On Tuesday (Feb. 28), we signed purchase and sale agreements with Total related to the assets of the Strategic Alliance set forth under the Master Agreement signed on Dec. 21, 2016.
The contracts seal the Strategic Alliance between the two companies, creating new partnerships in the upstream and downstream segments and strengthening technological cooperation in the operation, research, and technology areas. This Strategic Alliance allows both companies to combine their world-renowned experiences in all oil and natural gas chain segments in Brazil and abroad.
The contracts signed were:
- Transfer to Total of 22.5 percent of Petrobras’ stakes in the concession area named Iara (Sururu, Berbigão, and Oeste de Atapu fields, which are subject to unitization agreements with area called Entorno de Iara, under the transfer of rights scheme, in which we hold 100 percent of the stakes), in Block BM-S-11. We will remain the operators and hold the majority of the stakes of this area, at 42.5 percent. The partnership with Total will bring benefits, such as a decrease in investment volumes and the incorporation of technological solutions for its development to be studied jointly, maximizing profitability and the volume of oil to be recovered. BG E&P Brazil - A subsidiary of Royal Dutch Shell plc, with 25 percent, and Petrogal Brazil, with 10 percent, are also part of this consortium.
- Assignment of 35 percent of Petrobras’ interest to Total, as well as the operation, in the Lapa field concession area, in Block BM-S-9, leaving Petrobras with 10 percent. The Lapa field is in production, and operations went on stream there in December 2016. As the operator of the field, Total will benefit the consortium by incorporating their valuable experience in deep water projects for the next phases of the challenging development of Lapa, the characteristics of which differ from the other pre-salt fields in operation. BG E&P Brazil - A subsidiary of Royal Dutch Shell plc, with 30 percent, and RepsolSinopec Brazil, with 10 percent, are also part of this consortium.
- Sale of 50 percent of our stakes in Termobahia to Total, including the Rômulo de Almeida and Celso Furtado thermoelectric plants, in Bahia. Both thermals are connected to the regasification terminal, which is in São Francisco do Conde, Bahia, where Total will have access to regasification capacity aiming to supply gas to the thermal. This initiative is an innovative partnership on the Brazilian thermal market.
The contracts above are in addition to other agreements already signed on Dec. 21, 2016, which are: (i) Letter that grants Petrobras the option to acquire a 20 percent stake in block 2 of the Perdido Foldbelt area, in the Mexican portion of the Gulf of Mexico, taking on future obligations only in proportion to its participation; (ii) Letter of Intent for joint exploratory studies in the Equatorial Margin exploration areas and in the Santos Basin, and (iii) technological partnership agreement in the areas of digital petrophysical, geological processing, and subsea production systems.
With the transactions signed yesterday, Total will pay in the total amount of $2.225 billion, consisting of $1.675 billion in cash for the assets and services, a credit line that we can use worth $400 million, representing part of our investments in the fields in the Iara area, in addition to contingent payments of $150 million.
After the signing ceremony, Pedro Parente and Patrick Pouyanné, the CEOs of Petrobras and Total, respectfully, said: “We are excited about our strategic alliance having become a reality. This new partnership, together with strong technological cooperation, will create synergies and value by combining our operating excellence and reducing costs in our projects for the benefit of both companies.”
Transaction completions are subject to the approvals of the relevant regulatory authorities and to the existing partners’ potential exercise of preemptive rights in the Iara area, as well as other conditions precedent.
To us, this Strategic Alliance is an important part of our 2017-2021 Business and Management Plan, since it enhances the sharing of information, experience and technology, advances the strengthening of corporate governance, and improves our financial feasibility through the mitigation of risks, cash inflow, and with decreased investments.
To Total, the new partnerships with Petrobras strengthen its position in Brazil, through its participation in new fields in the Santos Basin and its entry into the promising natural gas value chain.
Petrobras and Total are currently partners in 19 exploration and production consortia. In Brazil, they partner in the Libra area, the first contract under the production sharing system, which is located in the Santos Basin pre-salt. Abroad, they are partners in the Chinook field, in the US portion of the Gulf of Mexico, in the Akpo deepwater field, in Nigeria, in the San Alberto and San Antonio/Itau gas fields, in Bolivia, as well as in the Bolivia-Brazil gas pipeline.