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Brazil Onshore Assets for Sale produce 2% of Output

Maritime Activity Reports, Inc.

March 5, 2016

Brazil's state-run oil company Petroleo Brasileiro SA said on Friday it plans to sell its rights to 104 onshore oil and gas concessions, part of efforts to raise cash and focus increasingly scarce capital on more profitable offshore assets.

The company, known as Petrobras, said in a securities filing that 98 of the areas are producing fields. Oil output from those areas is about 35,000 barrels a day, or less than 2 percent of the company's petroleum output and less than some single wells in Petrobras' giant offshore Lula field.

The Petrobras statement did not say how much natural gas the areas produce. Six of the areas are still in the exploratory phase.

Small Brazilian and international oil companies have long called on the company to sell the bulk of its onshore oil and gas portfolio. They say that private companies can mobilize more capital to develop additional oil and gas from the areas more cheaply that the state-run giant.

Some of the small oil companies already working in Brazil are from the regions where Petrobras plans to sell assets and they hope their ownership of concessions will boost local investment and wealth creation.

Many of the fields, though, are in poor, politically sensitive areas in the states of Bahia, Sergipe and Rio Grande do Norte where Brazil's ruling Workers' Party has had strong support and where Petrobras jobs are important patronage posts.

Selling the fields will likely result in job cuts in those areas, said Jose de Oliveria Junior, a senior consultant to the Sergipe state energy secretariat.

With plunging oil prices, lower royalties and scarce resources at Petrobras to invest in less profitable onshore fields, Oliveria Junior said states like Sergipe are eager for private capital to help boost output.

Sergipe already has some privately-run fields that Petrobras sold to U.S. investors in the late 1990s.

Proceeds from the sales may also help Petrobras meet its goal of selling about $14 billion of assets this year to help trim its $130 billion in debt, the most of any oil company in the world.

(Reporting by Jeb Blount; Additional reporting by Brad Haynes in Sao Paulo; Editing by Chris Reese)

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