Low oil costs have derailed Brazil's offshore boom

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Activity in the Brazilian energy zone continues to grow. In January 2020, Latin America’s largest economy saw its all-important oil industry take a new milestone, pumping an average of 3. 168 million barrels of crude oil steadily. The COVID-19 pandemic and the collapse of oil costs in March 2020 did little to slow the ongoing oil boom in Latin America’s largest economy. Brazil’s national oil company, Petrobras, cut planned annual spending by 29% in March 2020 and closed its shallow water platforms in reaction to the pandemic and collapsing oil costs. This did little to slow the expansion of production. Petrobras’ advertising oil production at the time of the 2020 quarter was up 4. 1% year-on-year to just about 2. 5 million barrels in line with the day. This is basically explained through the significant expansion of the presence of the national oil company in the pre-salt fields, where production increased by almost 31% to reach 1. 5 million barrels consistent with the day. There are symptoms that even the continuing effects of the COVID-19 pandemic, weaker oil demand and lower costs will not deter the development of Petrobras oil production. Petrobras is stepping up its offshore activities consistent with, especially in the prolific pre-salt fields, as the risk of a pandemic decreases. The Brazilian national oil corporation plans to start connecting new wells, in line with carrying out consistent maintenance and commissioning of new facilities this month. This will give a great boost to the oil production of the national oil company and Brazil.

Measures taken to curb the spread of the COVID-19 pandemic by postponing non-essential or consistent congestion, as well as stopping non-economic oil production due to falling prices, have had little effect on Brazil’s hydrocarbon production. The Petroleum Agency (ANP) shows that Brazil’s oil and herbal fuel production in August 2020 averaged just over 3. 9 million barrels of equivalent oil consistent with the day, nearly 1% more than in July and 2. 6% more than in the same year to year before.

Source: Brazilian National Petroleum Agency (ANP) and US EIABut it’s not the first time

Related: China crude oil imports fall

Brazilian production in August 2020, according to consultancy IHS Markit, remained strong, as indicated by export volumes, cutting only from a month earlier; Indeed, oil exports have increased particularly since the beginning of 2020, with China now as a key The collapse in oil costs in March 2020 caused China’s oil imports to increase, despite falling demand, as Beijing took the opportunity to take advantage of cost reductions to fill strategic oil reserves. This has been a vital driving force for activity in Brazil’s offshore oil fields.

The importance of oil exports to the world’s most populous country for Brazil’s economy and its oil industry cannot be emphasized enough, as by the end of July 2020, China accounted for 70% of Brazil’s oil exports, which will continue to grow despite however, recent knowledge implies that oil shipments from Brazil to China in August 2020 decreased by 5% compared to May june, which is attributed through consultancy IHS Markit to severe congestion. at several ports in China. La in August oil exports to China, which gave the impression of worsening in early September, was made up for an increase in shipments to Southeast Asia and India, which continued to increase.

Brazil’s oil production is expected to continue to grow at a steady rate as giant offshore projects develop and come online. countries up 2025. Si the number of Brazilian platforms used as an indicator of industry activity, it is imaginable to see the speed of operations increasing. At the end of August 2020, Baker Hughes’ knowledge showed that there were 10 trading platforms, two giants that in July and one higher than the same month of 2020. The volume of trading platforms has a tfinishenness to build after reaching its lowest number last year in July.

Source: Baker Hughes and EIA from the U. S.

The appeal of Brazil’s prolific pre-salt oil fields is easy to understand: they produce soft, low-sulfur crude oil, which is especially desirable for Asian refineries as efforts to generate marine carbon emissions multiply. Pre-salt fields also have low equilibrium costs that are set at $35 to $45 consistent with the barrel, while Petrobras says it is reaching $21 consistent with the barrel for the crude it pumps. This makes Brazil’s deep-sea pre-salt fields hot in the existing environment where oil costs, which see the foreign benchmark, are declining. for the Brent trading at around $43 consistent with the barrel, weighs on investment and activity.

However, prior to the COVID-19 pandemic, the oil and fuel economic sector faced headwinds. Global energy primaries have rejected two of Brazil’s 2019 oil auctions amid renewed interest in profitability and preferential rights for the national oil company. There is also a significant threat to exploration and progression activities due to significantly lower oil costs. Petrobras, like many other global primary energy companies, had founded its projected capex for 2020-2024 on $ 50 a barrel or more of Brent. As a result, the Brazilian national oil company drastically reduced its spending for 2020 and halted unprofitable production, negatively affecting the Latin American country’s oil production. In a recent statement, Petrobras said that capital spending from 2021 to 2025 would increase to $ 40 billion compared to an initial estimate of $ 64 billion for 2020 to 2024. The continued decline in oil costs means that corporations Global energy giants will continue to maintain Backup investment in exploration. and new projects for the foreseeable future.

However, while the foreign benchmark still soars around $40 consistent with the barrel, oil companies, adding Petrobras, will continue to keep their capital expenditure low by focusing on balance sheet coverage and capital preservation. exploration activities and the progression of new projects. Abroad, however, Brazil’s low equilibrium costs make it an exciting proposition for large foreign powers seeking to accumulate reserves and oil production.

By Matthew Smith for Oilprice. com

Low oil costs have derailed Brazil’s offshore boom

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