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Petrobras Delays Production Cuts, Eyes Fuel Exports

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After unexpectedly strong fuel demand during the first quarter, Petrobras said Tuesday it would put off initial plans to cut production by 200,000 barrels per day and would also boost utilization rates at its refineries. The Brazilian state-controlled firm now plans to return production in April to a level of 2.26 million b/d, after originally saying Apr. 1 that output would be 2.07 million b/d for the month. The firm still anticipates cutting output by 200,000 b/d, but said Tuesday that likely won't happen until the second half of the year. Citing a dip in demand for oil and oil products, Petrobras said Apr. 1 that it would cut production, reduce refinery utilization to 60% from 79%, and cut wages and hours worked (OD Apr.2'20). “With the better-than-expected evolution of demand for our products, we opted for the gradual return to an average oil production level of 2.26 million b/d in April alongside an increase in the utilization factor of our refineries,” Petrobras said. “The negative effects of the global recession caused by the public health crisis did not substantially impact production and sales performance in [the first quarter]" (OD Apr.16'20). Petrobras management pointed to China as a top export destination as Brazil's domestic demand for fuel takes a hit from the coronavirus pandemic. "The gradual resumption of China, a strong trading partner, and the constant search for new markets for our products, bring the expectation that we will continue to perform well in our exports,” Petrobras noted. Petrobras refineries processed 1.76 million b/d in the first quarter of 2020, up 3% sequentially and 4% from a year earlier (OD Mar.23'20). The firm said production during the first quarter of bunker fuel, fuel oil, naphtha and LPG rose 16% from the previous quarter and 29% year-over-year, while jet fuel was down 5% sequentially. “The production of low-sulfur bunker and fuel oil continued to stand out, maintaining its appreciation in the international market,” Petrobras said, citing high demand for its IMO-compliant bunker fuel. “We started 2020 fully supplying the market, with the required quality, constantly capturing export opportunities, especially in the Asian market.” Combined oil and gas production during the first quarter fell 3.8% from the previous quarter to 2.91 million barrels of oil equivalent per day, 2.32 million b/d of which was oil, with the offshore pre-salt accounting for two-thirds of that figure. Year-over-year, first-quarter production was up 14.6%, with oil production from the pre-salt rising 48.9% and mostly offsetting declines from onshore, shallow-water and post-salt deepwater (OD Apr.8'20). Petrobras' output growth was due to primarily to the ramp-up of platforms that started production in 2018 and 2019 in the Buzios, Lula, Berbigao and Sururu pre-salt fields, the company said. Production from the P-70 platform in the Atapu field in the pre-salt Santos Basin is still expected to start in the first half of this year. P-70 will have a capacity of 150,000 b/d of oil and 6 million cubic meters per day of gas. On Mar. 16, the hull for the P-71 floating production storage and offloading vessel arrived in Brazil. On track for completion in 2022, P-71 will also have a capacity of 150,000 b/d of oil and 6 MMcm/d of gas. Pietro Pitts, Houston

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