Multinational oil companies bought significant stakes in three Brazilian pre-salt oil fields auctioned Thursday, a show of confidence in the future of the energy sector despite a recent strike by truckers over rising fuel prices that brought Latin America’s largest nation to a halt.

The auction, which included several multinationals among the 16 companies bidding, was closely watched to gauge market reaction to the trucking shutdown, which raised questions about the ability of state oil giant Petrobras to set prices without government interference. 

In addition, Petrobras CEO Pedro Parente stepped down last week, saying his presence would be a distraction as the company looked to the future.

Those developments did not appear to present problems for companies that agreed to pay $798 million to explore three of four fields being auctioned. There were no bids on the fourth. 

Shell buys 40 percent

In the first, Shell bought 40 percent while Chevron and Petrobras each bought 30 percent. In the second, BP Energy bought 30 percent, Statoil 25 percent and Petrobras 45 percent. In the third, Statoil and ExxonMobil bought 28 percent each, while Petrobras got 30 percent and Petrogal 14 percent. Petrobras will be the operator in all three.

“This round was extremely successful, getting the attention of large companies,” said Decio Oddone, director of the National Petroleum Agency, which regulates the oil and gas sector in Brazil. “We continue the process of attracting investment for the country.”

Last year, for the first time the government gave private companies the chance to operate pre-salt fields alone.  It was part of President Michel Temer’s plan to increase foreign investment and give Petrobras more independence to set fuel prices.

Government gives in

However, Petrobras’ future is in doubt on the heels of the truckers’ multiday strike that led to widespread shortages in supermarkets and hospitals and the shuttering of thousands of schools. 

The strike ended when the government agreed to subsidize the price of diesel for 60 days and meet several other demands. 

While Temer and Cabinet ministers repeatedly insisted Petrobras would not be messed with, the markets were suspect. During the strike, the company’s stock plunged more than 20 percent on fears that in the future the government would intervene to set prices, a common practice before Temer took power in 2016.

Atlantic reserves

The pre-salt reserves auctioned lie offshore in the Atlantic. They are more than 1 mile (1.6 kilometers) below the ocean’s surface and under a further 2.5 miles (4 kilometers) underneath soil and corrosive salt. 

Eduardo Costa Pinto, an economics professor at the Federal University of Rio de Janeiro, said doubts about Petrobras’ future were likely outweighed by a combination of rising world oil prices and increasingly cheaper costs of pre-salt drilling.

“The overall risk for investors is minimal,” said Pinto.
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More than 14 percent of $140 billion in annual U.S. farm exports have been or are likely to be hit by retaliatory tariffs in trade disputes with countries

such as China and Mexico, a top U.S. trade negotiator said Thursday.

Mexico imposed tariffs on American products including steel, pork and bourbon Tuesday, striking back against import duties on steel and aluminum imposed by U.S. President Donald Trump.

The duties raised trade tensions and further complicated efforts to renegotiate the trillion-dollar North American Free Trade Agreement between Canada, the United States and Mexico.

Trump blames the 1994 pact for U.S. manufacturing job losses to lower-cost Mexico.

Mexico is the largest export market for U.S. pork, the product likely being targeted for retaliatory tariffs more than any other commodity, said Gregg Doud, the chief agricultural negotiator for the office of the U.S. trade representative.

“We’ve got to get this NAFTA thing sorted out,” he told a room full hog farmers at an agricultural event in Iowa.

China has also imposed tariffs on U.S. pork and other products. It was the second-largest destination for U.S. pork by volume last year.

Trump has threatened tariffs on up to $150 billion worth of Chinese exports as part of a different dispute over Chinese intellectual property protections.

Separately, Trump has withdrawn from the multilateral Trans-Pacific Partnership promoted by Japan, the top destination for U.S. chilled and frozen beef. Europe is expected to become a bigger competitor to U.S. meat in Japan unless Washington strikes a new deal with Tokyo.

“I am very concerned about the situation with Japan,” Doud said.

A bright spot for U.S. pork is an agreement that allows U.S. pork exporters to ship meat to Argentina for the first time in 26 years, Doud said.

“These things now that we have to fix are very, very difficult,” he said. “This is going to get a little more difficult here in the short term.”

Ty Rosburg, who transports hogs for a living in Iowa and heard Doud speak, said he worried trade disputes could hurt the farmers who are his customers. Still, he said he believed U.S. officials were attempting to improve trade.

“I guess at some point you have to trust they’re working for the greater good and hope that we don’t get bit too bad,” he said.
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U.S. President Donald Trump said on Thursday after White House talks with Japanese Prime Minister Shinzo Abe that the two leaders were working together to improve trading relations and that Abe promised new Japanese investment in the United States.

