Petrobras: Gas Contract Revision Talks 'Going Well'


Talks between Brazil's federal energy company Petrobras (NYSE: PBR) and its Bolivian counterpart YPFB over revised gas export contracts to Brazil are "going well," Petrobras CEO Jose Gabrielli told Sao Paulo state business leaders.

"The talks are proceeding normally," he said. "We're banking on a negotiated solution between two sides that have no option but to stay married."

Gabrielli stressed that while Bolivia needs to export gas to Brazil to raise hard currency revenues, Brazil needs the gas to supply fast growing domestic demand.

"We are importing some 24 million cubic meters a day (Mm3/d) and could increase that to 30Mm3/d under the current contract that expires in 2019," he said.

Gabrielli refused to go into details of the talks but said YPFB is not asking for a specific price increase. He refuted stories in Bolivian and Brazilian press saying YPFB is asking for a price of US$8/MBTU from some US$3/MBTU.

"We are discussing the conditions of the contract's readjustment clauses to ensure economic equilibrium," he said, pointing out the two companies are having regular meetings to discuss the contracts.

The current contract foresees price adjustments every three months based on a basket of fuels and currencies. Gabrielli did not, however, mention an earlier Petrobras position that there was no reason for changing the clause.


Petrobras' CEO also discussed his company's operations in Bolivia, saying there has been little change because Bolivia still needs to regulate the May decree that nationalized hydrocarbons assets.

"According to the decree, the handing over of assets must be concluded in 180 days after the just compensation of companies for investments made in the country," he said. "We are also discussing this with the government."

Petrobras is also in talks with Bolivian government authorities on details of the implementation of tax and royalties increases to 82% from 50% of companies' revenues announced in the decree.

Once the compensations are finalized, YPFB will take over a controlling 50% plus one share stake in Petrobras' refinery operations in the country, Petrobras Refinacion.

The only operational change since nationalization has been in wholesale distribution of fuels in the country. Petrobras is handing over to YPFB all fuels produced at the refineries and getting paid only for the transport, which is still being operated by Petrobras, he said.

Petrobras has invested US$1.3bn in upstream, refining and downstream operations in Bolivia since 1996.

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