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Petroleum

Petrobras Secures $2.67bn in Project Financing for Massive Expansion Programme

Strategic Insights

— 2 min read

Petrobras, Brazil's state-owned energy giant, has secured a massive $2.67bn in project financing to achieve its goal of boosting oil output by nearly a third by 2005. However, the company's efforts to attract foreign capital are not without problems, with a shaky Argentinian economy and growing economic uncertainty in the region potentially tightening the financing markets for new projects. The secured funds will be used to finance Petrobras' expansion programme, which aims to spend $32bn over the period.

Key Takeaways:

  • Petrobras has secured $2.67bn in project financing for its massive expansion programme, the largest financing ever for an offshore oil field in the Americas.
  • The company plans to spend $32bn as part of its massive expansion plans over the period, aiming to boost oil output by nearly a third by 2005.
  • Petrobras has arranged a $2.5bn financing deal for its Barracuda-Caratinga offshore project in the Campos basin, the largest financing ever for an offshore oil field in the Americas.
  • The deal includes a consortium of banks and Japanese trading houses lending to a special-purpose company set up for the project.
  • Petrobras is also securing $170mn in financing from Japan's Nissho lwai and Indonesia Petroleum for the Albacora Campos basin project.
  • The company plans to start construction of the project this month, with hopes to come on stream by December 2003 and drilling completion expected by October 2004.
  • Petrobras expects to boost production from 1.4mn b/d now to 1.85mn b/d by 2005, when output is expected to exceed domestic demand for the first time.
  • Petrobras has turned to project finance to stretch its funds as it embarks on new projects, providing safeguards for investors, including political risk insurance.
  • However, the company still faces challenges in securing financing, including investors' fear of oil export restrictions in Brazil and growing economic uncertainty in the region.

Statistics:

  • Petrobras plans to spend $32bn as part of its massive expansion plans over the period.
  • The company plans to boost oil output by nearly a third by 2005, from 1.4mn b/d now to 1.85mn b/d.
  • Petrobras has secured $2.5bn in financing for the Barracuda-Caratinga offshore project.
  • The deal includes a $1.14bn loan from the Japan Bank for International Co-operation and a $760mn loan from Brazil's national development bank.
  • Petrobras expects to generate $700mn in cash flow over the first five years of the project.
  • The company is locking in prices for part of the project's output with hedging instruments, with many of them coming from lead arranger Deutsche Bank.

Sources:

  • ALE (20 September, p13)
  • Deutsche Bank managing director Greg Moroney
  • Petrobras director of finance Raul Campos
  • Industrial Bank of Japan vice-president Robley Moor
  • Japan Bank for International Co-operation
  • Brazil's national development bank
  • Nissho lwai
  • Indonesia Petroleum

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