From a speck on the horizon the place sea and sky merge, a pilot flame is the very first thing seen to helicopter passengers flying in direction of one of many latest offshore oil platforms remodeling Brazil into a worldwide vitality energy.
Anchored 200km from Rio de Janeiro, the P-71 floating manufacturing unit is amongst greater than 30 run by nationwide oil firm Petrobras over a hydrocarbon-rich stretch off the nation’s south-eastern Atlantic coast.
The expanse is called the “pre-salt” area as a result of its crude deposits — 11.5bn confirmed barrels on the final depend — lie below a thick crust of sodium chloride, deep beneath the ocean ground. It was residence to an oil discovery thought of the western hemisphere’s most important for 30 years within the first decade of this century.
“There were doubts over whether we would be able to develop it,” mentioned José Ferreira Junior, supervisor aboard the P-71 vessel within the Itapu area. “The expectation was fulfilled and this turned a page for Brazil, putting it on the world stage as a petroleum producer.”
The South American nation’s total output of the commodity grew 4 per cent in 2022 to 3mn barrels a day, with three-quarters from pre-salt areas, rating it because the planet’s ninth-largest oil-producing nation.
Rising output from these huge deepwater reserves underpins an formidable goal by the Brasília authorities to achieve fourth place by the top of the last decade with 5.4mn b/d, forward of the likes of Iran, Canada and Kuwait.
At the forefront of that drive is $99bn-valued Petrobras. Latin America’s largest oil and fuel enterprise is state-controlled however with outdoors shareholders and a inventory market itemizing.
While the Rio de Janeiro-based group was given precedence over the pre-salt sources and dominates the actions, it operates many fields in consortiums with worldwide teams similar to Shell, TotalEnergies, QatarEnergy, Malaysia’s Petronas and China’s Cnooc, amongst others.
“This year we will exceed our goals [and] surpass what we predicted,” mentioned Joelson Falcão Mendes, director of exploration and manufacturing at Petrobras. “We have significant and growing production for the coming years.”
First present in 2006 and mainly positioned within the Santos Basin, the pre-salt deposits introduced technical challenges. At depths of as much as 7km beneath the water’s floor, together with layers of rock and a pair of,000 metres of salt to be drilled by, growth required colossal quantities of capital.
The useful resource is now a money gusher — each for the nationwide coffers and out of doors traders in Petrobras, based 70 years in the past as Petróleo Brasileiro.
Pre-salt manufacturing rose from 41,000 b/d in 2010 to 2.3mn final yr, fuelling document annual earnings of R$188bn (US$39bn) and dividends of R$216bn on the firm.
“For the shareholders — controlling and minority — pre-salt [operations] mean really good returns combined with production growth,” mentioned Gabriel Barra, analyst at Citi. “It is finally paying off.”
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While web revenue fell by two-fifths to $5.5bn within the third quarter — hit by decrease oil costs and a weaker greenback — Petrobras elevated whole crude volumes by virtually 10 per cent yr on yr.
To additional enhance extraction, it plans to launch one other 11 platforms within the pre-salt area by 2027.
However, with output from the fields anticipated to peak by 2029 after which begin falling, there are questions over the long run strategic steps for each the corporate and Brazil.
The rush to safe reserves of hydrocarbons — the chief parts of petroleum and pure fuel — has been underscored by blockbuster takeover offers by US oil business supermajors ExxonMobil and Chevron up to now weeks.
Yet because the world seeks to avert catastrophic local weather change, the very soundness of Brazil’s continued wager on oil and fuel has been challenged.
Critics say it exposes a contradiction throughout the inexperienced agenda of President Luiz Inácio Lula da Silva, who has promised higher ecological safety and sustainable growth.
The pre-salt riches have been found through the leftwing president’s first stint in workplace and his Workers’ celebration (PT) considers it one among his legacies.
Although the Lula administration and Petrobras have pledged to again cleaner alternate options, fossil fuels stay a pillar of nationwide coverage.
“We don’t see any type of contradiction,” mentioned Mendes. “As an integrated energy company, we can use what we [generate] in oil and gas production to invest in renewable energy.”
He added: “Oil will still occupy an important place in the energy matrix [alongside] renewables. We want to do this together.”
