Brazil coup was to stop "Car Wash' corruption ivestigation of Petrobras

I can bet you this won't be highlighted in the world headlines. 

Except when it comes to their egregious russophobiaand geopolitics  the Guardian and RT are often on the same page

Rousseff impeachment efforts a bid to stop oil corruption probe – leaked tapes

RT,
23 May, 2016

Secret phone recordings between Brazil's planning minister and the former president of Transperto have revealed that the minister suggested a “change” in the government to “stop the bleeding” caused by an investigation into Petrobras.

The March conversation between Planning Minister Romero Juca and former Transperto President Sergio Machado took place just weeks before impeachment proceedings were launched against Brazilian President Dilma Rousseff, newspaper Folha de Sao Paulo reported.

The dialogue centered around Operation Lava Jato, a probe into allegations of corruption at the state-controlled oil company Petrobras, of which Transperto is a subsidiary. Both Machado and Juca are being investigated under the probe.

Machado mentioned a renewed drive in the investigation against Petrobras, saying that the operation was leaving “no stone unturned.”

In response, Juca said a change of government was needed to “stop the bleeding” caused by the probe.

“I think we need to articulate a political action,” Juca said, adding that a possible government with Michel Temer as president should include a national pact.

Juca's lawyer, Antonio Carlos de Almeida Castro, said his client would "never think of doing any interference" in the investigation, and that the conversation between Juca and Machado contained no illegalities.

The minister himself denied that he had discussed Rousseff's impeachment with Machado.

"I want to repeal the interpretation made by Folha de Sao Paulo ... I was speaking of putting an end to the paralysis of Brazil, of ending the 'bleeding' of unemployment, separate [politicians] who are guilty and who are not," Juca said in response to allegations, as quoted by the BBC.

The conversation took place just weeks before Rousseff was suspended from her post amid impeachment proceedings.

The leader, who is accused of illegally manipulating finances to hide a growing public deficit ahead of her 2014 re-election, was removed from office after senators voted to suspend her by 55 votes to 22 earlier this month. Her trial may last up to 180 days.

Rousseff, who denies the allegations against her, made an appeal to the Supreme Court to stop proceedings, but the move was rejected.

She told RT that the impeachment situation is a coup attempt by the old Brazilian oligarchy.

"This coup is not like usual coups in Latin America, which normally involve weapons, tanks in the streets, arrests and torture. The current coup is happening within the democratic framework, with the use of existing institutions in support of indirect elections not stipulated in the Constitution. This coup is carried out by hands tearing apart the Brazilian Constitution,” Rousseff said.

"If there is no crime, an impeachment is illegal. And since it’s illegal, it’s a serious problem for the interim government. I’m living proof of this unlawfulness and injustice,” she added.

Meanwhile, Operation Lava Jato continues, with federal authorities investigating corruption allegations at Petrobras, where it is alleged that executives accepted bribes in return for awarding contracts to construction firms at inflated prices. The operation, launched in March 2014, has resulted in more than 100 warrants for search and seizure, temporary and preventive detention, and coercive measures.

Brazil minister ousted after secret tape reveals plot to topple President Rousseff

Planning minister Romero Jucá was recorded saying ‘We have to change the government’ as the only means to stop a sweeping corruption investigation

the Guardian,

23 May, 2016

The credibility of Brazil’s interim government was rocked on Monday when a senior minister was forced to step aside amid further revelations about the machiavellian plot to impeach president Dilma Rousseff.

Just 10 days after taking office, the planning minister, Romero Jucá, announced that he would “go on leave” following the release of a secretly taped telephone conversation in which he said Rousseff needed to be removed to quash a vast corruption investigation that implicated him and other members of the country’s political elite.

It is unlikely to be the last blow for the interim president, Michel Temer, whose centre-right cabinet includes seven ministers implicated by the Lava Jato (Car Wash) investigation into kickbacks and money laundering at the state-run oil company Petrobras.

Temer took power earlier this month after the senate initiated an impeachment trial of Rousseff, who is suspended for up to six months pending the upper house’s verdict on allegations that she manipulated government accounts before the last election. 

Supporters of the Workers’ party leader say the charges are a pretext for a “coup”. Temer’s allies counter that the impeachment was constitutional and necessary to address political paralysis and the worst recession in decades.

But the dubious motives and machiavellian nature of the plot to remove Rousseff are apparent in the transcript of a phone conversation between Jucá – a powerful ally of Temer’s in the Brazilian Democratic Movement party (PMDB) – and Sérgio Machado, a former senator who until recently was the president of another state oil company, Transpetro.

