A Petrobras is striving to extract as much oil as possible from its existing fields in Brazil, while simultaneously seeking new reserves to prevent production from beginning to decline in the 2030s.
The mantra “every oil counts” will guide the company’s next strategic plan, which will be revealed at the end of November, members of the management team told journalists this Monday (14).
The Brazilian oil giant is seeking to revitalize older fields, such as those in the Campos basin, where a low recovery rate of 17% “bothers” management, the CEO said Magda Chambriard. The company should complete studies by the beginning of next year to renovate four oil platforms in the Campos Basin that would otherwise be scrapped, the executive said.
At stake is how fast Brazil’s overall production grows at a time when oil prices face multiple headwinds. The Organization of Petroleum Producing Countries (OPEC) is about to begin restoring production at a time when demand in China is weakening.
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Petrobras is faced with the challenge of bringing new projects into production while trying to contain how quickly its older fields are declining, clouding prospects for how much growth will come from Brazil.
The International Energy Agency (IEA) predicts that Brazil’s production will grow by 190 thousand barrels per day next year. Meanwhile, consultancy Jefferies expects Petrobras’ production, responsible for almost 90% of the oil extracted in Brazil, to stagnate in 2025.
Petrobras managed to accelerate some of its production projects. It will begin operations of up to three production platform ships before the end of the year, adding 505,000 barrels per day in production capacity, which it will gradually increase. Some of them, like the production vessel Maria Quitéria, were originally supposed to start operations in 2025.
Offshore
Petrobras is also working with suppliers to make it more cost-effective to build the production units the company needs to continue expanding production, particularly in smaller fields with lower volumes.
“We are sending a message to the market. Brazil needs more accessible platforms” for projects offshore (on the high seas), said Chambriard.
The oil giant is optimistic that Brazilian environmental authorities will approve a license to drill a well in the Foz do Amazonas basin on the so-called Equatorial Margin because it met all requirements, said exploration and production chief Sylvia dos Anos.
Petrobras’ overall investments will not change significantly from the previous five-year plan of US$102 billion, Chambriard said. The management is still deciding on the final figure for 2025-2029, he added.
Dividends
The company must maintain its dividend policy of paying 45% of free cash flow, but may adjust its benchmark, said or CFO Fernando Melgarejo. The number is relevant because it contributes to how much the company pays to shareholders in extraordinary dividends. Petrobras plans to distribute any surplus cash as long as it does not harm the company’s financial sustainability, he said.
Analysts at Jefferies forecast a 10% increase in Petrobras investments for 2025-2029 and limited scope for special dividends in 2025 unless there is a further improvement in oil prices.
The consultancy expects Petrobras to face equipment constraints, and a push to increase natural gas supplies to the domestic market should moderate production growth for the next two to three years, it said in a note to clients.
© 2024 Bloomberg L.P.
