Petrotahlil - Brazil’s Petrobras has put the sale of a massive cluster of offshore oilfields on ice, three sources with knowledge of the matter told Reuters this week, underlining the challenges the state-run oil company faces in its bid to reduce debt amid the novel coronavirus pandemic.
Petrobras began preparations earlier this year to sell a minority stake in the coveted Marlim cluster off the coast of Rio de Janeiro, said the sources, who requested anonymity to describe private conversations. But it opted to shelve the project after oil demand plunged amid worldwide quarantine measures, the people added.
Petrobras Chief Executive Roberto Castello Branco said in December the company believed the firm could fetch $2 to $4 billion for a piece of Marlim. But that was before the current demand crisis, which has persisted even after the Organization of Petroleum Exporting Countries slashed production.
“With oil at its current levels, it doesn’t make sense to discuss such an interesting asset,” said a source with direct knowledge of the matter. “When it can be sold depends on when prices come back. The idea (of selling) didn’t die.”
Over the last two years, Petrobras has been selling off dozens of assets - ranging from oilfields in Nigeria to a refinery in Texas - in a bid to reduce its hefty debt load, which stood at $87.1 billion at the end of 2019.
The sale of Marlim, however, would represent a doubling down of that strategy.
While most of the oilfields Petrobras has sold so far produce less than 20,000 barrels of oil equivalent per day (boepd), the four oilfields comprising the Marlim cluster produced about 243,000 boepd according to March data from Brazilian regulator ANP. That’s equivalent to nearly 10% of the company’s total output.
Crucially, some of that production is in Brazil’s so-called pre-salt, a promising subsea geological formation where billions of barrels of oil are trapped beneath a layer of salt under the ocean floor.
Petrobras has not sold any pre-salt assets since 2016 when France’s Total SA agreed to buy a piece of the Lapa field and Iara prospect as well as stakes in two powerplants in a deal worth over $2 billion.
Its latest comparably sized oilfield sale occurred in 2017 when it agreed to sell a 25% stake in its legacy Roncador field to Norway’s Equinor ASA for $2.9 billion.
Petroleo Brasileiro SA, as Petrobras is formally known, declined to comment.
Executives have floated the possibility of selling a chunk of Marlim before. From 2017 to 2019, Petrobras held ultimately unsuccessful talks with China National Petroleum Corp (CNPC) about handing over a 20% stake in the cluster in a deal that would have seen CNPC become a partner at Petrobras’ Comperj, a financially troubled petrochemical complex near Rio de Janeiro.
Castello Branco, speaking at Petrobras’ December Investor Day, said it might consider selling a piece of Marlim - which he pegged at up to $4 billion - and the much smaller Papa-Terra oilfield.
In February, Petrobras and partner Chevron Corp, put Papa-Terra on the block.
Petrobras executives have insisted in recent weeks that it still sees strong appetite for the assets it is selling. However, executives have also acknowledged that debt reduction has become more difficult given current market conditions. In late April, the company scaled back its 2020 debt reduction target.