Strategic Considerations: Brazilian oil giant Petrobras announced it signed its first USD 1.25bn sustainability-linked loan earlier this month, which is tied to a handful of targets related to its emissions’ intensity in exploration and production and refining segments. The loan involves annual targets for each of the key performance indicators and interest rate increases or decreases depending on whether Petrobras meets or falls short of its commitments. The company said it expects to sell more sustainable debt as it keeps an eye on market trends.
- The company’s 2022-2026 strategic plan involves USD 2.8bn in decarbonization investments
- Petrobras cut emissions per barrel by almost 50% from 2009 to 2021
Brazilian state-owned oil company Petrobras expects to continue to issue sustainable debt, said a spokesperson in an emailed statement.
The company said it "intends to continue operating" in the ESG debt market while "keeping an eye on market trends and anticipating the transformations of these markets.”
Petrobras debuted n the sustainable debt market earlier this month with a sustainability-linked loan (SLL) contracted with Bank of China, MUFG, and The Bank of Nova Scotia, as reported. The USD 1.25bn facility is tied to targets related to the company’s greenhouse gas (GHG) emissions’ intensity in exploration and production (E&P), GHG emissions’ intensity in refining, and methane emissions’ intensity in E&P.
The company expects to obtain a 32% reduction in its carbon emissions’ intensity in the upstream segment by 2025, as well as a 40% reduction in methane emission’s intensity and a 16% reduction in carbon intensity in the refining segment by the same year, according to Petrobras’ 2022-2026 strategic plan. The plan involves USD 2.8bn in investments to “strengthen its low-carbon positioning.” Capex for the decarbonization of its operations totals USD 1.8bn alongside a USD 248m fund, while that for investments in bioproducts amounts to USD 600m. The company also plans to invest USD 130m in research and development.
The oil company cut its emissions per barrel by 48% since 2009, according to a presentation from November 2021. Petrobras’s production is in the first quartile in carbon intensity compared with the offshore oil and gas industry as a whole, per the presentation.
Petrobras declined to provide details on the SLL’s terms but said that the cost is “competitive,” and that the facility involves interest rate step-downs and step-ups. The loan’s terms involve annual goals for each of the KPIs through its expiration date, the spokesperson said.
The KPIs “are already part of the company's sustainability commitments and are therefore regularly supervised by our corporate governance,” the spokesperson wrote. The indicators are compliant with the International Capital Markets Association’s Sustainability Linked Loan Principles, they added.
ISS ESG provided a second-party opinion for the transaction, the company spokesperson said. Petrobras declined to share the document prepared by the ESG research firm as “it has commercial and strategic information of the company that is confidential.”
by Carla Dager, Guayaquil