Although Brazil sits on vast oil reserves and should be one of the primary growth regions for global supplies, the domestic oil equities such as Petrobras (PBR) and OGX Petroleio e Gas Participacoes have struggled. A big reason for this is the effort to try and produce as much as possible using domestic companies, when their are much lower cost operators abroad. In addition the Brazilian government is the largest shareholder in Petrobras and the company is often not run in the best interests of shareholders, as conflicts of interests arise relatively frequently. Brazil’s reserves are not close to the surface but instead are deep in the ocean floor, and therefore they require much more technical expertise. I’m sure that eventually the situation will resolve itself but I do believe that the more quickly Brazil opens the doors to a more competitive process, the sooner it will reap the harvests of its natural resources.
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