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Brazil Stretches Its Sea Sovereignty While Petrobras Offers US$ 64 Billion in Stock

Oil rig in Brazil As it seeks to increase control over its natural resources Brazil has just expanded the offshore area where drilling for crude or prospecting for minerals requires government authorization. 

Prospecting anywhere on the undersea continental shelf that extends from the South American country’s coast will now require government approval, even in areas that are beyond current sea borders, according to a Brazilian Navy order published in the official gazette, the Diário Oficial, this past September 3.

The continental shelf is the extended perimeter of a continent between the coastline and the oceanic abyss.

Brazilian president Luiz Inácio Lula da Silva has sought to increase control over offshore oil resources after state-controlled oil company Petrobras made discoveries such as Tupi, the largest find in the Americas since Mexico’s Cantarell in 1976.

Brazil is preparing a new sea-border expansion request to the United Nations after a 2004 proposal was rejected.

The UN generally recognizes a country’s maritime territory as the area within 200 nautical miles from the shore.

Public Share Offering

Petrobras, Brazil’s state-controlled oil and gas multinational, unveiled plans to sell up to US$ 64.5 billion of new stock, in one of the world’s largest public share offerings.

The transaction could be expanded to as much as US$ 74.7 billion if there is heavy demand, the company said. The money will fund the development of recently-discovered huge oil reserves off the coast of Rio de Janeiro.

Shares in Petrobras rose 4% in late afternoon trade in São Paulo. Petrobras stock is also traded in New York, Madrid and Buenos Aires.

The company said it would issue 2.17 billion common shares and 1.58 billion preferred shares. The price of the new shares will be announced on September 23.

A pubic share offer had been expected earlier this year but was delayed while a deal was sorted out over how many shares the Brazilian government would receive in return for giving Petrobras access to up to 5 billion barrels of oil.

Some investors have questioned the price of US$ 8.51 per barrel, but eventually agreed in the oil-for-shares swap, believing that 5 to 6 USD would have been fair.

International Finance Review in a release to its subscribers said that the figures of the offering made headlines, but “as investors sifted through the 620-page preliminary prospectus it became clear that what will actually reach the market is a far smaller amount. More importantly, while the number of shares held in the market will increase, the percentage of the company that is owned by the public is being reduced.”

Meanwhile OGX Petróleo & Gas Participações SA, controlled by Brazilian billionaire Eike Batista, fell the most in more than two months in São Paulo trading, 5.7%, as investors sold shares ahead of the equity offering from Petrobras.

The Ontario Teachers’ Pension Plan Board said in a filing that it cut its stake in OGX to 4.77% on September first after previously holding as much as 10.67%, according to data compiled.

Petrobras gained 4.4% to 28.80 Reais after losing 25% this year through now. The company is raising money to fund a US$ 224 billion plan to develop offshore fields and expand refineries. OGX, which doesn’t yet produce any oil, surged 20% in the same period.

Finance minister Guido Mantega said the Brazilian government will “act strongly” to prevent the national currency from appreciating too much because of a flood of US dollars into the country from the massive offering of state-run Petrobras.

Brazil’s real gained in the week for a fourth session and traded at its strongest level since December as investors positioned their bets for a rally for the currency because of dollar inflows.

Overseas investors normally buy two-thirds of share sales in Brazil, raising concerns of large capital inflows as fund managers exchange dollars for reais to buy the stock.

“Since we are getting closer to the offering, I believe it’s interfering with the exchange rate the past days or past weeks,” Mantega said in a conference call with reporters. “This is temporary and the government intends to act strongly” to prevent an appreciation.

MP

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  • Show Comments (6)

  • Jan Z. Volens

    Brazil’s space and rocket program in collaboration with Russia and Ukraine.
    Brazil’s Defense Minister Nelson Jobim arrived for military and space talks in the Ukraine. Both the Ukraine and Russia are competing as participants with the space programs of Brazil. In 2014 a space satellite may be launched from Brazil’s Alcantara Space Center with an ukrainian Cyclon-4 Launch Vehicle. Alcantara in Brazil, like Kourou Space Center in French Guyana, is located ideally for the “geostationary orbit”. (The European Union Space Agency plans to use Russia’s Soyuz rockets for heavy lifting in Kourou. Souyz rockets are currently used by U.S. Nasa. for heavy lifting, in the absence of are suitable american vehicle).

  • Jan Z. Volens

    Correction of previous commentary:
    The number of jet fighters that may be aquired is 36 not 56. Tenders are for Dassault Ravale of France, F-18 Super Hornet of Boing in USA, and Gripen-NG of Saeb in Sweden. In the process of aquisition are 50 helicopters EC 725 from Eurocopteur/Helibras. A small number of heavy duty helocopters were recently aquired from Russia. A joint military transport aircraft may be developed by Brasil and Chile. Brasil’s EMBRAER is the world’s leading manufacturer of median-range jets.

  • Jan Z. Volens

    Brazil’s geostrategists look at the map…
    Brazil is geostrategically wedged between the U.S. SOUTHCOM and the U.S. 4th Fleet in the Netherlands Antilles and the U.S.-Columbian military bases in the Amazon – at the Dog’s Head (Cabeca de Cachorro). The Brazilian blog “Militar Legal” of 30.Oct. 2007 carries a comment: “…the GTAM has advised the President that an international media campaign tries to characterize Hugo Chaves in Venezuela as “crazy and dictatorial”. The plan is probably to justify the military presence of the U.S. in the “Andean-Amazonian region” and in the Southern Cone, AROUND BRAZIL”. (GTAM – Grupo de Trabalho da Amazonia: Military, Federal Police, National Intelligence Agency). Brazil is now receiving one nuclear submarine from France and will then build several nuclear submarines of that model in Brazil. Brazil’s military has relations with the military of Africa’s lusophone nations. Lula visted Africa recently and mentioned in Cape Verde Republic – that Brazil might help them towards oil exploration. In Africa, Brazil is wedged in by U.S. AFRICOM and NATO – the U.S. is operating in the Sahara-Sahel, NATO-Germany is involved militarilly in Cape Verde Republic. And the British have plans to build an airbase on St. Helena island – between Brazil and Angola. After the national election in October – a decision is pending on purchasing 56 state-of-art jet fighters. Boeing USA, Saeb Sweden, and Dassault France have entered offering tenders. The Air Force of Indian recently reviewed those jet fighters, plus Sukhoy of Russia – and decided that Dassault of France and the Eurofighter by Airbus (France, Germany, Britain, Spain) are superior.

  • Andrade

    Jan Volens
    [quote]Brazil’s Defense Minister Nelson Jobim arrived for military and space talks in the Ukraine.[/quote]

    Jan, u must be an Ukranian or a Russian to get too excited about the visit of this gentleman to yr country. He is as slippery as an eel, dude, and therefore beware of him.

    Ah, stop interfering in the domestic affairs of Brazil, would you? If Nelson Jobim comes to know it, he might decide to invade both Ukraine and Russia and you will become a mere collateral damage.

  • Andrade

    Jan, would you stop interfering in the domestic affairs of Brazil? You are making a total ass of yourself. You are as clueless as your buddy Sarko on issues related to defense equipment and airplanes.

  • duga

    That’s $64 billion worth of salt

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