Petrobras set to become world’s largest publicly-traded oil firm

. Jan 14, 2021
Petrobras offshore oil rig along the coast of Rio de Janeiro. Photo: lazyllama/Shutterstock Petrobras offshore oil rig along the coast of Rio de Janeiro. Photo: lazyllama/Shutterstock

This newsletter is for PREMIUM subscribers only. Become one now!

Today, why Petrobras could become the world’s largest oil company on the stock market. The meddling of Bolsonaro in Brazil’s biggest publicly-controlled bank. And Brazil’s most innovative entrepreneurs.

Could Petrobras become the world’s largest publicly-traded oil company?

Brazil’s state-controlled oil and gas giant Petrobras is the second-largest corporation operating in the world’s seas, only ranking behind Saudi Aramco.

The findings come from a research effort by scientists at the Stockholm Resilience Center and the U.S.-based Duke University to map the companies which account for most of the profits from offshore operations. Their study was <a href="https://advances.sciencemag.org/content/7/3/eabc8041/tab-pdf">published in the Science Advances journal</a>.</p> <ul><li>Combined, the top 100 companies with offshore operations generated a total of USD 1.1 trillion in revenues in 2018. Petrobras alone accounted for USD 46 billion.</li></ul> <p><strong>The future is in the ocean.</strong> Despite the pandemic, Petrobras reached record levels for oil and natural gas production in 2020 — 2.28 and 2.84 million barrels per day, respectively. As of now, 87 percent of its activities are in deepwater offshore reserves, and the company plans to invest USD 46.5 million in oil exploration and production until 2025.</p> <p><strong>Why it matters.</strong> According to Henrik Wachtmeister, one of the authors of the study, &#8220;as one of the few countries with massive potential to produce conventional oil, Brazil&#8217;s should increase its output until 2030.&#8221; He told Deutsche Welle: &#8220;That would possibly make Petrobras the world&#8217;s largest publicly-traded oil company.&#8221;</p> <p><strong>Missing the zeitgeist?</strong> While the world&#8217;s major oil and gas companies have already started to invest heavily in the development of renewable energy sources, Petrobras is still banking its future on oil. Its investment plan for the 2021-2025 period briefly mentions the need to invest in &#8220;decarbonization and renewable fuels,&#8221; but fails to go into further detail.</p> <ul><li>Moreover, Petrobras has set aside only USD 1 billion in capital expenditures — out of USD 55 billion available — to fund its green drive. Meanwhile, 84 percent of provisions will go to oil and gas exploitation and production.</li></ul> <div class="flourish-embed flourish-chart" data-src="visualisation/4961336"><script src="https://public.flourish.studio/resources/embed.js"></script></div> <hr class="wp-block-separator"/> <h2>Bolsonaro meddles with a public bank</h2> <p>Just two days after the state-controlled Banco do Brasil announced a reorganization plan that includes reducing its staff by at least 5,000 employees, news broke that President Jair Bolsonaro decided to axe the bank&#8217;s CEO André Brandão, who has been in office for only four and a half months.</p> <ul><li>Banco do Brasil shares plunged nearly 5 percent as investors became wary of this latest instance of political interference in the bank.</li></ul> <p><strong>Behind the decision.</strong> The plan to downsize during the pandemic displeased political leaders, who voiced their complaints to Mr. Bolsonaro, according to a <a href="https://valor.globo.com/financas/noticia/2021/01/13/analise-fritura-de-andre-brandao-arranha-discurso-sobre-autonomia-de-estatais.ghtml">report</a> by finance newspaper Valor. The timing of the redundancy plan could not have been worse, some said, as Brazil is braced for a potential <a href="https://brazilian.report/business/2020/10/23/brazil-unemployment-hits-new-records-but-worse-is-yet-to-come/">job apocalypse</a> in 2021.</p> <p><strong>Why it matters.</strong> While the decision frustrates investors, it could bear political fruits for the government. Seats on Banco do Brasil&#8217;s board are highly-coveted political appointments, and could be used as bargaining chips in an effort to whip votes in upcoming congressional leadership votes, which are currently shaping up to be tight contests.&nbsp;</p> <ul><li>In the race for House Speaker, Mr. Bolsonaro has supported Arthur Lira, the leader of a loose coalition of rent-seeking conservative forces known as the &#8220;Big Center.&#8221; He faces off against Baleia Rossi, who has the support of incumbent Speaker Rodrigo Maia.</li></ul> <hr class="wp-block-separator"/> <h2>Who are Brazil&#8217;s most innovative young entrepreneurs?</h2> <p>Every year, the MIT Technology Review elects a list of top innovators under 35 years old, which in years past has featured Facebook&#8217;s Mark Zuckerberg and Google&#8217;s Larry Page. Since 2013, the magazine has a list just for Latin America — and the <a href="https://www.technologyreview.es/innovadores-menores-35-latam-2020?utm_source=meio&amp;utm_medium=email">latest installment</a> of the Innovators Under 35 LATAM includes five Brazilians:</p> <ul><li><strong>Amanda Pinto.</strong> The founder of <a href="https://www.ovosmantiqueira.com.br/n-ovo-substituto-para-ovos-plant-based?gclid=Cj0KCQiA9P__BRC0ARIsAEZ6irisCV5qnH-aPl4EcII0JpOSYajc09dxWzg4uuwf_gmeK_sMsa-MWdgaArEXEALw_wcB">N.ovo</a>, a startup developing vegan alternatives to eggs. Among the company&#8217;s products is a plant-based powder that replaces eggs in cooking recipes, as well as a line of vegan, gluten-free mayonnaise. Her company is incubated by Grupo Mantiqueira — South America&#8217;s leading egg producer&nbsp;— which is owned by her father.