Petrobras Faces Resistance to Divest From Mature Fields

The Brazilian State Oil Company Petrobras Strives to Sell More Than 100 Onshore and Offshore Fields, Which Has Hindered the Open Acreage Program Initiated by the Country’s National Petroleum Agency Last Year, According to ANP’s General Director, Decio Oddone.

“The main issue affecting the speed of the Open Acreage program is the divestment program of Petrobras“, Oddone said on the sidelines of an industry event on Tuesday. “So, the first step to make the Open Acreage program more attractive is for Petrobras to complete the sale of these mature fields.”

The ANP First Proposed the Open Acreage Program in 2017 as a Way to Increase Oil Companies’ Access to the Area, Allowing Them to Bid on Areas of Interest at Their Discretion, Rather Than Having to Wait for Inclusion in Future Bidding Rounds. The Open Area Program is Also the Only Way Brazil Sells Access to Onshore Areas, with the Sale of Onshore Concession Blocks Removed from Future Bidding Rounds That Will Focus Solely on Offshore Blocks.

The Program Also Aimed to Help Create a Niche for Small and Medium Oil Companies Focused on Revitalizing Mature Fields, a Segment of the Industry That Is Lacking in Brazil Compared to the Thousands of Small Active Participants in the U.S. and Canada. Brazil’s Oilfield Has Generally Attracted the Largest Players in the Industry, Who Have the Expertise Necessary to Explore Complicated Ultra-Deepwater Reservoirs, Containing Billions of Barrels of Crude Oil and Natural Gas in the Country’s Pre-Salt Zone.

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The ANP Wants to Change the Current Situation as a Way to Boost Production and Increase Recovery Rates in Brazil, Especially in Segments Largely Abandoned Due to the Focus on Deep Water.

Brazil’s Onshore Reserves, Which Dominated the Country’s Production Profile Until the Early 1970s, Have Been Largely Ignored Since Heavy Oil Fields Were Discovered in the Campos Basin. Onshore Production Peaked at About 210,000 b/d in the Early 2000s, Falling to About 130,000 b/d by the End of 2017 Amid Petrobras’ Focus on the Pre-Salt Region.

Many of the Mature Onshore and Offshore Fields Still in Production in Brazil Are Owned by Petrobras and Comprise the Company’s Current Divestment Project Portfolio in the Auction Under a US$ 26.9 Billion Divestment Program for 2019-2023. However, the Company Has Struggled to Complete Deals Due to Legal Challenges Brought by Oil Sector Workers and Labor Unions, Filing Lawsuits That Block Sales.

The New Administration of President Jair Bolsonaro, Which Supports the Asset Sale Program of Petrobras, Is Expected to Improve the Business Environment in Brazil and Create Conditions That Help Petrobras Move Forward with Its Plans.

The ANP Also Wants to Expand the Open Acreage Program to Include Blocks in the Pre-Salt Polygon, a Geographical Area the Size of New York State That Requires Production Sharing Contracts for Exploration and Production. The Blocks Would Still Be Sold Under Production Sharing Contracts, with Petrobras Retaining Its Preferential Right to Hold at Least a 30% Operating Interest in Any Block in Which It Has a Stake.

Last Year, Brazil’s National Energy Policy Council Added Nine Blocks in the Campos Basin to the Open Acreage Program and Said It Would Evaluate the Inclusion of 12 More Blocks. The Blocks Are on the Edge of the Pre-Salt Polygon and Do Not Require Production Sharing Contracts. Given the Intense Competition for Similar Blocks in Recent Bidding Rounds, Including the Blocks Is Expected to Further Increase Interest in the Open Acreage Program, According to Government Representatives.

So Far, 28 Companies Have Been Approved to Participate in the Open Acreage Program. Spain’s Repsol Is the Largest to Register for the Sale, with Repsol, Germany’s DEA Deutsche Erdoel, Karoon Gas Australia, Murphy Oil, and Wintershall Being the Only Companies Qualified to Operate Abroad.

The First Phase of the Open Acreage Program Includes 158 Blocks, According to the ANP. The 158 Blocks Have Received Preliminary Environmental Viability Studies and Will Be Eligible to Receive Proposals, the ANP Reported. The ANP Is Currently Working with Brazil’s Federal Environmental Regulatory Agency, IBAMA, to Issue Preliminary Environmental Licenses to Include Additional Blocks in the Program, Oddone Said.