After discussing how they are both targeted by Lava Jato prosecutors, Jucá says the way out is political: “We have to stop this shit,” he says of the investigation. 

“We have to change the government to be able to stop this bleeding.”

Machado concurs: “The easiest solution would be to put in Michel [Temer].”

The conversation took place just weeks before the lower house voted to impeach Rousseff, according to the Folha de São Paulo newspaper, which published the transcript.

At one point, Jucá appears to mock the Lava Jato investigators for their high-mindedness and determination to tackle all corrupt senators and congressmen. “[They want to] put an end to this political class so [a new one] can rise, to build a new breed [that will be] pure.”

He then says the “penny has dropped” on this threat not just for him, but for the leaders of the Social Democratic party, such as former presidential candidate Aécio Neves, Senator Aloysio Neves, José Serra and Tasso Jereissati – all of whom are now either in the cabinet of the interim government or key supporters of the coalition.

Later in the conversation, Juca says he talked about his plans to supreme court justices, who told him the “shit” (referring to the corruption investigation and its media coverage) would never stop as long as Rousseff remained in power. He also said he received “guarantees” from military commanders that they could prevent disturbances from radical leftwing groups such as the Landless Workers Movement.

Jucá – who took the influential post of planning minister in the interim government – admitted on Monday that the conversation had taken place, but he said his words were taken out of context. He argued that he was referring to economic losses when he talked about “the bleeding”. His lawyer, Almeida Castro, reiterated this: “At no time was Jucá speaking against Lava Jato or seeking to interfere with the operation.”

But Machado, who was the source of the recording, is already reportedly negotiating a plea bargain with prosecutors. According to reports in local media, Jucá has said he will stay on leave until prosecutors decide whether he has committed any crime.

During the Lava Jato investigation, Jucá was named in a plea bargain by former senator Delcídio Amaral as a beneficiary in a 30m reais (£5.7m) kickback scheme from inflated contracts for the Belo Monte hydroelectric dam in the Amazon. He has denied the charges, which are being considered by the supreme court.

The Workers’ party has also been deeply implicated in this and other wrongdoing, though Rousseff – who has not been charged with any crimes – allowed the Lava Jato investigation to continue while she was in charge.

Temer has insisted that he too would not interfere. But many fear his new justice minister, Alexandre de Moraes, will reduce the scope of federal police activities. Moraes has previously been a defence lawyer for Eduardo Cunha, the suspended lower house speaker who is a chief target of Lava Jato investigators.

In an interview with the Guardian last month, Jucá denied that he, Cunha, Temer and other members of the PMDB were planning to rein back the Lava Jato investigation for the sake of stability.

“On the contrary, I think it’s necessary to accelerate Lava Jato,” he said. “You need to separate the wheat from the chaff, separate the guilty from the innocent. Political stability will be created by the innocent and by the credibility of politics for society. Today, credibility is low and the level of representability of politicians and parties is very low. We have to recover politics, which is an instrument to diminish conflicts and set a direction for the country.”

But the interim administration he helped to create has shown little sign of reducing tension or restoring credibility. The all-male, all-white cabinet has been heavily criticised as unrepresentative of the country, its austerity policies are unpopular and its leader has already backed down on removing the ministerial status of the culture ministry in the face of protests by leading artists, musicians and film-makers.

Noam Chomsky: Brazil's President Dilma Rousseff "Impeached by a Gang of Thieves"

Petrobras, oil exploration and the Rena disaster

Many thanks to Frank McSkasy for this first-rate article.

Petrobras withdraws – sanity prevails

Frankly Speaking,

5 December, 2012

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Sanity has prevailed – albeit perhaps temporarily – as Brazilian oil company, Petrobras, has announced it’s withdrawal from further prospecting in the Raukumara Basin, off the East Coast of New Zealand.


Petrobras was first granted a prospecting permit on 1 June 2010. The signing was met with approval by Dear Leader,
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John Key, Gerry Brownlee, and Marcelo Carlos Lins Vertis, on 1 June 2010

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Gerry Brownlee (then Minister  of Energy) granted Petrobras a five-year exploration permit covering  12, 330 sq kilometres (red lined area in map below),
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Acknowledgement: unattachednz: Petrobras Protest
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Sixteen months later, on 5 October 2011,  the MV Rena smashed into the Astrolabe Reef, also off the East Coast of New Zealand,
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Oil began leaking from the stranded ship, eventually dumping an estimated 350  tonnes of heavy fuel oil into the sea,
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Much of this oil eventually washed onto East Coast beaches, killing an estimated 20,000 local birdlife,
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Volunteers cleaning up the mess were faced with heart-breaking  sights like this,
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Meanwhile, John Key was otherwise engaged in more important government duties,
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Full story
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Whilst it is unclear why Petrobras has backed away from continuing to exercise it’s license to prospect the Raukumara Basin for gas and oil, there are many New Zealanders who will be giving a sigh of relief.
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It  was fairly obvious to most people with a modicum of common sense that New Zealand was ill-prepared for a major oil spill disaster, as happened in the Gulf of Mexico two years ago.


