Petrobras poised to revive field that made Brazil an oil giant
(WO) - Brazil’s state-controlled oil company is nearing a deal with government regulators allowing it to move forward with plans to redevelop a massive deepwater field that could reinvigorate the nation’s stalled output.
Petroleo Brasileiro SA expects to resolve a long-running tax dispute with the Brazilian National Agency of Petroleum, Natural Gas and Biofuels by the end of 2024, the company’s head of exploration and production Sylvia dos Anjos said in an interview.
A deal with the agency, known as the ANP, would allow Petrobras to go ahead with a plan to drill new wells and carry out new seismic research at the Tupi oil field in the Atlantic off Brazil’s southeast coast, she said. The company is also considering adding another floating production vessel to Tupi, according to the firm’s executive manager for ultra-deep waters, Cesar Cunha de Souza. These production vessels can cost as much as $4 billion and take years to build.
“We expect to resolve this liability later this year,” Anjos said.
Tupi oil field production
It’s hard to overstate the importance of Tupi for Petrobras and Brazil. It made the country one of the world’s top 10 oil producers in the 2010s and has delivered hundreds of billions of dollars in taxes. The field motivated other oil majors to spend billions exploring the so-called pre-salt region in a campaign that continues today. In 2023, Tupi surpassed oil production from countries including Colombia, Venezuela, the United Kingdom and Argentina.
Petrobras is looking to arrest the natural decline at Tupi. Oil producing countries everywhere face similar challenges that can cause economic trauma. Mexico’s oil output went into free fall after the giant offshore Cantarell field peaked in the 2000s, removing a key source of government revenue.
“We’re going to carry out a process to get much more out of Tupi,” Anjos said. “It’s a giant field.”
The start date for the additional production unit at Tupi should be defined in the next strategic plan, according to Souza. Petrobras plans an infill drilling campaign to improve extraction rates from a field that has gone through more than a decade of production, he added.
Tax dispute
Petrobras needs to resolve a tax battle with the ANP before it can extend the operating contract at Tupi for another 27 years, or into 2064, a necessary step to justify all the investments in the new development plan that Petrobras is drafting for the field.
In Brazil tax rates are higher for larger fields, and Petrobras contends that Tupi is actually two separate deposits — Tupi and Cernambi — while the ANP argues that it is a single field. Petrobras has started arbitration proceedings, and both parties are now willing to negotiate a deal.
Petrobras and its partners at Tupi have a total 14 billion reais ($2.6 billion) in legal deposits for allegedly unpaid taxes, as a result of the dispute with the oil regulator, according to ANP data. The consortium has disputed the amount and is negotiating to reduce it.
Anjos said Petrobras agreed to stop the arbitration but is waiting for Shell Plc and Galp Energia SGPS SA, who have 25% and 10% stakes respectively, to approve the move. Both companies declined to comment.
Located in the ultra-deep waters of the Santos basin, Tupi was Brazil’s first oil field to come into production in the so-called pre-salt offshore area — named after the thick layers of salt above the crude. Petroleo Brasileiro SA, as the company is formally known, discovered a group of elephant fields in ultra-deep waters that currently represent around 80% of Brazil’s crude production.
Tupi alone has produced an average 764,000 bopd in the first eight months of 2024, still surpassing Buzios, another field where Petrobras is expanding production. Daily crude output returned to last year’s level in August, reaching 830,000 bpd, following the end of a planned maintenance on a platform.
