Pre-salt buoys Petrobras

Booming crude production in the region is helping to offset financial shock caused by Covid-19

Production growth has slowed to a crawl for much of the global oil sector this year. Subdued commodity prices and persistent market volatility have incentivised producers to slash capex and focus on the profitability of existing output until better economic times return.

In Latin America, Brazilian state-controlled oil firm Petrobras is a rare exception. The company’s domestic production grew by 9pc year-on-year across the first three quarters of 2020, eclipsing previous guidance. This was achieved despite the Covid-19 pandemic sinking global energy demand and Brazil suffering one of the highest mortality rates in the world.

Petrobras estimates production will end 2020 at an average of 2.84mn bl/d oe, with crude taking a 2.28mn bl/d share. Earlier in the year, the Brazilian giant had forecast average output of 2.7mn bl/d oe and 2.2mn bl/d of oil, a 2pc difference. And China’s swift economic recovery has been crucial to Petrobras’ ability to maintain its upstream strategy.

“Brazilian oil production has been ramping up since the beginning of the pandemic” Delgado, FGV Energia

Pre-salt upsurge

The production increase has been driven mostly by Petrobras’ pre-salt focus. Despite output from the post-salt, shallow water and onshore regions contracting, barrels from the pre-salt have increased by 32pc year-on-year in 2020. “Brazilian oil production has been ramping up since the beginning of the pandemic,” says Fernanda Delgado, senior researcher at Brazilian thinktank FGV Energia. “We expect internal demand to recover only by the end of 2021, but there will be more demand for exports over the coming months.”

In June, Petrobras completed startup of the P-70 floating production storage and offloading (FPSO) vessel, deployed to the Atapu offshore pre-salt field in the Santos basin. The Brazilian company has also continued to ramp up output from the pre-salt Buzios field, the world’s largest deepwater field.

Petrobras boosted production at four FPSOs stationed at Buzios across the first three quarters. In July, operational improvements at Buzios helped the Brazilian company achieve a monthly record figure of 765,000bl/d oe. In September, the highest ever monthly production from a single well was recorded when the BUZ-10 well hit 69,900bl/d oe; in the same month, another two Buzios wells topped 65,000bl/d oe.

Vital asset

In Q3, there was another important upstream milestone at the pre-salt’s Tupi field in the Santos basin. Ten years after the first production system was put in place, Tupi—formerly known as Lula—reached a total production figure of 2bn bl oe. The huge field is responsible for 28pc of Petrobras’ total output and remains one of the world’s largest ultra-deepwater offshore fields.

Petrobras holds a 65pc operator stake in Tupi in partnership with Shell (25pc) and Portuguese producer Petrogal (10pc). The consortium added a ninth FPSO to the field in 2019 as part of production ramp-up efforts.

32pc – Pre-salt increase year-on-year

Elsewhere, Petrobras continued to increase production from the Berbigao and Sururu fields in the pre-salt Santos basin. In Q4 2019, the company brought the P-68 FPSO online and has since been increasing production towards a capacity of 150,000bl/d. Both fields are controlled by a consortium including operator Petrobras (42.5pc), Shell (25pc), Total (22.5pc) and Petrogal (10pc).

The hard sell

The Brazilian firm maintained its upstream divestment drive in Q3. It signed an agreement to sell stakes in three shallow-water fields and 37 onshore fields; offloaded the shallow-water Pampo and Enchova clusters in the Campos basin; and shed onshore fields including the Lagoa Parda cluster in the Espirito Santo basin and the Ponta do Mel and Redonda fields in the Potiguar basin. The asset sales generated a combined $437mn.

Some fields were also shut in to protect company finances. Petrobras mothballed a platform in the Santos basin in Q3, bringing the number of installations platforms have been mothballed since March to reduce unnecessary outlay to 63. Lifting costs at shallow-water fields are much higher than the deeper more prolific pre-salt fields and, with oil prices still hovering near $40/bl, Petrobras will maintain its mothball strategy ahead of offloading non-core assets.

Source: Petroleum Economist

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