Our own Rena oil-spill created an enormous ecological disaster,
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Meanwhile, our witless National ministers can’t even get their stories straight. Energy Minister, Phil Heatley issued this explanational why Petrobras was leaving,

“I’ve met with them and they’ve said pretty clearly that it’s sort of technical reasons and prospectivity, meaning that they didn’t find enough to keep them sort of on the string so they want to regroup in Brazil. But we believe that there’s opportunities out there in the Raukumara Basin; others might pick up those particular permits and we might still see opportunities.”

See: Petrobras pulls out of NZ oil exploration

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If Petrobras “didn’t find enough to keep them sort of on the string ” – why would any other oil company be interested?! At $1 million a day, no oil company would be interested in taking the prospecting permit for the Raukumara Basin if  there was nothing there.
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Indeed, if Petrobras is  in dire financial straits, we are fortunate that they have pulled out now. One can only imagine a cash-strapped oil company, engaged in risky deep-sea drilling, and cutting safety corners .

The Pike River Mine disaster springs to mind what happens when companies ignore basic safety in the pursuit of profits.
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Indeed, the Royal Commission into the Pike River Mine disaster found  that the company put profits ahead of safety,

The Royal Commission of Inquiry’s report on the Pike River Mine disaster has slammed mine management and the Department of Labour for a lax attitude toward health and safety.

It highlights a culture of “production and profits before safety” which was enforced by managers, and paints a damning picture of ignored safety warnings and sidelined investigations into previous accidents.

See:  Report slams lax safety practices at Pike River mine

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Now consider a deep sea drilling rig  operating under similar circumstances – taking into regard New Zealand’s lax laws under our current de-regulated safety regime (courtesy National,  1992)  – and the potential for a repeat of the  Deepwater Horizon disaster on 20 April  2010 becomes wholly apparent,

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The initial explosion killed 11 men working on the platform; injured 17 others; and released about 4.9 million barrels of oil into the ocean from a 10,680 metre deep well.

The water depth was approximately 1,260 metres.

The crisis lasted for  eightyseven  days.
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By comparison, the Rena stranding was on the sea surface and relatively easy to access,
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It took over five weeks for  salvage crews to  finish pumping 1,454 tons of oil from the Rena. After fourteen months, the wreck of the now-submerged vessel remains, in pieces, on the reef along with an unknown number of sunken containers.


Now compare the depth of  where Deepwater Horizon was operating in the Gulf of Mexico (1,260 metres), with that of the Raukumara Basin,
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It took the Americans 87 days; with all their technological prowess; their Coastguard and navy;  and billions of dollars, to cap an oil spill that was in waters 1.26 kilometres (1,260 metres) deep.

Parts of the Raukumara Basin are over 6 kilometers (six thousand metres) deep.
Despite constant questions to Key and his Ministers, there is no indication that New Zealand is in any way prepared to deal with an oil blow-out that is six kilometres under water. National has consistantly fobbed off questions of concern regarding this country’s ability to address a critical oil spill.


As recently as 24 October, this exchange took place between Dear Leader and Russell Norman, of the Green Party.,

Questions for oral answer

5. Oil and Gas Exploration—Deep-sea Oil-drilling and Environmental Risk

5. Dr RUSSEL NORMAN (Co-Leader—Green) to the Prime Minister: Does he stand by his statement, “We’re not environmental bandits. If we don’t believe drilling can take place in a way that is environmentally sustainable and wouldn’t put at undue risk the environment, we wouldn’t go with it.”; if so, why?

Rt Hon JOHN KEY (Prime Minister) : I stand by my full statement, which included that we want to balance our economic opportunities with our environmental responsibilities; because it is true.

Dr Russel Norman: How is deep-sea drilling not putting the environment at undue risk, when just this month Dayne Maxwell of Maritime New Zealand said about the Government’s oil response equipment: “Most of the response equipment that we have is designed for near-shore sheltered conditions, and really there isn’t available internationally any equipment specifically designed to operate in the rough kind of conditions offshore that we have in New Zealand.”?