At a joint news conference, Trump said Abe told him Japan was buying “billions and billions of dollars of additional products of all kinds – military jets, airliners from Boeing, lots of farm products.”

“We’re working hard to reduce our trade imbalance which is very substantial, remove barriers to U.S. exports and to achieve a fair and mutually beneficial economic partnership,” Trump said.

Japan, a key American ally, is among a number of countries hit by metal tariffs Trump has imposed this year. The Trump administration has also threatened levies on imports of Japanese cars.

Trump has made clear he prefers a bilateral deal to reduce the U.S. trade deficit with Japan, while Abe’s government says multilateral agreements would be best.

“The United States seeks a bilateral deal with Japan that is based on the principle of fairness and reciprocity,” Trump said on Thursday.

Abe said he had a detailed and candid exchange of views with Trump and the discussions focused on North Korea.

Trump said his administration encouraged Japanese investment in new plants in the United States.

“The prime minister told me that will happen,” he said. “We want new auto plants going into Michigan and Pennsylvania and Ohio.”
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South Sudan said Thursday it had agreed with its northern neighbor Sudan to repair oil infrastructure facilities destroyed by conflict within three months to boost production in Africa’s youngest country.

Michael Makuei Lueth, South Sudan’s information minister, told Reuters that officials agreed with their visiting Sudanese counterparts to “evaluate and assess the damage” to South Sudan’s oilfields in the Heglig area in the country’s north.

“There is an agreement between the two oil ministries of the two countries. They agreed to cooperate and work together in order to repair [the damage],” he said.

South Sudan depends virtually entirely on oil sales for its revenue but production has declined since war broke out in the country in 2013.

The oil is shipped to international markets via a pipeline through Sudan.

Fighting was triggered by a political disagreement between President Salva Kiir and his former deputy Riek Machar, and a regionally brokered peace pact failed to end the war after violations by both parties.

Officials from the two countries “agreed that within the period of three months they will repair all the oil blocks and resume oil production in the region,” he said referring to the infrastructure in the oil blocks.

The war has uprooted a quarter of South Sudan’s population of 12 million, ruined the country’s agriculture and battered the economy.

A joint force would also be established by both countries to protect the oilfields from attacks by rebel forces in South Sudan and Sudan.
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The U.S. and China have reached a deal to lift sanctions against the giant Chinese ZTE telecommunications company that hobbled the firm when the United States banned the sale of American-made components it needed for its consumer products, U.S. Commerce Secretary Wilbur Ross said Thursday.

Ross told CNBC the accord will force ZTE, which employs nearly 75,000 workers, to pay a $1 billion fine for violating the U.S. ban on trade with North Korea and Iran, put another $400 million in escrow, and within 30 days replace its entire management and board.

Ross said going forward, the deal imposes the “most strict” compliance on ZTE. He said the penalties should serve as a very strong deterrent for “other potential bad actors” to force compliance with U.S. trade restrictions.

“If they do violate it again, in addition to the billion dollars they are paying us up front, we had them put $400 million in escrow,” he said. “The total deal is $1.4 billion. That money will be forfeited if they violate anything … and we still retain the power to shut them down again.”

ZTE must hire a new compliance team selected by the U.S. Commerce Department for a 10-year term.

“We are literally embedding a compliance department of our choosing into the company to monitor it going forward,” Ross said. “They will pay for those people, but the people will report to the new chairman.”

“This is a pretty strict settlement,” he added. “The strictest and largest settlement fine that has ever been brought by the Commerce Department against any violator of export controls.”

The commerce secretary said he did not think the settlement of the ZTE dispute would have any impact on ongoing contentious trade and tariff talks between the U.S. and China, the world’s two biggest economies.

Washington and Beijing have threatened each other with massive new tariffs on up to $150 billion of exports from the two countries, the fallout from the U.S. demand that China buy more American goods to sharply cut last year’s $375 billion Chinese trade surplus with the U.S.

The ZTE agreement was reached after weeks of talks between U.S. and Chinese officials. The dispute stemmed from a U.S. decision to block sales of American-made components ZTE needs to manufacture its products for seven years, until 2025. The agreement calls for a 10-year suspended ban that can be activated if ZTE commits new trade violations.

Most of the world first heard of the dispute over ZTE nearly a month ago following a tweet by U.S. President Donald Trump.

Some U.S. lawmakers, both Republicans and Democrats, balked at Trump’s effort to reach an accord on ZTE, saying that firm was a threat to U.S. national security through intelligence gathering on its devices. But Trump ignored the complaints, pushing Ross to settle the dispute.
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President Donald Trump’s tariff on imported solar panels has led U.S. renewable energy companies to cancel or freeze investments of more than $2.5 billion in large installation projects, along with thousands of jobs, the developers told Reuters.

