Brazil's Petrobras (NYSE: PBR) will likely stay in Ecuador and keep its investments in the country despite President Rafael Correa's threat to expel the federal energy company, an industry analyst told BNamericas.
"I think this is more a political issue and doesn't have much to do with Petrobras specifically," said Fausto Gouveia, a market analyst at brokerage Alpes.
Correa has threatened foreign oil companies with expulsion if they do not increase production and started negotiations to convert existing participation contracts into service provider ones, where the state would control the fields and reimburse companies for their operations.
If companies refuse to sign the new deals, they must pay a 99% windfall tax or abandon their fields, according to the president.
"I believe the negotiations will be used as a bargaining point so Ecuador can get more advantages from Petrobras," Gouveia added. "I don't really think Correa wants Petrobras to leave the country."
But Petrobras is considering abandoning Ecuador, Brazilian President Luiz Inácio Lula da Silva said recently, after a ceremony to launch the P-51 platform in Angra dos Reis, Rio de Janeiro state.
Petrobras decided in September to transfer its interests in Ecuador's block 31 back to state oil company Petroecuador. The Brazilian company also operates block 18 in the Amazon region.
Petrobras has invested US$430mn in Ecuador since 1997 and plans to spend an additional US$300mn in coming years.
FINANCIAL CRISIS
The global financial crisis pummeling international markets for the past few weeks might jeopardize Petrobras' foreign investments, Gouveia said.
"I don't think the crisis will affect the company's investments in Brazil, but the difficulty to obtain foreign capital could harm its operations abroad," the analyst said.
Petrobras is reviewing its US$112bn strategic plan for 2008-12, which is due to be released later this month. The bad credit scenario and the abrupt fall in oil prices could be a challenge for the company's previous plans.
"Oil prices have fallen to US$70/b from US$140/b and that might curb a little the planned investments," according to Gouveia.
"I believe Petrobras will now revise down its investment plan. It won't be a big reduction, however, investments follow international prices and those prices might not make some projects viable anymore," he said.
Investments in the pre-salt zones should not be altered, he said.
