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UPDATE 3-Petrobras mulls ventures with Batista; LLX shares rise
April 9, 2013 / 9:14 PM / 5 years ago

UPDATE 3-Petrobras mulls ventures with Batista; LLX shares rise

* Shares of Batista’s LLX port company rise 10 pct

* Petrobras rises most in a month on output outlook

* Chavez death further delays PDVSA refinery stake

* Floating LNG still an option for Petrobras, CEO says (Adds floating LNG plant outlook, fuel import cuts, updates share prices)

By Jeb Blount and Sabrina Lorenzi

RIO DE JANEIRO, April 9 (Reuters) - Petrobras, Brazil’s state-controlled oil company, is considering partnerships with billionaire Eike Batista’s EBX Group in ports and other services, Petrobras CEO Maria das Graças Foster said on Tuesday.

Shares of Brazilian port operator LLX Logistica SA , which is controlled by Batista, rose more than 10 percent after Foster’s remarks before trimming gains. The remarks at the Rio de Janeiro Federation of Industry added to speculation that Brazil’s government might throw a lifeline to his troubled EBX energy, port, mining, oil, and shipbuilding group.

The $2 billion Port of Açu, being built by LLX, sits on Brazil’s coast north of Rio de Janeiro near the center of the Campos Basin, the source of about 80 percent of Brazil’s oil. It is also close to the neighboring Santos and Espirito Santo basins, the country’s other principal oil production areas.

A lack of suitable ports is a key problem for the development of giant new offshore oil reserves being discovered off the coast of Brazil. Batista is rapidly adapting Açu, originally an iron ore terminal, to handle oil storage and processing, docks for service vessels, oil equipment factories and service warehouses and an oil-focused shipyard.

“EBX is one of the groups we are evaluating for projects that will serve us in the medium and long term; it’s business, not aid,” Foster said. “Petrobras has to reduce its capital expenditure. It can’t do everything, build everything and be the owner of everything. This would be inviable. We want to use to what others have to the maximum, paying market prices.”

In afternoon trading on Tuesday in Sao Paulo, LLX rose 10.9 percent at 2.14 reais. While Petrobras’ interest in Batista’s group helped two other EBX companies gain through early afternoon trading, OGX Petroleo e Gas SA and OSX Brasil SA ended up falling in late trading.

After rising as much as 5.4 percent OGX gave up gains to fall 1.2 percent to 1.67 reais. OSX fell 3.6 percent to 3.49 reais after earlier rising 5 percent.

OGX’s see-saw trading came after a decision by Moody’s Investor Service to downgrade OGX debt.

OGX debt was cut to “B2” from “B1” and put on watch for possible further downgrades. OGX shares have fallen more than 60 percent this year after oil from the company, which began production last year, was less than expected.


Petrobras shares also received a lift after the company said it cut fuel imports by 10,000 to 15,000 barrels a day in the first quarter, compared with a year earlier and that it expected oil output in Brazil, which fell for 11 straight months through February, to rise in the coming months.

“I can’t give you a clear result about March,” Jose Formigli, the company’s director of exploration and production told reporters at an event at Firjan, the Rio de Janeiro Federation of Industry. “But output will rise in the coming months.”

Production increases are expected as repair and maintenance work on platforms in some of the company’s largest and most productive fields ends, he said.

The company is importing about 245,000 barrels of diesel and gasoline a day, an amount likely to continue through the end of the year, said Jose Carlos Cosenza, Petrobras refining and fuel supply director.

The production outlook and refining news helped Petrobras shares rose 5 percent to 16.80 reais in late-afternoon trading in Sao Paulo on Tuesday.

Falling production, rising demand for fuel and government reluctance to let the company increase domestic prices for gasoline and diesel have caused its debt to rise and limited available cash to finance a $237 billion, five-year expansion.

Because of the fuel price controls, it sells imported gasoline and diesel in Brazil at a loss.


Foster and top company directors also discussed other issues at the event, called to explain the investment plan to investors and local business people.

Foster said talks on the stake Venezuela’s state oil company, PDVSA, will take in the Abreu Lima refinery near Brazil’s northeastern city of Recife were put off due to the death of Venezuelan President Hugo Chavez, and there is no date for discussions to resume.

Soaring costs, stagnant production and inexperience refining the heavy grades of crude oil that dominate Petrobras output led the company to seek a partnership with PDVSA seven years ago. Despite high-profile pledges of support and investment by the late Venezuelan leader, PDVSA has not yet paid anything for its 40 percent stake.

Petrobras plans to complete the refinery, which it calls Refinaria do Nordeste, or RENEST, with or without PDVSA, Foster said again on Tuesday. Production is slated to start in 2014.

Foster said Petrobras plans to continue a partnership with another neighbor, Bolivia. She said the company would renew a natural gas import contract that expires in 2019.

Under that contract Petrobras will continue to receive gas until at least 2020 because Petrobras has already paid for some gas for which it never took delivery.


Petrobras now imports about 24 million cubic meters (847 million cubic feet) of gas per day from Bolivia, but has the right to take up to 30 million cubic meters per day.

The company also said it has not abandoned potential plans to build floating offshore factories to produce and export liquefied natural gas (LNG) from offshore fields as much as 360 kilometers (225 miles) from shore, distances for which deepwater undersea pipelines may be prohibitively expensive, Foster said.

Last Friday, Roberto Ramos, chief executive of Odebrecht Oil & Gas, a leading Petrobras offshore service provider, said falling prices for gas will probably prompt Petrobras and its partners to abandon floating LNG as world gas prices fall.

$1 = 1.9815 Brazilian reais Additional reporting by Rodrigo Viga Gaier; Editing by Gerald E. McCormick, Leslie Adler, Steve Orlofsky and Bob Burgdorfer

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