Petróleo Brasileiro S.A., or Petrobras (ticker: PBR), is the state-run oil company of Brazil and has operations in 24 countries across five continents. It is the largest producer in South America and participates in E&P, refining, trade, transportation, petrochemicals, oil distribution, electricity, biofuels, and sources of renewable energy. PBR celebrated its 60th anniversary on October 3, 2013.
Petrobras announced on September 30, 2013, a 1.1% month-over-month volume increase in oil production for August 2013. This represents an increase in production for two of the past three months. Previously, PBR reported production declines for 15 straight months.
PBR averaged 1.9 MMBOPD in August, up from 1.88 MMBOPD in July 2013. PBR’s total energy equivalent output from Brazil was 2.29 MMBOEPD.
What’s Driving the Growth in Production?
PBR resumed operations on four platforms that underwent scheduled maintenance stoppages, and the startup of wells on platforms P-54 and FPSO-Piranema. According to the schedule, production was halted on platforms P-26 and P-35 (both in Marlim) in August to comply with the scheduled maintenance shutdown program.
For those not familiar with the PBR story, historically the state run oil company was exploring and producing oil and gas above the salt layer – or post-salt formations. However, giant new oil provinces in the Campos and Santos Basins near Rio de Janeiro were discovered deep beneath the salt layer in 2007 – known as pre-salt.
Pre-salt production rose 1.9% from July to 365,600 BOEPD, or 16% of Brazil’s total. Subsalt output is 80% higher than a year ago, a sign that this new output is only just keeping pace with production losses in other more mature areas.
A Billion Barrel Discovery in Brazil?
On September 26, 2013, Reuters reported an oil discovery off Brazil’s northeastern coast could hold more than a billion barrels of oil.
PBR and India-based Bharat Petroleum Corp. (ticker: BPCL.NS) control the area under a 50-50 joint venture, known as the SEAL-11 exploration block.
Reuters reports the unconfirmed estimates are based on at least 10 oil and gas discoveries in seven wells since June 16, 2011.
“Sergipe (the discovery area), without a doubt, has great potential and excellent perspectives,” a Brazilian government official with direct knowledge of Petrobras and IBV’s discoveries and development plans told Reuters. “I would say that Sergipe is the best area in Brazil in terms of perspective after the subsalt.”
The exact numbers will only be known once appraisal plans are completed sometime in 2015, a BPCL source in India said on condition of anonymity. Some industry experts worry the tests could take longer because Petrobras is currently burdened with other giant investments and is struggling to raise money.
If the area proves to have 3,000 MMBO or more in place, it could ultimately produce 1,000 MMBO based on Brazilian recovery rates of 25 percent to 30 percent of oil in place, a Brazil-based oil industry expert with direct knowledge of the drilling program said.
Recent drilling also suggests that a giant natural gas field may extend well beyond SEAL-11 with enough gas to supply all of Brazil’s current needs “for decades,” one of the sources said.
[sam_ad id=”32″ codes=”true”]
Important disclosures: The information provided herein is believed to be reliable; however, EnerCom, Inc. makes no representation or warranty as to its completeness or accuracy. EnerCom’s conclusions are based upon information gathered from sources deemed to be reliable. This note is not intended as an offer or solicitation for the purchase or sale of any security or financial instrument of any company mentioned in this note. This note was prepared for general circulation and does not provide investment recommendations specific to individual investors. All readers of the note must make their own investment decisions based upon their specific investment objectives and financial situation utilizing their own financial advisors as they deem necessary. Investors should consider a company’s entire financial and operational structure in making any investment decisions. Past performance of any company discussed in this note should not be taken as an indication or guarantee of future results. EnerCom is a multi-disciplined management consulting services firm that regularly intends to seek business, or currently may be undertaking business, with companies covered on Oil & Gas 360®, and thereby seeks to receive compensation from these companies for its services. In addition, EnerCom, or its principals or employees, may have an economic interest in any of these companies. As a result, readers of EnerCom’s Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this note. The company or companies covered in this note did not review the note prior to publication. EnerCom, or its principals or employees, may have an economic interest in any of the companies covered in this report or on Oil & Gas 360®. As a result, readers of EnerCom’s reports or Oil & Gas 360® should be aware that the firm may have a conflict of interest that could affect the objectivity of this report.