Petrobras

Petróleo Brasileiro S.A.
	File:Petrobras logo.jpg
Company type	Semi-Public (NYSE: PBR / PBRA) (Bovespa:PETR3 / PETR4)
Industry	Oil and Gasoline
Founded	1953
Headquarters	Rio de Janeiro, Brazil
Key people	José Sérgio Gabrielli de Azevedo (current President)
Products	Petroleum and derived products; BR service stations; Lubrax motor oil
Revenue	$94.547 billion USD (2007)
Operating income	19 billion USD (2006)
Net income	$4.05 billion USD (2008)
Number of employees	68,300. (2007)
Website	www.petrobras.com

Petrobras (NYSE: PBR / PBRA) (Bovespa:PETR3 / PETR4), short for Petróleo Brasileiro S.A., is a semi-public^[5] Brazilian energy company headquartered in Rio de Janeiro. The company was founded in 1953 mainly due to the efforts of the Brazilian President Getúlio Vargas. While the company ceased to be Brazil's oil monopoly in 1997, it remains a significant oil producer, with output of more than 2 million barrels of oil equivalent per day, as well as a major distributor of oil products. The company also owns oil refineries and oil tankers. Petrobras is the world's leader in development of advanced technology from deepwater and ultra-deep water oil production.

Petrobras controls significant oil and power assets, as well as related business activities, outside of Brazil in 18 nations in Africa, North America, South America, Europe and Asia. These holdings as well as its activities in Brazil give it total assets of $133.5 billion. 55.7% of Petrobras' common shares (with vote right) is owned by the Brazilian government,^[6] however privately held portions are traded on Bovespa, where it is part of the Ibovespa index.

Petrobras also has oil shale processing activities started in 1953 by developing Petrosix technology for extracting oil from oil shale. The pilot plant started in 1982 and the commercial production started in 1992. At present, the company operates 2 retorts, the largest of which processes 260 tonnes/hour of oil shale.

Petrobras operated the world's largest oil platform - the Petrobras 36 Oil Platform - until an explosion on 15 March 2001 led to its sinking on 20 March 2001.

Petrobras is also recognized for being the largest sponsor of arts, culture, and the environment in Brazil through several projects. Among the environmental initiatives, Petrobras is the main supporter of whale conservation and research through the Brazilian Right Whale Project ^[7] and the Instituto Baleia Jubarte (Brazilian Humpback Whale Institute).^[8] Petrobras is a long-term sponsor of the Williams Formula-1 team. The company employs the H-Bio process to produce biodiesel.^[9]

As of 19 May 2008, Petrobras is the 3rd largest company of the Americas, after Exxon Mobil and General Electric making it larger than Microsoft, AT&T and Wal-Mart and 6° largest in world. ^[10]

History

In 1953, Brazil's president Getúlio Vargas officialized the creation of Petrobras, with great popular support under the motto "Petroleum is Ours!". The company's creation provoked the wrath of the Brazil's elite, which reacted fervently against the institution and Vargas himself, who committed suicide in 1954. Many attempts were made to privatise the company, especially during Brazil's dictatorship period (1969-1974).

Cronology

Petrobras standart model for its land oil pump, popularly known as Wood Horse (*Cavalo de Madeira* in portuguese)

1953: the company is created by president Getúlio Vargas;
1954-1961: period of great instability in the company's politics, caused by the great government opposition against it;
1961: a relatory released by the government revealled pessimist news about oil perspective in the country's terrains;
1973: after a short growth, the company is heavily affected by the first world petroleum crisis, which stopped the period known as "Brazilian Miracle", a period of great growth in the country's economy. The company, weakened, almost bankrupted;
1974: Petrobras discovered a huge oil field in Bacia de Campos, which the oil reserves raised the company's finances, "resurrecting" its operations nationwide;
1975: the company signed "risk contracts" of partnership with private oil companies to intensify the search for new oil fields and to consolidate the its influences in the country;
1979: it was the second world petroleum crisis. Petobras was affected, but not with the same strong effects as in the crisis of 1973;
1997: the government sanctions the Law N. 9.478, "breaking" the company's commercial monopoly in Brazil and allowing its competitors to act in the country's oil fields. In this same year, Petrobras reached the mark of one-million barrels per day production. The company begins its operations out of Brazilian domains, starting agreements with the Latin-American governments;
2000: the company reaches the world record of oil exploration in deep waters (1,877 under the sea-level);
2001: disaster with the P-36 Platform, that was the world's biggest platform for oil exploration. The platform, by technical failures, sank in May 20th with an estimated weight of 1500 tons of oil;
2003: acquires the Argentina's largest oil company Perez Companc Energía (PECOM Energía S.A.) and its operational bases in Bolivia, Peru and Paraguay;
2006: Petrobras reaches the Brazilian auto-sufficiency in oil needs;
2007: it was the company's best performance in its entire history, with more than US$13 billion of profit. The company announced the discovery of the giant oil field "Jupiter", in Santos. Petrobras stock market's value increases about 106% (from February to December);
2008: discovery of what can be the world's third largest oil field. More details of the discovery, however, still unverified.

