Petrobras broadens upstream expansion plans

  • Market: Crude oil, Oil products
  • 23/05/22

Brazil's state-controlled Petrobras is moving away from the cost-cutting philosophy that shaped its investment outlook for the past five years, in a response to higher crude prices and lower debt levels.

Amid a barrage of attacks from Brazil's political class, the company has retained its composure while defending its market-based fuel-pricing policy and rolling out news of major upstream changes. Brazilian president Jair Bolsonaro's hunt for a convenient culprit for high fuel prices recently cost former mines and energy minister Bento Albuquerque his job but, so far, does not appear to have moved Petrobras away from its more realistic investment strategy.

The company's $8.6bn first-quarter profit, bolstered by higher Brent prices and improved operational efficiency, should have been a reason for applause from Petrobras' controlling shareholder, the federal government. It was instead likened to "rape" by Bolsonaro, who is facing voter backlash over high prices at the pump ahead of a presidential election in October. Petrobras insists that the profit was driven by demand for pre-salt crude and not meaty margins on fuel sales, and that the government reaps the benefits of its market-based fuel pricing in the form of taxes and dividends — an argument that has not assuaged Brasilia.

Petrobras' new chief executive Jose Mauro Ferreira Coelho has been clear on the company's intention to stick with the import price parity principle, considered essential to maintain imports and investments. But his predecessor Joaquim Silva e Luna was sacked in March for allowing domestic price rises under the same principle, and that stance may yet cost Ferreira Coelho his position too.

Petrobras flexed its independence with a 9pc diesel price increase on 10 May, the first adjustment in 60 days. Hours after that rise, Albuquerque was replaced by economist Adolfo Sachsida, who, along with finance minister Paulo Guedes, has already started studies on the privatisation of Petrobras and state-owned pre-salt marketing firm PPSA — Bolsonaro's go-to promise whenever the fuel price crisis flares. The sales have little chance of gaining approval during this election year, or likely any year, but the process has been set in motion.

Resistance is utile

The debate over fuel prices and what it may mean for Brazil's plan to open its downstream segment has eclipsed Petrobras' strong upstream position. Medium sweet pre-salt grades remain the centerpiece of the firm's growth plans, but Petrobras has also shown a renewed appetite in assets that until recently were considered prime candidates for divestment. In recent weeks, the company has announced plans to retain its controlling interest in deepwater fields in the frontier Sergipe-Alagoas basin, and has hinted that the Albacora field, originally listed with sister field Albacora Leste, may also stay in its upstream portfolio. And the firm this month detailed its plans to invest $16bn over the next five years to curb natural decline at post-salt fields in the ageing Campos basin.

Local oil executives say the wave of upstream divestments that helped Petrobras tame its heavy debt load appears to be breaking. The resumption of major upstream projects and the growth of associated job-creating industries will likely be trumpeted by politicians. The Santos basin's pre-salt giant fields yield lower-cost and lower-carbon-intensity production, so the question remains as to whether increasing development outside of this core region will interfere with Petrobras' modest upstream emission reduction targets. Viviana Coelho, Petrobras' executive manager of climate change, says it will not, as much of the firm's upstream emissions-reduction plan is already related to carbon capture technology that can also be deployed in post-salt reservoirs.

Petrobras results$bn
1Q221Q21% chg 22/21
Profit8.6050.1804,681
Upstream profit 7.9553.925103
Downstream profit 1.9871.25558
Crude production* ('000 b/d)2,2312,1962
Pre-salt production1,6821,5677
Post-salt/onshore production549629-13
Crude exports ('000 b/d)5435116
* Brazilian

Sharelinkedin-sharetwitter-sharefacebook-shareemail-share

Related news posts

Argus illuminates the markets by putting a lens on the areas that matter most to you. The market news and commentary we publish reveals vital insights that enable you to make stronger, well-informed decisions. Explore a selection of news stories related to this one.

