Petroleo Brasileiro SA (PETR4), Brazil’s state-run energy company, is selling at a loss record amounts of natural gas for electricity generation as hydropower dams operate at the lowest water levels in more than a decade.
Petrobras, as the company is known, increased imports of the fossil fuel to 11.9 billion cubic meters (420 billion cubic feet) last year through November, the most for any year since at least 2000, when Brazil’s oil regulator started keeping records. Petrobras may be losing 240 million reais ($117 million) a month by selling imported liquefied natural gas, or LNG, at a discount of about $6 per million British thermal unit, said Marco Tavares, chairman of research firm Gas Energy.
Brazil’s driest rainy season in a decade is affecting dams that provide about 85 percent of the country’s electricity, prompting utilities to make up for the shortfall with gas- powered plants. Policies that force Rio de Janeiro-based Petrobras (PBR:US) to sell fuel at subsidized prices have hurt earnings, disappointing investors and making the stock the worst- performing major oil company in the past year.
“You have these distortions in the market that end up affecting the numbers at Petrobras,” Lucas Brendler, who helps manage about 6 billion reais at Banco Geracao Futuro de Investimentos, said in a telephone interview from Porto Alegre, Brazil. “Given the supply and demand, we can see these problems showing up in their numbers.”
Petrobras is also selling imported gasoline at a loss to ensure domestic supplies. The company lost investors 17 percent in the past year including dividends, the worst performance of any oil company worth more than $100 billion, according to data compiled by Bloomberg. That compares with a 5.7 percent total return for shares of Exxon Mobil Corp. and a 46 percent gain for Colombia’s Ecopetrol SA. (ECOPETL) Petrobras shares slid 0.4 percent to 20.32 reais at 11:39 a.m. in Sao Paulo today.
Government fuel-price controls caused Petrobras to post a 1.35 billion-real loss in the second quarter, its first in 13 years. The company’s 5.57 billion-reais profit in the third quarter missed the 7.02 billion-real average of eight analysts’ estimates compiled by Bloomberg.
The government controls the price of gasoline, diesel and natural gas sold to distributors through a 50.2 percent voting stake in Petrobras, the country’s only major fuel producer.
Petrobras set a gas supply record of 98.1 million cubic meters on Nov. 9, of which 43.4 million went to thermal plants, including its own, the company said yesterday in an e-mailed response to questions. The daily average was 93 million in November and 87 million in December, Petrobras said.
Hydroelectric reservoirs in Brazil’s southeastern and central regions, the most populated and industrialized, were 28.9 percent full in December, the least since 2000, according to data on the national power grid operator’s website. The minimum required for optimal operations in the region is 28 percent. In the northeast, reservoirs were 32.1 percent full, less than the 34 percent considered optimal in the region.
Reservoir levels are unlikely to rise in the next two months, meteorologist Flavia Matioli at weather forecaster Somar Meteorologia said in a telephone interview.
“Rainfall in January and February is expected to be spotty, poorly distributed,” Matioli said in a Dec. 27 telephone interview from Sao Paulo. “Precipitation won’t be enough to cover the ongoing deficit.”
Petrobras, which has capacity to process 27 million cubic meters per day of LNG, set a regasification record of 22 million cubic meters on Dec. 8, the company said.
In yesterday’s response, Petrobras declined to say how much it pays for LNG. Gas Energy’s Tavares said the company is paying $16 to $18 per BTU on the global spot market and selling it in Brazil for about $10 to $12. Low dam levels probably will sustain high demand from thermal plants through the southern hemisphere summer, Petrobras said.
Rising gas demand for power generation doesn’t necessarily mean that Petrobras will lose money because it’s also selling electricity from its own thermal plants at a time when prices are near record highs on the domestic spot market, according to Gustavo Gattass, an analyst at Banco BTG Pactual SA.
Petrobras owns 18 thermoelectric plants in Brazil, according to its website.
“With high spot prices, Petrobras won’t necessarily have a loss,” Gattass said in a telephone interview. “Honestly, Petrobras is not good at disclosing these figures.”
Net income at Petrobras, the world’s most indebted publicly traded oil producer, is forecast to rise to $32.2 billion next year from $24.5 billion in 2012, according to the average of 16 analysts’ estimates compiled by Bloomberg.
For utilities, the higher cost of producing electricity from gas are partly passed through to consumers. In yesterday’s response, Petrobras said thermal electricity is sold at the so- called PLD price set by the government, which at current levels pays generators at “satisfactory” levels.
“If there isn’t an improvement in water levels, you depend on Petrobras for supplies at non-competitive prices,” Geracao Futuro’s Brendler said.
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