OPINION: Petrobras’ increasing focus on pre-salt oil and gas, which currently accounts for approximately 70% of all hydrocarbons produced in Brazil, has generated a surge in contracting activity, suggesting that life in at least one offshore sector is bright enough and will probably carry on this way for many years to come.
With a number of high-profile assets under development, none is set to attract more investments this decade than the giant Buzios pre-salt field, and that alone should convince contractors that Petrobras will keep pouring money in oil and gas activities even as other operators around the world begin a shift to renewable sources of energy.
This world-class field is already producing over 600,000 barrels of oil equivalent per day from a quartet of floating production, storage and offloading vessels.
Petrobras has a fifth unit earmarked to enter operation in 2022 and seven more on the drawing board.
Often described as the largest deep-water field in the world, with recoverable volumes probably in the 10 billion barrels of oil equivalent range, Buzios has become the crown jewel of the next wave of Santos basin pre-salt development, and its importance to Petrobras is such that it is increasingly edging out other projects inside and outside the prolific play.
With the world still reeling from the effects of the sharp drop in crude prices seen earlier this year and the Covid-19 pandemic, Petrobras has been extremely selective in the allocation of resources and has preserved money for its most lucrative endeavours.
“Cash is God,” hailed Petrobras chief executive Roberto Castello Branco in a conference call with investors last week. And if cash is indeed so important, it makes sense for the company to spend it on its heaven-sent development.
Petrobras is set to tender soon for three large FPSOs for Buzios, and another four floaters are on the cards to be offered to contractors over the next few years.
With so much effort being done to lift Buzios output to more than 2 million boepd in the future, other Petrobras projects in Brazil are losing the spotlight.
Contracting for units to produce from fields such as Itapu, Parque das Baleias and the Sergipe-Alagoas basin have moved onto the back-burner.
The domino effect also had a small impact on the Mero pre-salt development, with Petrobras postponing submission of bids for a fourth FPSO to November.
The move caught contractors off guard, as it was widely expected Petrobras would seek offers for the unit before launching the Buzios FPSO tenders.
With concerns mounting over a potential flurry of orders, one has to wonder if Petrobras is properly assessing the market and contractors’ ability to engage in so many biddings at the same time while also securing necessary funding.
Even though Petrobras will be responsible for the bulk of investments in Brazil, a number of international oil companies including Shell, Equinor, Total and ExxonMobil are also making their own plans for the country, adding even more spice to the mix.
There is little doubt that Brazil will remain a beacon for offshore oil and gas activities as we enter a new decade, but the proposed speed of this development will require adjustments, as some of these projects will likely take a bit longer to see daylight as they enter the queue.
(This is an Upstream opinion article.)