Petrobras May Boost Production Targets as Campos Output Rises

Petroleo Brasileiro SA, Brazil’s state-controlled oil company, may boost crude production targets next year as it seeks to increase output at offshore fields.

Petrobras, as the Rio de Janeiro-based company is known, could “certainly” set a target higher than the 2.05 million barrels a day it aims to pump in Brazil this year as platforms in the Campos basin could add more than 200,000 barrels a day of output, Chief Financial Officer Almir Barbassa said Nov. 13. A new target will likely be set at the end of this year, he said.

Petrobras boosted production to a monthly record of 2.004 million barrels a day in September, helping compensate for a 41 percent drop in crude prices during the third quarter compared with a year earlier. The company earns $500 million more a year for each $1 rise in a barrel of oil and is spending $174.4 billion through 2013 to boost output more than half and develop the Tupi field, the Americas’ largest oil discovery in 30 years.

“They don’t have to worry about finding the oil, they’ve already got it,” Roger Tissot, an energy consultant with Gas Energy Latin America in Vernon, British Columbia, said in a telephone interview Nov. 13 “It’s an issue of project management and if they have the man power.”

The company is seeking to increase production at the P-51, P-53 and FPSO-Cidade de Niteroi platforms, located in the Campos basin, which produced on average 216,000 barrels a day in the quarter and are capable of producing 460,000 barrels a day.

200,000 Barrels a Day

“Output in three of our platforms already installed can grow by more than 200,000 barrels a day,” Barbassa said at a press conference. “Other platforms will come during next year.” Output in 2009 will be at the lower end of the target of 2.05 million barrels a day plus or minus 2.5 percent, he said.

Chief Executive Jose Sergio Gabrielli said in an Aug. 3 interview that meeting the domestic production target would be a “hard task” after recording average output in the first six months of 1.958 million barrels a day. Credit Suisse said on July 20 that meeting the goal was “virtually unachievable.”

Petrobras said Nov. 13 third-quarter profit fell to 7.3 billion reais, or 83 centavos a share, from 9.84 billion reais, or 1.12 reais, in the year-earlier period. The company was expected to earn 7.25 billion reais, according to the average estimate of six analysts in a Bloomberg Survey. Sales for the period declined 20 percent to 47.9 billion reais.

The company aims to increase total output to 3.7 million barrels a day by 2013, or 52 percent more than the 2.4 million barrels at the end of 2008. By 2020, the company expects to have more than doubled oil production to 5.7 million barrels a day.

Collapse in Crude

“The weaker earnings are a result of this year’s collapse in crude oil prices and is consistent with the earnings hit other producers took in the third quarter,” Gianna Bern, president of energy consultancy Brookshire Advisory & Research Inc. in Flossmoor, Illinois, wrote in e-mailed comments Nov. 13. “Long term, Petrobras is still going to be a good story.”

Petrobras, the world’s seventh-largest company with a market value of about $206.3 billion, has climbed 63 percent this year in Sao Paulo trading compared with a 74 percent gain in the benchmark Bovespa index. The shares rose 28 centavos, or 0.8 percent, to 37.13 reais Nov. 13 in Sao Paulo trading.

Exxon Mobil Corp. reported third-quarter profit fell 68 percent to $4.73 billion, while Royal Dutch Shell Plc said net income for the period fell 62 percent to $3.25 billion.

Crude Drops

Crude for December delivery fell 59 cents to $76.35 a barrel Nov. 13 on the New York Mercantile Exchange, the lowest since Oct. 14. Futures averaged $68.88 in the third quarter, or 41 percent less than the $117.49 average a year earlier. Prices in July last year touched a record $147.27 a barrel.

Petrobras said it sold oil at $64 per barrel on average in Brazil during the quarter, down from $100.60 a year earlier. Its average export price fell to $57.20 per barrel from $68.70.

The company said Nov. 12 it finished drilling its fourth well at the offshore Tupi field and said the results reinforce previous estimates of 5 billion to 8 billion barrels of recoverable oil and equivalents at the site. That would make the field the biggest find since Mexico’s Cantarell in 1976.

Petrobras reported a financial gain of 707 million reais in the quarter, compared with a year-earlier gain of 2.6 billion. Oil and gas output in Brazil and abroad rose to 2.53 million barrels a day in the three months through September, up from 2.44 million a year earlier, according to the company.

Tupi lies in the so-called pre-salt area that runs 800 kilometers (500 miles) off Brazil’s coast, holding oil deposits beneath a layer of salt resting as deep as 3,000 meters (9,843 feet) beneath the ocean surface and another 5,000 meters below the seabed.

Regulatory Changes

Proposed regulatory changes by Brazil would make Petrobras the sole operator of all the offshore pre-salt oil fields still to be exploited and give the company a minimum 30 percent stake in joint ventures that will be set up to bid for licenses. The government is also selling Petrobras the right to produce 5 billion barrels of oil in offshore areas. Petrobras will issue new shares to pay for the rights.

The proposed share sale will help the company maintain its investment grade, Barbassa said Nov. 13.