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Investments of $102 billion on Petrobras’ five-year agenda: Oil & gas getting the lion’s share while $11.5 billion goes to low-carbon projects

Home ↗ Fossil Energy ↗ Investments of $102 billion on Petrobras’ five-year agenda: Oil & gas getting the lion’s share while $11.5 billion goes to low-carbon projects

Brazil’s state-owned oil and gas giant Petrobras has unveiled its new strategic plan for the 2024-2028 period, outlining that oil and natural gas will be given the biggest slice of the Brazilian player’s $102 billion investment pie, seeing them as drivers of growth which will propel and fund the energy transition to greener sources of supply. In line with its net zero goals, the company plans to dish out $11.5 billion on projects that will enable a reduction in its carbon footprint, spotlighting the role of biorefining, wind, solar, carbon capture, utilization and storage (CCUS), and hydrogen in this decarbonization quest.

FPSO Almirante Barroso operating on the Búzios field in the pre-salt layer of the Santos Basin; Source: Petrobras News Agency

Petrobras’ board of directors approved the firm’s strategic plan for the 2024-2028 five-year period on November 23, 2023. This strategic plan aims to strengthen and prepare the company for the future by initiating a process of integrating energy sources, which the Brazilian giant perceives to be essential for “a fair and responsible energy transition.” To this end, the new plan will be implemented with “total attention to people, safety and respect for the environment, perpetuating value for future generations, with a focus on capital discipline and a commitment to keeping the company’s indebtedness under control,” according to Petrobras.

Source: Petrobras

The firm’s CAPEX forecast for the 2024-2028 period totals $102 billion, 31% higher than the previous plan, with $91 billion corresponding to projects under implementation and $11 billion composed of projects under assessment, which are subject to additional financial feasibility studies before contracting and execution begin. This increase in CAPEX is mainly associated with new projects, including potential acquisitions; assets that were in divestment and returned to the company’s investment portfolio; and cost inflation, which impacted the entire supply chain.

Furthermore, the CAPEX amount in the Exploration and Production (E&P) segment represents 72% of the total, followed by Refining, Transportation and Marketing (RTM) with 16%, Gas and Low Carbon Energies with 9%, and Corporate with 3%.

“Oil and natural gas commodities will continue to be the main drivers of value, with economic and environmental resilience, financing the just transition. Profitable low-carbon investments will gain relevance for long-term value generation. Governance will be respected in all decision-making processes and project evaluations, guaranteeing sustainability and profitability, with more transparency,” underlined Petrobras.

Based on the Brazilian player’s E&P CAPEX for the 2024-2028 period of $73 billion, around 67% will be allocated to the pre-salt. Petrobras claims that pre-salt has “a major economic and environmental competitive advantage,” with the production of “better quality” oil and lower emissions of greenhouse gases. In terms of exploration, $7.5 billion is planned for the five-year period, covering $3.1 billion for exploration in the Equatorial Margin; $3.1 billion for exploration in the Southeast Basins; and $1.3 billion for other countries. This investment encompasses the drilling of around 50 wells in areas where the company has exploration rights in acquired blocks.

“The E&P segment remains relevant to the company, with a strategic focus on profitable assets and investments compatible with a long-term vision aligned with the energy transition. At the same time, the company maintains significant deepwater revitalization projects (REVIT), as well as complementary projects, in order to increase recovery factors in mature fields,” pointed out Petrobras.

The Brazilian giant is adamant that the E&P segment maintains the premise of double resilience both economic and environmental, and high economic value, with a portfolio that is viable in scenarios of low oil prices in the long term, including Brent with a prospective average break-even of $25 per barrel, and with a carbon intensity commitment of up to 15 KgCO2e per barrel of oil equivalent by 2030.

