New Petrobras Supply Chain Financing Engineering

New Wave Media

October 20, 2010



Petrobras supply chain to receive an unheard of $1.8 billion (R$3 billion) in financing by major national banks.

The $1.8 billion in financing for the Petrobras supply chain, which has never occurred before, will be undertaken by the biggest banks operating in Brazil, through the Progress Program (Programa Progredir). The banks involved in the financing operation are Bradesco, Banco do Brasil, Santander, Caixa Economica, HSBC and Itaú. The targets are the 34 thousand direct suppliers and 216 thousand indirect suppliers for Petrobras.
The goal is to preferentially beneficiate the small and medium companies that supply equipment and materials to Petrobras´ direct suppliers. These small and medium companies have difficulty in obtaining credit in the market and they are vital as they will supply the whole Brazilian O&G structure for the next four years.
The supply chain for the O&G sector involves more than 1,300 items, reaching considerable volumes. Some examples of products required from the supply chain are: 8 million screws, 15,6 million bolts, 9,6 thousand electrical motors, 478 million kilos of wires, 34,3 million liters of paint, 54 million kilos of steel rods and 32 million meters of electric cables. These equipment and material requirement forecasts are part of the Prominp – National Industry Mobilization Program for the O&G Industry.
The Progress program, elaborated by the Petrobras financial department in partnership with the banks, uses a novel and unique financial engineering system, unlike any other being implemented in the world. The financing for the supply chain usesas bank guarantees, the contracts signed between Petrobras and its suppliers. Petrobras transfers its comfortable position in credit risk, as it is considered as investment degree, which means it has a very low risk, to its partners. The subcontractors supplying the companies direct suppliers will be allowed to present their contracts as guarantee of the financing to the banks.
This will greatly help the small and medium supply chain companies which normally struggle to secure financing, in many cases resulting in delays in production and delivery of products and also in lost business opportunities. It also creates an unnecessary bottleneck it the Petrobras logistics supply plans with far reaching consequences, including delays in implementing important growth programs and decreasing upstream and downstream efficiency. This is an important step made by Petrobras and the financing institutions to streamline and facilitate credit to the vital materials and equipment supply chain, which is mostly composed of national companies, but increasingly includes Brazilian subsidiaries of foreign owned companies.
Claudio Paschoa
Paschoa, Claudio
Claudio Paschoa is Marine Technology Reporter's correspondent in Brazil.
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