Petrobras intends to be one of the last remaining oil producers on the planet, the Brazilian energy company’s chief executive said as he outlined a $100bn-plus investment plan concentrated on offshore oil exploration and production.
Jean Paul Prates told the Financial Times that Latin America’s largest oil and gas company is considering a fresh wave of international expansion in Europe, west Africa and the Americas as part of a strategy overhaul.
The state-controlled group would also seek to establish Brazil as a leader in offshore wind, as part of a diversification push to prepare for the world’s transition away from fossil fuels, he said.
“We want to be able to be there at the very end of the fade-out of oil. And for that we need to have new frontiers open or at least accessible,” Prates said last week in New York, where he met investors to discuss a new five-year strategic plan.
“We need to keep the core [business] very safe . . . We are not doing [a] crazy transition.”
After several years of selling off non-core assets in order to focus on its mainstay of deep sea oil and gas production, Petrobras again intends to be a diversified energy group, in line with the wishes of leftwing President Luiz Inácio Lula da Silva.
Since the return to power of Lula, who previously ruled between 2003 and 2010, it has increased its five-year capital spending budget by 31 per cent, with almost three-quarters dedicated to exploration and production.
It also plans to return to areas it sought to exit, such as petrochemicals, renewable power and fertilisers, alongside increased investments in refining and biofuels.
Petrobras, which has a market capitalisation of about $110bn, is pursuing oil, natural gas and renewables opportunities abroad again in conjunction with some of its international partners in Brazil including Shell and Equinor, Prates said.
Having mostly exited operations outside its homeland over the past decade, locations for potential new investment include in Norway, the UK, the Netherlands, west Africa and Guyana, according to Prates.
Last month Petrobras began delivering on its expansion strategy when it acquired exploration rights in three oil blocks operated by Shell in São Tomé and Príncipe, a country on the west coast of Africa.
It also partnered with Shell and China National Offshore Oil Corporation to secure exploration blocks in Brazil in December. Overall, Petrobras plans to spend $7.5bn on exploration over the next five years drilling 50 wells, mostly in Brazilian waters.
“We want to use these [partnerships] as a buffer for strategic exchanges and experience exchanges but also as an investment together,” said Prates, who criticised the previous management of Petrobras under the government of Jair Bolsonaro for “pulling out of everything”.
He said Petrobras’s former leadership prioritised “super profits” and “exceptional dividends” by making everything look nice and selling it.
With the change of leadership, which followed last year’s return to power of left-winger Lula, the company would get back to replacing oil reserves and growing production, said Prates, a former senator and political ally of the president who also has a background in the energy industry.
However, opponents of Lula’s Workers’ party have sounded the alarm. Petrobras was the locus of a sprawling graft scandal during the previous stint of leftwing rule in Brazil, with kickbacks paid in exchange for overcharged construction contracts.
Critics also alleged mismanagement and political interference that cost the business billions of dollars, whether through fuel subsidies or refinery building projects that went over budget.
Prates said addressing investor worries over this history is the “biggest mission” he faces. Higher standards of corporate governance have been put in place, he said, adding that his experience as a politician and oil executive can help him resist overt political influence, he said.
“I always have good arguments on the other side to say [to politicians], ‘look this is not a direct administration entity’ — you have to do that through the board of administration,” Prates said. “I don’t need to say that ever to President Lula, for instance, because he knows that he never, never ever told me anything about, do this, do that.”
Investors have backed management under Prates. Petrobras shares have surged 60 per cent over the past 12 months to hit and all-time high last week, outperforming ExxonMobil and Chevron.
Schreiner Parker, analyst at Rystad Energy, a consultancy, said: “There is an idea in the investor community that the troubles of the past have cleared up . . . and that there is much more regulation and oversight that’s occurring in Petrobras.”
Rising output from vast offshore reserves known as the ‘pre-salt’ fields off its southeastern coast is set to propel Brazil into the top-five oil-producing nations towards the end of the decade, according to analysts.
But the search for new viable deposits to sustain production in the medium-to-long term has disappointed lately and production is due to peak in 2029, according to Marcelo de Assis at consultancy Wood Mackenzie.
“They have a challenge in upstream to replenish reserves and keep the money flowing in future from the most profitable business they have,” he said.
In the hunt for new deposits, Petrobras has identified a 2,200km marine tract along Brazil’s northern coast called the Equatorial Margin.
However, it is appealing a refusal by environmental regulators for a drilling licence to explore a section considered the region’s main prize. Located 500km from the mouth of the Amazon river, campaigners say it is an ecologically sensitive area.
Prates said Petrobras has a duty to the people of Brazil to replenish its oil reserves.
“If you don’t explore there, you’re going to ask if you run out of oil? All of a sudden you’re going to import from Nigeria, from Angola . . . it’s better to pay taxes in your own country if you have the resource there,” he said.
