Petrobras to cut more costs, delays offshore unit

Brazil's state-controlled Petrobras has delayed the installation of a fifth production platform at the Buzios pre-salt field by one year to 2022, part of a deeper cost-cutting plan.

Around 60,000 b/d of oil equivalent (boe/d) of production will be lost over the 2022-23 period as a result of the platform delay.

The new "resilience plan" foresees an $8.1bn cut in $122.6bn of budgeted operating costs, expansion of the company's $26.9bn five-year divestment plan, and the release of excess cash for investment.

The plan is an addendum to Petrobras' 2019-23 $84.1bn investment plan—released last year in the final weeks of former chief executive Ivan Monteiro's tenure—and reflects current chief executive Roberto Castello Branco's leaner corporate vision.

Petrobras attributed the delay in the fifth Buzios unit, which is the final platform in a first phase of the field´s development, to the charter process.

The company is maintaining the timeline for the other four platforms scheduled to come on stream across the pre-salt patch in 2019-21, and another six in 2022-23. Petrobras estimates its oil and gas production will grow at a rate of 5pc/yr through 2023.

The delay in the Buzios 5 unit comes after national energy policy council CNPE adopted guidelines for an auction of excess reserves in the Santos basin pre-salt cluster known as the Transfer of Rights (TOR) region, where Buzios is located. Included in the guidelines that form the framework for the 28 October auction is a requirement that new partners reimburse Petrobras for TOR investments made up to the date of the contract signing.

Petrobras has so far shouldered all costs associated with TOR development, including the acquisition of the three 150,000 b/d floating production, storage and offloading (FPSO) units at Buzios. A fourth unit, P-77, is scheduled to come on stream later this year.

Under a 2010 agreement with the federal government, Petrobras has exclusive rights to produce up to 5bn boe from the TOR region. The area is estimated to hold the upwards of 15bn boe of additional reserves, mostly concentrated in the four areas—Atapu, Buzios, Itapu and Sepia—that will be offered later this year.

In his two months as chief executive, Castello Branco has repeatedly said the company will focus on assets where Petrobras' is a "natural owner," understood to mean deepwater, mainly pre-salt, reservoirs.

To fund the development of massive offshore deposits while still trimming its $84bn debt load, Petrobras will add more midstream, downstream, mature and shallow water assets to its already ambitious divestment portfolio.

New divestments envisaged under the resilience plan do not include refinery assets, the company said. Castello Branco wants to reduce the company's share of the domestic refining market to around 50pc from the current 99pc.

The ambitious cost-cutting plan includes voluntary payroll reductions and a cut in discretionary expenses such as advertising and office expenses.

Petrobras did not disclose the scope of or estimated savings related to the voluntary separation program. Similar programs launched in 2014 and 2016 generated savings of around $16bn and cut staff to 46,979 at the end of 2017 from 56,874 at end-2015.

The resilience plan also frees up cash for "more productive uses."