Douglas Westwood: Petrobras will miss 2020 production target

Petrobras has a track record of remarkable technological achievements, including most recently exceeding 470,000b/d production in the pre-salt layer of the Santos and Campos basins offshore Brazil, Douglas-Westwood says in its DW Monday report.

However, DW further writes, the world leader in the deepwater production race remains beset with problems ranging from corruption to vast debt. It’s huge potential remains constrained by Brazilian politics and it has consistently missed its overall self-set production targets over the last decade. In 2013, it seemed the NOC had finally accepted reality as it announced an output target similar to that of 2012 levels (2mb/d). However, its long-term forecast estimates oil production to reach 4.2mb/d by 2020, with much of the increase occurring in the latter part of the decade.

Douglas-Westwood (DW) expect this to be missed by some 800,000 barrels a day. Petrobras have suffered with persistent funding problems, along with project sanctioning and execution issues which have served to delay the arrival of much-needed production from new fields. Historic estimates of Capex requirements have proved unrealistic and Petrobras has struggled with a double whammy of general industry cost inflation coupled with specific cost increases incurred as a result of local content requirements.

A challenge for Petrobras is the sheer number of major floating production projects required to meets its lofty 4.2 million b/d 2020 target and ensuring that these are executed on time. In this respect, the industry track record is poor. DW predicts that given the NOC’s current situation oil output will reach 3.4mb/d by the end of the decade. The difference between Petrobras’ and DW’s production forecasts in terms of oil-targeted offshore wells required is significant. Over the 2018-20 period the Petrobras 2020 target would require 78 more producing wells. To stand a chance of bridging this gap, Petrobras must increase recovery in existing projects, it must find ways of delivering projects successfully, and it must do all of this whilst satisfying the considerable constraints imposed by the government of the day. “Will Brazil ever uncage its energy tiger?”, DW asks at the end of the report.