Brazil postpones long-term oil production target

OREANDA-NEWS. October 15, 2015. Brazil has pushed back its long-term oil production target of 4.5mn b/d by at least three years.

Output will reach the target in 2025 at the earliest, instead of the original date of 2022, Magda Chambriard, director general of petroleum agency ANP, said today.

The less ambitious target aligns with state-controlled Petrobras? downward adjustment in its output goal, announced earlier this year, to 2.8mn b/d by 2020, down from a previous 4.2mn b/d objective. Petrobras accounts for more than 90pc of oil production in Brazil.

Total national oil production hit a record 2.547mn b/d in August, up by 3pc from July and by 9.5pc compared with August 2014.

In June, Petrobras reduced upstream spending to \\$108.6bn under its 2015-19 business plan, down from \\$153.9bn under the previous five-year plan covering 2014-18.

Early this month the company cut an additional \\$11bn in investment spending planned for this year and next. The cuts are expected to put additional pressure on the Petrobras' revised 2020 target. The company declined to comment.

Petrobras currently produces around 2.21mn b/d of oil in Brazil, of which around 859,000 b/d comes from extensive sub-salt fields in the Campos and Santos basins.

Sub-salt areas are the main driver of new production in Brazil, offsetting declines from mature fields in shallow parts of the Campos basin. But the oil price slump has raised doubts about the pace of costly sub-salt and deepwater developments.

A sparse turnout for Brazil?s 13th upstream licensing round last week foreshadowed today?s official postponement of the country?s long-term production target. Only 37 mainly onshore blocks, or 14pc of the 266 blocks on offer, were awarded during the round. Petrobras did not participate.

With lower projected domestic oil production and limited refining capacity, Brazil will continue to rely on fuel imports. Chambriard said gasoline and diesel imports will reach 400,000 b/d by 2025. Gasoline and diesel imports averaged 178,844 b/d in the first nine months of 2015, down from 230,864 b/d during the same period of 2014, according to data published by the ANP.

Domestic fuel demand has slowed in response to an economic recession, but is expected to rebound when the country returns to growth in 2017.

Financial strain at Petrobras, aggravated by a massive corruption scandal and a sinking Brazilian currency, has forced the company to scrap plans to add 1mn b/d of new refining capacity through 2019.

Petrobras now only plans to add 115,000 b/d of new capacity to the 115,000 b/d Abreu e Lima refinery, by 2020.