Petrobras has pledged extra of its capital expenditure funds to low-carbon initiatives since Lula returned to energy. But with world crude demand forecast to say no within the subsequent decade, campaigners argue it ought to pivot away from polluting actions extra shortly.
Enrico Marone at Greenpeace rails towards the concept “Brazil will be the last country to produce and export oil in the throes of the now outdated petroleum era”.
“It makes no sense to keep betting on fossil fuel sources when the world is looking for urgent reductions in greenhouse gas emissions.”
Petrobras counters that pre-salt oil is reasonable and comparatively clear in contrast with different sources, and subsequently a really perfect provide as societies stay depending on hydrocarbons through the vitality transition.
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Pre-salt wells provide enormous economies of scale that deliver down unit prices, say analysts. The sheer measurement of operations is proven by the P-71: a floating manufacturing, storage and offloading unit (FPSO) that appears like an enormous ship.
A 316-metre-long industrial advanced of gantries, pipework and heavy gear with about 160 employees on board, it began manufacturing in December 2022 and may course of 150,000 barrels a day.
Pre-salt oil prices roughly $35/barrel to supply, in keeping with Schreiner Parker at consultancy Rystad Energy, nicely beneath present worldwide benchmark costs of about $90. The CO₂ emitted within the manufacturing can be half the worldwide common for a barrel of oil of 18kg/b, he added.
“That combination of low break-even cost and low emissions intensity means those pre-salt barrels are what we called privileged,” mentioned Parker, whose agency forecasts Brazil would be the fifth-biggest oil producer by the top of the last decade.
“By 2050, even in the most conservative scenario, we’re still going to need around half the oil that we consume today. You’ll have significant Brazilian production throughout the 2030s and into the 2040s, but the question is: what’s next?”
The reply could also be a brand new offshore frontier positioned in a 2,200km tract of deep waters alongside Brazil’s north coast, referred to as the Equatorial Margin.
Proponents imagine it may very well be Brazil’s subsequent oil frontier and draw comparisons with neighbouring Guyana, the place huge offshore reserves at the moment are being exploited by Exxon.
Estimated to comprise 10bn recoverable barrels, Petrobras has allotted half its $6bn exploration funds for the Equatorial Margin over the subsequent 5 years.
The firm just lately obtained permission to drill exploratory wells in one of many area’s 5 basins, nevertheless it faces obstacles to the part considered the principle prize, positioned off the mouth of the Amazon river.
Activists declare the block lies close to an ecologically delicate zone, posing dangers to wildlife and close by indigenous populations. After refusing a drilling request, Brazil’s environmental company is contemplating an attraction filed by Petrobras.
Beyond oil, the corporate believes its expertise on the excessive seas equips it to turn into Brazil’s main developer of offshore wind. Mendes mentioned such initiatives might probably provide electrical energy to grease rigs.
“In theory, offshore wind is simpler than oil production in deep waters. Historically it requires less technology. The big question is whether we can do this at competitive costs.”
In line with Lula’s marketing campaign pledge, Petrobras can be pursuing a method of diversification outdoors its core of oil and fuel, with higher investments in areas similar to refining, biofuels and petrochemicals. Analysts, nevertheless, warn this might lead to decrease monetary returns.
Another concern for minority shareholders is the spectre of political interference within the enterprise — a trademark of previous PT administrations, below whom Petrobras was embroiled in a sprawling corruption scandal, misplaced tens of billions of {dollars} subsidising gas and racked up huge money owed.
Citi’s Barra mentioned it was tough to evaluate the longer-term situation for Petrobras due to frequent adjustments on the prime, with chief executives chosen by the federal government of the day: “We’ve had a new CEO every one-and-a-half years on average.”
For Ferreira, the pre-salt riches can unlock the corporate’s future.
“My view is that we invest in the pre-salt [operations] to change the energy matrix,” the P-71 rig supervisor mentioned, staring out into the Atlantic. “If you look back, Petrobras went from onshore [oil] to offshore, then to deepwater. Now it can go to renewables.”
https://www.ft.com/content/76a1ccb0-8534-4513-8fb5-5eb5e07773bd
