Recently, we reported that Brazilian President Luiz Inacio Lula da Silva has been pressing the country’s environmental regulators to approve oil drilling near the mouth of the Amazon River, arguing that revenue from this new fossil fuel supply could help finance a transition to green energy. Located in the Equatorial Margin, the offshore site, Bloc 59, is about 160 kilometers (99 miles) off Brazil’s eastern coast. Brazil’s environmental regulator rejected a license in 2023, citing issues such as the risk of oil spills that could affect one of the world’s most biodiverse regions.  Petrobras (NYSE:PBR) estimates the potential reserves in the basin at 10 billion barrels.

Well, maybe the latest oil discovery by Brazil’s state-owned oil giant will persuade Lula to go easy on the world’s largest rainforest. Petrobras has discovered oil in the western region of the Búzios field in the pre-salt Santos Basin, with the new reservoirs within a new accumulation in a zone below the main reservoir.

A "pre-salt field" refers to an offshore oil and gas reservoir located beneath a thick layer of salt deposits, formed during a geological period before the salt formation, typically found off the coast of Brazil and characterized by large reserves of high-quality oil trapped under the protective barrier of the salt layer. Essentially, a pre-salt field it's a geological formation where oil was deposited before the salt layer formed, creating a reservoir protected from escaping to the surface. Located 189 kilometers off the coast of Rio de Janeiro, Petrobras drilled 9-BUZ-99D-RJS well at a water depth of 1,940 meters, with oil presence confirmed at a depth of 5,600 meters through electrical profiles. Petrobras is the main operator of the Búzios field with a 88.98% stake, while China’s CNOOC (OTCPK:CEOHF) and CNPC own 7.34% and 3.67% share, respectively. Pré-Sal Petróleo S.A. (PPSA) is the manager of the field.

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Búzios is a giant oil field in Brazil estimated to have recoverable oil reserves of about 11.3 billion barrels of oil equivalent (boe). While the companies are yet to determine the volume of recoverable fossil fuel reserves in the new formation,  the discovery reaffirms the pre-salt potential of the Búzios field. Last March, Petrobras hit the 1 billion barrels milestone of oil produced in Búzios since the start of operations in 2018. According to Petrobras, the new production systems to be installed over the next few years will boost the field's capacity to around 2 million barrels of oil per day by 2030.

Petrobras’ Output Declines

Two weeks ago, Petrobras reported that its Q4 total oil and gas production declined 10.5% to 2.63M boe/day from the year-earlier quarter, while export volumes and revenue also fell thanks to a higher number of maintenance shutdowns in the field. The company’s fourth-quarter sales of oil, gas and derivatives fell 8% Y/Y to 2.83M bbl/day while exports tumbled nearly 22% to 692K bbl/day. Petrobras’ production of oil and natural gas liquids in Brazil fell 11.5% in the period to 2.09M bbl/day while natural gas output dropped 6.1% to 507K boe/day. Petrobras reported that~30% of its oil exports went to China in the quarter, compared to 44% in the same period in 2023, while Europe received 38% of its total oil exports, up from 28% a year earlier.

Last year, Petrobras lowered its capital expenditure (capex) estimate for 2025 to $17 billion from an earlier estimate of $21 billion. According to the company, the lower capex is more realistic and in-line with its financial wherewithal. In its latest strategic plan, Petrobras plans to invest $102 billion in the 2024-2028 period, good for a 31% increase over the previous plan amid pressure from Lula for the firm to ramp up investments in a bid to prop up the country's economy and generate local jobs.

At a time when Petrobras has seen its output fall, global research and consultancy group Wood Mackenzie has predicted that Brazil’s private oil companies will increase oil production by 75% from 1.221Mb/d to 2.123Mb/d by 2030. According to WoodMac, international oil companies such as Shell Plc (NYSE:SHEL), Equinor ASA, (NYSE:EQNR), TotalEnergies SE (NYSE:TTE), Repsol Sinopec Brasil S.A. and Petrogal will be among the top producers thanks to their partnership with Petrobras in the pre-salt and fields under development.

By Alex Kimani for Oilprice.com

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