Petrobras Losses to Corruption May Top US$1.5 Billion

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The investigation which seeks to determine the financial losses to Brazil’s oil giant, Petrobras, due to Operação Lava Jato (Operation Carwash) may take up to three years to be concluded and total R$4.06 billion (over US$1.5 billion), according to Petrobras President, Maria das Graças Foster.

This year alone the losses to the company could go as high as R$150 million (over US$57 million) due to the corruption scheme, stated Foster on Thursday, January 29th during a teleconference with journalists, analysts and stockholders.

“The investigation is being conducted at many levels, and the main and most urgent one is the company’s top administrators, the company’s CEO, its directors and all its executive managers,” Foster explained.

Brazilian prosecutors responsible for the task-force looking into the Lava Jato Operation stated Thursday that their investigation has uncovered Petrobras executives received at least R$2.1 billion (US$800 million) in bribes and illicit funds. The prosecutors, who created a webpage dedicated to the operation, said that this number could go up as the investigation moves forward.

According to the webpage, R$450 million (over US$170 million) have been recovered and R$200 million (close to US$77 million) worth of assets have been blocked by the courts. In all more than 232 companies and 150 people have been or are being investigated and more than eighty people have been charged with corruption in the case. Twelve of those investigated have agreed to help investigators in exchange for reduced sentences.

The average bribery percentage received by executives, according to Foster, was of three percent of the contracts, and that would mean an estimated loss to the company of over R$4.06 billion (over US$1.5 billion) in all.

The investigations, however, are ongoing and have not been concluded, stated the CEO. “This number could grow,” warned Foster.

With the Brazilian economy in a slump, petroleum prices decreasing and the Lava Jato investigation promising to do more damage before it is finally concluded, Petrobras executives announced as well that the company plans to reduce its investments in 2015 so as not to incur new debts to the oil giant in 2016.

“If the exploration segment [of the company] had been a priority, today it even takes on a much larger dimension. It has become a priority and it has become selective,” said Foster. “Less attractive projects will go to the end of the line.”

Among the projects whose contracts are being reviewed are the Abreu and Lima Refinery in the state of Pernambuco and the Petrochemical Complex (COMPERJ) in Rio de Janeiro. According to prosecutors the construction of the Abreu and Lima Refinery was budgeted at R$2.5 billion but at the end expenses totaled R$20 billion.

According to Petrobras executives, the participation of the oil giant in auctions will also be reduced this year. “We will have to carefully assess if it [the project] is worth participating in,” said José Formigli, Petrobras Exploration and Production Director.

The director, however, said that plans for petroleum exploration of the sub-salt layer by the company have not been altered. “There are no proposals at this time to change sub-salt [project] plans,” concluded Formigli.