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Written by  Tuesday, 01 August 2017 00:00

After years of turbulence fueled by scandal and debt woes, Brazil and its oil company Petrobras detailed how they intend to get back on the right track. Melissa Sustaita reports.

Fernando Coelho Filho, Minister of Mines and Energy, speaks at OTC 2017 in Houston.
Photo by OTC/Scott Morgan.

“We are trying to put the country back on track,” said Fernando Coelho Filho, Brazil’s Minister of Mines and Energy, at his first-ever visit to the Offshore Technology Conference (OTC) in Houston earlier this year.

Coelho Filho said that the Brazilian government is working to improve the country’s business environment to allow investors and more companies to be able to operate.

The country recently eased criteria for oil and gas companies to participate in pre-salt auctions, which are also on track until 2019, allowing companies other than Brazilian national company Petrobras to operate blocks.

“We do want more investors. We do want more people coming to Brazil,” Coelho Filho said. “Bid rounds, like the one that we are trying to host in the second semester, [will] be responsible for the Brazilian recovery, and the economy recovery that we need to put Brazil back on track.”

He told the audience that there are many other issues that need improvement, and that the Brazilian government is working on solutions.

“We are far, far away from doing everything we want, but we already [made] our first step. We now have a very clear calendar of the dates when the auctions will take place,” Coelho Filho said.

Brazil’s upcoming auctions for pre-salt areas are in place for 2017 until 2019. A total of four bid rounds will be held this year: the 14th bidding round, second production sharing bidding round, third production sharing bidding round, and the fourth marginal fields bidding round.

The 14th bid round of concession auctions will focus on the East Margin, which is set for 27 September, while the second and third bidding rounds for pre-salt blocks under production sharing contracts are scheduled for 27 October.

The offshore areas include Sergipe-Alagoas, Espirito Santo, Campos, Santos, and Pelotas. Brazil will offer 287 blocks at a total area of 122,622sq km. The acreage also includes onshore basins.

Sergipe-Alagoas will offer 11 blocks at a total area of about 7700sq km in ultra-deepwater, with an estimated 15 billion bbl in place.

The Espirito Santo basin includes seven ultra-deepwater blocks at a total area of about 5000sq km.

The ultra-deepwater Campos basin has 10 blocks on offer, at a total area of some 5500sq km, with an estimated 13 billion bbl in place.

The Santos basin has 76 blocks, both in shallow and deepwater, at a total area of about 20,000sq km.

The Pelotas basin will offer six blocks at a total area of about 15,000sq km in deepwater.

In 2018, Brazil’s 15th bid round will focus on the Equatorial Margin and will offer the offshore areas of Foz do Amazonas, Ceara, Potiguar, Campos, and Santos. The year will also include the fourth production sharing bidding round with areas available in Saturno, Tres Marias, Uraipuru, and Campos; in addition to the fifth marginal fields bidding round covering marginal oil and gas accumulations in mature basins.

The 16th bidding round in 2019 will include the offshore areas of Jacuipe, Camamu-Almada, Campos, and Santos. The 2019 bidding rounds, which will also focus on the East Margin, will include the fifth production sharing bid round covering the areas of Aram, Southeast of Lula, south and southwest of Jupiter, and Bumerangue; and the sixth marginal bid round will cover marginal oil and gas accumulations in mature basins.

Coelho Filho said that the auctions are expected to raise about US$2.6 billion (BRL $8.5 billion) in signing bonuses. The auctions for 2017-2018 may bring in about $61 billion (BRL $200 billion) over the next 10 years. For 2019, Brazil is expecting to see approximately $21 billion (BRL $70 billion) of investments until 2027.

Petrobras CEO Pedro Parente speaks at a luncheon at OTC 2017 in Houston. Photo by OTC/Edmund Fountain.

Petrobras CEO Pedro Parente’s message was in sync with Coelho Filho, as Parente told the OTC audience that the company is also on a mission to get back on track.

Parente said that Petrobras is adopting a new strategy, creating opportunities for both industry operators and suppliers, as well as expanding partnerships with universities and research institutions that will include cutting-edge technological development with lower costs and greater production growth. 

Petrobras experienced an increase in gross debt, reaching more than six times the level of 2009, and much above the industry level. Parente said that due to the debt interest rates, Petrobras is not able to invest as it would like to.

Under the company’s new strategic plan for 2017-2021, Petrobras is working on a new pricing policy, increased capex productivity, increased opex efficiency, and is seeking partnerships and divestments.

“We are intensifying our partnerships with operators, with service companies, and with research institutions,” he said. “We really feel good about partnerships in the E&P area. We have more than 130 partnerships.”

Parente said that partnerships will boost the company’s activity in upstream, including: taking advantage of technological knowledge, help with lowering research costs, faster production growth, lower capex, lower lifting costs, and reduce the breakeven of production in Brazil.

He gave an example in which it took 300 days for Petrobras to develop its first pre-salt well. Now, Petrobras can now develop a pre-salt well in less than 90 days.

In its divestment process, the Brazilian giant has changed its target to reach $21 billion in 2017-18 across its business, a 54% increase from its 2015-2016 target of $13.6 billion.

Petrobras also intends to reach a total production of 2.8 MMboe by 2021 in Brazil, and 3.4 MMboe internationally.

“In reality, Petrobras was a victim of this huge scandal that we’ve seen in Brazil,” he said. “We’re working very hard to leave this in the past.”

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