Major Petrobras capex cut in line with global players
The new strategic plan of Brazilian oil giant Petrobras with a 27% capex cut compared to the previous plan falls in line with the average 20-30% reduction at global oil majors.
The week saw the NOC unveil its new five-year plan with estimated capex of US$55bn for 2021-25.
Petrobras plans to invest US$10.2bn next year, more than Norway’s Equinor, whose estimated capex is around US$8.5-10bn and Italy’s Eni with just over 5bn euros (US$5.97bn).
Equinor’s original 2021 capex plan was US$10-11bn while Eni’s was 30% higher than the current plan.
France’s Total also said in March that it would reduce this year’s capex by 20% to US$15bn. Then in October, the company said it expected annual capex in the range of US$13-16bn.
British oil major BP Energy has reduced its 2021 capex plan to US$13-15bn from the US$15-17bn it had announced in the fourth quarter of 2019, while Anglo-Dutch Shell has said its 2020 investment would be around US$19-22bn compared to the US$25bn originally planned.
After cutting its 2020 capex by 30% to US$23bn, US-based ExxonMobil expects to invest US$16-19bn in 2021.
In Latina America, the capex of Mexican NOC Pemex for this year had initially been planned at US$16.7bn, but it is now expected to be around US$14.4bn. Capex for 2021 should remain flat, according to market sources.
Argentina’s state-run YPF estimates a capex figure of around US$1.5bn for next year. In the first eight months of this year it invested US$2.6bn.
RISKY STRATEGY
Around 85% of Petrobras’ capex for the 2021-25 period will go to E&P activities, the same proportion as in the previous plan. Also in line with the 2020-24 plan, pre-salt projects will absorb 70% of the E&P budget with investments of US$32bn.
The company estimates an average output ranging from 2.75Bboe/d (billion barrels of equivalent oil a day) next year and 3.3Bboe/d in 2025, down by 200,000boe/d compared to the previous plan.
The production estimates could see an impact equivalent to 600,000b/d due to the sale of onshore and shallow water assets, in addition to the Marlim and Albacora/Albacora leste deepwater projects.
In the new five-year plan, Petrobras kept the basic strategy from its previous plan but the big change was the modification of its resilience Brent reference price from US$50/b to US$35/b, Rodrigo Leão, technical director at Brazil’s institute for strategic petroleum studies (Ineep), told BNamericas.
“This has a major impact in terms of investments, which have plummeted and prevents Petrobras from reducing its debt,” he said.
Leão believes that Petrobras’ strategy to focus on E&P will potentially generate negative effects for the company in the medium term.
“Every time there is a strong variation in the barrel price, Petrobras will have to make big adjustments to its investments and asset management,” he added.
Petrobras' strategy is linked to an effort to reduce debt and accelerate production by seeking to seize the right moment to sell low-sulfur oil internationally, Fernanda Delgado, a researcher at FGV Energia, a unit of local research center Fundação Getúlio Vargas, told BNamericas
“This does not mean that Petrobras is not considering investments in renewable, alternative sources, like it has done in the past,” she said. “That should be a natural move but oil companies often buy and sell assets according to the opportunities available.”
DECARBONIZATION
Even though Petrobras does not make any mentions of “energy transition” or renewable energy projects in its new strategic plan, the company said it would deploy new decarbonization technologies involving gas flaring emissions, CO2 reinjection and energy efficiency gains at its refineries.
It also highlighted the recent creation of an executive management unit focused on climate change, reiterated the 2030 goal of reducing total emissions from its operations by 25%, and established a goal of zero oil spill.
“All these measures indicate that Petrobras is taking a more aggressive strategy to position itself among the top global companies in the pursuit of decreasing CO2 emissions,” Antônio Souza, an independent consultant, told BNamericas.
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