Petrobras to stay away from exploration in India

Brazil’s Petrobras, the third-biggest energy company in the world, will steer clear of exploration opportunities in India, having exited a partnership with Oil and Natural Gas Corporation (ONGC) to develop an asset in the Krishna Godavari basin in the recent past.

“We are not discussing right now for going back to upstream activities. We have a good relationship with ONGC in Brazil today, (and) we have two blocks that we are (developing in Brazil) together,” the Brazilian state-owned oil company’s chief executive officer Jose Sergio Gabrielli said on the sidelines of the Singapore International Energy Week on Tuesday.

ONGC has a presence in Brazil through its subsidiary ONGC Videsh, and has interests in deepwater offshore blocks including BC-10 and ES-42, apart from other assets under exploration.

“Right now, 95 per cent of our investment in upstream is in Brazil because we have discovered very big reserves,” said Gabrielli, referring to the three mega fields the company struck in Brazil since 2007, adding that the only exploratory work Petrobras was undertaking in Asia is in Australia and New Zealand.

Instead, Petrobras Singapore managing director, Sillas Oliva Filho, said, “negotiations were underway” between the Brazilian company and Indian refineries to increase crude exports to the country, which currently stand at two-four million barrels per month. Petrobras’ downstream Indian partners include Reliance and Essar.

“We see the whole Indian market is looking for crude oil from Brazil,” he said, without giving details of possible increase in exports. However, Sillas indicated there were no supply-side constraints and the company would be able to meet growth in demand from India, if required.

Although the United States and China will remain the main consumers of Petrobras’ crude, India will also stand to gain from the company’s plans to increase production. Petrobras could export as much as 1.6 million barrels per day by 2020, with overall production reaching 4.9 million barrels per day during the same period.

But, even as crude exports are slated to increase, Petrobras will scale down imports of diesel from India, with additional capacity coming on-stream in Brazil. “Brazil has been growing like India for the last four years. We cannot cope with the demand for gasoil (diesel), so we are buying from India. We take around 600,000 – 1.2 million tonnes per month, depending on seasonality and the demand that we have in Brazil,” Sillas said.

“But it (diesel imports) is going to reduce from next year once we have improved our production in Brazil,” he said.

Meanwhile, as part of its divestment plans to raise about $14 billion over the next few years, Petrobras is also scouting for suitors for its resource assets.

“We see a very, very big interest from oil companies (who are) trying to get access to reserves and resources. We don’t see any big problem right now (for making these sales), and we have several offers right now,” Gabrielli said.

This could mean yet another opportunity for Indian energy companies to strengthen their foothold in Brazil’s resources sector.