Rt Hon JOHN KEY: Well, that is one person’s view. I think it is also worth remembering that if somebody gets a permit to go and undertake these activities in the exclusive economic zone, not only would this Government be filling a gap that was previously left open but also there would no doubt be conditions on that. Finally, as I said yesterday, there have been 50,000 wells drilled in the Gulf of Mexico. Is the member arguing that all of those wells were a high risk and should have been closed up?

Dr Russel Norman: How is deep-sea drilling not putting the environment at undue risk, when the head of the Petroleum Exploration and Production Association said in April 2011: “You know, there is no absolute guarantee that disasters won’t happen, and if you had a major catastrophe, it would be just as bad as you have in North America.”—aka Deepwater Horizon?

Rt Hon JOHN KEY: Firstly, I mean, the member asked me yesterday about the head of Anadarko. One of the things he did say to me in the meeting was that there were a lot of learnings that had come out of that situation, and that they can be applied so that those things do not happen again. Secondly, if the member is reflecting on a comment by an individual that basically says there are no guarantees in life, well, actually, that is true, but, on the same basis, the member will never get on a plane again, never get in a car again, never get on a train again, never do a lot of things he does, because the risk is that something very bad can happen.

Dr Russel Norman: How is deep-sea drilling not putting the environment at undue risk when a leak at 2.5 kilometres under water cannot be fixed by divers, and companies are forced to rely on robots and relief rigs, and this is diametrically different from operating in shallow water, like the case in Taranaki, where the deepest production well is only 125 metres deep?

Rt Hon JOHN KEY: All of those issues in mitigation of any risk would have to be considered as part of an application to drill in the exclusive economic zone.

Dr Russel Norman: How is deep-sea drilling not putting the environment at undue risk, given that the Gulf of Mexico disaster was stopped only when a second rig drilled a relief well, and this Government will not require a relief rig to be on site during deep-sea drilling operations in New Zealand?

Rt Hon JOHN KEY: The member is jumping to conclusions. He does not know what conditions will be set. But, in the end, I mean, this is really the fundamental problem, is it not, with the Green Party. What Green members are arguing is that everything contains some risk, so they do not want to do anything, except that they want to give lots and lots of money away, which is why they come up with the only solution that that person could come up with—print it!

Dr Russel Norman: I raise a point of order, Mr Speaker. That was not a question about the Prime Minister’s former job as a currency speculator. It was about deep-sea oil production. [Interruption]

Mr SPEAKER: Order! Order! I think we will consider it a draw at that point.

Dr Russel Norman: Given that the Prime Minister is putting enormous weight on this new piece of flimsy legislation, the exclusive economic zone Act, how does he think that this particular piece of legislation will plug an oil leak at 2.5 kilometres under water? Does he plan to shove the legislation in the hole? Does he think that might work?

Rt Hon JOHN KEY: I think it is unlikely a couple of bits of paper will work. But let us cut to the chase here. We are a Government that is actually filling a gap that has been missing from our environmental protection. That member has been in the House for how long? And how many members’ bills has he put in about this issue? Oh, that is right—none. What he is focused on is printing money. That is his focus of attention.

Dr Russel Norman: I raise a point of order, Mr Speaker. My question was not about the Prime Minister’s currency speculation—

Mr SPEAKER: Order! On this occasion I invite the member to reflect on the question he asked. It kind of invited the sort of response he got.

Dr Russel Norman: Why has this Government taken a major anti-environmental turn since the 2011 election; is it because of the rising influence of Steven Joyce and others—environmental bandits within the National Party—who now dominate Cabinet and the Prime Minister?

Rt Hon JOHN KEY: Shock, horror! It is Steven Joyce’s fault. No. It is because this is a Government that wants, in an environmentally sensible and considered way, also to grow the economic opportunities for New Zealanders. That member wants to go down to the West Coast and say it is really bad that people are losing their jobs, potentially, at Spring Creek, while at exactly the same time he is stopping them getting a job down the road. I call that hypocrisy.

Source
I have re-printed nearly all the text of that exchange to show the reader that,

• National has no answer to critical safety issues surrounding deep-sea drilling,
  

• National is willing to engage in risky commercial behaviour for short term gain,
  

• John Key has a cavalier, foolish attitude when it comes to serious issues like this.
  

