Brazilian state-led oil producer and refiner Petrobras expects to ramp up its divestments in the near term, with a series of deals expected to close by the end of April, according to Chief Executive Roberto Castello Branco.
"An asset-sales program already exists, but now we have a much more aggressive divestment program," Castello Branco said during an event Friday at the private Getulio Vargas Foundation, or FGV. "I believe that in the first four months of the year, we're going to carry out $10 billion in divestments and we intend to do much more than this going forward."
Petrobras currently is targeting $26.9 billion worth of sales in the 2019-2023 period, according to the company's most recent five-year investment plan. But the company announced last week it would expand the sales to additional onshore and shallow-water mature oil and natural gas fields, midstream and downstream assets. The fresh assets are part of the company's new resiliency plan, Petrobras said.
While the sales target appears aggressive given Petrobras' failure to meet its 2017-2018 divestment goal and pending legal challenges to the sales, the company has enough assets currently in the binding phase of negotiations to quickly make good on Castello Branco's forecast.
The biggest asset up for sale is gas pipeline operator Transportadora Associada de Gas, which is expected to fetch more than $7.5 billion. Last week, Petrobras reopened bidding for interested parties that have not yet participated in the sales process and want to submit a binding offer. Petrobras previously was in exclusive talks to sell 90% of TAG to France's Engie.
TAG operates more than 4,505 km of pipelines across 10 states in Brazil's north, northeast and southeast, with 10 compressor stations and 91 access points.
Petrobras is also in the binding phase of talks to sell two fertilizer plants to Russia's Acron.
The company has already completed two deals this year. Petrobras agreed to sell a 70% operating stake in the offshore Maromba Field to BW Offshore for $90 million while also completing the sale of its fuel distribution business in Paraguay to Grupo Copetrol for $381 million.
The asset sales should then accelerate through the rest of 2019, buoyed by a better business climate and the continued opening of Latin America's biggest economy under President Jair Bolsonaro, Castello Branco said. "In 12 months, we'll have three or four times the $10 billion, but this is going to depend on the market."
Petrobras sold about $14 billion worth of assets in the 2017-2018 period.
One of the key areas Castello Branco wants to focus is on the refining market, where Petrobras controls 98% of the country's installed processing capacity. "Petrobras' position, with 98% of refining, is an absurdity," Castello Branco said. "We're going to sell and remove any temptation to exercise this monopoly and, in the end, have less than 50%."
Petrobras' current plan for refinery sales outlines the sale of a 40% minority stake in four refineries divided across two separate packages of assets, one in the northeast and one in the south of Brazil. But Castello Branco said in late February that the model would be revised to include the sale of full operating stakes in several refineries.
While Castello Branco said he would eventually like to fully privatize Petrobras, the executive admitted the government lacked enough political capital to undertake such an unpopular move. Instead, the new management team will try to make Petrobras as lean as it can, Castello Branco said.
"We're going to transform Petrobras into the closest thing possible to a private company," Castello Branco said.
