Recently, it was reported that Brazilian President Luiz Inácio Lula da Silva has been urging the country’s environmental regulators to approve oil drilling near the mouth of the Amazon River. Lula argues that the revenue from this new fossil fuel source could help finance the transition to green energy. The offshore site, Block 59, is located in the Equatorial Margin, about 160 kilometers (99 miles) off Brazil’s eastern coast. However, Brazil’s environmental regulator rejected the drilling license in 2023, citing concerns over the risk of oil spills that could damage one of the world’s most biodiverse regions. Petrobras (NYSE: PBR) estimates the reserves in the basin to be around 10 billion barrels.
In light of this, Brazil’s state-owned oil company may have found a new oil discovery that could influence Lula’s stance on the rainforest. Petrobras has confirmed the discovery of oil in the western section of the Búzios field, located in the pre-salt Santos Basin. The new reservoirs were found beneath the main reservoir in a zone that had not been previously explored.
“Pre-salt fields” refer to offshore oil and gas reservoirs located beneath thick salt layers that formed before the oil deposits. These fields, commonly found off Brazil’s coast, are known for having large reserves of high-quality oil trapped below the salt layer. Petrobras drilled the 9-BUZ-99D-RJS well 189 kilometers off the coast of Rio de Janeiro, reaching a water depth of 1,940 meters. Oil was found at a depth of 5,600 meters, confirmed by electrical profiles. Petrobras holds an 88.98% stake in the Búzios field, with China’s CNOOC (OTCPK: CEOHF) and CNPC holding 7.34% and 3.67%, respectively. Pré-Sal Petróleo S.A. (PPSA) manages the field.
The Búzios field is one of Brazil’s largest oil fields, with an estimated 11.3 billion barrels of recoverable oil equivalent (boe). While the exact amount of recoverable oil in the new formation is still under evaluation, this discovery strengthens the field’s potential. In March, Petrobras reached the milestone of producing 1 billion barrels of oil from Búzios since operations began in 2018. The company expects to boost production capacity to 2 million barrels per day by 2030 with new production systems.
Decline in Petrobras’ Output
Petrobras recently reported a 10.5% decline in its fourth-quarter oil and gas production, falling to 2.63 million barrels of oil equivalent per day (boe/day), compared to the previous year. The drop in production, along with maintenance shutdowns, contributed to a fall in export volumes and revenue. Sales of oil, gas, and derivatives decreased by 8% year-on-year, while oil exports dropped nearly 22% to 692,000 barrels per day. Petrobras’ production of oil and natural gas liquids in Brazil declined by 11.5% to 2.09 million barrels per day, while natural gas output fell 6.1% to 507,000 boe/day.
In terms of exports, around 30% of Petrobras’ oil exports went to China, down from 44% in the same period of 2023. On the other hand, Europe’s share of Petrobras’ exports increased from 28% to 38%.
Petrobras also adjusted its capital expenditure (capex) forecast for 2025, lowering it to $17 billion from an earlier estimate of $21 billion. The company stated that this revised estimate aligns better with its financial position. As part of its latest strategic plan, Petrobras plans to invest $102 billion over the 2024-2028 period, a 31% increase compared to the previous plan. This increase in investment comes amid pressure from President Lula to ramp up spending to support the country’s economy and create jobs.
Rising Competition in Brazil’s Oil Industry
While Petrobras faces declining output, global research group Wood Mackenzie forecasts that private oil companies in Brazil will boost oil production by 75%, from 1.22 million barrels per day (Mb/d) to 2.12 Mb/d by 2030. International oil companies, such as Shell Plc (NYSE: SHEL), Equinor ASA (NYSE: EQNR), TotalEnergies SE (NYSE: TTE), Repsol Sinopec Brasil S.A., and Petrogal, are expected to be major contributors, thanks to their partnerships with Petrobras in the pre-salt fields and others under development.
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