Brazilian state-led oil giant Petrobras remains tightly focused on developing its huge offshore oil and gas resources despite rapidly escalating public concerns over the climate impact from fossil fuels, its chief executive said Friday.
While most integrated oil majors are under increasing pressure from investors to future-proof their businesses with a shift to low-carbon or zero-carbon energy, Petrobras has no immediate plans to invest in renewable projects, Roberto Castello Branco told investors in London.
"Right now, we don't have the competencies to engage in aggressive programs to produce renewables. The business of solar and wind power is completely different from oil," he said while presenting the company's latest four-year strategic plan.
Petrobras' only recent renewables push was a 2018 deal with Norway's Equinor to explore joint offshore wind projects. Noting that the average expected returns from renewable energy projects are well below those for oil and gas projects, Castello Branco said: "We're not a charity, we're not going to dispose of money. We have to run profitable operations. Without cash generation, there is nothing we can do to deal with climate change."
Petrobras holds proven oil and gas resources of some 12 billion boe, putting it among the world's top 10 listed oil companies in terms of total carbon reserves, according to estimates by Carbon Tracker.
But Brazil's oil resources are often seen as being at a low risk of becoming future stranded assets because of their relatively low break-even costs to develop, giving them a competitive cost advantage globally.
NO CARBON COST
The company estimates that its lifting costs from its subsalt fields will remain below $4/b through to 2024 and sees total development costs of between $35-45/b for its deepwater offshore reserves.
But Petrobras' upstream head Alberto Pereira de Oliveira said the company is not currently modeling any carbon cost for developing and producing its oil resources due to the lack of any global carbon price.
Under the company's current 2020-2014 plan, Petrobras expects oil and gas output to rise to 3.5 million b/d of oil equivalent in 2014, up from a target of 2.7 million boe/d this year.
Declining to give volume targets beyond 2024, Petrobras said the company remains focused on the value of its upstream output, not on outright volume targets.
"We are not worried about increased production. We are worried about increased production which adds value ... so that's what you're going to see going forward," CFO Andrea Marques de Almeida said.
This year, Petrobras jumped from fifth place to become the third-largest listed oil producer, behind Rosneft and PetroChina, with oil output hitting around 2.2 million b/d in the third quarter, according to Norway-based consultants Rystad Energy.
Rystad estimates that Brazil's oil production could be pushed to average to over 5.5 million b/d, thanks to Petrobras' potential peak output of almost 3.8 million b/d by 2030.
KEY SUBSALT PROJECTS
The subsalt Buzios field, where Petrobras recently won the right to produce more oil, will play a key role in the company's upstream expansion, Pereira de Oliveira said.
Four FPSOs onstream at Buzios are producing about 600,000 b/d of oil, and the company plans to bring onstream a further seven FPSOs, the first of which is scheduled for 2024. As result, Buzios could be producing more than least 1.65 million b/d in 10 years.
The company's 1 million b/d Lula subsalt field, Brazil's biggest oil and natural gas producer, is expected to keep pumping at that level well into the next decade as new production wells are drilled, he said.
"We don't see that we're in a decline phase" at Lula, he said. "If we didn't add new wells, the field would decline by 2-3%/year from 2023/2024, but production will continue at current levels over the next five years as a result of new wells."
Around three-quarters of the oil production from the Lula field currently goes to China, Petrobras head of refining Anelise Lara said.
BRASKEM SALE DELAY
Castello Branco also said he wants to sell the company's stake in petrochemical company Braskem within 12 months, after recent reports that the sale plans have been delayed.
Brazilian construction conglomerate Odebrecht, which also has a large stake in Braskem, is in advanced talks to delay a sale for up to two years, according to a Reuters report this week.
"We'd like to sell within 12 months," Castello Branco said. "Someone who says they want to sell in 36 months, to me, it means they do not want to sell anything,"
In June, global petrochemical giant LyondellBasell ended talks to buy a majority stake in Brazilian petrochemical producer Braskem.
LyondellBasell announced in 2018 it was in talks to acquire Odebrecht's 38.3% share in Braskem in a deal that market participants said could reach a value of $11 billion.
