Pre-Salt Discoveries to Pave Long Term Growth Potential for Petrobras

Friday 27 July 2012, Amsterdam

Petrobras has been a key contributor in developing oil and gas resources in Brazil for the last five decades. Petrobras has witnessed many developments in deepwater and ultra-deepwater (D&U) regions, especially after the major pre-salt discoveries, including Tupi oil field. D&U projects have been offering significant growth potential to drive the company’s production over coming years. The company dominated the oil and gas sector in Brazil prior to oil and gas market deregulation in the country in 1997. However, the Brazilian government has partially privatized Petrobras, and invited many other foreign oil and gas companies to explore and develop the oil and gas resources present in Brazil. In order to develop Brazil’s oil and gas effectively, the government decided to allow the company to remain as the sole subsalt operator, and therefore plans for Petrobras to own a minimum of 30% working interest in any consortium within Brazil. Petrobras has proven to be successful in tapping oil and gas resources from Brazilian deepwater fields. Moreover, the company claims to have an exploration success ratio of around 87%, as compared to the industry average of 25% in pre-salt areas.

The company has made some recent major discoveries, including Lula, Guara, Cernambi, Carioca and Lara in the Santos Basin. These discoveries are expected to add around 2 MMbbl/d of oil and gas production by 2020. Petrobras is aggressively involved in developing Santos and Campos basins, in order to capitalize on huge growth opportunities in pre-salt areas. In line with this, the company has allocated an investment plan of $224.7 bn for 2011–2015. Moreover, Petrobras has been planning to invest around $53.4 bn in pre-salt projects, and a further $64.3 bn in post-salt projects in Brazil. The company has increased its capital expenditure more towards upstream operations, from 53% to 57%, primarily to address the development of new pre-salt discoveries. Additionally, Petrobras has also planned to construct and install 19 large production projects, which are expected to add around 2.3 MMbbl/d of new capacity in this five year program. Moreover, it will drill about 400 new wells in exploration and 600 new wells in producing areas, to add capacity and new reserves.

Petrobras’s oil and gas production (based on SPE criteria) is expected to grow to 6.4MMboe/d by 2020. As the company owns 90% of the production in Brazil as of 2011, over the coming years Petrobras will still hold the majority share of the country’s oil and gas production, and therefore it can be expected that Petrobras’s production growth will help in shaping the country’s overall oil and gas market.