Petrobras lifts April crude output target to 2.26 million b/d

Rio de Janeiro — Brazilian state-led oil company Petrobras increased its April domestic crude oil production target to 2.26 million b/d amid better-than-expected demand for products despite social-distancing measures imposed to prevent the spread of the coronavirus pandemic in Latin America's biggest country.

"With the evolution of demand for our products proving to be better than expected, we opted for a gradual return to an average oil production level of 2.26 million b/d in April accompanied by an increase in the refinery utilization capacity factor," Petrobras said after markets closed late Monday.

Petrobras had previously expected to produce about 2.07 million b/d in April after slashing output by 200,000 b/d in the wake of a dramatic decline in crude oil and refined-product demand caused by the coronavirus pandemic.

Petrobras maintained its 2020 production target at 2.7 million b/d.

The brighter second-quarter outlook came as Brazil starts to emerge from a broad shutdown implemented in March to slow the spread of the virus. The death toll and numbers of confirmed COVID-19 infections, however, continued to climb despite efforts by the administration of President Jair Bolsonaro, who has downplayed the pandemic, to restart Latin America's largest economy.

While the coronavirus pandemic was already wreaking havoc with global markets in the first quarter, Petrobras said the impact on output was limited.

Petrobras pumped 2.909 million b/d of oil equivalent in the first quarter, an increase of 16% from the same period of 2019, the company said. Production was down 2.8% from the record 3.025 million b/d registered in the fourth-quarter 2019.

Domestic oil production advanced 17.7% year on year in the first quarter to 2.320 million b/d. Domestic oil output was down 3.1% from a record 2.394 million b/d in the fourth quarter.

Output had been projected to remain stable year on year in 2020 amid Petrobras's plan to conduct a wide-ranging maintenance program at subsalt fields.

The maintenance program was expected to shutter each floating production, storage and offloading vessel, or FPSO, installed in the subsalt for 15-20 days.

The pandemic, however, has forced Petrobras to delay the program until the second half of 2020 because of safety measures that reduced onboard staffing levels.

Petrobras produced 2.77 million b/d in 2019, with output surging in the second half of the year as production was ramped up at FPSOs installed at subsalt fields over the past two years.

Subsalt production was the lone segment to show growth in the first quarter, primarily because Petrobras continues to benefit from the installation of eight new FPSOs at subsalt fields since early 2018.

Each FPSO had installed capacity to pump 150,000 b/d and process up to 6 million cu m/d, according to Petrobras. Petrobras is currently ramping up output from the last FPSO installed, which was the FPSO P-68 at the Berbigao Field in November.

Petrobras pumped 1.543 million b/d from subsalt fields in the first quarter, up 49% year on year. First-quarter output also topped the 1.533 million b/d pumped in the fourth quarter, Petrobras said. Record output from the Buzios Field fueled the growth, with the field pumping 640,000 b/d and 790,000 boe/d on March 10, the company said.

"In the first quarter of 2020, production at subsalt fields maintained the same level as the previous quarter, with the entrance of new wells compensating for the larger number of maintenance shutdowns at the Lula and Buzios fields," Petrobras said.

The Atapu Field will be the company's primary candidate for production growth in 2020, with anchor operations for the FPSO P-70 completed during the first quarter, Petrobras said. First oil was expected in the second quarter.

Fading plays

While subsalt development continued to drive production gains in the first quarter, onshore and other offshore plays maintained the downward trajectory seen in recent years.

The downturn in onshore, shallow water and deep-water production followed Petrobras' strategic shift to focus on the larger subsalt plays.

Many of the legacy fields are up for sale under the company's $20 billion-$30 billion divestment program for 2020-2024 or have been shuttered in the wake of declining oil prices.

Deepwater and ultra-deepwater production from fields above the subsalt layer slid 15% year on year to 620,000 b/d in the first quarter. The fall was attributed to the sale of a 50% stake in the Tartaruga Verde Field to Malaysia's Petronas last year. Output was also down 8.8% from 680,000 b/d in the fourth quarter, Petrobras said.

Onshore output, meanwhile, slipped 12% year on year in the first quarter to 114,000 b/d, Petrobras said. Shallow-water production tumbled 43% year on year to 43,000 b/d in the first quarter.