With Brazilian oil demand set to continue, Petrobras is making big plans for oil and gas as well as testing the water with greener fuels, although it is not yet investing in other renewables such as solar or wind power.
As several countries move away from fossil fuel production towards renewable alternatives, many will have to import oil and gas to bridge the gap during the transition period. Meanwhile, the Energy Information Administration predicts that Brazil's consumption of crude will rise 34 percent over the next three decades. Petrobras exported around 27 percent of its crude last year, demonstrating the high national demand and the potential to expand.
This month, Petrobras signed a $5 million revolving credit facility, that ends in 2026 with the potential a further two-year extension. It signed the agreement with 16 banks, replacing the $4.35 billion revolving credit facility it contracted in 2018. This borrowing power will allow the company to use the cash more effectively, maintaining access to its liquidity without additional costs.
Petrobras is going ahead with several projects in oil and gas while demand remains high. Quick to repair the Manati field export pipeline's subsea valve, the gas production is back up and running after around 10 days of pause. Manati provides a high gas output, which totaled 120.7 million cubic feet per day of production in November, of which Petrobras took a 35 percent share.
Just days ago, TBG, the Brazilian pipeline company, sold its 2022 natural gas transport capacity to Petrobras for its Bolivia-Sao Paolo route. The company requested injection volumes of 19.7 million m³ per day and withdrawal volumes of 17.7 million m³ per day from TBG.
International companies are also noting the value of Brazil's oil potential. In November this year. Petrobras awarded two $549-million contracts to drilling contractor Seadrill Limited for a fixed three-year term. This is part of plans for the West Carina and West Tellus rigs to start working for Petrobras in the third quarter of 2022. And this month, Seadrill acquired a third contract to work with Petrobras in the Búzios oilfield offshore Brazil, at an estimated cost of $264 million. The West Jupiter drillship will commence operations by the end of 2022.
Stuart Jackson, CEO at Seadrill, stated of the contracts, "Brazil is a strategically important market for the offshore sector and I am pleased that Seadrill will continue to play an increasingly significant role in the coming years."
But oil and gas are not the company's only interests, as it looks to expand its energy portfolio by developing renewable projects across the country. Petrobras hopes to start testing renewable diesel, made from co-processed soybean oils, with customers from as early as January. The second round of testing will take place over around six months. It already completed a successful first round of tests on the diesel at its Repar refinery in mid-2020, a facility that can produce around 114,000 tonnes of the fuel annually.
Pending regulatory approval, the energy firm hopes to invest $600 million in new production units between 2022 and 2026. This includes the conversion of the Paulinia and Cubatao refineries to produce a total of 505,000 tonnes of renewable diesel each year. The majority of these funds would contribute towards the construction of a renewable biorefinery with a 500,000 to 800,000-tonne annual capacity, to commence operations in 2027.
Related: Are Oil Markets Already Oversupplied?
In addition to renewable diesel, the company says it is developing bio aviation fuels as part of its carbon reduction strategy. CEO of the firm, Roberto Castello Branco, believes decarbonizing transportation is a key component of any net-zero target. It has also hinted at its interest in the hydrogen market in the future. At present, Petrobras is one of the region's principal exporters of low-sulfur marine fuel, with competitors in Venezuela and Mexico lagging. Petrobras has stated its aims to capture 25 million tonnes of carbon dioxide through 2025 as well as cutting its carbon emissions by 25 percent b 2030.
Although, beyond greener fuels, Petrobras has shown little interest in developing traditional renewable energy projects due to its lack of core competence in the field. Castello Branco stated, "We are not going to do things where we do not have competence, in sectors like wind or big solar projects." Rather, "if my big potential wealth creator is under the sea bed and that is something I know how to do, then my investments will reflect that."
Petrobras continues to focus heavily on oil and gas, responding to national needs and its potential international position during the energy transition. With several new projects planned for the next decade, Brazil is not likely to give up on fossil fuels any time soon. And while it hasn't shown much interest in renewables such as solar and wind power, Petrobras could expand to offer greener diesel and biofuels, supporting the decarbonization of transportation with an aim to cut emissions.
By Felicity Bradstock for Oilprice.com
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Felicity Bradstock is a freelance writer specialising in Energy and Finance. She has a Master’s in International Development from the University of Birmingham, UK. More
Comments
Whilst Petrobras always talks big about expanding production, at best Brazil would be able to maintain self-sufficiency in oil for the near future. Long-tem, Brazil will have to import crude oil to satisfy rising domestic demand. So any talk about Brazil becoming a major exporter in coming years is mere hype.
And rather than testing renewable diesel made from co-processed soybean oils thus depriving global food production from agricultural land and a vital food source like soybeans, Brazil could contribute far more effectively to combatting climate change by stopping the destruction of its Amazon rainforest, the world’s lungs, at an exceptional speed for financial benefits.
Dr Mamdouh G Salameh
International Oil Economist
Visiting Professor of Energy Economics at ESCP Europe Business School, London
Sure won't be the USA or Putin's Russia let alone Western Europe itself. "Something about a Communication Breakdown" apparently.