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Petrobras looks above the salt in new 5-yr plan

21 Dec 2017 14:28 GMT
Petrobras looks above the salt in new 5-yr plan

Rio de Janeiro, 21 December (Argus) — Brazil's state-controlled Petrobras strikes a more balanced approach to sub-salt and post-salt spending while maintaining a steady upward production forecast in a modest $74.5bn five-year business plan released this morning.

The company forecasts a 37pc jump in domestic oil production to 2.88mn b/d in 2022 compared with expected 2018 output of 2.10mn b/d.

Petrobras sees a 1.5pc increase in production between 2017 and 2018, with the rate accelerating in 2018-19 before gradually reaching the 2022 target.

The oil company produced 2.156mn b/d in the first 11 months of 2017, suggesting that output may actually fall between this year and next, as planned upstream asset sales outweigh more than 300,000 b/d of fresh production capacity in 2018.

The new production goals align with the company's 2017-21 plan that targeted domestic output of 2.77mn b/d in 2021.

Under the new plan, the company's natural gas production in Brazil is expected to hold steady at around 500,000 b/d of oil equivalent (boe/d) in 2018-22, down slightly from 570,000 boe/d in its previous plan.

Total production, including production from foreign fields, is expected to reach 3.55mn boe/d in 2022, a 4pc increase compared with the 2021 target.

The 2018-22 plan reflects what is perceived as the steady management of chief executive Pedro Parente, with only a few minor tweaks to more radical revisions in the $74.1bn 2017-21 plan, when planned spending was cut by 25pc compared with the 2015-19 plan.

Petrobras' 2018-22 plan foresees around $400mn in additional capital expenditures compared with the previous five-year plan.

Most of the increase is earmarked for spending in the company's refining and gas segments, where planned investment was bumped up to $13.41bn from $12.60bn, or 18pc of the total planned investments compared with 17pc under the previous plan.

Petrobras will continue looking for partners to help complete the greenfield 165,000 b/d Comperj refinery in Rio de Janeiro and Abreu e Lima in Pernambuco.

Of the $13.1bn earmarked for refining and transport, $8.65bn, or 66pc, will be spent on new pipelines, such as 18mn m3/d subsea Rota 3 scheduled for completion in 2019, completion of the second 115,000 b/d phase of the Abreu e Lima refinery, and the 21mn m3/d gas treatment facility at the Comperj.

Upstream spending was trimmed to $60.35bn from $60.76bn, or 81pc of the total plan compared with 82pc under the previous plan. Spending in other segments remained stable at around $745mn.

Petrobras plans to bring eight platforms on stream in 2018, six sub-salt units owned by the company and two chartered post-salt units. Three of the sub-salt units had originally been scheduled to come on stream in 2017.

The company will add another two sub-salt units in 2019. Four more units originally planned for 2020 have been pushed to 2021. Three of those are sub-salt units, one post-salt.

Petrobras has allocated 42pc of upstream spending to post-salt projects, compared with a previous 34pc, largely reflecting an effort to revive production in the aging Campos basin. Around $35bn of upstream spending will be spent on sub-salt projects, down from $40bn, with $2.3bn of that amount earmarked for developing the 3.3bn bl Mero field in the Libra block. Mero is scheduled to receive its first definitive floating production, storage and offloading (FPSO) unit in 2021 and a second in 2022.

The giant Lula field, Brazil's largest oil and gas producer, will receive around $4.5bn in new investment.

The Buzios sub-salt discovery, located in the Santos basin region known as Transfer of Rights, will account for around $11.5bn in new investment, earmarked for five FPSOs in 2018-21.

Around $18.9bn of post-salt spending will go to Campos basin revitalization and new exploration, including four new platforms and exploration spending in partnership with ExxonMobil. The company will also pursue six new sub-salt discoveries in the mature basin.

In a break with tradition, the company moved today's presentation of the plan from its Rio de Janeiro headquarters to a ceremony with Brazilian president Michel Temer in Brasilia.

The business plan assumes divestments of around $21bn, unchanged compared with the previous plan.

Brent prices are seen rising from $53/bl in 2018 to $58/bl in 2019, $66/bl in 2020, $70/bl in 2021 and $73/bl in 2022. Under the previous plan, Petrobras' had assumed Brent prices of $56/bl in 2018, $68/bl in 2019, $71/bl in 2020, and $71/ bl in 2021.

The new plan assumes a Brazilian real-US dollar exchange rate of R3.44 in 2018 and R3.80 in 2022.