&nbsp;</li><li><strong>Renato Borges.</strong> An engineer, he founded <a href="https://agrointeli.com.br/">Agrointeli</a>, an artificial intelligence platform made for rural producers. The system combines satellite imagery with data from land sensors, machines, and weather forecasts to guide farms&#8217; decision-making processes in order to save time and money, as well as pursue more sustainable practices.</li><li><strong>Ricardo di Lazzaro.</strong> With degrees in medicine, biochemistry, pharmaceutics, and genetic engineering, he founded <a href="https://www.genera.com.br/">Genera</a> — a startup specializing in personal genome mapping. Tests allow people to discover their genetic predisposition to particular diseases and information about their ancestry. We at <strong>The Brazilian Report</strong> made an <a href="https://brazilian.report/podcast/2020/06/10/explaining-brazil-podcast-lifting-lid-brazil-divided-race/">episode of our Explaining Brazil podcast</a> discussing the country&#8217;s ethnic makeup, using one of Genera&#8217;s tests.</li><li><strong>Fred Rabelo.</strong> An engineer, he founded <a href="https://www.tisaude.com/">Ti.Saúde</a>, a platform connecting patients to health professionals. As well as remote consultations, it allows for the follow up of patients on WhatsApp and phone calls — and is suited for both private and public health institutions.</li><li><strong>Gabriel Liguori.</strong> The doctor co-founded <a href="https://www.tissuelabs.com/">TissueLabs</a>, a startup which makes tissues and organs in a laboratory. These materials allow for companies to test medicines in a development phase or seek better treatments for patients. The company has invested in research in the cardiology field with hopes to produce artificial hearts and tissues that allow human organs to regenerate.</li></ul> <hr class="wp-block-separator"/> <h2>What else you need to know today</h2> <ul><li><strong>Economy. </strong>Confidence levels among Brazilian industrialists have <a href="https://static.poder360.com.br/2021/01/indicedeconfiancadoempresarioindustrial_janeiro2021.pdf">dropped</a>. According to the National Confederation of Industries (CNI), despite vaccination campaigns being on the horizon, industry owners fear that a more aggressive second Covid-19 wave will bring new, longer lockdown measures. Moreover, the end of the coronavirus emergency salary program could cool off domestic consumption.</li><li><strong>Pandemic. </strong>Helder Barbalho, the governor of the northern state of Pará, decided to <a href="https://www.poder360.com.br/coronavirus/coronavirus-governador-do-para-anuncia-bloqueio-de-divisa-com-o-amazonas/">block</a> his state&#8217;s borders with the neighboring Amazonas, which is on the cusp of a <a href="https://brazilian.report/society/2021/01/06/manaus-biggest-amazon-city-back-in-coronavirus-chaos/">second collapse of its healthcare network within a year</a>. In practical terms, Pará will no longer allow boats carrying passengers to cross state lines — the leading mode of transport in the Amazon.</li><li><strong>Vaccines 1.</strong> The Health Ministry said on Wednesday that Brazil&#8217;s <a href="https://static.poder360.com.br/2020/12/plano-vacinacao-covid19-16dez2020.pdf">nationwide vaccination plan</a> will begin before the end of January. The campaign will reportedly begin with 8 million doses in the country&#8217;s 27 state capitals, before spreading to smaller cities. To the Supreme Court, the ministry reported that seven states (Acre, Bahia, Espírito Santo, Mato Grosso do Sul, Paraíba, Pernambuco, and Santa Catarina) don&#8217;t have sufficient stocks of syringes and needles — and that the government is trying to compensate for that by procuring 30 million units. Earlier this month, President Jair Bolsonaro <a href="https://brazilian.report/coronavirus-brazil-live-blog/2021/01/04/brazil-bans-export-of-syringes-after-failed-procurement-process/">blocked syringe and needle exports</a> due to domestic shortages —&nbsp;but then <a href="https://brazilian.report/coronavirus-brazil-live-blog/2021/01/06/president-bolsonaro-suspends-syringe-purchases-due-to-high-prices/">suspended purchases</a> after deeming prices to be &#8220;too high.&#8221;</li><li><strong>Vaccines 2. </strong>A Brazilian plane will fly to India today to collect 2 million ready-for-use doses of the AstraZeneca vaccine.&nbsp;</li><li><strong>Vaccines 3.</strong> Russian lab Gamaleya is poised to request emergency approval of its Sputnik V vaccine. However, Brazilian rules require labs to be running clinical trials within the country in order to issue authorization. States have shown their disgruntlement with the rule, especially since the federal government had promised to lift that requirement late last year.</li><li><strong>Energy.</strong> The northern state of Amapá registered power outages in all but three municipalities on Wednesday. This is the third such episode since November 2020, when the state underwent an <a href="https://brazilian.report/society/2020/11/10/cut-off-amapa-state-endures-week-without-electricity/">energy crisis</a> which forced authorities to postpone municipal elections. Power suppliers say the problem occurred in a transmission line that supplies the local power distribution network and claims to have solved the issue.

Read the full story NOW!

Our content is protected by copyright. Want to republish The Brazilian Report? Email us at contact@brazilian.report