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The Petrobras strategy

08th August 2013

2013 has begun with a bang for Petrobras, with Brazil’s 11th tender of oil and gas blocks promising to launch the company toward unprecedented heights in terms of exploration and production. In order to reach them, the Brazilian state-owned firm is betting high on three crucial fronts: capex, infrastructure and technological development

Graça Foster
Graça Foster, president of Petrobras, at OTC 2013, second panel, 7 June. Copyright: Agência Petrobras

In May of this year, Petrobras invested USD 720m to acquire the most blocks offered in the 11th round held by the National Petroleum Agency (ANP). Petrobras bought 34 of the 289 blocks offered in the bid. It also secured, in its technicians’ opinions, the blocks with the highest exploratory potential offered by the agency, located in the Foz do Amazonas, Espírito Santo and Barreirinhas basins.

 

“The result of the bid will… allow the company to expand its knowledge of the geology of the sedimentary basins in the blocks it bought, by drilling wells and acquiring a large amount of seismic data, which will increase the likelihood of discovering new oil and natural gas accumulations,” Petrobras said.

 

The company’s strategy in the bid is consistent with the goal outlined in its record breaking USD 236.7bn 2013-2017 business strategy plan, as it seeks to incorporate new exploratory areas to achieve future production curves, something no less short of doubling its oil output by the end of the decade.

 

Petrobras investments have increased at a rate of 21.5 per cent per year since 2000 and reached USD 42.9bn in 2012. Investments in R&D have grown 18.3 per cent per year, reaching USD 1.1 billion in 2012. These have not only yielded direct results – as with the 34 blocks acquired through the 11th round – but prompted  Petrobras CEO Maria das Graças Silva Foster to look towards the future with optimism. 

 

Petrobras reserves will double by 2020, was her resounding projection at this year’s Offshore Technology Conference (OTC) in Houston. The Petrobras CEO also highlighted that production in Brazil, which was 2.2 million barrels of oil equivalent (mmboe) per day in 2012, will reach 5.7 million in 2020.

 

Pre-salt claims the spotlight

 

The pre-salt, of course, will be largely responsible for these estimated increases. In Petrobras’ new business and management plan, all eyes have turned to the development of this rich geological formation, which will claim 43 per cent of all production developments (USD 46.4bn) and 24 per cent (USD 5.4bn) of exploration activities between 2013-2017.

 

"We have made 53 discoveries in Brazil during the last 14 months. In the pre-salt alone there were 15 discoveries", she emphasised. “Petrobras’ reserves have the potential to double in size and reach 31.5 billion barrels of oil equivalent in the coming years," she added.

 

According to executive manager of Petrobras’ R&D centre Cenpes, Carlos Tadeu Fraga, who spoke during a panel at OTC, the pre-salt’s total area of 150,000 sq. km is “equivalent to 6,000 blocks in the Gulf of Mexico”. Total output from pre-salt reservoirs between 2008-2013 has reached 192.4 mmboe, he added, while daily production went over 311,000 barrels per day (bpd) on 17 April, significantly more than double its value in 2011, which was on average 121,000 bpd. Petrobras’ production target for the area is set to increase from its current 1 mmbpd to 2.1 mmbpd, Tadeu said, which roughly equals Brazil’s total oil production.

 

There are currently seven platforms and 19 producing wells in the pre-salt area in the Santos and Campos basins. The FPSO Cidade de Angra dos Reis, operating in Lula’s pilot project, is producing approximately 25,000 bpd, considerably above its initial production yield estimates of 15,000 bpd. The FPSO Cidade de São Paulo also began producing in January in Sapinhoá, one of Brazil’s biggest oil fields, located in the pre-salt area of the Santos Basin, while Cidade de São Vicente went on stream in February, also kicking off an estimated production of 15,000 bpd at the Sapinhoá field. In addition, the FPSO Cidade de Paraty has already been deployed and began production activities northeast of the Lula formation.

 

At OTC, Tadeu said that Petrobras’ strategy in the pre-salt is an extension of the strategy it laid out for the development of deepwater fields in the Campos Basin starting in the 1980s. For him, this strategy – which includes speedy project flow, acquiring additional discovery data via drilling additional wells, acquiring new seismic data and conducting long-term testing and pilot tests – is largely responsible for the good results so far.

 

“We are working tirelessly to reduce drilling costs, which make up 50 per cent of our capex. Drilling times have dropped 50 per cent since 2006. At that time, drilling times were 134 days, and today we can achieve that in 70 days, which is excellent,” he said.

 

Cooperation key to enhance technological developments

 

Tadeu also highlighted the important technological developments which have been achieved in several areas and recognised the significant work which has been carried out in conjunction with Petrobras’ partners and suppliers to strike gold in the pre-salt. This was a central focus in another Petrobras OTC panel, led by Petrobras' executive manager for Production Engineering in the Exploration & Production business area, Solange da Silva Guedes.

 

“With technology, we can, just seven years after the discovery of the pre-salt, produce 300,000 barrels per day in the area,” she said. Within the most relevant technological developments, Guedes highlighted advancements in the areas of high-end solutions for reservoir analysis, drilling and well completion technologies, subsea systems, infrastructure integrity and CO2 processing and storage.

 

Guedes also highlighted the need for strong cooperation in technological development and R&D to unlock the pre-salt’s vast potential.

 

“Cooperation with universities from around the world, as well as companies and suppliers has been a practice which has bared many fruits for the company,” she said, highlighting Petrobras’ strategic programmes for the development of new technology with other organisations, which includes Procap, a programme that has masterminded the majority of existing pre-salt solutions for the Campos Basin.

 

“The first Procap was created to foster the development of technology for fields with water depths of over 400 meters. Today, Procap Visão Futuro seeks to anticipate needs, as well as to provide and enhance technologies,” she said. Procap Visão Futuro is focused on finding technological solutions in oil and gas E&P and is ranked by 40 organisations from around the world from different areas, including well engineering, logistics, reservoirs and sustainability.

 

Another such project of perhaps higher magnitude is DeepStar, which is the result of a partnership between the world’s top energy companies. DeepStar focuses especially on the research and development of technology for the purposes of exploration and production of oil in deep waters.

 

Joint projects like DeepStar are an integral part of Petrobras’ strategy for the development of technology, as they accelerate the development of R&D solutions which reduce costs.

 

We will have to wait and see how the conjunction of Petrobras’ big pockets, its large infrastructure plans and high focus on technological development unfold. It is safe to say, however, that, looking ahead, Petrobras’ long-term technology strategy will require an intense cooperation with foreign suppliers and partners, so that the technologies it uses guarantee efficient and safe operations.