Petroprom

2 September 2010 By Christopher Swann

By overpaying for 5 bln barrels of reserves the Brazilian statecontrolled oil group is transferring up to $17 bln of value to the government, whose stake will also rise. Petrobras is looking like an instrument of the state rather than a guardian of shareholder interests.

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Brazil's government will charge statecontrolled oil company Petrobras $8.51 per barrel for crude reserves in a $43 billion oilforshares swap, the government and the firm said on Sept. 1.

The price is higher than the $5 to $6 per barrel that analysts see as fair, which could hit interest in a related share offering by Petrobras. The government will trade 5 billion barrels of oil for company shares. The transaction will go alongside a stock issue for private shareholders that could raise as much as $25 billion more in cash.

The Brazilian government owns some 32 percent of Petrobras' stock overall and controls about 56 percent of its voting shares. Both figures are set to rise as a result of the planned transactions.

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