Business ^[11]

Petrobras makes money, in general, with the following markets:

Domestic Sales: it represents the majority of the company's profit and includes the extraction and distribution of oil, natural gas, electricity and petrochemical products;
Export Sales: the company's main exports are not related to oil extraction itself, but with mechanic technologies. However, it is planned to the company exports oil in large quantities when it begins to explore the Jupiter and the Tupi fields (see Recent Events of Significance);
Foreign Exchange Gains: the company imports natural gas from other Latin-american countries (mostly from Bolivia). According to the Brazillian group National Petroleum Agency, Petrobras owns Brazil's largest and most important gas pipe network, having a near monopoly of the natural gas marketed in the country.

Petrobras works extensively with foreign acquisitions too, buying and controlling the most important energy companies in South America and exploring huge deepwater fields of West Africa and Gulf of Mexico. Petrobras is known for its leadership in deepwaters exploration: the Tupi field itself, that is said to be the world's third largest oil field (information that stills unverified), is a deepwater discovery, located in the pre-salt layer.

In short, the company begun to increase its profit from 2002, with the government's heavy investments on it. In the first quarter of 2008, Petrobras reached US$295.6 billion of market value, surpassing Microsoft (US$274 billion) and becoming America's third largest company, ahead of giant oil companies such as BP and Chevron Texaco, and only behind of ExxonMobil and General Eletric. Petrobras' market value is also bigger than Industrial & Commercial Bank of China Ltd (US$289.3 billion), making it the 6th biggest company in market value in the world.

Competition

Petrobras is the world's largest governmental oil company, which is explained for the economic protection given by the Brazillian govenment to it, even after the country has opened its oil market to foreign companies (1997). However, Petrobras faces a great challenge to surpass the giant ExxonMobil, which stills being America's largest oil company.

Comparison with world-wide companies

Company	Reserves (MM boe)	Current Years of Production	Oil & Gas Production (1000s boe/d) 2006	Oil & Gas Production Growth (%) 2006
Petrobras	11,458	14.2	2,287	4.5
BP	17,368	10.4	3,926	-1.9
ChevronTexaco	11,020	10.9	2,667	6.1
ExxonMobil	21,518	11.3	4,238	3.8
Royal Dutch Shell	11,108	6.7	3,474	-1.0

Reasons of the Commercial Growth

Rising Oil Prices: the company profits with the oil rising prices, caused by the great political instability in Middle East, a mayor oil producer region. The oil price reached US$120 in May 20th and many experts say that the price will surpass US$200 between 2009 and 2010;
Increasing Demand for Oil: the oil demand has increased drastically in the emergent contries, for which Petrobras exports its technologies. The BRIC countries' (Brazil itself, Russia, India and China) growth explains this huge demand. The Brazillian auto-suficiency in Petroleo (May 2006) allowed the company to export small quantities of oil too;
Political Issues: despite of being half-controlled by private investments, the company's stock shares majority belongs to the Brazillian government, what gives it the right to control the company's finances and operations. The recent growth of the company is explained by the political stability. Since 1997 the Brazillian oil market was opened to foreign investments, but Petrobras continues to be the largest oil owner in the country, enjoying an almost monopoly condition;
The Recent Megafields Discovery;
Alternative Energy Sources: pressured by the decline of the world's oil supply and by the idea of "green energy", Petrobras started exploring alternative energy. Its most sucessful strategy was the biodiesel fuel, used by almost 47% of Brazillian population. Petrobras was the leader of the researches for this kind of fuel, allowing a mixture of 40% of biodisel with gasoline without prejudicing the car's performance. The company also holds the control of Brazillian ethanol researches and the company enjoys a confortable position with those researches, because Brazil is the world's biggest ethanol producing country.

