Brazil's Oil & Gas Production Hits Record Highs
Brazil's oil and gas production hit the highest level ever for a single month in July, with production totaling 4.48 million barrels of oil equivalent per day in the period, data from oil regulator ANP has revealed. According to ANP, oil output increased 18.6%Y/Y to 3.51 million barrels per day while natural gas production grew 13.6%Y/Y to 154.08 million cubic meters per day.
Previously, global research and consultancy group Wood Mackenzie predicted that Brazil’s private oil companies will increase oil production by 75% from 1.221Mb/d to 2.123Mb/d by 2030. According to WoodMac, international oil companies such as Shell Plc (NYSE:SHEL), Equinor ASA, (NYSE:EQNR), TotalEnergies SE (NYSE:TTE), Repsol Sinopec Brasil S.A. and Petrogal will be among the top producers thanks to their partnership with federal oil firm Petrobras (NYSE:PBR) in the pre-salt and fields under development.
Petrobras is also expected to grow production at an impressive clip, with output expected to increase 61% from 2.15Mb/d this year to 3.46Mb/d in 2030. Last year, the oil and gas supermajor announced that it will increase 2023-2027 investments by about 15% to $78 billion over the company’s 2022-2026 projected spending. Of the $78 billion planned for capex, 83% or $64 billion is earmarked for E&P activities while 67% of the E&P capex budget will go to pre-salt activities.
The company also plans to boost spending to reduce carbon emissions to ~6% of the total compared with 4% in the previous plan, and will see its decarbonization fund more than double the current $248M.
Earlier, Petrobras CEO Jean Paul Prates reaffirmed those targets but said the company is preparing to preview updates to its business plan next month, including a greater focus on renewable energy sources. Unfortunately, Prates said that investors should not expect the kind of huge dividend payments they enjoyed last year, with the company’s dividend policy likely to undergo adjustments to reflect the reality of a company investing in the future. Petrobras will also continue to focus on its strengths in offshore oil exploration, especially in the "pre-salt" fields off Brazil's coast, but it "will gradually transform itself," Prates said.
By Alex Kimani for Oilprice.com
Brazil Struggles With An Energy Tax Dilemma
The energy ministry in Brazil wants newly proposed tax incentives for energy infrastructure to include oil projects and refineries in a renewed debate over whether the energy transition or Brazil’s massive oil and gas industry should take priority.
The administration of Brazilian President Luiz Inacio Lula da Silva is looking to accelerate the energy transition, but it is also betting on continued development of the oil and gas industry, to pay for more incentives for green initiatives.
Now the Brazilian Mines and Energy Ministry is pushing for the proposed tax incentives for electricity generation, power grids, and natural gas facilities to extend to refineries and oil projects, Reuters reported on Thursday, citing a senior official and a document it has seen.
“Oil refining will continue to be fundamental for guaranteeing supply for a long time, so it is essential that projects aimed at decarbonizing refining be a priority, as they are adhering to energy transition and energy security,” Mines and Energy Ministry officials wrote in the document seen by Reuters.
The Brazilian government is considering an emissions cap and protection for indigenous communities involved in carbon offsetting as part of a new carbon market, Rafael Dubeux, a senior coordinator of the country’s energy transition plan, told Reuters in an interview earlier this month.
Despite the efforts to accelerate emissions reductions, the Brazilian administration has signaled that there isn’t a discrepancy in Brazil’s efforts to advance the energy transition and its state oil company Petrobras pursuing drilling in domestic frontier areas.
“There is no contradiction. You indicate where you want to get and then you'll need resources for that,” Lula’s chief of staff Rui Costa said in a radio interview this week carried by Reuters.
“We are going to build a sustainable, renewable energy matrix, but it's obvious that we need to fund that transition process,” Costa added.
Brazil’s Petrobras Seals Cooperation Deal With Chinese Oil Giant
Brazil’s state energy major Petrobras has inked a strategic cooperation deal with China’s state oil major CNOOC.
The deal, Reuters reports, citing a China-backed outlet, would focus on refining and chemical engineering, but also oilfield services and low-carbon energy projects.
The Chinese company, which almost exclusively focuses on overseas projects, already has a modest presence in Brazil, Reuters notes, with a minority stake in the Buzios field—one of the promising new developments in Brazil’s presalt offshore zone.
The Buzios field, operated by Petrobras, was discovered in 2010 and production began eight years later.
CNOOC recently reported an 11% decline in its net profit for the first half of the year as, like everyone else in the industry, it suffered the consequences of lower oil prices.
“In the first half of 2023, macroeconomy stayed complex and volatile, while international oil prices saw fluctuations in a downward trend,” CNOOC’s chairman Wang Dongjin said in a statement to shareholders.
At the same time, CNOOC boasted production growth both at home and overseas during the first half of the year, with daily net production reaching an all-time high. The company plans to book a record-high daily production for the full year as well, at 650 to 660 million barrels of oil equivalent daily.
Petrobras saw a much steeper drop in profits for the first half, at almost 33%. Yet it was the company with the third-highest profits for the period on a global scale, booking a net result of $13.17 billion, after only Aramco and Exxon, the Rio Times reported earlier this month.
Also earlier in August, media reported that the Brazilian state energy major was looking for opportunities to expand overseas in the upstream segment. The expansion would take the form of acquisitions, the chief financial officer of the company, Sergio Caetano Leite, told Bloomberg.
By Charles Kennedy for Oilprice.com
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