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C O N F I D E N T I A L SECTION 01 OF 02 LAGOS 000085 
 
SIPDIS 
 
DOE FOR GPERSON, CHAYLOCK, CGAY 
TREASURY FOR PETERS, HALL 
 
E.O. 12958: DECL: 02/12/2019 
TAGS: EPET ENRG ECON EINV PREL BR NI
SUBJECT: PETROBRAS EXEC SAYS NIGERIA PRODUCING BELOW ITS 
OPEC TARGET 
 
Classified By: Consul General Donna M. Blair for reasons 1.4 (B) and (D 
) 
 
¶1. (C) Summary:  The head of Petrobras Nigeria said on 
February 9 that Nigeria is producing 80,000 barrels of oil 
per day less than its current OPEC quota.  He expected the 
Total-led Akpo project, in which Petrobras has a 40 percent 
stake, to come on stream before April 1.  Once Akpo comes on 
stream, Nigeria will become Petrobras's largest petroleum 
producing country outside of Brazil, at least until Petrobras 
developments in the Gulf of Mexco are completed.  However, 
he acknowledged the company is cutting costs in its overseas 
operations, partly in response to lower oil prices, and 
partly in a strategic move to focus resources on exploration 
in Brazilian waters.  A plan to export Brazilian-produced 
ethanol to Nigeria failed and is not expected to be revived. 
Despite annual pressure from Brazil's President, Petrobras 
refuses to explore for oil in the Nigeria-Sao Tome Joint 
Development Zone which, the executive said, does not have 
enough oil reserves to be commercially attractive to major 
oil companies.  The company continues to spurn Nigerian 
requests to build refineries in country.  End Summary. 
 
Nigerian Production Below Quota 
------------------------------- 
 
¶2. (C) Rudy Ferreira, the Managing Director of Petrobras 
Nigeria, told Energyoff on February 9 that Nigeria is 
producing 80,000 barrels per day less than its OPEC 
production quota of 1.7 million.  Ferreira believed this is 
solely because of ongoing security problems in the Niger 
Delta, and that the GON would probably be inclined to exceed 
its quota if it could.  He agreed that most of the production 
losses come from Shell's onshore subsidiary, Shell Petroleum 
Development Corporation.  He labeled Shell's continued 
diminished oil output in Nigeria "shocking" and said those 
losses would be devastating to smaller oil companies like 
Petrobras. 
 
¶3. (C) Ferreira acknowledged that Nigeria's production 
numbers may not be as dire as portrayed.  Work on Total's 
Akpo offshore project, in which Petrobras has a 40 percent 
share, is ahead of schedule and the field will likely come on 
stream before its officially planned startup date of April 1. 
 When fully operational a few months after startup, the field 
is expected to produced 225,000 barrels of oil equivalent per 
day.  An estimated 175,000 barrels of that production will be 
in the form of natural gas "lease condensate", essentially a 
very light form of oil that does not count against an OPEC 
member's production quota.  (Note:  The lease condensate from 
the Akpo project will be processed and exported directly from 
the Akpo offshore platform.  Natural gas produced by the 
field will be sent to the Bonny Liquefied Natural Gas plant 
for processing and export.  End Note.)  Meanwhile, Chevron's 
Agbami deep offshore oil field, which began production in 
August 2008, is scheduled to ramp up production from 125,000 
barrels per day to 250,000 barrels by June 2009.  Petrobras 
has a 8 percent stake in Agbami and increased production from 
that field will force the GON to make a formal decision on 
whether to abide by its OPEC quota or not, barring further 
unplanned outages from onshore fields. 
 
Petrobras to Cut Costs, Remain in Nigeria 
----------------------------------------- 
 
¶4. (C) With Agbami and Akpo in operation, Nigeria will become 
Petrobras' largest producing country outside of Brazil, its 
equity stakes in the two fields producing 70,000 barrels of 
oil equivalent per day.  Additionally, Petrobras is leading a 
consortium exploring for oil in deep water oil blocks OPL 324 
and OPL 250.  That said, Ferreira remarked he had spent the 
past several days in video teleconferences with Petrobras' 
headquarters discussing cost cutting measures.  When asked if 
cost cutting was related to recent lower oil prices, Ferreira 
 
LAGOS 00000085  002 OF 002 
 
 
said it was partly related to oil prices, but was also part 
of a broader strategic plan by Petrobras to focus it 
resources on oil fields offshore Brazil. 
 
¶5. (C) Ferreira noted that while Petrobras may be interested 
in further Nigerian deep offshore developments, it has no 
plans to move onshore.  When asked about the Nigeria-Sao Tome 
Joint Development Zone (JDZ), he said Petrobras (and other 
major oil companies) did not see commercially attractive 
prospects in the area and his company has no plans to explore 
in those waters.  However, Ferreira related that every year 
the Sao Tome and Principe President makes a plea to Brazilian 
President Luiz Inacio da Silva asking him to push Petrobras 
to invest in the JDZ, these requests usually coming on the 
margins of meetings between the heads of state of Portuguese 
speaking countries.  According to Ferreira, immediately 
afterwards President da Silva contacts the head of Petrobras 
to ask why the company is not doing more in Sao Tome and 
every year the head of Petrobras has to remind da Silva that 
there is not a commercially significant amount of oil in the 
JDZ.  That explanation, Ferreira said, usually ends the 
conversation, at least until the next time the two presidents 
meet. 
 
Petrobras on Chinese and Russian Activity in Nigeria 
--------------------------------------------- -------- 
 
¶6. (C) Ferreira did not see Chinese oil companies as playing 
a significant role in Nigerian offshore oil field development 
now or in the near future.  However, he did see Chinese as an 
active threat in oil field service industry.  A Petrobras 
subsidiary recently lost a bid to perform seismic survey work 
in Nigeria to a Chinese company.  The Chinese were able to 
significantly underbid the Brazilians by, Ferreira thought, 
bringing cheap Chinese labor to Nigeria and ignoring Nigerian 
local content directives.  Ferreira said Russian companies 
appear particularly interested in the Nigerian natural gas 
sector, but like other oil company contacts who have 
mentioned Russian activity, he was unable to point to any 
specific projects or deals to back up his claim. 
 
Ethanol Export Plan Dead; No Help on Refineries 
--------------------------------------------- -- 
 
¶7. (C) A 2005 agreement between the GON and Petrobras to 
import ethanol into Nigeria from Brazil has failed.  After 
lengthy delays in starting the project, Petrobras had begun 
loading its first tanker of ethanol in Brazil for export to 
Nigeria when the Nigerians abruptly ordered the shipment 
called off.  According to Ferreira, the Nigerian National 
Petroleum Corporation (NNPC) finally realized it had no 
facilities for storing ethanol, no method for mixing it with 
gasoline, and no plan to distribute pure ethanol or blended 
gasoline throughout the country.  Ferreira does not expect 
the ethanol export plan to be revived.  In an aside, he noted 
that NNPC has repeatedly inquired about the possibility of 
Petrobras building petroleum refineries in Nigeria.  Ferreira 
said his company has absolutely no interest in doing so. 
 
¶8. (U) This cable cleared by Embassy Abuja. 
BLAIR