Corruption Cost Petrobras over $5 Billion
Corruption-related losses at Brazil's state-run oil firm Petrobras will likely surpass 20 billion reais ($5.3 billion), federal prosecutor Deltan Dallagnol said on Friday.
Dallagnol, part of a task force overseeing Brazil's largest-ever corruption investigation, said the 6.2 billion reais in corruption-related losses the company wrote off in April was "just the tip of the iceberg."
In April, Petrobras also wrote down another 44.6 billion reais of assets. While the additional charges reflected falling oil prices and a weaker Brazilian currency against the dollar, they were also sparked by refineries and other facilities whose value was inflated by the corruption scandal.
Prosecutors have accused executives at the nation's top engineering firms of forming a cartel to fix contracts and overcharge Petrobras for work, using the excess to line their own pockets, bribe politicians and finance election campaigns.
Dallagnol, speaking at an event in Rio de Janeiro, said the more than 20 billion reais estimate includes outright losses as well as illicit profits that the engineering firms earned through price fixing and overcharging.
Spending Cuts
On Monday, Petrobras cut $11 billion from its capital spending plans for this year and next as Brazil's currency and oil prices slump.
Petrobras plans to cut 2015 investment by 11 percent to $25 billion from the previous $28 billion, according to a statement. Investment for 2016 will be cut 30 percent to $19 billion from $27 billion. Budgeted costs plus operating expenses excluding purchases of raw materials were also trimmed for this year and next.
The company is being battered by a whirlwind of bad news. In the last year, oil prices dropped nearly 50 percent and Brazil's currency slipped by a third against the U.S. dollar, causing revenue to fall and debt to soar.
Meanwhile, the downgrade of its debt rating to junk status has raised the cost of borrowing.
An Energy Consumer
In 2014, Brazil was the eighth-largest energy consumer in the world and the third-largest in the Americas, behind the United States and Canada, according to BP statistics.
Brazil is also a significant energy producer. In 2014, Brazil produced 2.95 million barrels per day (b/d), representing a 9.5 percent increase from 2013, making it the world's ninth-largest producer and third-largest in the Americas behind the U.S. and Canada.
Increasing domestic oil production has been a long-term goal of the Brazilian government, and discoveries of large offshore, pre-salt oil deposits in the Santos Basin have already transformed Brazil into a top-10 liquid fuels producer. However, weak economic growth and the corruption scandal have dampened prospects for production growth in the short term.