Petrobras SWOT & PESTLE Analysis

Strength

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Weakness

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Opportunity

1. New growth opportunities in technology: Petrobras has moved up to partner with R&D leader CSEM Brazil for printed, solution-based, solar generation. This partnership to collaborate on an R&D project will see investments worth USD 6.5 million over a 30 month period. The project is aimed at creating completely printed, carbon-efficient, solar films coated with very promising perovskite-based photoactive materials. Apart from this, for its internal processes the company is looking forward towards implementing block chain technology for trading, supply chain hiring process and compliance. Another area where the company is focused is digital transformation to improve drilling efficiency and operations. For example the company is exploring application of a project called Pressure While Drilling Analysis, a real-time data visualization platform which can be utilized to monitor pressure during drilling operations using data obtained by sensors installed on rigs. Some of its refining sites are also adopting new refining technologies with technological alliances with companies like Shell and ExxonMobil.

2. Expanding investment plans: Brazil’s Petrobras in its strategic plans has started to invest a total US$105 billion in the five years to 2023 as well as divest its assets worth US$35 billion. Petrobras has plans to invest $84.1bn in deep water exploration and production projects in Brazil. The company is also expected to divest $27bn through asset sales and partnerships by 2023. For production in the pre-salt areas around $69bn of the planned investment will be channelled. Other key focus area of investment include refining, transportation, trading, and natural gas and petrochemicals and the oil and gas behemoth is seeking partners for its refining, transportation and trading operations, as well as renewable energy businesses. The North-East and South clusters represent 40% of the installed refining capacity in Brazil. Hence the company plans repositioning in refining by means of partnerships in the North-East and South clusters, allowing for shared business risks and thereby strengthening the liquidity position of the company.

3. Ramping production of natural gas and oil: Brazil crude oil growth target is expected to touch 13% in 2019 and refinery market by 1.8% till 2030. Looking ahead to 2019 and beyond, it is expected to see production increase steadily, as a result of ramp up from both existing FPSOs, and new pre-salt FPSOs. Natural gas production is also expanding at more modest levels with a month on month increase of 1.2 percent and an overall annual growth rate of 1 percent. Keeping this in mind, oil production should grow by 24% to 3.2 MMb/d by 2022. However, Brazil will need to nurture the right investment climate to allow assets to come online through either future discoveries or new development plans. Since Petrobras is a major contributor to the Brazil economy and is dependent on the country, the company has to fuel up its investment in the industry accordingly to meet the global requirements.

4. Rising need for digitization: Economic and technical challenges in drilling operations are on a rise due to more and more extreme weather and geographic conditions, rising costs, decreasing quality of deposits. In this scenario, market growth as well as technological growth of companies will depend on the adoption of digital technologies and their new forms of work, collaboration and innovation. Real time data, Single platform to measure drilling performance, safety etc. are some of the key areas where digitization would play an important role in an industry like oil and gas.

Threat

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Political

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Economic

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Social

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Technological

1. Automation in Oil and Gas industries: In an industry like Oil and gas it is a vital parameter to control well costs and improve. The key to this is having an automated system which would analyse the factors involved and provide data. In such areas another challenge related to data is that it is scattered among various stakeholders. Hence even though Petrobras had an understanding of the analyses that would drive increased safety and reduced costs, since the data governance and analytical tools were not developed enough and data was stored across different stakeholders so different analyses required different software programs. The solution would be having a program which would consolidate the data automatically. For example Petrobras adopted a software from Intelie which was a real time operating Live analytics platform. Petrobras saved 90% of costs when compared to the previous software, in an order of magnitude of millions of R$ in the first year.

The remaining section of “Technological” is available only in the 'Complete Report' on purchase.

Legal

1. Litigations against corruption and bribery: One of the biggest scandals which still haunts Brazil is the Lava Jato Case where Petrobras’ employees underwent an investigation scanner for corruption were found to have taken bribes, while politicians obtained kickbacks. The scandal involved the top political leaders of Brazil as well as top management of Petrobras which turned the focus lights on the oil and gas titan. Pertobras has already provisioned US$8 million in 2018, US$76 million in 2017 and US$372 million in 2016. Such scandals can bruise the financial statements of a company to a high extent.

2. New Regulations related to contracts: After the new State Companies Act introduced new procedures for public companies' bids and contracts, Petrobras issued Bid for Regulation and Contract in the month of May 2018 which presents the new ways of contracting. It encompasses the stages to be covered in the bids, the management procedures related to contracts and auxiliary procedures like Supplier register. Similarly Petrobras amended changes to its shareholder remuneration policies and Corporate and Shareholder Governance policy in compliance with State Companies Act. The changes in such policies are aimed at increasing the participation of suppliers and the transparency of processes.

Environmental

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