State-Owned Oil Company Petrobras: Brazil's Crown Jewel

Petrobras is the jewel in Brazil's crown: Latin America's most valuable enterprise, a $100-billion oil and gas group whose crude output puts the country in the top 10 league globally, rivalling that of many OPEC members.

Yet it is also the most indebted oil company in the world. And it is at the heart of the biggest corruption scandal to rock Brazil: a graft probe that has claimed numerous political scalps, not least that of former leftist president Luiz Inacio Lula da Silva.

Much attention in Brazil and abroad is now being focused on Petrobras because of what looks likely to be a Brazilian presidential election victory by Jair Bolsonaro. The ultraconservative has expressed a willingness to oversee further sales of Petrobras' non-core assets.

Petrobras was founded 65 years ago as a government monopoly to tap the tiny reserves that existed at the time. It grew in the mid-1970s when shallow offshore fields was discovered, but they were not big enough to provide self-sufficiency for the vast South American nation.

Brazil's real oil bonanza happened in late 2006 when Petrobras discovered what turned out to be huge amounts of crude lying under the oceanic crust far offshore -- so-called pre-salt deposits.

That pre-salt oil is costly to get at, but its extraction soon made the country a net exporter, propelled into the same league as members of OPEC, of which it is not part.

Today, Brazil has proven reserves of 13 billion barrels and produces 2.5 million barrels of oil a day, according to the US Energy Information Administration. Half the production comes from the pre-salt fields, with that proportion forecast to grow.

Petrobras used to the sole producer on all the pre-salt fields, though foreign oil companies were later allowed to participate. Under Brazil's outgoing center-right government tender conditions have eased up.

Currently one deepwater zone, the Libra field, is being tapped by Petrobras in partnership with France's Total, British-Dutch giant Shell, and Chinese groups CNPC and CNOOC. Analysts believe the Libra field could by itself hold up to 15 billion barrels.

- Over-leveraged -

But Brazil's oil giant wagered way too much too early on the pre-salt crude wealth. It laid out an over-optimistic multi-year investment plan in 2007 that soon proved an over-leveraged mistake when the global financial crisis hit and oil prices tumbled.

The company's market value is around half of what it peaked to in those heady days, and its focus has since turned to chipping away at its massive debt mountain, which in August stood at $73 billion after billions of dollars in divestments and restructuring.

The other major blow was its involvement in a sprawling corruption probe called "Operation Car Wash."

It revealed that senior Petrobras executives orchestrated hundreds of millions of dollars in bribes, engaged in bid-rigging, funneled cash to political parties and politicians, and hid the malfeasance from investors.

That resulted in multiple business leaders and politicians of all stripes, including Lula, facing prosecution, a $2.5 billion write-down of overstated assets, and a $853-million fine levied last month.

Petrobras has sought to draw a line under the double disasters, slashing spending and trying to move past the corruption scandal.

There are some signs things are turning around for the company. Most notably, oil prices have firmed this year though uncertainty has returned to the sector because of major pressure on OPEC kingpin Saudi Arabia over the death of journalist Jamal Khashoggi, and the specter of a US-China trade war triggered by threats and tariffs from US President Donald Trump.

Petrobras has seen sharply higher profits this year: $2.7 billion in the second quarter, stronger than forecast. Its share price is rebounding.

The company's plan for the next four years calls for it to spend $60 billion over the next four years to boost production and infrastructure.