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Brazil Q3 domestic oil output down 9.3% on FPSO overhauls: Petrobras

Rio de Janeiro — Brazilian state-controlled oil producer and refiner Petrobras posted a 9.3% year-on-year slide in domestic crude oil output in the third quarter as overhauls of floating production platforms and sharp declines at mature fields offset fresh output from new subsalt wells, the company said Tuesday.

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Petrobras produced an average of 1.937 million b/d in Q3, down from 2.134 million b/d a year earlier and also down 6.2% from Q2, the company said in a results statement.

The country's top oil and gas producer continued to shutter floating production, storage and offloading vessels, pumping crude from subsalt fields for maintenance during the quarter, a trend that the company started in 2016 to maintain high productivity. Subsalt wells can produce up to 40,000 b/d on average, but the extreme environments require overhauls to ensure performance. Much of the work was centered on the oldest subsalt FPSOs at the Lula Field, which was the first major subsalt field in the Santos Basin to start production in 2010.

Petrobras shuttered the FPSO P-58 at the Jubarte Field and the FPSO P-52 at the Roncador Field in September, while August featured the closure of the FPSOs Cidade de Angra dos Reis and Cidade de Marica at the Lula Field, according to Petrobras. The Mexilhao platform, which handles output from the Mexilhao Field and also serves as a natural-gas export hub, was shuttered for 45 days to connect a new pipeline during the quarter.

The focus on the subsalt also accelerated declines in the mature Campos Basin, with Petrobras opting to put many aging fields into its asset-sales program rather make additional investment. Petrobras shifted its focus to the subsalt in 2014 to maximize returns after the company struggled through the collapse in oil prices and a corruption scandal.

Production in the Campos Basin fell to 910,740 b/d in September, its lowest since February 2000. Output from the Campos Basin, which produces mainly heavy oil from reservoirs above the more-productive subsalt layer, peaked at 1.759 million b/d in February 2012.

The year-on-year comparison also underscored Petrobras' recent efforts to diversify its portfolio, showing the impact of recent oil-field sales to Norway's Equinor and France's Total. Equinor purchased a 25% stake in the Roncador Field, while Total snapped up a 35% operating stake in the Lapa Field.

The lost output to maintenance, Campos Basin declines and oil-field sales combined to leave Petrobras short of its annual production target of 2.1 million b/d for 2018, with output in Q1-Q3 of 2.028 million b/d. Petrobras produced 2.154 million b/d in 2017.

Production might receive a boost in Q4, however, after Petrobras installed three new FPSOs with plans to install three more before the end of the year. Petrobras pumped first oil from the Lula Extremo Sul area of the Lula Field in late October, the Tartaruga Verde Field in June and the Buzios Field in April. In Q4, Petrobras expects to start up the FPSO P-67 at the Lula Norte area of Lula and the FPSOs P-75 and P-76 at Buzios.

REFINERY OUTPUT UP

Despite lower crude-oil output, Petrobras continued to increase refinery runs for a second consecutive quarter in Q3. Domestic demand picked up during the quarter after Brazil implemented a Real 0.30/liter (8 cents/liter) subsidy on diesel prices in June after a 10-day strike by independent truckers, although activity slowed slightly in September ahead of presidential elections in October.

Petrobras' refineries produced 1.801 million b/d of oil products in Q3, up 0.2% on the year but down 2.1% from Q2.

Refined-product sales grew in Q3, especially diesel sales after the subsidy took effect, Petrobras said. The company sold an average of 1.941 million b/d of refined products in Q3, up 2.9% on the year and 8.4% from Q2.

Lower crude-oil output and increased refined-product imports also undercut the company's trade balance in Q3. Petrobras was forced to take a bigger role in refined-product imports in Q2, when the diesel subsidy temporarily idled third-party importers.

Petrobras imported 439,000 b/d of crude and oil products Q3, 30.7% more than a year earlier. Exports sank 26.2% year on year to 511,000 b/d in Q3.

Net exports ended the quarter at 72,000 b/d, down from net exports of 356,000 b/d a year earlier.

Higher oil prices and margins on domestic product sales and crude exports pushed Petrobras' Q3 net profit to Real 6.64 billion from Real 266 million a year earlier.

Revenues surged 36.9% year on year to Real 98.3 billion, the company said. --Jeff Fick, newsdesk@spglobal.com

--Edited by Jonathan Dart, newsdesk@spglobal.com