14 new FPSOs on the five-year horizon

With Petrobras’ strategic focus at the forefront, exploration and production activities are expected to be concentrated on profitable assets, thus, pre-salt production will represent 79% of the company’s total at the end of the five-year period. As a new generation of platforms is being built, more modern, more technological, more efficient, and with lower emissions, the Brazilian player’s production curve considers the entry of 14 new FPSOs in the 2024-2028 period, ten of which have already been contracted. Thanks to this plan, the firm aims to produce 3.2 million barrels of oil and gas equivalent per day in five years.

In accordance with this, the projections for oil production, total production, and commercial production of oil and natural gas for 2024 have been increased by approximately 100,000 bpd/boed compared to the previous plan, considering the performance of the fields, the forecasts for ramp-ups and the entry of new wells. During 2025 and 2026, oil production, total production, and commercial production of oil and natural gas are anticipated to be around 100,000 bpd/boed, lower than projected in the previous plan.

Source: Petrobras

The company elaborates that this deviation is mainly due to current market conditions arising from the global context, where some production systems and complementary deepwater projects have had their schedules impacted. However, the fluctuations are part of the dynamics of the industry and are within the range of uncertainty disclosed in the last plan. Come 2027, the projections for oil production and total and commercial production of oil and natural gas are maintained in relation to the previous plan.

Moreover, the Gas & Energy (G&E) segment’s CAPEX totals $3 billion for the five-year period and Petrobras emphasizes that progress is being made not only in competitive and integrated operations within the gas and energy trade but also in improving the portfolio, working towards the inclusion of renewable sources aligned with decarbonization actions. One of the Brazilian player’s priorities in this segment is to expand the infrastructure and portfolio of natural gas offers.

Source: Petrobras

Considering the investments in gas production and disposal in the E&P segment, the firm plans to boost domestic gas supply by investing around $7 billion over the next five years. To this end, Route 3 will come into operation in 2024 with a processing plant with a capacity of 21 MMm³/day and a pipeline with a capacity of 18 MMm³/day. Four years later, the Raia project gas pipeline (BM-C-33) will come into operation, with a capacity of 16 MMm³/day; while the Sergipe Águas Profundas – SEAP project gas pipeline will be online in 2029, with a capacity of 18 million m³/day.

The hydrocarbon exploration and production steps Petrobras is taking are in line with the Brazilian Ministry of Mines and Energy (MME)’s program – unveiled in March 2023 ↗ – to boost investments in oil and natural gas exploration in a bid to promote regional development and foster national production while turning Brazil into the fourth largest oil producer in the world.

Multi-billion spending for low-carbon future

As Petrobras’ priorities entail several elements, including reducing its carbon footprint, protecting the environment, caring for people, and acting with integrity, the firm reaffirms its ambition of “zero fatalities and zero leakages, in line with its commitment to life and the environment, which are non-negotiable values.”

To bring its energy transition vision to life, the firm will allocate up to $11.5 billion to low-carbon projects over the next five years, considering transversal investments in the various business segments. This covers initiatives and projects to decarbonize operations, alongside the maturing and development of businesses in the low-carbon energy segment, with emphasis on biorefining, wind, solar, CCUS, and hydrogen.

Source: Petrobras

As a result, low-carbon investment represents 11% of Petrobras’ total investment in the 2024-2028 average, indicating progress in the company’s current position in relation to its market peers. The forecast indicates that low-carbon investment will gradually gain ground in the firm’s portfolio over the period, reaching 16% by 2028.

Petrobras says that investments should be financed primarily by operating cash flow, at levels equivalent to those of its peers, preferably through partnerships that allow for the sharing of risks and expertise, and seeking a return on investment, a reduction in the cost of capital, and the strengthening of the firm as an integrated energy company.

“Accompanying the great transformations in the world, especially in the energy, digital, social and environmental segments, Petrobras is going through a phase of changes and new perspectives, aiming to prepare for the energy transition and for a fair, inclusive low-carbon economy, with changes in energy use patterns, assessing and minimizing social impacts for all parties: its employees, communities and the entire supply chain,” underlined the Brazilian giant.

Source: Petrobras
Kaylie Pferten
Kaylie Pferten
A pilot of submersible crafts in a former life, now married to my husband David and writing about investment advice.

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