Profitability and Performance in the Stock Markets

Instalações da REFAP

From May 1997 to June 2006, the company's value in the IBovespa increased about 1200%, reaching a record profit in 2006, with approximately R$25.9 billion, which is equivalent to US$15.3 billion nowadays, becoming the most profitable public company in Latin America of 2006. The discovery of the giant oil field in Santos, the "Jupiter Field" (see the relation of discovered fields column and the "Recents Events of Significance" article), increased its stock price by about 19% in just one day, a performance that is still stable.

Petrobras, along with the private mining company Vale, is considered the most reliable Blue Chip of the Bovespa Stock Exchange. While the North American Crisis of 2007 decreased the value of the stocks of a great majority of stock markets in the world, Petrobras and Vale, with their excellent performances managed to hold the Bovespa's activities with impressive success, making it one of the least affected Stock Exchanges in the world by the crisis.

Despite its performance in 2008, on May 28, Petrobras announced a loss of $775 million, compared to the same period in 2007. The causes for this fact were the stop in the production at a refinery in the center of the state of São Paulo and fast biodiesel expansive market in Brazil, which is hindering the company from following the market growth.

News After the Investment Grade

On April 30, 2008, Brazil received an "investment grade" rating from Standard & Poor's, given to countries with stable and consistent growing economy. Petrobras had great importance in the "Grade", since its performance played a big part in the country's growth, along with Vale and Gerdau (mining companies). According to a great number of analysts, the "Investment Grade" will be of great importance to the company's international operations, attracting more foreign investments than expected. This, with lots of other factors, will make a huge recovery in the company's common shares in a long-term perspective.

Despite the good news, some little problems made the company's common shares' growth smaller than expected: many investors criticized the company for increasing the gasoline prices in Brazil, despite the record oil production. The company is having problems adapting its business to the ethanol's market as well.

Recent events of significance

Headquarters of Petrobras in downtown Rio de Janeiro

On December 19, 2005, Petrobras announced a contract with the Japanese Nippon Alcohol Hanbai for the creation of a joint-venture based in Japan to import ethanol from Brazil, to be called Brazil-Japan Ethanol. A primary target of the company is the development of an ethanol market in Japan.

On April 21, 2006, President Luiz Inácio Lula da Silva announced Brazil's self-sufficiency in petroleum on board the Petrobras P-50 Oil Rig, a Floating Production Storage and Offloading vessel.

In November, 2007, Petrobras made a major new oil field discovery off the coast of Rio de Janeiro. The Tupi oil field, in the Santos Basin, is estimated to have a volume of approximately 5 billion to 8 billion barrels. Should these estimates prove to be correct, Tupi would be the world's largest new oil source since Kashagan in Kazakhstan in 2000. This would raise the country’s reserves by 62 per cent and put Tupi on par with Norway’s 8.5bn barrels of proven oil reserves.^[12]

The Financial Times listed Petrobras as one of the world's 50 largest companies in 2007.^[13]

On January 21, 2008, Petrobras announced the discovery of Jupiter, a huge oil field which could equal the Tupi oil field. It is located Template:Unit km from Tupi, Template:Unit m below the Atlantic Ocean, Template:Unit km from Rio de Janeiro.^[14]

On April 14, the director general of Brazil's National Petroleum, Natural Gas and Biofuel Agency (ANP), Haroldo Lima, announced that Petrobras discovered a "mega field" of oil and gas at the Santos Basin, in the southeastern Brazilian Coast.