News
27/03/24

Baltimore bridge collapse to raise retail fuel prices

Baltimore bridge collapse to raise retail fuel prices

Houston, 27 March (Argus) — The collapse of the Francis Scott Key Bridge in Baltimore, Maryland, is more likely to increase regional gasoline prices than diesel due to additional freight costs and certain route restrictions. Suppliers in the region have so far signaled that the effect on broader markets will be minimal, but regional prices will likely rise, especially as peak summer demand season begins with Memorial Day weekend in late May. The bridge closure could pose more problems for gasoline supply than diesel, since gasoline cannot be transported through the Fort McHenry (I-95) and Baltimore Harbor (I-895) tunnels — the two other major roads that cross the Patapsco River at Baltimore — while there are no restrictions on diesel, according to the Maryland Transportation Authority (MTA). Fuel wholesaler Global Partners said yesterday that it would like to see hours of service waivers for trucking in the region to minimize fuel supply disruption to customers, but the Federal Motor Carrier Safety Administration (FMCSA) is yet to issue one. Elevated retail prices are likely to be limited to the immediate Baltimore area but could spill over into neighboring markets should trucking markets remain tight due to rerouting, market sources told Argus . Fuel markets in eastern Maryland can be supplied by PBF's 171,000 b/d Delaware City, Delaware, refinery and two further plants in Pennsylvania — Monroe Energy's 190,000 b/d Trainer refinery and PBF's 160,000 b/d Paulsboro refinery. To the north, United Refining runs a 65,000 b/d plant in Warren, Pennsylvania, and along the Atlantic coast Phillips 66 operates the 259,000 b/d Bayway refinery in Linden, New Jersey. PBF, Monroe and United did not immediately respond to a request for comment on whether the bridge collapse is affecting refinery operations. Phillips 66 declined to comment on commercial activities. Still, the five nearby refineries — representing all the Atlantic coast's 850,000 b/d of crude processing capacity — are unlikely to see their operations curtailed by limits in shipping products to Maryland. With no refinery in the state of Maryland, most fuels are delivered to Baltimore by Gulf coast refiners on the Colonial Pipeline. Global Partners, which operates a terminal just west of the collapsed bridge, said yesterday it is primarily supplied by the pipeline and expects product flows to continue. Several terminals in the Baltimore Harbor and the nearby Port Salisbury can also receive small vessels and barges of road fuels from Delaware and Pennsylvania, according to the Maryland Energy Administration (MEA). The Port of Baltimore — which remains closed since the collapse — took delivery of 24,000 b/d of gasoline and under 2,000 b/d of distillates from barges and small vessels in 2019, about three percent of the Atlantic coast's refining capacity. "A closure of the Port of Baltimore while the Colonial Pipeline is open would not significantly disrupt fuel supply," the MEA wrote in a 2022 analysis of liquid fuels supply in the state. By Nathan Risser Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Read more
News

US breaks $79/bl ceiling in latest SPR purchase


27/03/24
News
27/03/24

US breaks $79/bl ceiling in latest SPR purchase

Washington, 27 March (Argus) — President Joe Biden's administration has exceeded a price ceiling that has guided when the US government would buy crude to refill the US Strategic Petroleum Reserve (SPR), with the latest crude purchase hitting a price of $81.32/bl. The US Department of Energy (DOE) six months ago adopted a new strategy for replenishing the SPR, with a plan to use consistent monthly purchases to replace some of the 180mn bl of crude that Biden sold from the reserve in 2022 after the start of the Russia-Ukraine conflict. For months, DOE has said it would continue to buy crude so long as it was a "good deal for taxpayers," which the agency defined as a purchase price not to exceed $79/bl. But the agency's latest crude purchase, for nearly 2.8mn bl of sour crude for delivery in September, came at a cost of $225.6mn, an average price of $81.34/bl, according to data DOE recently published on its website. The crude contracts went to Macquarie Commodities Trading, Sunoco Partners Marketing & Terminals and Total's Atlantic Trading & Marketing. DOE, asked for comment about why it purchased crude in excess of its price target, said there would "likely be news coming later today." Before this week, the administration had largely adhered to its $79/bl price target to buy 24.7mn bl of crude for delivery to the SPR from January through August, with the exception of a $79.10/bl purchase for January delivery. DOE reiterated the price ceiling on 14 March, when it announced a new solicitation to buy crude, and last year had called off multiple crude solicitations when prices came in too high. DOE has previously increased its price ceiling based on shifts in the oil market. DOE in 2022 had initially targeted a purchase price of $67-$72/bl, resulting in the purchase of 6.3mn bl of crude last summer at an average price of $72.67/bl. But after rising prices put that target out of reach, DOE raised its price ceiling to $79/bl. The SPR held 363mn bl of crude as of 22 March, according to federal data. By the end of this year, as a result of crude purchases, the reserve is expected to "be back to essentially where we would have been had we not sold during the invasion of Ukraine," US energy secretary Jennifer Granholm said on 20 March, after accounting for the cancellation of 140mn bl of congressional mandated crude sales that were scheduled through 2031. With the latest crude purchase, DOE will have signed contracts to buy 32.4mn bl of crude at an average price of nearly $77/bl, of which more than 19mn bl has yet to be delivered to the SPR. Another 20mn bl of crude that oil companies and traders borrowed from the SPR in 2022 is set to be returned by year-end, which would push inventories in the reserve to above 400mn bl. By Chris Knight Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

