Petrobras explores abroad Petrobras is well on the road to greatly increasing its market share of the South American oil business. The state-run oil giant is investing more than US$3 billion in a strategy to spread risk, its managers say, through bold foreign exploration. In October 2002, Petrobras paid $1 billion for 59% of Argentina's second-largest oil producer, Perez Companc (Pecom), which expects to spend another $2 billion over the next five years to beef up international production, mainly in Venezuela but also Peru, Bolivia and Ecuador. Earlier, Petrobras swapped a billion dollar's worth of assets with Spanish-Argentine energy giant Repsol-YPF for a share of Argentina's retail gasoline and refining business. On the heels of the Pecom deal, Petrobras broke out the checkbook again, spending $88.5 million for oil and natural gas producer Petrolera Sante Fe in Argentina, with oil and natural gas output equivalent to 10,000 barrels of oil per day. It's in talks, too, to make deals in Venezuela with state-owned Petroleos de Venezuela (Pdvsa); it might bid on Uruguay's state-owned Ancap; and it expects to increase investments in the U.S. Gulf of Mexico, where it has spent $18 million to work 61 concessions since 1999. Using its deep-water expertise to develop reserves in the Gulf of Mexico as well as offshore West Africa and its proximity to fields in South America, Petrobras is seeking to increase its international output to 300,000 barrels per day by 2005 from less than 60,000 barrels now. "Petrobras wants to become a more international oil company because producing and exploring for oil in a variety of different places around the world diversifies risk," says Joao Figueira, executive manager of exploration and production at Petrobras Internacional. "For example, you greatly increase the likelihood of finding oil if you explore for it in a variety of places, rather than just a few places." The wider geographical spread also means lower international financing costs, says Figueira. With the Argentine purchases, Petrobras has bumped up its international oil and natural gas output to the equivalent of 177,000 barrels of oil per day. Some observers worry that the state-run oil giant has replaced geographic risk with political uncertainty in Argentina and Venezuela. by Mike Kepp