Petrobras re-enters Africa, three years after $1.5bn Nigeria exit

Brazilian oil giant Petrobras has dipped its toes back into the African oil and gas market, buying three exploration blocks in the island nation of Sao Tome and Principe, three years after selling off its Nigerian assets for $1.5 billion.

Petrobras’ exit from Nigeria in 2020 was driven by a combination of factors, including financial struggles stemming from domestic corruption scandals and a desire to streamline its global portfolio.

However, the company has since undergone a significant turnaround, bolstered by rising oil prices and a renewed focus on international expansion.

According to the Brazilian company, the decision to invest in São Tomé and Príncipe marks the resumption of exploratory operations in Africa with the aim of diversifying its portfolio and is in line with the company’s long-term strategy, aimed at rebuilding oil and gas reserves by exploring new frontiers and working in partnership.

The acquisition of three blocks in São Tomé and Príncipe complied with all the company’s internal and governance procedures and is in line with its Strategic Plan 2024-2028 and is subject to approval by the local regulatory bodies, Petrobras said on Thursday.

The assets were previously owned by Shell, Reuters reported. After the deal, Petrobras will hold 45 percent stakes in two of the blocks and a 25 percent stake in the third one.

In July, Sergio Leite, Petrobras’ chief financial officer, told Bloomberg the company was on the lookout for potential asset acquisitions after spending years selling off stakes in upstream and downstream businesses.

“Petrobras had a divestment program,” Leite told Bloomberg TV. “The company has now changed sides of the table.”

Petrobras reported in May that its gross debt was $53.3 billion at the end of the first quarter of 2023, the lowest level since 2010.

Any additional investments in asset acquisitions will not put Petrobras into more debt, Leite told Bloomberg.

Then, in November, Petrobras announced it had budgeted $102 billion in capital spending for the next five years, with the bulk of the sum to be spent on a boost in oil and gas exploration.

The five-year investment plan is a 31 percent increase on Petrobras’ budget for the previous five years and also an increase on earlier spending plans for the 2024-2028 period, which totalled $85 billion.

Of the latest total, some 72 percent will go towards boosting exploration and production, the company said.

Plans are to increase the company’s average daily output to 3.2 million barrels from 2.8 million barrels at the moment. To that end, the company earlier this week started drilling in an area called the Equatorial Margin (potentially rich in oil and gas), a region along the Brazilian coast.

In 2020, Petrobras, facing financial difficulties and a shifting global energy landscape, decided to divest its Nigerian holdings, by completing the sale of its 50 percent stake in Petrobras Oil & Gas BV to an Africa Oil Corp. unit for $1.53 billion, resulting in Petrobras fully ceasing operations in Africa.

Petrobras subsidiary Petrobras International Braspetro BV previously held the stake sold to Africa Oil’s Petrovida Holding BV. The $1.53 billion was adjusted to a total of $1.45 billion, which reflects interest on the acquisition price and the deduction of Petrobras’ share of fees paid to the Nigerian government for the deal’s approval.

Of the $1.45 billion, Petrobras received $1.03 billion in the form of dividends from Petrobras Oil & Gas, as of the transaction’s base date of Jan. 1, 2018. Petrobras received $276 million at deal closing and stands to receive another $123 million following the redetermination process of the Agbami deepwater oil field. A deferred payment of $24.8 million was made by the end of June 2020.