Petronas Essay

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Petrobras  (Petroleo  Brasileiro) is a state-controlled integrated  energy  company.  Headquartered in  Rio de Janeiro, Petrobras, along with its subsidiaries, engages in the exploration, production,  refining, and transportation of oil from reservoir  wells, shale oil, and other rocks. It owns and operates thermoelectric, petrochemical, and fertilizer plants, and is involved in the purchase, production,  transportation, and distribution of liquefied natural gas and natural gas. Most recently, Petrobras formed a joint venture with Mitsui Group of Japan to produce biofuels.

Petrobras’s creation and early history are intimately related to Brazilian economic nationalism and its import-substituting industrialization strategy. Public distrust of international oil companies and their geologists, who claimed that  Brazil had very limited oil wealth, encouraged  the nationalization of undiscovered oilfields under  the aegis of the National  Petroleum Council in 1939.

The combination  of wartime trade disruptions  in the 1940s with modest domestic exploratory efforts led to a severe shortage of petroleum,  which, along with a surge in national  security concerns,  fueled a popular state-backed campaign for the development of the Brazilian oil industry. Under the banner “The Oil Is Ours” and with the twin objectives of supplying the nation  hydrocarbons  and saving on scarce foreign exchange, Petrobras was founded in 1953 under the  presidency  of Getulio  Vargas. Despite  regular and intense politicization at the top, Petrobras delivered on its mission and stood up to the formidable challenge of building an oil industry  from scratch, without  previous knowledge, lacking a skilled labor force, and having practically nonexistent  reserves to start with.

This achievement  was a two-stage process, as historian  Laura Randall suggests. First, Petrobras  concentrated  on building refining capacity to substitute imported hydrocarbon products for those refined domestically; subsequently, it increased crude oil production.  Brazil’s foreign dependence  on oil dropped from around 90 percent in the mid-1950s to less than 50 percent in the 1990s and keeps decreasing. Yet this is unlikely to be Petrobras’s biggest accomplishment. World  technological  leadership  in  the  exploration and production of oil in deep water (300–1,500 m) and ultradeep  water (1,500 m and more) has proven profitable and is most promising.

Exploration And Production

Petrobras’s  offshore  explorations   in  the  Campos Basin first paid off in 1974 with the discovery of the Garoupa  field in shallow waters  (120 m). Production started  in 1977. Since then,  more  than  40 oilfields have been found off the Brazilian coast, among which  Roncador,  Marlim,  and  more  recently  Tupi were so-called elephant fields—those containing proven reserves over 1 billion barrels. These deepand  ultradeep-water  reservoirs   now  account   for more than 80 percent  of Brazil’s oil production and proven reserves.

The challenges in economically  exploiting  oil at these depths are remarkable and have catapulted Petrobras to the technological frontier, via horizontal drilling, few and high-productivity  wells, high-resolution  stratigraphic  analysis, and  3D visualization techniques.  Petrobras’s deep and  ultradeep-water discoveries are not  only meeting  Brazil’s desire for self-sufficiency in oil, but also challenging the oldest myth in the industry, the peak oil theory—the  idea that the rate of global oil production had reached a maximum.

As of 2007 Petrobras  had 69,000 employees, ran and/or owned more than 8,000 service stations, operated 77 fixed and 32 floating production platforms, refined  some  2 billion  barrels  per  day (bpd)  from 15 refineries,  produced  another  2 billion bpd  from around  13,000 productive  wells, boasted  proven  oil reserves of 11.7 billion barrels, and relied on a fleet of more than 150 tankers to transport its products.

Market Position

Petrobras  is a player in world  energy markets.  Its sheer size and technological leadership have made it one of the “new seven sisters” (the industry’s name for the dominant  companies  in the production/distribution  of oil). On  the  financial side, Petrobras’s net  earnings  were $102.9 billion, with net  income of $12.9 billion and  $27.3 billion worth  of investments. Its market value exceeded $100 billion, making it the most profitable public company in South America—as well as the most valuable of all, private and public—and ranking it 50th among the world’s largest firms.

The company  has ventured  outside  Brazil and  is particularly  strong  in Argentina,  Bolivia, Colombia, Ecuador, Peru, Uruguay, and Venezuela. It also does business in countries  including Angola, China, England, Iran, Mexico, Nigeria, Norway, Turkey, and the United  States.  Its  shares  are  traded  in  the  world’s main stock exchanges, and its bonds are among the best rated in Brazil’s capital markets.


  1. Carlos Bruhn et al., Campos Basin Characterization and  Management: Historical Overview and Future   Challenges  (Offshore   Technology   Conference, 2003);
  2. Petrobras, “Petrobras in Numbers,”  (cited March  2009);
  3. Laura Randall, The Political Economy of Brazilian Oil (Praeger, 1993);
  4. Joshua Schneyer, “Brazil, the New Oil Superpower,” BusinessWeek  Online (November 20, 2007);
  5. Peter Smith, “Petrobras: The Politicizing of a State Company, 1953–64,” The Business History Review (v.46/2, 1972);
  6. Daniel Yergin, The Prize: An  Epic Quest for Oil, Money and Power (Free Press, 1991).

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