Petrobras and Total Form Strategic Alliance

Petrobras and Total have signed a Memorandum of Understanding which sets the general framework for a strategic alliance covering upstream and downstream activities in Brazil as well as international potential opportunities.

The MOU was signed by Pedro Parente, CEO of Petrobras, and Patrick Pouyanné, Chairman and CEO of Total, in Rio de Janeiro.

As a first phase of implementation, the companies intend to focus on upstream and on gas and power. Petrobras will propose Total to partner in projects in Brazil and Total will propose Petrobras to partner in opportunities outside Brazil. The new partnership will allow both companies to combine their world class experience and expertise in deep water development to optimize the production and jointly develop this strategic area of activity in Brazil and in other high potential oil and gas provinces, as well as sharing costs and risks in projects with high investment and complexity.

In downstream, the companies will be working to develop joint activities in the gas and power generation in Brazil. The memorandum also states that the cooperation will be extended, in a second phase, to a broader cooperation in Brazil focused on all downstream segments.

Currently, Petrobras and Total are jointly participating in 15 consortiums worldwide in exploration and production, nine of which are in Brazil and six abroad. In Brazil, the companies are partners in the development of the giant Libra area which is the first production sharing contract in the Brazilian pre-salt in Santos basin. Outside Brazil, Petrobras and Total are partners on the Chinook field in the US Gulf of Mexico, on the deep-water Akpo field in Nigeria and on the gas fields of San Alberto and San Antonio/Itau in Bolivia, as well as in the Bolivia-Brazil gas pipeline.

Petrobras' Parente said the accord with Total would give investors greater confidence about the Brazilian oil company's ability to execute future plans, at the same time that it tries to reduce its hefty debt load and work itself out of a massive corruption scandal that it is at the center of.

In September, Pouyanné said the company planned to increase opex savings from $3 to $4 billion by 2018 and to deliver growth with Capex at a sustainable level of $15 to $17 billion per year from 2017. The company also plans to grow production by an average rate of five percent per year through to 2020.

Company priorities are to lower the breakeven of oil portfolio, both upstream and downstream, to expand along the full gas value chain and to position itself in the low carbon energy business.