Privatizations take Petrobras the opposite direction

The current president of Petrobrás, Roberto Castello Branco, declared that his dream is the privatized company. We were in the period of institutional normality, being the leaders responsible for the success of the organs under their direction, such desire would be a reason for replacing the manager.

The Business plan and management project privatize US $26.9 billion, between 2019 and 2023. It intends to privatize eight refineries that account for 50% of the current refining capacity, the subsidiary for the typical activity of all oil companies, distribution, BR Distribuidora, in addition to pipelines, terminals, fertilizer factories, participation In petrochemicals and biofuel production. All this adds to the alienation of production rights in oil and natural gas reserves. That is, to promote a quartered end of the largest Brazilian company.

Between 2015 and 2018, we privatized US $18.7 billion in Petrobrás assets. In 2019, the subsidiary carrier of Gas S.A. was alienated. (TAG), for US $8.7 billion.

The privatizations and the consequent disintegration of Petrobras are contrary to the trend of the international industry and the growing relevance of state oil companies.

The state is already 19, among the 25 largest oil and natural gas companies, controlling 90% of the reserves and 75% of the world's productions.

Petrobras ' sales of assets are not justified by the reduction of indebtedness and are in contradiction with the increase in vertical integration and the internationalization of oil companies, including those of the state.

Between the end of 2014 and 2018, Petrobrás reduced its net debt from US $115.4 to US $69.4 billion and its leverage (Liquidated debt/adjusted EBITDA) from 4.25 to 2.20.

In the same four-year period, Petrobrás sold assets worth US $18.72 billion. Of this total, the values actually received in cash totaled US $11.81 billion.

This debt could be reduced even without the entry into the box of US $11.81 billion. In reality, privatizations had little relevance in reducing the company's net indebtedness.

What can be attributed to the sale of assets was limited to 25.65% of the net debt reduction, between the end of 2014 and the end of 2018. About three quarters (74.35%) Of this reduction originated in the operational cash generation of Petrobrás.

The sum of the operating profit of the Petrobras supply in the years 2015, 2016 and 2017 recorded US $23.7 billion, in corrected values for 2018, while the E&P obtained US $9.4 billion in the same period, when the average oil price was US $52.68 per barrel.

The privatizations of refineries, terminals, pipelines and distributors bring much more serious damage to the resilience and even to the survival of Petrobrás than presumed benefits by reducing interest expense, resulting from the anticipation of the reduction of Debt.

State participation in the global petroleum industry

The oil industry is among the largest in the world. For example, it is the largest steel consumer, and the negotiated value of crude oil is the highest in comparison to any commodity.

Despite the growth of renewable energy production, the share of fossil-oil, coal and natural gas-in the global energetic matrix is around 80% of the total demand for primary energy and remains stable in the last 25 years.

In spite of the alleged concerns related to the effects of carbon emissions on human-induced climate change, most professional analyses predict that hydrocarbons will continue to be the dominant source of mankind's energy in foreseeable future.

Of the 25 largest oil companies in the world-which have 90% of the reserves and produce two-thirds of the total oil and natural gas-19 are state-owned and only 6 private capital.

Approximately two billion dollars a day are marketed in petroleum, and this is the largest isolated item in the balances of payments and exchanges between nations. Oil represents the largest part in the total use of energy for most liquid exporters and importers. And oil taxes are an important source of income for more than 90 countries in the world.

Unlike most commodities, oil is especially important in international politics and in the socioeconomic development of nations. These characteristics of the oil sector explain why many producer countries and importers have opted for state intervention.

State-owned companies have more than 90% of global reserves and are responsible for about 75% of oil and natural gas production.

Oil sector policies seek a variety of socio-economic objectives, including maximising the net present value of economic income derived from oil exploration, intertemporal equity, promotion of the integration of the production chain, Promotion of bilateral trade, self-reliance and security of supplies etc. State-owned companies are often used to achieve a wide range of these objectives, as a main tool or in combination with other political means.

Objectives and efficiency of state oil companies

The evaluation of the efficiency of the State should consider its socio-economic objectives: the national energetic security and self-sufficiency, the reduction of supply costs, the greater recovery and replenishment of reserves, the appropriation by the state of greater Fraction of oil income, access to investment and operational information for greater tax and regulatory efficiency in the sector, the guarantee of geopolitical advantages to the state for the availability of petroleum in its international relations and the development Resulting from investment policies with local content, as well as research and technological development, with the resulting generation of jobs and technological sovereignty.

While evaluating the efficiency of the companies controlled by private capital derives from the generation of value for shareholders, expressed by the relationship between the payment of dividends and the price of shares and/or the mere valuation of the price of shares in the market.

