Brazil’s biggest oil discovery, the offshore Libra area, will not enter production until 2020 and peak output will come at least four years later, the head of state-run oil company Petrobras said last Thursday. Chief Executive Maria das Graças Foster said in a television interview that heavy investment in Libra will begin in 2017 and 2018, leaving time for the debt-laden oil producer, officially known as Petróleo Brasileiro SA, to raise cash for investment from output elsewhere. That means it will be more than a decade before Brazil sees the bulk of the windfall from the massive deap sea oil find.
Government officials have touted some $400 billion in state revenue from the Libra field over 30 years, paying for education and health care needed to turn Brazil into a developed nation. President Dilma Rousseff stressed the public benefits on October 21 as a group led by Petrobras won rights to the Libra field in an auction with only one bid. Rousseff and her predecessor spent five years creating special legislation leading to the Libra auction, which expanded state control over Brazil’s most promising oil region.
« The government is selling this as a win, but it’s also a loss, » said Cleveland Jones, a geologist and member of the Brazilian Petroleum Institute at Rio de Janeiro-State University. « The change in the law that allowed this (auction) to happen put Brazilian oil development behind by five years and they could have gotten as much money, or more, for education and health under the old law. » Some protestors still objected to the role of foreign companies that ended up with 60 percent of the Libra consortium. France’s Total SA and Anglo-Dutch Royal Dutch Shell Plc each took 20 percent, while two Chinese partners, CNOOC Ltd and China National Petroleum Corp, each took 10 percent. Petrobras, which was required by law to take 30 percent, bid for an additional 10 percent, raising its stake in Libra to 40 percent.
« The first oil from Libra will be in 2020 – the first oil from production, » said Foster. « The peak of production is 2024, 2025. » Brazil could have started receiving revenue from Libra next year if it hadn’t waited so long to rewrite its law and auction off the new area, Jones said. Investment required of Petrobras in Libra is « quite small » for the next few years, according to Foster, easing pressure on the heavily indebted company, which is in the midst of a $237 billion five-year investment plan to boost exploration and production. Petrobras said it will have to review its plan to pay for Libra, which the government said will take more than $100 billion of investment to develop.
Libra has an estimated 8 billion to 12 billion barrels of recoverable oil, enough to supply all world needs for as much as 19 weeks, according to Brazil’s oil regulator, the ANP and oil reserve certification company DeGoyler and MacNaughton. Heavy capital spending, rising debt levels and slipping production led Moody’s Investors Service to downgrade Petrobras’ debt rating this month. A lower rating means investors are less sure a company can pay its debts. Foster said stagnant production at the oil company is over as production is set to grow significantly from the final months of this year.