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Brazil's Government Seeks Mediation to Avoid Having to Pay US$ 19.7 Billion to Petrobras

02/13/2018 - 11h31

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JULIO WIZIACK
MARIANA CARNEIRO
FROM BRASÍLIA

The government plans to settle an impasse with Petrobras within two months in order to realize a mega-auction with an estimated value of at least at R$ 76 billion (US$ 23 billion) within this year and has already consulted with the AGU (Solicitor General) regarding the possibility of arbitration.

Due to a dispute among stakeholders, however, the deal could end up yielding more than R$ 90 billion (US$ 27.3 billion). Although the government has signaled a willingness to compromise, its tendency is to resolve things as a state matter.

On the other hand, Petrobras will not reach an agreement if it encounters resistance from minority shareholders, who are already aware of the issue and could complicate the negotiations if they see them as being harmful to the state-owned corporation.

The issue has created conflict among technocrats and ministers from Economics, Planning, Mining & Energy and the Chief of Staff. The preferred idea for now is to convince Petrobras to cede territory to competitors in the "pre-salt" fields where, according to a contract from 2010, it has exploration rights through 2050.

According to specialists, the contract, which was signed by former president Lula da Silva, was "so poorly elaborated" that it creates room for Petrobras to question whether it is a creditor or debtor.

The contract allows for the renegotiation of nominal values based upon the prevailing price of petroleum. As the market price has been falling since the contract was signed in 2010, the state-owned corporation claims that it is owed compensation, and estimates the amount to be around R$ 65 billion (US$ 19.7 billion).

The economic team wants to auction off this excess crude oil and in turn to use the proceeds to pay Petrobras. Pedro Parente, the President of Petrobras, has already said that he won't sign any contract unless the state-owned company is considered as a creditor.

Translated by LLOYD HARDER

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