Brazil's Petrobras: Could Replace Imports From Nigeria

Dow Jones Newswires Tuesday March 25, 6:48 AM

RIO DE JANEIRO (Dow Jones)--Brazil's Petroleo Brasileiro (PBR), or Petrobras, will be able to find alternatives for the oil it currently imports from Nigeria if ethnic violence in that country escalates to critical levels and further disrupts supply.

Analysts say the federal oil group can redirect imports from Latin American countries such as Argentina and Venezuela to make up for supply problems with Nigerian imports.

"Perez Companc (PC), for example, exports about 90,000 barrels a day which is not coming to Brazil," said Rony Stefano, an analyst at BBV Securities in Sao Paulo, referring to Argentine energy conglomerate, in which Petrobras last year acquired a controlling stake. "They can redirect that production to the Brazilian market," he added.

Nigeria supplies about 33% of the Brazilian giant's imports: Out of an average 338,000 barrels a day Petrobras imported last year, about 107,000 barrels came from Nigeria.

Petrobras declined several requests for comment on the situation in Nigeria and its possible effects on the Brazilian company's operations.

The African nation's worst ethnic violence in years sent shock waves through global oil markets Monday as three major players suspended production at their facilities in the Niger Delta and withdrew staff due to safety fears.

The Nigerian subsidiaries of Royal Dutch/Shell Group (RD), ChevronTexaco Corp. (CVX) and TotalFinaElf (TOT) have halted production totaling 817,500 barrels a day, or about 40% of Nigeria's output of some 2 million b/d amid violence between rival ethnic groups, the Ijaws and Itsekiri, leading up to April 19 parliamentary and presidential elections.

Militant Ijaws reportedly threatened to blow up multinational oil installations they said they had captured in retaliation for government military raids.

Analysts said it is still too early to assess the impact of prolonged conflict in the region for Petrobras. But oil markets reacted quickly, leading crude oil futures on a rally, owing to fresh uncertainties about oil supply disruption. At the New York Mercantile Exchange, the nearby May crude oil futures contract rose $1.75 to $28.66 a barrel.

The rally halted a seven-session streak of losses, which had pushed down U.S. oil prices by nearly 30%.

-By Adriana Brasileiro, Dow Jones Newswires; (5521) 3288-5004, adriana.brasileiro@dowjones.com