Hart's E&P recently spoke exclusively with Petrobras International E&P executive manager Joao Figueira about the company's international operations and aspirations as it gears up for worldwide expansion.

Petrobras remains one of the oil industry's paradoxes. On the one hand, it is universally recognized as one of the world's most innovative operators in terms of offshore technology developments. On the other, it is seen as a large state company heavily focused on Brazil.
Prospects of a bull market have made Brazilian acreage some of the hottest leases recently acquired by oil majors. Certainly, the now part-privatized Brazilian oil company has had no shortage of hydrocarbon targets. In 2000, it drilled 378 wells - 116 offshore and 262 onshore. More than 20 wells were drilled in water depths of 5,000 ft (1,500 m) or more while production peaked at 1.53 million b/d.
In the past, such a high a level of activity coupled with competition from foreign operators would have kept Petrobras firmly on Brazilian soil. This is no longer the case. In its quest to become an integrated energy company and a household name globally, Petrobras recently floated on the New York Stock Exchange. The sale of 180 million shares raised US $4 billion, providing it with the financial muscle for international growth.
"Over the last decade, giant finds such as Roncador or Marlim, which produces 508,000 b/d, created such a surge in Brazilian E&P activities that quite frankly, our international focus was limited," Figueira said from offices overlooking the famous Maracana football stadium.
The New Era initiative launched last year changed the company's focus. One of the targets of the 10-year strategy is to boost international annual production from about 70,000 b/d to 300,000 b/d. "We are also looking to augment foreign refining capacity to reach the same amount by 2005. By that time, Petrobras gross revenues are forecast at $35 billion, accompanied by a 12% return on equity based on an oil price of $15/bbl," he said.
New Era unveiled
The New Era is a cornerstone in Petrobras' planned metamorphosis from state organization to private company. In human terms, that means changing the way 33,000 employees think.
Having operated outside of Brazil since 1972, Petrobras International - formerly Braspetro - has a strong international business perspective that is helping realize the transformation. Figueira pointed to a map: "We operate in 11 countries and actively participate in 146 with 83 companies. That valuable trading experience is aiding growth worldwide and in Brazil."
He detailed this change. "In the past we were obliged to provide work; now we are obliged to deliver shareholder value. Isolating performance, autonomous assets and new information management systems such as SAP will help us here. Motivating our people to succeed will also be important. An asset manager's pocket will directly benefit, or not, depending on asset performance."
In the past 3 years, proven reserves have soared from 312 million boe in 1998 to 574.6 million boe in 1999 to 717 million boe in 2000.
The flip side of growth means pulling out of certain locations. "One of these was the UK North Sea sector. The other was Peru, where two disappointing dry holes meant that Petrobras moved out." In the North Sea, Petrobras partnered 11 oil fields with production totaling just less than 4 million boe a year. Good oil at low extraction costs is a given for any operator, but Petrobras has set a demanding target of $2.80/bbl within 4 years. Current costs are $3/bbl.
Latin American integration
In Latin America, Petrobras is realizing its vision of becoming an international energy company by integrating upstream and downstream activities ranging from selecting prospects for seismic work to supplying consumers with natural gas or gasoline.
"There is a strong synergy with our neighbors and regionally, and of course some history," Figueira said. "For instance, we have been active in Argentina since the 1980s. We were the first company to drill a well in the Argentinian side of the Falklands. Currently, we have a 100% holding in Puesto Zuñiga; Cerro Manrique is split equally with YPF Repsol; and there is a 15% holding in Aguaragüe. Other partners are Tecpetrol, Mobil, Ledesma, CGC and YPF Repsol."
A deft positions swap between YPF Repsol and Petrobras - valued at $1 billion - has strengthened ties and benefited both companies. "YPF Repsol took a 30% stake in the Refap refinery, a 10% share in the Albacora L'este field and the rights to commercialize 1.4 MMcf of natural gas every month in Brazil," Figueira said. "Across the border, Petrobras acquired complete control of the marketing and refining company Eg3, adding a 30,500-b/d refining capacity in Bahia Blanca and roughly 700 retail gas stations spread across Argentina."
In Bolivia, more energy integration can be found in one of Petrobras' most notable onshore achievements. A gas pipeline stretches 1,969 miles (3,150km) from Rio Grande, Bolivia, to Sao Paulo and Porto Alegre, Brazil. This enables Petrobras to meet the demands of one of the world's largest concentrations of industrial and household consumers.
"Petrobras' aim for 2004 is to produce 741 MMcf/d of natural gas, and an extra 317 MMcf/d will be supplied by other operators," Figueira said. "In 1999 we bought a 70% stake in two refineries in Bolivia. The remainder is owned by Perez Companc. We also hold a 35% interest in a block shared with Andina 50% and TotalFinaElf 15%."
Bolivia's E&P boom of the past few years has included the unprecedented discovery of 9 Tcf of proven gas reserves in the San Alberto and San Antonio fields.