South Sudan crude output halves on pipeline blockage


27/03/24
News
27/03/24

South Sudan crude output halves on pipeline blockage

London, 27 March (Argus) — South Sudan's crude production has almost halved to around 80,000 b/d because of a blockage at a pipeline in war-torn Sudan, South Sudan's oil ministry undersecretary William Anyak Deng told Argus today. A blockage along the Chinese-led Petrodar Pipeline is currently preventing around 100,000 b/d of South Sudan's heavy sweet Dar Blend grade from reaching Sudan's Bashayer terminal on the Red Sea for export, Deng said. But production of South Sudan's medium sweet Nile Blend grade has not been impacted, as this is transported to Bashayer through the separate Greater Nile oil pipeline which remains online, he said. His comments come after Sudan earlier this month warned major oil exporting companies in South Sudan that his country could no longer carry out its obligation to transport their crude . Dar Petroleum Operating Company (DPOC) — a consortium including China's state-controlled CNPC and Sinopec and Malaysia's state-owned Petronas — produces Dar Blend but has had to all but cease output, Deng said. Nile Blend production is split between the South Sudan-based firms Sudd Petroleum Operating Company (SPOC) and Greater Pioneer Operating Company (GPOC) and currently running at around 80,000 b/d, he added. South Sudan's crude production stood at around 150,000 b/d in February, according to Argus estimates. The blockage is a result of gelling issues — solidifying crude — in the Petrodar Pipeline, which Sudanese and South Sudanese engineers are struggling to resolve. This is because of a lack of diesel that is used to heat the crude or dilute it to help it flow, Deng said. "We are working to resolve the problem right now. There is mechanical work that is ongoing, we are trying to flush out the oil," he added. But the pipeline has been suffering from leaks and pressure drops for months, with repairs complicated by the ongoing civil war in Sudan between the army and the paramilitary Rapid Support Forces. Deng said it was becoming increasingly difficult to get permission from the warring parties in Sudan to move workers, equipment and spare parts to maintain infrastructure. He also said South Sudan has been sending diesel to Sudan to help with repair work given the closure of Sudan's 100,000 b/d Khartoum refinery which has come under repeated fire since the civil war began last year. Sudan also typically produces around 50,000 b/d of mostly Nile Blend crude, but this is thought to have been impacted by the civil war. Crude exports from Sudan's Bashayer port averaged 130,000 b/d in 2023 and hit 168,000 b/d in January, according to Kpler. But exports have only averaged about 75,000 b/d since February. Landlocked South Sudan is entirely reliant on Sudan to export its crude and depends on oil sales for more than 90pc of government revenues. Any prolonged disruption to exports would put the country's economy in a precarious position. By Aydin Calik Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

