Petrobras says it is expanding oil and gas production in the pre-salt in “economically viable” manner
07 January 2015
Responding to press articles saying that the collapse of the global oil price is threatening oil and gas production in the off-shore Brazil pre-salt layer, Petrobras countered that it is expanding its production capacity “in an economically viable manner.” The company said that the break-even price (the minimum oil price at which production is economically viable) planned when its pre-salt production projects were approved was around US$45 per barrel, including taxes and not including natural gas transportation infrastructure spending. Inclusion of the latter spending may raise the total figure by US$5 to US$7 per barrel, Petrobras said.
On Tuesday, 6 January, the price for WTI crude closed at $47.93/bbl, while Brent crude closed at $51.10.
Furthermore, Petrobras said, the stated break-even price assumes a well flow of between 15,000 and 25,000 barrels per day (bpd). Petrobras is currently producing average flows of 20,000 bpd in the pre-salt layer. Some wells in the Santos Basin Pre-Salt Cluster have attained flows of more than 30,000 bpd, making projects more economical.
This high productivity has enabled the pilot production units of the FPSO Cidade de São Paulo (a ship-platform operating in Sapinhoá field) and FPSO Cidade de Paraty (deployed in Lula field) to reach their maximum production capacity of 120,000 bpd, using just four production wells connected to each one.
This calculation presumes that all the projects’ expenditure (investment, operating costs and taxes) is associated with the price level of inputs prevailing at the time the projects were approved. It is important to highlight, however, that the costs of goods and services suppliers have historically been correlated with oil prices in the international market. When there is a significant decline as in the current case of the oil price level, this is accompanied, not always immediately, by a fall in costs in relevant parts of the goods and services sector. The effect of this reduction partially offsets the loss of revenue caused by the drop in oil prices, Petrobras said.
Investment decisions in exploration and production projects—especially deep-water ones—are based on scenarios that incorporate a long-term view, not only of prices, but also all the other inputs and costs of projects.
Petrobras also said that the pre-salt’s enormous potential can be seen in the high productivity of wells in operation. On 16 December, for example, oil production in the fields operated by the company in the pre-salt province of the Santos and Campos basins reached a record of 700,000 bpd, using just 34 production wells connected to 12 different platforms—including eight producing exclusively in the pre-salt layer. This volume was reached just eight years after the first oil discovery in this province, in 2006, and only six months after the company broke through the 500,000 bpd mark, in July.
Petrobras said its pre-salt performance has been supported by the results obtained by its strategic Well Cost Reduction Program (PRC-Poço) and Subsea System Cost Reduction Program (PRC-Sub). These programs are part of initiatives that have incorporated continuous improvements to reduce well drilling times and costs, and the costs of submarine facilities for exploration and production projects, helping to further improve the economic competitiveness of pre-salt projects. One example of the enhanced productivity achieved since 2010 is the reduction of around 60% in well construction time in the Lula and Sapinhoá fields, both in the Santos Basin Pre-Salt Cluster.