The race for Petrobras assets in Nigeria may go to the wire

Brazil’s Petrobras is set to sell its Nigerian assets as part of a divestment plan aimed at slimming down its massive debt of over $100 billion. The divestment target for this year totals $21 billion but its Nigeria’s assets are valued at $2 billion. Scotiabank is running the process with Evercore, according to the sale launch document.

The result of the auction is expected to be announced in early May but some participants said the assets might not be sold in one package.

Global oil traders Vitol and Glencore are in talks to financially back Nigerian firms racing to buy the assets. The deal would guarantee the traders access to high-quality crude oil for many years. They would then be able to syndicate out the debt to banks. Signing up to long-term financing deals to increase volumes and gain exclusive access is one of the traders’ strategies to compensate for increasingly thin profit margins.

It will be recalled that in November 2017, Petrobras, launched the sale of 100 percent of Petrobras Africa, as part of the heavily-indebted company’s plan to offload $21 billion in assets through 2018 as it also faces a massive corruption scandal. Petrobras holds half the shares in the company while 40 percent are held by a subsidiary of Grupo BTG Pactual SA and 10 percent by Helios Investment Partners.

The venture has stakes in two offshore blocks that contain two producing fields, the major Agbami field in OML 127, operated by a local Chevron affiliate and the Akpo field in OML 130 operated by Total SA.

Sources say Glencore was looking to back Nigerian producer Seplat in bidding for the assets while Vitol is examining backing several bidders in the process. Swiss-based commodities trader Mercuria was involved in the initial bidding round but was unlikely to continue in the process. Oil major BP’s trading division had also considered participating in a possible consortium, but dropped out.

The Akpo field produces nearly 130,000 barrels per day (bpd) of condensate and Total is also due to start production at the Egina development in OML 130 later this year. The Agbami oilfield is the main prize, however, producing about 240,000 bpd of light, sweet crude. Petrobras holds a 12.5 percent stake in the field, Statoil has 20.2 percent and Chevron holds a 67.3 percent stake.

The operator is a Chevron affiliate called Star Deep Water Petroleum Ltd. Famfa Oil is one of the concessionaires of Star Deep Water Petroleum and was also looking to increase its stake in the oilfield.

Meanwhile, back home in Brazil, international oil companies have snapped up prolific offshore oil fields in a recent auction where the cash-strapped government raked in about $2.4 billion of signing bonuses, a record for a concession-style auction, despite a court’s surprise decision to eliminate the top two blocks from the auction.

Exxon along with Petrobras and Qatar Petroleum Intl shelled out 2.8 billion reais (£601.3 million) for just one block in Brazil’s offshore Campos basin as the American oil major seeks to replace dwindling reserves.

Chevron Corp, Repsol SA, Royal Dutch Shell Plc, BP Plc and Statoil ASA also spent top dollar to lock down stakes in Brazilian offshore blocks, some of which may be part of the coveted pre-salt play, where oil is trapped under layers of salt beneath the ocean floor.

Behind the resounding success is oil majors’ urgency to lock in stakes in Brazil before a presidential election in October that could bring to power a government seeking to halt or slow private investment in Brazil’s oil sector.

Higher oil prices and the need to replace shrinking reserves have boosted appetite among oil majors for costlier, higher-yield offshore ventures, though some projects are still seen as too pricey to be viable.

Despite the big bonuses paid to the government, it only awarded 22 of 68 blocks on offer and failed to offload any onshore blocks.

FRANK UZUEGBUNAM