Should foreign oil companies engage in deep sea oil drilling, and should a disaster similar to Deepwater Horizon occur, this is what we can expect as a consequence;
1. The economic fallout of any off-shore disaster involving a massive, uncontrollable oil-spill, will impact on our “clean and green” image and will cause incalculable harm to our tourist industry.
2. The harm to our fishing industry in an affected zone will result in lost exports and jobs.
3. As with the owners of the Rena, and BP’s reluctance to pay full costs for the Gulf of Mexico spill, we can expect the owners of a failed deep-sea drilling rig to evade paying for the full clean-up costs and compensation to local businesses that suffer as a consequence.
4. National will hold a Commission of Inquiry into any deep-sea oil spill.
5. Such a Commission will find the oil company  at fault – but not National, who allowed deep-sea drilling to take place without adequate safety precautions in place, in the first place.
6. A token gesture of a ministerial “resignation” will take place. Then followed by John Key wiping his hands and insisting  that,

“The Royal Commission found the Department of [insert name]  itself did not have the focus, capacity or strategies to ensure [insert company]  was meeting its legal responsibilities under health and safety laws, blah, blah, blah…”

See:  Labour Minister Kate Wilkinson resigns in Pike River report fallout
National governments – they permit things to happen.


But never take responsibility.


I doubt John Key and Gerry Brownlee will be helping to clean up the next oil-fouled beach, somewhere on our coastline. That responsibility will go to others, who had no making in the decision to allow deep-sea drilling in our waters.
Never underestimate National politicians (and their supporters) to do dumb things.
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Sources
unattachednz: Petrobras Protest (31 March 2011)
OFW Magazine: Salvage crew returns to NZ ship (Rena, 13 October 2011)
NZ Herald: Rena: Oil clean-up chemical worries Greenpeace (25 Nov 2011)
Business Insider: BP Only Wants To Pay $15 Billion To US Authorities Over The Gulf Oil Spill (9 June 2012)
Business Insider: 19 Months Later, Here’s What We’ve Learned From The Deepwater Horizon Oil Spill (3 Dec 2012)
NZ Herald: Brazilian oil giant Petrobras dumps NZ exploration permits (4 Dec 2012)
Radio NZ: Petrobras pulls out of NZ oil exploration  (4 Dec 2012)

Previous related blogposts

On the smell of an oily rag (11 Oct 2011)

Additional reading

It’s Déjà vu All Over Again
Gary Taylor: Sloppy oil mining rules too risky
World’s Largest Oil Rig Sinks
Rena timeline

Other blogs
TangataWhenua: Petrobras pulls out of Raukumara Basin
The Jackal:  Petrobras sent packing

Petrobras pullls out of NZ

Brazilian oil giant Petrobras dumps NZ exploration permits

NZ Herald,

4 December, 2012

Brazilian oil company Petrobras has handed back exploration licences it holds for deep sea oil and gas prospects in the Raukumara Basin, off East Cape, in what appears a reaction to a string of difficulties which have seen the oil giant report losses for the first time in 13 years.

Prime Minister John Key told The New Zealand Herald that the decision was "not a reflection on the capacity to undertake deep-sea drilling or the prospect of activity of that area."

The Raukumara Basin lies in very deep water off the east coast of the North Island and has barely been explored. Petrobras contracted a seismic survey ship to undertake initial surveys of parts of the basin early last year, where it encountered stiff opposition from a protest flotilla organised by Greenpeace and a local Maori tribe, Te Whanau a Apanui.

The New Zealand Navy was despatched to ensure the seismic survey could continue.

The Ministry of Business, Innovation, and Employment (MBIE) said this afternoon it had accepted Petrobras' application to surrender its permit

Petrobras has had what the Financial Times newspaper described early last month as an "annus horribilis", reporting its first quarterly loss in 13 years in the second quarter, disappointing investors in the third quarter, and facing a 40 per cent plunge in its share price over the year.

Among its difficulties have been falling production, foreign currency losses caused by the need to import fuel owing to a lack of refining capacity in Brazil, government interference, and most recently an order to pay back taxes of US$2.4 billion dating back a decade, relating to offshore activities.

Key said he understood Petrobras was "going through a bit of a regrouping phase and they're stepping back from what they're doing. I don't think it has got anything to do with the capacity to do the mining activity they were looking at undertaking.'

"I think it's the context of their local and domestic issues they're dealing with" and should not be seen as a blow to the government's agenda for accelerating economic growth through oil and gas discoveries.

"I wouldn't really put it in those terms. That's a long-term project and opportunity out there. There are plenty of other people looking at lots of other options in the Canterbury Basin and the likes."

