Total enters Petrobras’ pre-salt assets

FPSO Cidade de Caraguatatuba

French oil major Total will team up with the Brazilian state-owned oil company Petrobras in two pre-salt fields off Brazil, Iara and Lapa fields. Total will take over operatorship of the Lapa field, which recently came online.

The pair signed on Wednesday an assets package agreement in the framework of their strategic alliance announced in October 2016 where the two companies agreed to cooperate on upstream as well as downstream projects in Brazil and internationally.

This agreement reinforces the joint partnership and cooperation between the two companies, in the Upstream and Downstream sectors, covering operations, research, and technology.

In the Upstream, the technical cooperation will be reinforced between the two companies including joint assessment of the exploration potential in key prospective areas in Brazil and the development of new technologies.

Total will also become partner to Petrobras in two pre-salt licenses of the prolific Santos basin: the BMS-11 with the “Iara” fields currently under development where Total will acquire a 22.5% interest from Petrobras, and in the BMS-9 with the Lapa field which just entered into production and where Total will become the operator of the license with the acquisition of a 35% interest from Petrobras.

In the BMS-11, Petrobras will remain the operator and will keep the largest stake in that consortium, with a 42.5% interest. Shell, with 25%, and Galp with 10%, are partners in this area. Following the sale of interest to Total in the BMS-9, Petrobras will keep a 10% interest. Shell, with 30%, and Repsol with 25%, are partners in this field.

The two companies will combine their expertise in deep-water to jointly develop solutions for long subsea tie-backs, reservoirs with high CO2 content and digital geosciences data management.

Total will also offer to Petrobras the option of taking a 20% stake in the Perdido Belt deepwater exploration Block 2 recently awarded in Mexico’s offshore licensing round. Total gained 50% interest and operatorship of Block 2 in the Perdido basin while ExxonMobil got the other 50%.

In the Downstream, Total will acquire from Petrobras some regasification capacity in the Bahia LNG terminal and a 50% interest in two co-generation plants located in the Bahia area as well as pipeline transport capacity, enabling Total to supply gas to the two co-generation plants.

Following the signature, Patrick Pouyanné, Chairman and CEO, said: “I am delighted today to see the concretization of our Strategic Alliance with Petrobras. These agreements will reinforce Total’s position in Brazil through access to outstanding pre-salt resources while entering the promising gas value chain. I’m confident that both companies will be able to create significant value by sharing their technical expertise, leveraging operational excellence and further reducing costs.”

Under the terms of this assets package deal, the acquisition of the Upstream and Downstream interests in Brazil from Petrobras will represent a global value of around 2.2 billion dollars, made of cash, carry and contingent payments.

It is subject to the final execution of the sale and purchase agreements, to the relevant regulatory approvals and to partners’ preemption rights only on the Iara transaction.

As part of its plan to divest approximately $35 billion of assets between 2015‐2018 to reduce debt, the Brazilian company has been trying to sell off some of its assets. However, the oil company has faced problems in several transactions.

One of the issues Petrobras is facing relates to the sale of Baúna and Tartaruga Verde fields to the Australian company Karoon Gas due to alleged non-compliance with relevant Brazilian regulatory requirement. The sale process is still on hold.

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