Petrobras is drilling three development wells in San Alberto and an appraisal well in San Antonio.
Figueira explained Iraq's effect on Petrobras' Colombian operations: "Petrobras came to Colombia in 1972. Around that time, we made the Maj Noon discovery in Iraq, so we pulled out of Colombia. However, the Iraqi government introduced some contractual changes, marked up the investments we made and paid us back. So we re-entered the Colombian market." This position recently was justified by the exceptional discovery of the 200 million-bbl Guando field. "Sixty percent is ours, PetroCanada holds the remainder, but this could change. Colombian contracts are linked to Ecopetrol, the national oil company. It retains an option to enter the contract after any declaration of commerciality is made," he said.
Petrobras produces an average of 20,000 b/d in Colombia and is revisiting existing fields with such techniques as horizontal drilling. In Venezuela, the company has signed a memorandum of understanding with PDVSA to develop business together. "We are discussing opportunities which are upstream in Venezuela and downstream in Brazil," Figueira said.
"Cuba is our next stop via Trinidad and Tobago, where Petrobras has a 38% stake in Block 27, shared with BP and PetroTrin," Figueira said. Figueira acknowledged a story about an engineer who stood on the Cuban coast, looking at the horizon, and noticed a small island. "He was one of our drilling engineers on the promising L/50 Block. He suggested the island of Félipé el Grande as an offshore location for an onshore rig. We are the first to drill in these waters. The requirement is to drill a single well, and depending on its results, we may negotiate a production-sharing agreement with the Cuban government," he said. The Félipé 1-X wildcat is to be drilled to a target depth of 13,125 ft (4,000 m).
Infrastructure and facilities on the island were created with a careful regard for the unspoiled natural environment. "To give you a basic idea of our commitment, we took a picture of the island before work began. We will return the island to this state upon completing our activities. That is our promise," Figueira said.
West African match-up
West Africa is considered an ideal match for Petrobras' deepwater know-how. Figueira worked there for 5 years, first as a geophysicist and then as a manager. "West Africa is exciting. Petrobras can really add value to operations here," he said. "We pioneered deepwater expertise and geological models of eastern Brazil. The fact that both continents can be reconstructed indicates that we can move models from one to the other.
"At the same time, we have the technological hardware to meet deepwater challenges. We are doing this in deepwater West Africa and the US Gulf of Mexico. In the Gulf, we hold interests in 84 blocks, 13 of which are as an operator. Essentially, we operate in places where we feel comfortable enough to add value. We are looking at US downstream capacity, but for now we are trading."
Petrobras' acreage in the Equatorial Guinea sector of the Niger delta is a 40% share with TotalFinaElf. The company operates a 30% interest in Block E, where a well will be drilled later this year.
In Angola, Petrobras has a 27.5% stake in the huge Block 2, comprising 18 fields producing 22,800 b/d. In Nigeria, it has a share in OPL 216 and 246. Texaco believes reserves in Agbami amount to 1 billion bbl. This major discovery was made in block OPL 216, and work has started on delineating and appraising the immense potential. However, Petrobras is not resting on its laurels. "We were recently awarded operator status for block OPL 324," Figueira said.
Transferring deepwater know-how
"The philosophy is to transfer knowledge wherever possible," Figueira said. "If Petrobras holds a percentage in a block, we try to share our experience in several ways. One is a 'secondment program,' where Petrobras engineers are placed within the operator's group to discuss and refine concepts such as deepwater development, drilling and completion issues.
"In the Agbami asset, we are helping Texaco by providing a development team of five highly experienced people who are adding special value to this project," he said.
Another way of transferring knowledge was the Proquadros project in conjunction with the Agostinho Neto University in Angola. At the end of the third year of a bachelor of science program, 100 students fulfilled their degree requirements through 2 years of petroleum industry experience sponsored by Petrobras.
The trainers or lecturers were Petrobras engineers who taught such subjects as seismic interpretation, drilling and well completions. The students complemented the lectures by working on live projects within Petrobras, Brazil. This molded the students to meet the tough requirements of offshore operations.
"Proquadros was a tremendous contribution to the Angolan community," Figueira observed. "Most of these students are now professionals working within Sonangol, the national oil company, or foreign companies based in Angola."
Key deepwater technology
The long tradition of supplying key technologies to Petrobras lies with Cenpes, the largest research and development facility in Latin America. Key technologies such as reservoir modeling, deepwater risers or directional drilling techniques are rapidly applied to the field, but only through Petrobras projects. "The reason for having the research center is to help us add value to our shareholders' investments. New technology can be provided to the wider market through joint ventures, but that is the exception. One of our key competencies is technology. It gives us a competitive edge, and we want to maintain this. So the main focus is on commercialization within Petrobras. But we pursue every qualified opportunity to succeed in the international arena."