Petroleo Brasileiro Petrobras SA (NYSE:PBR) struggling to fuel-up

Posted by Kristi Scott August 5, 2013 0 Comment 859 views


IOC’s or International Oil Companies like Petroleo Brasileiro Petrobras SA (NYSE:PBR) have been in the clutches of angst lately. Production volumes have been on the decline and expenditures have been skyrocketing. All of this despite the fact that the exploration and the production industry as a whole has tasted a remarkable amount of profitability since 2006.

Numerous oil and gas fields have been explored across the world and production and exploration companies have added several new reserves and expanded their operations.

The larger, the slower

What is unfortunate that the larger exploration and production corporations have been stragglers in this context. Most of the major oil and gas discoveries that have taken place over the past 5 years were in the ultra-deep water and deep water space. The state-owned PBR is amongst the biggest beneficiaries in Brazil. Santos Basin’s pre salt has helped this company top up its reserves pretty satisfactorily.

The company has also played a prominent role in the oil potential in South America, where several deep water finds have been taking place. The one major hurdle is that it is very expensive to develop these areas. PBR has been compelled to set aside an amount of $106.9B just for production development from 2013-2017.

The controversy
The one major point of contention for PBR is that it is the government that sets the gasoline price and the company gets straddled with the bill. The Brazilians are ever -ready to protest against the rise in transportation costs and PBR’s losses are not going anywhere, anytime soon. When it comes to the government, profits are never its priority. The very recent protests will only aggravate the controversy that the company faces.

The company

The Brazil-based Petroleo Brasileiro Petrobras SA (NYSE:PBR) is an integrated gas and oil company. Via its subsidiaries or directly, it is involved in researching, extracting, processing, refining, transporting and trading of oil and natural gas.


About Kristi Scott

Kristi Scott joined GDP Insider in 2005 as a Wall Street reporter for the Business and Market section. Kristi covers the stock market, financial markets and personal finance. Her awards have come from the National Federation of Professional Writers, the Ohio Newspaper Association, the Cleveland Press Club, the Society of Professional Journalists and Suburban Newspapers of America. Kristi was named SNA's national Journalist of the Year

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