That’s more than double the about $1 billion in new spending plans announced by firms building or expanding U.S. solar panel factories to take advantage of the tax on imports.

The tariff’s bifurcated impact on the solar industry underscores how protectionist trade measures almost invariably hurt one or more domestic industries for every one they shield from foreign competition. 

Trump announced the tariff in January over protests from most of the solar industry that the move would chill one of America’s fastest-growing sectors.

​Utility-scale projects

Solar developers completed utility-scale installations costing a total of $6.8 billion last year, according to the Solar Energy Industries Association. Those investments were driven by U.S. tax incentives and the falling costs of imported panels, mostly from China, which together made solar power competitive with natural gas and coal.

The U.S. solar industry employs more than 250,000 people, about three times more than the coal industry, with about 40 percent of those people in installation and 20 percent in manufacturing, according to the U.S. Energy Information Administration.

“Solar was really on the cusp of being able to completely take off,” said Zoe Hanes, chief executive of Charlotte, North Carolina solar developer Pine Gate Renewables.

Companies with domestic panel factories are divided on the policy. Solar giant SunPower Corp opposes the tariff that will help its U.S. panel factories because it will also hurt its domestic installation and development business, along with its overseas manufacturing operations.

“There could be substantially more employment without a tariff,” said Chief Executive Tom Werner.

​Lost profits, jobs

The 30 percent tariff is scheduled to last four years, decreasing by 5 percent per year during that time. Solar developers say the levy will initially raise the cost of major installations by 10 percent.

Leading utility-scale developer Cypress Creek Renewables LLC said it had been forced to cancel or freeze $1.5 billion in projects, mostly in the Carolinas, Texas and Colorado, because the tariff raised costs beyond the level where it could compete, spokesman Jeff McKay said.

That amounted to about 150 projects at various stages of development that would have employed 3,000 or more workers during installation, he said. The projects accounted for a fifth of the company’s overall pipeline.

Developer Southern Current has made similar decisions on about $1 billion of projects, mainly in South Carolina, said Bret Sowers, the company’s vice president of development and strategy.

“Either you make the decision to default or you bite the bullet and you make less money,” Sowers said.

Neither Cypress Creek nor Southern Current would disclose exactly which projects they intend to cancel. They said those details could help their competitors and make it harder to pursue those projects if they become financially viable later.

Both are among a group of solar developers that have asked trade officials to exclude panels used in their utility-scale projects from the tariffs. The office of the U.S. Trade Representative said it is still evaluating the requests.

Other companies are having similar problems.

Stockpiling panels

For some developers, the tariff has meant abandoning nascent markets in the American heartland that last year posted the strongest growth in installations. That growth was concentrated in states where voters supported Trump in the 2016 presidential election.

South Bend, Indiana-based developer Inovateus Solar LLC, for example, had decided three years ago to focus on emerging Midwest solar markets such as Indiana and Michigan. But the tariff sparked a shift to Massachusetts, where state renewable energy incentives make it more profitable, Chairman T.J. Kanczuzewski said.

Some firms saw the tariff coming and stockpiled panels before Trump’s announcement. For example, 174 Power Global, the development arm of Korea’s Hanwha warehoused 190 megawatts of solar panels at the end of last year for a Texas project that broke ground in January.

The company is paying more for panels for two Nevada projects that start operating this year and next, but is moving forward on construction, according to Larry Greene, who heads the firm’s development in the U.S. West.

‘A lot of robots’

Trump’s tariff has boosted the domestic manufacturing sector as intended, which over time could significantly raise U.S. panel production and reduce prices.

Panel manufacturers First Solar and JinkoSolar , for example, have announced plans to spend $800 million on projects to increase panel construction in the United States since the tariff, creating about 700 new jobs in Ohio and Florida. Last week, Korea’s Hanwha Q CELLS joined them, saying it will open a solar module factory in Georgia next year, though it did not detail job creation.

SunPower Corp, meanwhile, purchased U.S. manufacturer SolarWorld’s Oregon factory after the tariff was announced, saving that facility’s 280 jobs. The company said it plans to hire more people at the plant to expand operations, without specifying how many.

But SunPower has also said it must cut up to 250 jobs in other parts of its organization because of the tariffs.

Jobs in panel manufacturing are also limited because of increasing automation, industry experts said.

Heliene, a Canadian company in the process of opening a U.S. facility capable of producing 150 megawatts worth of panels per year, said it will employ between 130 and 140 workers in Minnesota.

“The factories are highly automated,” said Martin Pochtaruk, president of Heliene. “You don’t employ too many humans. There are a lot of robots.
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