Brazil’s Petrobras which has become the world’s biggest deepwater oil producer is looking past its largest discoveries to avoid a fate similar to Mexico, where output has plummeted 25% since 2004.
Petrobras, as Brazil’s state-controlled oil company is known, is shifting exploration efforts away from the ultra- deepwater deposits where it made the Americas’ biggest discoveries since 1976 after missing output targets in the past eight years.
About 69% of the company’s exploration budget is going to areas outside the so-called pre-salt region to guarantee it can bring new fields online in the coming years.
“We have large pre-salt potential, but we understand we need to open -- and we have expectations to do so -- new horizons along the Brazilian coastline” Jose Formigli, the head of exploration and production, told analysts at a conference in Rio de Janeiro on Monday.
Petrobras is learning a lesson from Mexico, whose Cantarell field lifted the nation’s output to a record 3.4 million barrels a day before falling as the country failed to invest in new fields. Mexico is just now starting to explore deep waters of the Gulf of Mexico after Cantarell’s output slid 74% since 2006. The field’s production fell to the lowest in at least 22 years in April.
Petrobras cut its production goal in a business plan published June 14 to 5.7 million barrels a day by 2020, from a previous target of 6.4 million barrels. The company is spending 236.5 billion dollars through 2016, with a majority on exploration and production at offshore fields.
About 80% of Brazil’s oil comes from the Campos Basin, where Petrobras has been producing since 1977. Output at Roncador, which was Brazil’s biggest-producing field until January, declined 8% in the past 12 months through April, underscoring the need to replace aging deposits with new fields.
The Santos Basin, which holds Brazil’s biggest pre-salt fields including Lula, the largest discovery in the Americas since Cantarell, only produced 6% of Brazil’s oil in April as Petrobras works to develop the discoveries that lie miles beneath the floor of the Atlantic Ocean.
Petrobras forecast on Monday that it will only start having positive cash flow, excluding dividends, in 2016 as the Brazilian government holds back fuel price increases in an effort to contain inflation. Petrobras tumbled 9%, the most since November 2008, after securing fuel price rises that were below some analysts’ estimates.
Petrobras is looking to replicate discoveries made by Tullow Oil Plc. (TLW) in French Guiana and Ghana, where the geology is similar to basins in northeastern Brazil. Petrobras plans to resume drilling at its first well in the Foz de Amazonas basin near the border with French Guiana after suspending drilling early this year because of bad weather, Formigli said.