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(Handout from Anadarko)
(Handout from Anadarko)

Anadarko drops Brazilian sale Add to ...

U.S. oil company Anadarko has shelved plans to sell its Brazilian assets after failing to elicit an acceptable price, in a sign of how western majors are cooling towards a country once considered the most exciting frontier in global oil.

Anadarko confirmed it was “currently in a holding pattern with regard to any divestitures in Brazil”. The group declined to comment further.

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Oil companies such as Statoil, Total and Maersk Oil had initially shown an interest in the assets, which were valued at more than $3-billion (U.S.). But in the end they failed to attract a high enough price, according to people familiar with the matter.

Anadarko’s decision highlights the waning of enthusiasm about Brazil among foreign oil companies, which once considered it the hottest real estate in the industry.

“It’s been a flash in the pan,” said Fadel Gheit, an oil analyst at Oppenheimer & Co in New York. “There are other more economically viable areas around the world.”

Just five years ago the country was seen as the biggest draw in the oil industry. It had discovered vast quantities of oil under a thick layer of salt in the Atlantic and the majors were desperate to grab a slice of the action.

But in recent years, the appeal of the so-called “pre-salt” has worn off. Brazil has not sold any offshore permits since the big finds of 2007. Meanwhile Petrobras, which is in charge of all new contracts in the pre-salt, has struggled to meet its own targets for boosting output, and recently cut its production guidance out to 2016. OGX, another big local player, has also lowered its output targets.

The lawsuits and fines against Chevron and its drilling partner Transocean over oil leaks off the coast of Rio have also sent a chill through the investor community.

All those factors complicated Anadarko’s asset sale. “People are looking with more of a clinical eye at Brazil these days,” said one western energy banker. “They’re saying: Just because it’s Brazil, we shouldn’t pay over the odds.”

Other issues include the government’s insistence on a high degree of local content in new offshore drilling rigs and production facilities. “Cost pressures and capacity constraints are impacting the price companies are willing to pay for Brazilian assets,” the banker said.

The political context also makes Brazil less attractive. “There is now too much political interference in the oil sector,” said one senior executive at a western oil major.

The disappointments have prompted some companies to quit. Exxon Mobil abandoned its only Brazilian block this year after drilling three dry holes.

However, there is one group of foreign oil companies whose ardour has not faded – the ones that entered Brazil years ago and are now Petrobras’ partners in its pre-salt fields. “Those of us who bet on Brazil when no-one was interested are sitting pretty,” said an executive at one of the early entrants.

An example is BG Group, which first acquired acreage in the Santos Basin in 2000. It expects its interests in Brazil – which include stakes in huge discoveries like Lula and Sapinhoa – to hit 2.3 million barrels a day of installed capacity by 2017, and be producing 600,000 b/d by 2020. Those estimates have not been affected by Petrobras’ new guidance.

Yet even the first wave of companies in Brazil worry that factors such as the local content law are making the country a more complicated place to do business. “It creates bottlenecks, and makes things more expensive,” says one western oil executive.

Additional reporting by Leslie Hook.

Copyright The Financial Times Ltd. All rights reserved.

 
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