Oil strike continues to weigh on Petrobras

OREANDA-NEWS. November 19, 2015. An ongoing workers strike that started on 1 November continues to erode Brazil's state-controlled Petrobras' domestic oil production, with seven unions now rejecting the company's 12 November proposal for a 9.53pc pay raise.

Last week, the FUP, a federation of oil workers unions, said it had struck a deal with Petrobras for a pay increase and the establishment of a joint technical committee to analyze proposed changes to the company's 2015-19 business plan. The FUP suspended the strike on 13 November but left final approval of the deal to autonomous regional unions. Workers are mainly striking against Petrobras plans to shed non-core assets and streamline the company's business structure.

As of today, 10 unions have approved Petrobras' proposal, but seven have rejected the proposal mainly as a result of Petrobras' rejection of a proposal to pay full wages for the days of the strike. Petrobras says the proposal is its final offer.

The Sindipetro-NF union, which represents workers on the 51 offshore platforms in the Campos basin, is among the unions that remain on strike.

Petrobras says daily lost production as a result of the work action, the longest since a 32-day strike in 1995, has been around 100,000 bl since 9 November.

Contingency teams brought into operate key production units, such as those in the Campos basin's 254,000 b/d Roncador field have helped bring lost production down from 273,000 bl on 2 November to current levels.

Total lost oil production as a result of the strike is around 2.06mn bl, or 129,125 b/d since the strike started, according to Petrobras. The unions claim Petrobras is deliberately underestimating the losses resulting from the work action and lost output has been closer to 200,000 b/d. The Brazilian oil regulator ANP, which is responsible for keeping tabs on daily production, has declined to offer an estimate.

Petrobras says the strike has caused a 1.5mn m?/d (52mn ft?/d) reduction in natural gas output, around 3pc of the total available to the market.

The work action has also put a dent in Petrobras' downstream operations, though to what extent processing at the company's 13 domestic refineries has been impacted is unclear.

"Despite the effects on the production of oil and gas in Brazil, there is no impact on supply to the market," the company said today in a securities filing. "Throughout this period, Petrobras has taken the necessary measures to maintain its activities while preserving its facilities and the safety of their workers."

A slowdown in the production from the emblematic sub-salt fields in the Campos and Santos basins is largely to blame for lower output in October. Oil production from sub-salt deposits operated by Petrobras reached 809,900 b/d, a 2.3pc decrease compared with September but still up 33pc year-on-year.

Total sub-salt production including natural gas was 1.01mn b/d of oil equivalent (boe/d), a 2.3pc decrease compared with September.

The company's gas production in Brazil averaged 74.7mn m?/d in October, mostly unchanged compared with October and up 3.7pc year-on-year.

Petrobras' overall domestic production in October was 2.57mn boe/d, up 1.6pc compared with September but almost unchanged compared with October 2014.

Oil and natural gas production from abroad reached 194,000 boe/d in October, a 3.4pc increase compared with the 188,000 boe/d in September, largely the result of new production wells at the Rio Neuqu?n field in Argentina.

Oil production outside of Brazil averaged 99,000 b/d in October, a 2.8pc increase compared with September. Average gas production from abroad was 16.1mn m?/d, 4.1pc higher than September.

Petrobras domestic oil production averaged 2.12mn b/d in the first ten months of 2015, up almost 6pc compared with the 2mn b/d produced in the same period of 2014. The company says domestic oil output should grow to an average of 2.121mn b/d this year, a 4.5pc increase, plus or minus 1pc, over 2014.