The comparisons of efficiency, between state oil companies and those with private capital oil, should weigh the complexity of the objectives pursued by the State, compared to the simple maximization of the return to shareholders on the Applied capital, which is pursued by private companies.

In short, the performance of a state should be measured with reference to its objective function, not from the purpose of private companies.

National oil companies exist in a variety of forms, but most are vertically integrated and gather exploration and production activities (E&P) with supply operations (refining and distribution) and transportation.

The state has historically operated in their countries of origin, although the trend of evolution is its internationalization. Examples of state-owned include Saudi Aramco (the largest integrated oil company in the world), Kuwait Petroleum Corporation (KPC), Petrobrás, Petronas (Malaysian state), PetroChina, Sinopec and CNOOC (Chinese), StatOil (Norwegian), Sonangol (Angola) , Sonatrach (Algeria), Gazprom (Russian, the world's largest natural gas exporter), Oil and Natural Gas Corporation Limited-ONGC (India) etc.

Asian State enterprises, most prominently from China and India, are at the forefront of international investments as their governments face energy supply challenges.

In the 1970 years, the state controlled less than 10% of the world's oil reserves, while in the 2010 years they guaranteed more than 90%. This evolution allowed the state to increase its capacity to access capital, human resources and technical services directly, with the development of internal competencies.

Investment in research and development (P&D) and the business model of state oil companies

State-owned companies have four key elements for success in the oil and gas sector: access to capital, access to technology, breadth of capacities and partnerships, and the efficiency of their operations.

In recent years, state-owned companies have achieved greater technological progress in relation to private equity multinationals. A common metric for innovation is investment in a company's P&D. State-owned companies are also innovative: Saudi Aramco, Petrobrás, Petronas and Chinese state-owned companies have internationally recognised capacity in P&D.

In addition, changing business models, with the internationalization of state-owned companies, poses challenges for private multinationals endangering the sustainability of their business model and the scarcity of their oil resources. Among these challenges are the decline in production in existing oil fields, the difficulty of replacing oil and gas reserves in areas of restricted access, the rapid depletion of conventional or easy-to-access oil, increasing the costs of Exploitation and production of unconventional resources and the consequent decline of its profit margins.

State-owned, with more access to capital and the development of internal specialization, have transformed from simple crude oil producers into energy companies, fully integrated into refining, marketing, petrochemical and energy activities. Renewable energy sources (biomass, wind, solar, etc.).

While large global oil companies may be afraid to invest in unstable areas of the world or where international sanctions have been imposed, state decision-making has only to be compatible with national policy and it is unlikely that Corporate governance and stakeholder actions.

State-owned companies are more capable of mitigating political risks abroad through intergovernmental relations and trading strategies.

State strategies and policies will have a substantial, long-term impact on the pace of resource development in the coming years. Asian and Russian state oil companies are increasingly competing for strategic resources in the Middle East and Eurasia, in some cases replacing Western private carriers in key resource development activities and Negotiations.

Companies such as Indian Oil and Natural Gas Corporation Ltd. (ONGC) and Indian Oil Corporation Ltd., the Chinese Sinopec and China National Petroleum Corporation (CNPC) and Petronas, Malaysia, have expanded in Africa and Iran, and are now seeking investments in All over the Middle East.

Russia's Lukoil is becoming an important international player in several regions such as the Middle East and the Caspian Basin.

Many emerging states are funded or have operations subsided by their Governments of origin, with strategic and geopolitical objectives incorporated into investment decisions, rather than simply being submitted to the considerations Financial transactions.

Political constraints influence and impact the international expansion of state oil companies. The Kuwait Petroleum Corporation is the only one in its region that has integrated in Europe, with the brand Q8. The PDVSA of Venezuela acquired CITGO in the United States of America (USA); However, China's CNOOC was prevented from acquiring the United States UNOCAL in 2005. If a state-owned oil company is perceived as more than just a corporate entity, its international growth can be questioned.

The trend is that state-owned companies continue to aggressively track new growth opportunities in terms of reserves and revenues resulting from increasing access to capital markets, increased profits, greater participation in technological advances, Increasingly effective project management and technical capacity development.

In short, state oil companies are on the high because they have a number of advantages over private multinationals.

Global investments of state oil companies

State-backed investments are responsible for a growing share of global energy investment, since state-owned enterprises have remained more resilient in oil, natural gas and thermal energy compared to the private sector.

The participation of global investment in energy driven by state-owned companies has increased in recent years to more than 40% in 2017.


The acceleration of the sales of Petrobras ' assets is the result of a purely ideological decision, has no coherence with the trends of the international industry and is not justified in the face of the company's business and financial reality and its status as state.

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