According to Lima, the Carioca field is located near the Tupi field discovered last year. He stated that the new field contains reserves estimated at 33 billion barrels of oil equivalent (petroleum and petroleum gases), whereas the Tupi field contains reserves estimated to be between 5 million and 8 billion barrels. ^[15]

List of recent oil field discoveries

From 2002-2005, Petrobras doubled its success rate at drilling new wells.^[16]

**Petrobras latest Oil Discoveries**
Date	Basin	Field	API gravity
4/18/06	Espirito Santo	Golfinho	40
6/11/06	Santos	1-RJS-628A	30
3/2/07	Campos	Caxareu	30
3/29/07	Santos	below the salt layer	30
6/8/07	Espirito Santo	Pirambu	29
9/4/07	Santos	Tupi	27
9/10/07	Campos	Xerelete	18
9/20/07	Santos	Tupi	28
10/11/07	Sergipe	Piranema	44
1/21/08	Santos	Jupiter

The Megafields

The company's most important discoveries started at the end of 2007, when the first megafield, named Tupi, was found at a depth of 5,000 meters below the sea level, the first discovery of the company in the pre-salt layer. The second discovery was announced in January 21st of 2008: the new megafield was named Jupiter and, according to Petrobras news website, had the same size of Tupi. The company revealled no more information about the field, forcing many investors to consider the fact as being an "industrial secret".

In May 21st of 2008, the company announced the discovery of a third oil megafield^[17], located 250Km distant from the state of São Paulo, at a depht between 6000 and 6300 meters below sea level. The discovery was made by a consortium formed by Petrobras (66% of participation), Shell (20%) and Galp Energia (14%). The field's oil reserves had an API gravity between 25 and 28.

Reputation Worldwide

The company's absurd growth since 2006 made Petrobras the most profitable company in Brazilian economy, and gave it great importance worldwide, being recognized as the eighth biggest oil exploring company in the world^[18]. Here are mentioned some of the most significant news of Petrobras around the world recently:

The Petroleum Intelligence Weekly Publication reveals Petrobras as being the world's 15th biggest energy company;
It was elected the world's eighth most respected company by the Reputation Institute;
It reached the sixth place of the most profitable companies in the United States market, ahead of giants like Google, Cisco Systems and Procter & Gamble;
The civil society named Transparency International, which fights against global corruption, made a non-ranking list (April 28th of 2008) with the name of 42 companies with high-transparency levels, in which Petrobras is included;
According to the annual survey made by Management & Excellence Institute, Petrobras is the most sustainable oil company of 2008. The Total Company holds the second place and BP holds the third;
It was the first oil company to explore the pre-salt layer, in which it discovered the "Jupiter" oil fields;
In April 14th, the company announced the discovery of what could be the world's third biggest oil field, with up to 33 million of oil barrels, a reserve for aproximatelly 150 years of use. More information will soon be revealed by the company, according to the Brazilian National Petroleum Agency.

Global Operations

The Petrobras global operations are extended for over than 27 countries (including Brazil). Those countries are more related to diplomatic trades than oil exploration, although that the company have important fields in India, Turkey, Angola and Nigeria. The most important countries for commercial agreements are Japan, United Kingdom and China. The complete map can be located in Petrobras official link Petrobras Worldwide.

Petrobras in Popular Culture

Many Brazilian films and TV shows sponsored by Petrobras contain shots of the enterprise's activities.
In the Speed Racer live-action movie, one of the cars featured is the "Green Energy", a biodiesel fueled racing car sponsored by Petrobras.

References

External links

[1] Economia

[2] [1]

[3] Conheça a Petrobras,

[4] [2]

[5] Petrobras - Investor Relations

[6] Source: 09-July-2006 - Petrobras Investor Relation Site

[7] Brazilian Right Whale Project

[8] Instituto Baleia Jubarte

[9] Petrobras.com

[10] ttp://portalexame.abril.com.br/negocios/m0159879.html

[11] [3]

[12] Petróleo mostra que 'Deus pode mesmo ser brasileiro'

[13] FT Global 500, June 29, 2007 (list/PDF).

[14] BBC NEWS, 'Huge' oil field found off Brazil

[15] Brazzil Mag

[16] Petrobras 2006 20-f, item 4, p 26 via Wikinvest

[17] [4]

[PETOITAVA-18] Petrobras é oitava empresa de petróleo com ações em bolsa.Fonte: Petrobras, Gerência de Imprensa – 31 de janeiro de 2007

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