Petrobras plans to sell nine shallow-water oil fields

Jul 05, 2016 12:00 AM

Brazil's state-owned oil company said July 4 that it plans to sell nine shallow-water oil fields that produce a total of 13,000 barrels of oil per day (bbl/d), and equivalent natural gas per day, from multiple wells.

Furthermore, the sale of the fields, among Brazil's oldest, will not significantly cut the debt of Petrobras, the sources said. Petrobras' $126 billion of debt is the largest in the world's oil industry.

Not only do the fields produce very little oil or natural gas compared to other Petrobras assets, the sources said, their age will require substantial investment to maintain commercially viable output, a situation made more difficult by oil prices that are near decade lows.

Additionally, the aging wells come with large future costs for safe closure under environmental and other laws.

"The fields are junk," one of the sources said. "Unless Petrobras shoulders the labor-related costs of selling the fields and laying off workers and some of the shut-in costs that will come sooner rather than later, the fields offer little upside even though almost anybody can run them cheaper than Petrobras."

The sources, who asked for anonymity because their dealings with Petrobras are confidential, have either direct knowledge of the fields up for sale or were briefed on the proposed sale on July 5 by Petrobras CEO Pedro Parente.

Petrobras announced the sale hours after Parente met with Sergipe officials to explain the company's cutbacks at low-output onshore fields in the state.

He also addressed repeated delays in developing giant offshore discoveries it owns with India's Oil and Natural Gas Corp. and IBV Brasil Ltda., a 50:50 joint venture between Bharat Petroleum Corp. and Videocon Industries Ltd., a source at the briefing said.

Earlier on July 5, Reuters reported that Petrobras told IBV in April that oil output at the Sergipe offshore areas would be delayed until 2022, four year later than promised. The Indian partners have invested $2.1 billion in the giant deepwater fields near the state.

The prospects owned by Petrobras and the Indian companies dwarf the rapidly declining Sergipe onshore and shallow-water fields, and are among the world's largest discoveries in decades. Sergipe gets about one-quarter of its industrial output from Petrobras.

"We're stuck," one of the sources said. "Petrobras is cutting crucial investment and thousands of jobs in Sergipe and can't or won't invest in new discoveries that could transform people's lives here. The shallow-water sales, even if they happen, won't help much."

Parente has promised to sell or slash investment and sell assets in underproducing areas to focus the company's limited cash on the subsalt region near Rio de Janeiro. Some single wells in the subsalt produce 40 Mbbl/d, among the highest levels ever seen in offshore development.

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