Petrobras $84bn plan boosts capex, focuses upstream

Brazil's Petrobras boosted upstream spending in its $84.1bn business plan for 2019-23, although the production target for the end of the five-year period remains flat.

The plan represents a 12.8pc increase in planned capex from the previous $74.5bn plan for 2018-22. Around $8bn of the additional $9.6bn in spending will be directed towards exploration and production.

Upstream spending is projected at $68.8bn over the new five-year period, compared with $60.35bn under the previous plan, with pre-salt development accounting for around $27.2bn of that amount, a slight increase compared with the previous plan.

The Buzios pre-salt field—one of the projects in the Santos basin cluster known as the Transfer of Rights (TOR ) region—leads planned pre-salt spending with $9bn, followed by Mero, the first commercial discovery in the Libra project, with $3.5bn.

Post-salt development spending was increased to $21.22bn compared with a previous $19.49bn. The company will spend around $20.5bn to revitalize the mature Campos basin, where natural declines have pushed production to levels not seen since 2001.

Exploration spending saw the biggest jump, to $10.8bn compared with $6.63bn under the 2018-22 plan. Most of that will be spent on exploring dozens of pre and post-salt assets the company picked up in recent upstream licensing rounds.

Domestic oil production is slated to climb to 2.3mn b/d in 2019, a 9.5pc increase compared with Petrobras' 2.1mn b/d target for this year.

That increase takes into account a planned divestment of producing assets accounting for around 100,000 b/d, though Petrobras did not disclose if that comes from domestic or foreign fields.

Total production, including domestic natural gas and foreign production, is expected to inch up to 2.8mn b/d of oil equivalent (boe/d) in 2019 from 2.7mn boe/d in 2017.

Petrobras says production should grow at an average rate of 5pc/yr, but did not disclose a firm target beyond 2019. Based on the 2.3mn b/d domestic production target for 2019, domestic oil flows would reach 2.875mn b/d in 2023. Under its previous business plan, domestic oil production was pegged at 2.88mn b/d by 2022.

The company plans to add 13 new domestic production platforms, almost all pre-salt units, through 2023.

The P-76 and P-68 platforms earmarked for the Buzios and Lula fields, respectively, will only come on stream in 2019, not later this year as originally planned.

The first unit planned for the Atapu pre-salt field, one of the TOR assets, has been pushed to from 2019 to 2020. A new unit in the Campos basin's Marlim field originally scheduled for 2021 is now slated for 2023, and units for the Itapu field—another TOR asset—and in post-salt Sergipe originally planned for 2022 have been delayed to 2023.

The company plans to invest $13.9bn on refining, and natural gas and energy projects, stable compared with the previous plan.

Petrobras has earmarked $1.3bn for refinery projects, mainly to complete a pollution treatment unit and the second 115,000 b/d train at the Abreu e Lima refinery (RNEST). The company says the two projects could add around 160,000 b/d of new capacity.

The refinery spending also includes ultra-low sulfur diesel projects, which the company says could add another 98,000 b/d in capacity.

Subsea pipelines to transport associated gas from pre-salt fields will soak up another $3.7bn.

Petrobras maintained its plans to sell 60pc stakes in four refineries, deals that would shrink the company's share of the domestic refining market to around 60pc from a current 99pc. That plan was blocked by the federal supreme court in July, but is expected to move forward next year.

Part of the new plan, the first to be issued by the company without a press conference, will be financed by around $26.9bn in asset sales, bringing the company's divestment target in 2015-23 to around $62bn. Petrobras will likely miss its $21bn divestment target this year.

Brent prices are seen rising from $53/bl in 2018 to $66/bl in 2019, $67/bl in 2020, $72/bl in 2021, and $75/bl in 2022 and 2023.

The new plan assumes a Brazilian real-US dollar exchange rate of R3.6 in 2019 and R3.8 in 2023.