European bio-bunker March prices firm on uncertainty


27/03/24
News
27/03/24

European bio-bunker March prices firm on uncertainty

London, 27 March (Argus) — Marine biodiesel prices firmed in the second half of March across Europe as higher levels in underlying markets combined with supply uncertainty to lend support to blend prices, despite limited demand. Very-low sulphur fuel oil (VLSFO) firmed by $16/t to $585.58/t on a dob Amsterdam-Rotterdam-Antwerp (ARA) basis and $17.47/t to $628.17/t on a dob Gibraltar-Algeciras-Ceuta (GAC) basis during 14-26 March compared with the two weeks prior. Gains in the fossil market were mainly attributed to an increase in European refinery turnarounds as well as stronger crude values. The front-month Ice Brent crude futures 16:30 GMT marker averaged $86.07/bl on 14-16 March, an increase of $2.92/bl from 1-13 March. Rising fossil levels were accompanied by increases in the biodiesel spot barge market. Prices for advanced fatty acid methyl ester (Fame) 0°C cold-filter plugging point (CFPP) on a fob ARA barge basis averaged $1,407.15/t during the last two weeks of March, a $53.58/t rise from 1-13 March. Used cooking oil methyl ester (Ucome) barges firmed by $47.47/t to $1,316/t during the same timeframe. Biodiesel prices have firmed from long-term lows on the back of a reduction in European production and limited demand. Higher prices in underlying markets were accompanied by an emerging theme of biofuel supply uncertainty. Participants reported that European suppliers may look to steer away from Chinese-origin biodiesel as the EU's anti-dumping investigation continues, with a conclusion by early 2025 at the latest. This was compounded by chronic disruption in the Red Sea, historically the most utilised route on the east-west voyage, leading to traffic redirecting via the Cape of Good Hope and a subsequent increase in freight costs. The potential shift in supply routes can be supported by changes in product flows. Some 19,000t of Fame has been exported from China with a marked destination in Europe in March so far, an 80pc drop from February's 106,000t — according to Kpler data. This month's exports are just 10pc of the 184,000t exported from China to Europe in March last year, according to Kpler. Declining volumes from China were accompanied by an increase in Fame volumes exported from northwest Europe intra-continental to 409,000t in March from 364,000t a month prior. GTT data pointed to a 47pc decline in Chinese biodiesel exports in January-February, coinciding with an increase in Chinese exports of used cooking oil (UCO) with northwest Europe the main destination. Uncertainty in the supply import pool coincided with raised concerns around the presence of "unestablished" biodiesel feedstocks in bunker fuels. A report from Lloyd's Register fuel oil bunkering analysis and advisory service (FOBAS) highlighted a correlation between engine fuel pump and injector related damage in vessels and the presence of cashew nut shell liquid (CNSL) in marine fuels utilised by the vessels. CNSL is one of the cheaper advanced feedstocks and can be eligible for Dutch renewable tickets (HBE-G) — which can help make marine biodiesel blends more appealing and price competitive to buyers, as well as reduce production costs. But participants noted that during tests conducted by shipowners to assess the compatibility of CNSL with marine engines, technical and specification limitations emerged because of potentially high acidity and metal contents. This prompted shipowners and bunker suppliers to avoid fuels that contain CNSL, which may further constrict the pool of biodiesel supply that can be integrated into the maritime sector. Argus assessed the price of B30 Ucome dob ARA, a blend comprising 30pc Ucome and 70pc VLSFO, at $839.17/t during 14-26 March — an increase of just under $22/t from the 1-13 March average. B30 Advanced Fame 0°C CFPP dob ARA range averaged just over $785/t during 14-26 March, higher by $16.19/t from the two weeks prior. B100 Advanced Fame 0 levels rose by $16.62/t to $1,159.79/t in the second half of March. B24 dob Algeciras-Gibraltar firmed to $812.61/t in 14-26 March, an increase of $19.50/t from prices on 1-13 March. By Hussein Al-Khalisy Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

