LIBRA in balance prompts rethink on Petrobras presal role

The success of the giant LIBRA field auction was on a knife-edge today as union protests and tepid foreign interest continued to overshadow the $270bn project. Yet, although pessimism over Brazil reigns, some good old common sense looks to be leaking into Brazil's deepwater oil explorations.

Brazilian newspaper Folha runs a story today that Petrobras is actively seeking to rediscuss (by which it means 'get out of') the obligation to take a minimum 30% stake in any field that is auctioned. Plans to invest $263.5bn are unrealistic given a weak share price and more difficult background for debt fund raising mean. Petrobras just cannot take on yet more tasks - if anything, it needs to be doing far less.

It has long been clear that the sheer enormity of investments is overwhelming Petrobras whose share price has been as underwater as the pre-salt layer it would like to tap. The government, which is already struggling to push forward a myriad of transport projects that are  proving less popular than hoped, may now be prepared to interpret rules more flexibly. That should allow a greater participation for non-domestic players. As always, though, if the government squeezes the pips too hard, foreign investors could prove as elusive as they are in the road sector.

About admin

I've been researching and writing on Brazilian financial markets, industry and economy since 2006 for a wide range of specialist media, consultancies and investors. Before that I spent over 10 years in London and New York writing for and editing magazines and journals dedicated to finance, investment and economics in developing markets, mostly for the Euromoney Institutional Investor group and Thomson Financial. Areas of coverage Below are samples of areas that I cover and some of the common themes that I investigate. Capital markets BM&FBovespa markets *capital raising trends: via equities (IPOs and secondary issuance), debt and loans *the asset management industry: legislation and coverage of the key hedge, pension and investment funds * corporate governance: how the regulator is seeking to strengthen best practice and limitations * debt markets: the nascent corporate markets, attempts to boost liquidity and new insturments. * private equity market: why this market has been so successful, who’s involved. *electronic, high frequency trading and alternative trading platforms: what does the future hold? Banking *credit: the growth of consumer and business credit and competition between banks and models *Public versus private: the role and market share of public and private sector banks and the politicization of the industry * internationalization: which Brazilian banks are expanding overseas and where * investment banking: the growth of the domestic market and who’s winning which mandates *regional banks and development banks: what role they play in the industry and how they compete Mining *licensing: the complex process of obtaining environmental, water, land and operating licenses at a state and federal level. * capacity: the feasibility and sustainability of capacity increases * financing: how miners are raising finance in Brazil and abroad *competition: the interplay Vale, MMX and junior miners *logistics: rail, road and port connections Oil and gas: the fund raising issues related to the massive of pre-salt (link) Multilatinas: Who are they and how and where they are expanding Meatpacking: Are debt burdens sustainable, what are the different business models for areas such as branding and distrbution Agriculture: How are farms consolidating, what are environmental risks, how can foreign investors be involved. IT and software: Can Brazil take on India and build a viable long-term IT industry? For more information on clients and work, please see the media and consultancy sections.
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