Brazilian national oil company Petróleo Brasileiro SA, aka Petrobras, managed to avoid expensive LNG imports during the first quarter amid historically high reservoir levels at the country’s hydroelectric dams.
The majority state-owned firm sourced 63% of its gas supply from domestic production and 37% via pipeline imports from Bolivia during the first quarter.
In 1Q2022, by comparison, Petrobras sourced 15% of its gas supply from liquefied natural gas imports, with domestic production and Bolivia imports accounting for 55% and 29%, respectively.
Petrobras reported natural gas sales volumes of 50 million cubic meters (1.77 Bcf)/d during the first quarter, down from 66 MMcm (2.33 Bcf)/d last year.
“Two factors explain this drop,” said Petrobras’ Mauricio Tolmasquim, chief energy transition and sustainability officer, during the first-quarter earnings call on Friday (May 12). “The first is the opening of the natural gas market in the country.”
As a result of the market-opening reform signed into law by president Jair Bolsonaro in 2021, producers who formerly sold all of their gas output to Petrobras “now sell into the market directly,” Tolmasquim said.
Another factor was lower consumption by power generators due to the recovery of hydroelectric reservoir levels. Reservoirs were 88% full at the end of April, Tolmasquim said.
The Gas and Power segment generated net income of $388 million versus a net loss of $263 million in the year-ago period. The improvement, which occurred despite a 15% year/year drop in natural gas sales prices was “mainly due to lower acquisition costs for natural gas,” the firm said.
Meanwhile, in the upstream segment, Petrobras and partners Equinor ASA and Repsol Sinopec Brasil this month sanctioned development of the BM-C-33 offshore block targeting the prolific pre-salt layer.
The project, slated to begin producing in 2028, would send about 494 MMcf/d of natural gas to shore on average at its peak, according to the firms.
The pre-salt “continues to be the driver of our revenues and operational cash flows, accounting today for 77% of our total production,” said CEO Jean Paul Prates upon announcing the first-quarter results. He cited that pre-salt production in February hit a new monthly record of 2.13 million boe/d, “thanks to high wells productivity and the use of cutting-edge technologies that combine high efficiency with low carbon intensity. We are growing production, increasingly more efficiently and with lower emissions.”
Prates told analysts during the call that, “We will continue our efforts to decarbonize our production processes and to develop greener products, which we understand to be the only way looking forward for the oil and gas industry reducing its emissions and consolidating clean energy alternatives. In fact, we are convinced that Brazil and Petrobras have all the conditions to be global leaders in a fair energy transition without ceasing to be an oil power, establishing partnerships with other companies and taking advantage of the different locations and potentialities of all Brazil's regions.”
Petrobras on Wednesday (May 17) also announced a hydrocarbons discovery at the Aram block in the pre-salt. An exploratory well verified an oil-bearing interval “through wireline logging and fluid samples, which will be further characterized through laboratory analyses,” Petrobras said. “These data will allow evaluating the potential and directing the next exploratory activities in the area.”
Petrobras holds an 80% operating interest in Aram, which was acquired in March 2020 through a bid round conducted by Brazil’s National Agency for Petroleum, Natural Gas and Biofuels (ANP). China National Petroleum Corp. holds a 20% non-operated interest.
“The Aram block constitutes an important asset for exploring the remaining pre-salt potential, particularly in the Santos basin,” Petrobras management said. “In addition, the well presented a fluid of excellent quality, confirming the low levels of contaminants.”
Petrobras production averaged 2.68 million boe/d during 1Q, versus 2.8 million boe/d in the year-ago period.
Exploration and production capital expenditures totaled $2.0 billion during the first quarter, up 49% from 1Q2022. The spending increase was “due to the development of large projects that will sustain the production curve in the coming years, in particular the construction and integration of new production units,” the company said.
Investments during the period mainly went toward development of the Santos Basin pre-salt ($1.1 billion), deepwater production development ($400 million) and exploratory investments ($100 million).
Petrobras reported an 11.4% year/year decline in natural gas net revenues, “due mainly to lower sales to the non-thermoelectric sector and lower prices,” management said.
Petrobras reported net income of $7.37 billion for the first quarter, versus net income of $8.65 billion in the same period last year. Sales revenues totaled $26.8 billion, compared to $27.2 billion a year earlier.
