Brazil’s federal oil company Petrobras reported net income of US$5.8bn in the second quarter, down 20.3% from the previous quarter and 35.9% from a year earlier.
The result mainly reflected a lower Brent price, a 40% decline in the diesel crack spread (i.e. the difference between derivatives and crude oil) and higher operating expenses, in particular US$400mn of impairment charges and US$100mn of tax charges.
Mahatma Santos, head of petroleum, gas and biofuels association Ineep, expects Petrobras to maintain revenue and profit levels – if the company can keep its fuel prices below the import parity price (PPI) and if other factors such as the international price of crude oil and the exchange rate work out.
“The scenario is one of uncertainty, given the context of strong geopolitical tensiondue to the war in Ukraine, which has direct impacts on the prices of natural gas, LPG [cooking gas] and other inputs for the industry,” Santos told BNamericas.
He said the drop in profits and hareholder dividends compared to the figures reported during the previous Jair Bolsonaro administration would cause dissatisfaction among financial market players.
“But they need to understand that Petrobras and Brazil are experiencing a different moment. The company is now aligned with a national development strategy, which focuses on both energy sovereignty and ensuring supply at fair prices in the domestic market,” Santos added.
Luan Alves, chief analyst at VG Research, said that there are still risks related to Petrobras’ new fuel pricing policy, which was adopted last May. “The company has a lag of around 20% [from the PPI] at the moment,” he said in a statement.
Flávio Conde, of Levante Investimentos, attributed the fall in Petrobras’ revenues and profit to the 10-20% lag between its fuel prices and the PPI during 2Q23, according to a statement.
Petrobras CEO Jean Paul Prates claimed the drop was due to Brent falling and increased investments. “One thing is certain: we’re nt losing money with this [pricing] policy. We know how to compensate, and the range in which we’re operating is safe for each of the products,” he told a press conference on Friday.
EXPLORATION AND PRODUCTION
Petrobras plans to drill wells in the Água Marinha, Norte de Brava and Sagitário blocks in 2024. The company is also studying a strategy to extend the useful life of the Tupi/Iracema fields.
It expects the drilling license for the Equatorial Margin by year-end to start work in the Foz do Amazonas and/or Potiguar basins.
“We’ll probably maintain [the plan to drill] 16 wells in the five [Equatorial Margin] basins in five years, with investment of around US$3bn, in line with the current business plan,” Petrobras’ E&P director Joelson Mendes told the press conference.
He added, “all areas in Latin America, such as Guyana and Suriname – and West Africa – are of interest to us. We’re paying attention to bidding rounds and talking to potential partners.”
FPSOs
The second Marlim evitalization FPSO, Anita Garibaldi, is planned to come online later this month, and the second Mero field unit, Sepetiba, by the end of the year.
Petrobras’ executive director of engineering, technology and innovation, Carlos Travasso, said that the company decided to work with non-mandatory local content in the contracting of the Barracuda and Caratinga FPSO to test market competitiveness.
“Although this unit doesn’t have mandatory local content, the investment in this production system, which includes subsea equipment, wells etc, is in the order of US$2bn,” he said.
Prates said local content should not be seen as a burden. “The percentage in Barracuda and Caratinga compromises absolutely nothing. It serves as an important test to start rebuilding this [nationalization] process that generates jobs in Brazil,” he told the press conference.
REFINING AND FUEL SALES
On Friday, Petrobras launched a tender for the construction of the second refining train of the Abreu e Lima (RNEST) efinery, in Pernambuco state.
The project will add about 13Ml/d of S10 diesel to domestic production capacity. At the same plant, Petrobras is conducting works on the emission abatement unit and the modernization of the plant’s first refining train.
The company’s commercialization director Cláudio Schlosser told theh conference that the fuel pricing strategy is helping in the competition with the growing volumes of Russian diesel that are entering Brazil. “The commercial strategy implemented in May allows Petrobras to adjust its prices economically, given this new customer alternative,” he said.
REGIONAL INTEGRATION
Prates emphasized that Petrobras is interested in Bolivia again, especially in gas production, including for geopolitical reasons. “We consider it interesting to evaluate areas in Bolivia as long as there are talks to improve the local fiscal and contractual environment,” he told investors.
Business in Argentina depends on the connection of the countries’ gas network. “The ideal is to reach a point where this whole set of reserves and consumers are connected in a ring, so that it can be reversed when there is winter on one side or the other,” Prates said.
ENERGY TRANSITION
Energy transition director Maurício Tolmasquim highlighted that the company is discussing potential onshore and offshore wind partnerships, as well as PV solar power.
It is also studying producing blue and green hydrogen for export and a green ammonia project with Unigel, which could be financed by development bank BNDES.
Petrobras is waiting for a carbon capture, utilization and storage regulatory framework to enter this market. “We’re going to deploy a pilot plant in Cabiúnas [Rio de Janeiro state]. If that works out and the regulatory framework comes out, the idea is to create a commercial hub there or in other regions,” Tolmasquim told reporters.
THERMAL POWER
Petrobras has launched a process to evaluate the commercial conditions for the construction of a 600MW thermelectric plant at the Gaslub hub, in Rio de Janeiro state. Construction depends on winning an energy auction electric power watchdog Aneel plans for 2024.
According to Tolmasquim, the project has competitive advantages because it is close to Gaslub’s new natural gas processing plant, scheduled to come online next year.
PETROCHEMICAL
CFO Sérgio Leite said the non-bidding proposals presented by Adnoc/Apollo, Unipar and J&F for the purchase of Novonor’s controlling stake in petrochemical unit Braskem expired. Petrobras has the preferential right to buy Novonor’s stake.
The company started an internal process to re-evaluated Braskem in case any of the proposals become binding. “We know that these groups are negotiating with banks and Novonor,” Leite said.
Petrobras also assumes to resume activities at itsits Araucária Nitrogenados fertilizer plant in Paraná within eight months and finish the UFN III plant in Mato Grosso do Sul, which is 80% complete, while joining forces with Unige to reopen the Sergipe and Bahia units.
“It’s a very important step because it represents Petrobras’ re-entry into fertilizer production, which is strategic for the company and the country,” Prates said.