil has the potential and the resources to go from the 2 million barrels it produces today to five million by 2030,” he said. Petrobras forecasts an earlier time frame.

Editor's note: Patti Domm is traveling and will return to her regular posts later this week.