Key did not believe the court challenge from Greenpeace or Te Whanau a Apanui played any role in the decision.

MBIE Director Petroleum Kevin Rolens said Petrobras had the option to surrender its permit after gathering 3,305 kilometres of 2D seismic data during its exploration.

"This is a commercial decision, based on a number of factors including how the company will be prioritising its oil and gas exploration portfolio worldwide."

The Raukumara Basin is "an important frontier basin" for future oil and gas exploration activity in New Zealand, Rolens said.

"It is a relatively unexplored area, where no commercial activity had previously been undertaken and I expect that the data will be of interest to other companies exploring in New Zealand.

"The work Petrobras has done has added to the information regarding the potential for oil and gas projects in the region and will be freely available for other companies wanting to explore."

While this is good news for New Zealanders and while Greenpeace are giving credit to the protest movement I suspect this decision by Petrobas was taken for their own reasons – they are in trouble

Petrobras announce that they ain’t lovin New Zealand

Greenpeace,

4 December, 2012

Today we learned that the Brazilian oil giant Petrobras has handed back its licence to drill for oil in the deep waters off the East Cape. And this news has been welcomed by those communities whose beaches and livelihoods were at risk from an oil spill and the pollution that comes from oil drilling. The cultural and environmental heritage of this beautiful, pristine part of Aotearoa is now safe.

However, this news should also be a wake-up call for Steven Joyce and his Cabinet colleagues who have pinned our economic hopes on the whims of overseas oil companies. Every effort has been made by this National Government to court some of the world’s most polluting industries, allowing them to damage the once proud reputation New Zealanders had by lobbying for the weakening environmental safeguards and demanding taxpayer handouts.

As Bill English said today; “the Government has invested a bit of time and money making sure that oil and gas exploration is attractive”. But it’s just not working, is it Bill.

Earlier this year, Anadarko announced they were delaying their drilling activities until the end of next year, perhaps the next, and now Petrobras has pulled out. It’s like a young John Key’s posted on Facebook that his parents have left him the keys to their bach and everyone’s invited to come drink Vermouth from their drinks cabinet, but nobody’s turned up.

And from an economic standpoint, this is good news. Not only because the risk of a catastrophic oil spill on our coastlines is reduced, but making the right choice for building a more prosperous economy has become easier.

The Government’s business growth agenda – the route map to National’s economic road to nowhere – is failing. They’ve bet the house on big oil to help them think big, but this is not what’s going to help raise the standard of living in New Zealand. Neither is diminishing our global reputation by weakening laws to favour our biggest polluters or undermining global efforts to tackle climate change. All of this will harm our economy, not strengthen it.

So now, as the Ministers stand around scratching their heads looking for excuses, it’s time for us all to demand that our Government make a different choice. One which will help us build a cleaner, smarter, more inclusive economy, that is supported by progressive business and industry and will help us grow a wealthier by reducing our pollution.

An economy which is built upon our greatest resources – our values and ability to innovate – and the bedrock of our world class renewable know how.

The Portuguese have a saying: ‘Cada carneiro por seu pé pende’ which roughly translates as ‘we must depend on ourselve’s, and perhaps if the Government started believing in our ability to build our own prosperous nation, we would be well on our way to a brighter future.

Petrobras Kills Order for Five Drill Ships

24/7 Wall Street,
30 November, 2012



Brazil’s state-controlled oil giant Petroleo Brasileiro S.A. (NYSE: PBR), or Petrobras, announced today that it was cancelling an order for five new drill ships that had been placed with Ocean Rig UDW Inc. (NASDAQ: ORIG). The five rigs were planned to be put to work in the presalt layer of the Santos Basin, at water depths up to 3,000 meters (just shy of 10,000 feet).


In its press release, Petrobras said:


This decision is based on the reduction of future needs for drilling, due to a fewer number of wells expected to be drilled in the pre-salt Santos Basin, relating to a higher productivity gained through the project wells in that area.


Given the company’s lack of production growth, however, that may not be the entire story. Petrobras could be looking for ways to maintain profitability in the face of its long-term $236 billion spending plans.



The five rigs were ordered in February at a daily rate of $548,000 for a 15-year term. At the time, Petrobras ordered a total of 26 new rigs, all to be built in Brazil.



Shares of Petrobras are down 1.4% in early trading this morning, at $18.23 in a 52-week range of $17.27 to $32.60. Ocean Rig shares are down 1% at $15.68, in a 52-week range of $11.70 to $18.43.