Petrobras Ramps Up Production at Major Oilfield

Brazil’s state oil producer Petrobras is accelerating production from the world’s biggest deep-water field, helping the company raise dividends even as crude prices hover near a five-year low and the global market braces for glut.

Petroleo Brasileiro SA’s output from the Buzios field off the coast of Rio de Janeiro reached one million barrels a day last month after the sixth floating production vessel at the site reached its capacity three months ahead of schedule. The company reported it would pay $2.3 billion in dividends on Thursday, slightly above expectations and more than the previous quarter. 

The field, part of the pre-salt basin that 18 years ago made Brazil one of the world’s oil hottest oil regions, is now Petrobras’ last big growth engine. Its rapid development has allowed the nation to increase production more than any other non-OPEC country apart from the US in the past year and provided Petrobras with a crucial source of revenue as it hunts for the next big discovery. 

The flood of crude from Buzios comes as global oil futures have slipped 15 percent this year as OPEC and its allies have ramped up production, fueling concerns the market will soon be awash in crude. The chief executive officer of Mercuria, the commodities giant, said at a conference in Abu Dhabi Wednesday that an oversupply is likely to be as much as 2 million barrels a day next year.

The company’s record exports helped it increase its net income to $6 billion from the previous quarter despite low prices, it said in its earnings release on Thursday. 

At the Buzios field, the Almirante Tamandare floating production and storage vessel reached production of 225,000 barrels a day ahead of schedule in August, helping to bring exports to a record. Last week, it reached 270,000 barrels a day, beyond its expected peak output. 

Expectations for Buzios were sky-high from the start. Petrobras and its Chinese partners paid a record 68 billion reais ($13 billion) signing bonus for the field when it was offered in 2019. 

SBM Offshore NV operates the Almirante Tamandare and eight other floating production and storage facilities, or FPSOs, in Brazil. The offshore equipment provider is competing for a contract to build what will eventually be the 12th FPSO to be installed at Buzios, which could eventually take it to nearly 2 million barrels a day, more than the current production of any other country in Latin America.

“The biggest market is here in Brazil,” SBM Chief Executive Officer Øivind Tangen said in an interview. “Half of the prospects that we see in the foreseeable future are in Brazil.”

Buzios will continue to make Brazil one of the top sources of oil growth outside of OPEC, potentially helping extend the glut. Another vessel is on site and preparing to start production. The geology of the so-called pre-salt region has made Brazil Latin America’s leading oil supplier. Individual pre-salt wells have reached as much as 70,000 barrels a day.

“It’s a freak of nature,” Olivier Bahabanian, TotalEnergies SE’s general manager for Brazil, said during an oil conference in Rio last week.

An hour in a helicopter takes you from the coast of Rio state to Buzios, which looks like an industrial city floating in the Atlantic Ocean. The six production vessels on site host hundreds of engineers and technicians. Floating hotels are docked next to some of them. 

Unlike US shale fields, where producers can trim output when prices tank, the pre-salt is basically immune to market fluctuations. Each production vessel, known as an FPSO, costs about $4 billion and takes years to build. Operators like Petrobras strive to recover costs as fast as they can regardless of price. 

While Buzios is growing rapidly, the clock is ticking for Petrobras to find a new discovery. Buzios will begin to decline near the end of the decade, dragging down the company’s overall output unless it finds more oil.

“An oil company has no future without exploration,” Chief Executive Officer Magda Chambriard said at an oil conference in Rio de Janeiro last week. “Replacing our reserves is vital.”