Petrobras Facing First Strike in 7 Years

RIO DE JANEIRO (Dow Jones Newswires), July 14, 2008

Brazilian state-run energy giant Petroleo Brasileiro (PBR), or Petrobras, faced its first strike in seven years Monday as oil workers halted production on platforms in the key Campos Basin.

The Sindipetro-NF union said production on 12 platforms had been halted, affecting an estimated 400,000 barrels of oil output a day. An additional 21 platforms were operating at less-than-peak capacity under control of Petrobras' contingency teams, a union official said.

Mines and Energy Minister Edison Lobao, however, said during a radio interview that the strike had affected output at four platforms.

Oil workers walked off the job at 0300 GMT Monday, the first strike to affect oil production at the company since 2001. Petrobras has so far declined to comment on the strike, but a company spokeswoman said that the oil giant will make a statement later in the day.

The Campos Basin is currently Brazil's largest oil-producing region, responsible for more than 80% of the country's output. In June, the region pumped 1.559 million BOE.

Investors appeared to take the news in stride, sending Petrobras locally traded shares up 1.4% to 41.18 Brazilian reals ($25.74).

Monday's walkout undercuts some of the euphoria surrounding Brazil's promise as a future giant in the global oil industry. Petrobras and other oil majors have announced a series of discoveries in the pre-salt layer in the Santos Basin off the country's coast, including the massive Tupi field.

In November, Petrobras estimated recoverable reserves at Tupi could be as high as 8 billion barrels of oil equivalent, or BOE.

In addition, the president of Brazil's National Petroleum Agency, or ANP, sent shockwaves through the global oil industry by saying that another pre-salt region near Tupi could hold reserves of 33 billion BOE. Petrobras officials, however, have declined to confirm the estimate and said that further drilling was needed before any estimate on volumes could be made.

Unhappy workers would further add to the challenges Petrobras faces in the Santos Basin, where prospecting is expected to be complicated and expensive. Brazil's pre-salt layer lies below 2,000 meters of water and a further 5,000 meters below sand, rocks and salt.

Petrobras could face additional labor troubles Tuesday, when the Brazilian Oil Workers Federation, or FUP, will meet with workers to vote on a nationwide strike. A strike by FUP members would affect most of Petrobras' installations, including refineries.

Workers represented by Sindipetro-NF are pushing for a change to the way the company accounts for shore leave from platforms. FUP wants Petrobras to increase the share of profits given to workers through the company's profit-sharing plan.

Copyright (c) 2008 Dow Jones & Company, Inc.


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