Opinion: Oil Wells and Its Dragons

04/23/2015 - 09h07

Holiday in Rio. The day is filled with prayers and promises. Saint George is the symbol of devotion to a large portion of the city. For Petrobras, it is an appropriate day to start again.

The numbers from 2014 are as ugly as a dragon: a reported loss worth R$ 21.6 billion (U$S 7.1 billion) (in 2013 the company profited R$ 23 billion (U$S 7.6 billion)), of which R$ 6.2 billion (U$S 2 billion) were considered lost to corruption.

It is only the first step on a long way. The board will be modified, the R$ 300 billion (U$S 100 billion) debt needs to be addressed and a review of the investment plan is essential for the company to be rebuilt. Along with it, Rio de Janeiro and the country also need to be restored.

Rio's economy was one of the hardest hit by the suspension of contracts brought on by the crisis at Petrobras and the 'Car Wash' operation.

The oil and gas sector represents about 30% of the economic activity in the state of Rio. The estimate was that 60% of investments planned between 2014 and 2016 would come from this sector.

Revenue from oil royalties - which represent 10% of the total state income - are dropping. Including the first quarter, R$ 2.2 billion (U$S 731 million) was earned in 2013, R$ 1.6 billion (U$S 531 million) in 2014 and R$ 1.5 billion (U$S 498 million) in 2015.

If he isn't yet a devout, perhaps the new president of Petrobras, Aldemir Bendine, should drop by Quintino Church this April 23rd to ask for the protection and help from Saint George to face his dragons (namely: the drop in barrel prices, corruption, inflation, debt and layoffs). Only a miracle could quickly rebuild Petrobras.

Translated by CRISTIANE COSTA LIMA

Read the article in the original language