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Shell Sees Petrobras Emerging Stronger From Corruption Scandal

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Screen Shot 2015-04-08 at 08.12.04By Mario Sergio Lima and Rachel Gamarski published by Bloomberg.com 23 April 2015

Royal Dutch Shell Plc, poised to become Brazil’s biggest oil producer after Petroleo Brasileiro SA, said the state-run driller will emerge strengthened from a corruption scandal and the industry’s biggest debt load.

Speaking to reporters in Brasilia after meeting with President Dilma Rousseff, Chief Executive Officer Ben Van Beurden said Brazil probably will account for 20 percent of Shell’s output by the end of the decade after its planned $70 billion purchase of BG Group Plc. The Hague-based company would consider further growth opportunities in the country if they arise, he said.

“Given the quality of resources in Brazil, I think 20 percent is still at the lower limit of what we think we will be exposed to,” he said. “If opportunities would come to further deepen our positions in Brazil we will look at that very favorably indeed.”

BG’s Brazilian portfolio will become a key growth driver for Shell, with production set to increase to 557,000 barrels a day by 2020 from 144,000 in 2015, Jefferies analysts led by Jason Gammel wrote in a note to clients this month.

For Petrobras — which posted a record loss Wednesday partly because of writedowns from Brazil’s largest ever corruption scandal — Van Beurden’s comments offer some relief.

He forecast oil prices, which slumped to six-year lows this year, to rebound “in the medium term” and described Brazil’s so-called pre-salt deep-water deposits as among the world’s best with output profitable even at today’s prices.

“We have a lot of confidence in the investment climate in Brazil and the resources that this country holds,” he said. “So Brazil is a very strong and strategic country for us with the combination we announced with BG.”

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