Brazil’s Petrobras: new light oil find; prospects for production, pipelines

New oil find

Brazil’s state controlled oil company, Petrobras, recently announced that preliminary analysis indicates the presence of 280 million bbls of recoverable light oil in Brazil’s offshore Campos Basin. The light oil was discovered in the Aruana field, 120 km (74 miles) from Brazil’s coast and above the salt layer. Petrobras’s oil production in Brazil rose to 1.938 million bpd (3.8%) in July compared to 1.927 million bpd in June.

Petrobras’ business plan

Petrobras’ International Business Plan, released earlier this year, calls for investments of US$ 15.9 billion between 2009 and 2013, with 7% of these resources directed to the refining, transportation, marketing and petrochemicals sector and 5% going towards distribution.

Amongst the initiatives and strategies announced were:

  • Invest in growing production in the producing areas of Brazil and abroad, making better use of the installed infrastructure.
  • Undertake exploratory efforts in new frontiers in Brazil and beyond.
  • Ensure access to natural gas reserves and production in Brazil and abroad, and in an integrated manner with Petrobras’ markets.
  • Ensure access to the target oil, derivatives, and biofuels markets, expanding performance in trading and marketing.

Relations with China

Relations between Brazil and China are at an all-time high. In May, China agreed to lend Brazilian state-run oil company Petrobras US$ 10 billion to help the company develop its newly found offshore oil reserves. Petrobras, Chinese state-run oil company Sinopec and the China Development Bank entered into an agreement in which the bank will underwrite Brazil’s efforts to exploit huge new oilfields. Under the 10 year deal, Petrobras will supply China with crude oil at an average of 150,000 bpd, rising to 200,000 bpd in 2010. Sinopec has already invested US$ 1 billion to build a gas pipeline for Petrobras.

Foreign participation

Foreign oil companies are continuing to drill in Brazil despite a steep incline in oil prices and costs, according to reports from Brazil’s National Petroleum Agency, or ANP. Following some high profile oil discoveries, including the Santos Basin sub-salt wells and the Tupi field, Brazil continues to attract foreign companies and investors. The majors currently drilling in the country are the Brazilian unit of ExxonMobil; the local unit of BG Group; and Chevron Corp.

Pipeline potential

There is much potential for new pipeline infrastructure in Brazil: it is predicted that recent sub-salt discoveries in the Santos basin will ramp up Santos production from 4000 bpd in 2008 to 675 000 bpd in 2015, with gas production rising too. According to a recent Wood Mackenzie report, Petrobras is likely to lead the way in transforming the Santos basin into an intricate network of production platforms, offshore storage facilities and oil and gas pipelines. The Mexilhao, Tupi extension, Guara and Lara fields will all need extensive pipeline infrastructure if they are to come onstream in the next few years.

Petrobras seeking credit

Petrobras continues to seek out credit lines: at the time of writing, the company is in talks with BNDES for a US$ 13 billion loan; and Brazil’s Modal Bank is preparing to register a fund that would focus on refineries, pipelines and transportation. Petrobras is encouraging local private investors to shore up domestic industry to support the company’s expansion plans.

International attention

Brazil’s ambitious infrastructure plans are attracting attention from the international market too: Brazil is a mature, stable and diversified economy, largely unthreatened by social or economic upheaval. Energy and Mines Minister Edison Lobao stressed earlier this year that Brazil “has not succumbed to the [global financial] crisis but, on the contrary, has stepped up its investments”. Its robust future as a major oil exporter makes it a magnet for foreign trade and investment. Looking ahead, there is expected to be increased demand for pipeline construction and maintenance services, as Brazil undertakes rapid growth in its transportation sector.

Published on 30/09/2009

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