Petrobras rolls out leaner, greener spending plan

Brazil's state-controlled Petrobras has slashed capital spending and reduced medium-term oil production growth targets in its $55bn 2021-25 business plan that was released earlier than expected late yesterday.

The plan envisages around $46.2bn in upstream spending over the next five years, of which around 70pc or $32bn is earmarked for pre-salt assets. The company's previous $75.7bn 2020-24 plan had allocated 84pc or around $64bn of capital spending to its upstream operations, including around $38bn for pre-salt.

Under the new plan, spending will peak at around $10.5bn in 2023, when Petrobras is expected to accelerate contracting for the Buzios pre-salt field, its crown jewel. Buzios is forecast to produce around 2mn b/d of 28°API crude through 12 production platforms by 2030, from a current 600,000 b/d.

Petrobras has set a $35/bl breakeven baseline for all new upstream spending, a threshold that could sideline some costlier post-salt projects. Excluding pre-salt, the $14bn in planned upstream spending is around 24pc below the allotment of the previous plan.

Petrobras expects to bring 13 deepwater production systems on stream though 2025. The previous plan targeted 12 units through 2024, when the company's domestic oil production was expected to reach 2.9mn b/d.

The company is now targeting a more modest 2.6mn b/d of domestic oil production by 2024 and 2.7mn b/d by 2025. Crude flows are expected to reach around 2.2mn b/d this year and remain there in 2021 as a result of the Covid-19 pandemic and planned divestments of mainly shallow-water assets. The company's output is expected to climb gradually to 2.3mn b/d in 2022 and 2.5mn b/d in 2023, though flows could be lower depending on the timing of its divestments of around 600,000 b/d of oil equivalent (boe/d) in assets over the next five years.

Total production including natural gas is slated to climb to 3.3mn boe/d in 2025 from 2.75mn boe/d in 2021.

In May, Petrobras revised its mid-term crude price assumptions to reflect the fallout from the ongoing pandemic and the Saudi-Russian price war earlier this year. The company expects crude prices to average just $25/bl this year and climb to $50/bl by 2024.

Petrobras did not disclose details of divestment revenue targets in the coming years, but said its portfolio covers 50 assets. The previous plan envisaged the sale of around $20bn-$30bn in non-core assets. The firm is currently selling around half of its 2.2mn b/d of domestic refining capacity.

Asset sales and reduced capital spending are part of Petrobras' strategy to bring its debt level to $60bn by 2022. The company ended the third quarter with around $71.2bn in net debt.

Notably, Petrobras did not provide a breakdown of spending outside of its core upstream segment, but it indicated that downstream spending will continue to diminish over the five-year period.

Emissions goals

Petrobras has set new more aggressive emissions targets just weeks after establishing a climate change division tasked with leading the company in lowering emissions, boosting energy efficiency and monitoring climate. The firm is targeting a reduction of its total operational absolute emissions by 25pc by 2030.

In the upstream segment, Petrobras envisages zero routine flaring by 2030, increased CO2 re-injection, a 30pc reduction in methane emissions, and a 32pc reduction in upstream carbon intensity by 2025. Downstream, the company plans to reduce carbon intensity by 16pc by 2025 and by 30pc in 2030, and is also targeting a 50pc reduction in water collection by 2030.

The company had been expected to release the new five-year plan at the end of November to coincide with investor day.

By Nathan Walters