Dear Reader,
This week’s entry will be analyzing only one article that I found really interesting to share. As I am taking Spanish, as my fourth language in my study program and the current topic discussed is South America, I found this article coincidental, while searching for information about Brazil.
Brazil is the largest national economy in Latin America, the world's eighth largest economy at market exchange rates and the ninth largest in purchasing power parity (PPP), according to the International Monetary Fund and the World Bank.
I think most people are not aware of these facts that Brazil is listed in the top 10 countries for two important economic rankings in the world.
Coming to the story, Brazils state owned oil company Petrobras raised $70 billion in the worlds largest share sale on Friday. Petrobras aim is to invest $224 billion over the next five years to boost their production by 5.38 million barrels a day. Therefore, investors bet on its plans to double output and takeovers like rivals as Chevron Corporation within a decade (For additional info please refer to video - http://www.youtube.com/watch?v=dyO9hJIDuO4&feature=channel)
After the sale Petrobas became the fourth-biggest company in the world behind the competitors Exxon Mobile Corp, Apple Inc. PetroChina Co. (excluding Apple).
In my opinion the aggressive step of starting investment plans in this category will challenge other global majors in this field as their reserves are being depleted soon, as also stated by Ron Holt, CEO of Hansberger Global Investors.
(Source: Petrobras)
Looking at the potential capital expenditures of $224 billion over the next decades also leans on the discovery of Tupi (near Rio De Janeiro) and the presalt region nearby Libra, which may each contain 8 billion barrels of oil.
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| (Source: http://www.petroleum-economist.com/images/46/25635/brazil1.gif) |
According to the EIA (International Energy Outlook), Brazil will add the highest amount of oil production of any other country outside the OPEC over the next 25 years.
Having outlined some details and the background of the story, I would like to say that I personally found it very appealing to read this article, because it is getting more and more important to be aware of the opportunities that companies of emerging markets can create. Above all, as oil will get rare in the future it seems that there will be a shift in production where companies like Petrobas will get an important role. As the industrial countries are depleting their own resources, they will be more dependent on these companies as it is already happening nowadays, when looking at companies from China (PetroChina) and Russia (Gazprom).
Another point that I liked about this article was the strategic approach of the company. Raising awareness through a share sale in a category never seen before, getting in the headlines of the media thereby finding potential investors to help realize the big investments in the future – smart moves!
E.V.
Sources:
1. WSJ
2. 247 Wallstreet
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