News

Grupo Carso expande su huella en energía


27/03/24
News
27/03/24

Grupo Carso expande su huella en energía

Mexico City, 27 March (Argus) — En los últimos años Grupo Carso, dirigido por Carlos Slim, ha expandido sus operaciones en el sector de petróleo y gas natural, destacándose como uno de los pocos operadores que han fortalecido su presencia a pesar de las restricciones del presidente mexicano Andrés Manuel López Obrador a la inversión del sector privado. A medida que los independientes y las grandes empresas petroleras han empezado a cerrar sus negocios en medio de la falta de nuevas oportunidades en subastas de la fase de exploración y producción, el Grupo Carso ha adquirido dos de los mayores contratos de aguas someras en los últimos 12 meses y ha expresado interés en hacer nuevas adquisiciones. Durante una conferencia de prensa de cuatro horas en febrero, Slim confirmó el interés de la empresa en desempeñar "un papel más importante en el sector de los hidrocarburos y, finalmente, participar en los productos petroquímicos." Slim, la persona más rica de México y director de un conglomerado que abarca desde las telecomunicaciones hasta la minería, también expresó su interés por "ser socio de alguien con experiencia" y por aumentar la participación de la empresa en el operador independiente estadounidense Talos Energy. La división de energía de Grupo Carso, Carso Energy, tenía un papel marginal en el sector aguas arriba de México antes de esta administración, con derechos de producción y exploración de dos bloques terrestres asegurados tras la reforma energética de 2014. A pesar de que los contratos se adjudicaron en 2017, los bloques 12 y 13 de Veracruz siguen en fase de exploración en medio de la falta de equipos de perforación disponibles y la presencia del crimen organizado en la zona, que ha impedido el acceso al emplazamiento, el operador informó al regulador de petróleo CNH el pasado diciembre. Pero los dos bloques terrestres son pequeños en comparación con los bloques de aguas poco profundas que Grupo Carso compró el año pasado. En septiembre, Grupo Carso completó la compra por $124 millones de una acción de 49.9pc en la filial mexicana de Talos Energy, involucrada también en el mega yacimiento de aguas superficiales de Zama que se está desarrollando con la paraestatal Pemex. Con un pico pronosticado de producción de 180,000 b/d de crudo para 2026, el yacimiento sería el segundo campo de producción de crudo más importante de México según las cifras de enero. El pasado diciembre, Carso Energy llegó a un acuerdo de $530 millones para adquirir el bloque de aguas someras 4 del conglomerado mexicano Petrobal en la cuenca sureste. El bloque es el tercer contrato de producción de crudo más alto, con una producción de 11,784 b/d en enero, según la CNH. Inversiones en gas En el sector del gas, Carso Energy también opera el gasoducto de gas natural Sasabe-Samalayuca de 472mn cf/d y es socio en las líneas estadounidenses de interconexión Waha-Presidio y Waha-San Elizario. Pero mientras que la mayoría de las empresas del sector de la energía han visto un colapso de las oportunidades de inversión durante la administración de López Obrador, el Grupo Carso parece ser una de las pocas empresas del sector privado con las que el presidente permitirá que las empresas estatales Pemex y CFE hagan negocios. CFE adjudicó directamente un nuevo contrato de gasoducto al operador en diciembre del año pasado, con un acuerdo para ampliar la línea de gas Sasabe-Samalayuca de 416km y 472mn cf/d de Sasabe, Sonora a Mexicali, Baja California. López Obrador, a menudo crítico de las empresas del sector privado dentro del sector de la energía, incluso ha elogiado el papel creciente de Slim en el mercado del petróleo y el gas, celebrando su adquisición del contrato Petrobal por permitirle "permanecer en manos mexicanas." Mirando hacia el futuro, los profundos bolsillos del Grupo Carso podrían convertirlo en un socio potencial para desarrollar el campo de gas de aguas profundas de Lakach tras la decisión de New Fortress Energy de retirarse el pasado mes de noviembre. Pero el entorno de bajos precios del gas podría complicar el proyecto en el que Pemex ya ha invertido $1.4 mil millones, mientras que la falta de experiencia de Carso en aguas profundas plantea preguntas sobre su viabilidad como socio. Carso Energy representó sólo 1.6pc de los Ps55.4 mil millones ($3.29 mil millones) totales de ventas del Grupo Carso durante el cuarto trimestre del año pasado, pero la estrategia de adquisición del grupo y el estatus favorecido frente a la administración podrían ver esa cuota aumentar en los próximos años. Por Rebecca Conan Proyectos de energía de Carso Proyecto Tipo de proyecto Tamaño/capacidad Bloque 12 E&P en tierra Fase de exploración Bloque 13 E&P en tierra Fase de exploración Zama E&P en aguas someras 180,000 b/d crudo en 2026 Bloque 4 E&P en aguas someras 11,784 b/d crudo en enero Sasabe-Samalayuca Gasoducto 472mn cf/d Waha-Presidio Gasoducto 1.4 Bcf/d Waha-San Elizario Gasoducto 1.1 Bcf/d Grupo Carso Send comments and request more information at feedback@argusmedia.com Copyright © 2024. Argus Media group . All rights reserved.

Business intelligence reports

Get concise, trustworthy and unbiased analysis of the latest trends and developments in oil and energy markets. These reports are specially created for decision makers who don’t have time to track markets day-by-day, minute-by-minute.

Learn more