"All oil companies worldwide are increasing their investments," he said. "The costs are higher, but the returns are also higher."
While the costs of equipment and services are rising in line with higher international oil prices, a heated world economy is also increasing demand for fuels, increasing pressure on prices.
These and other factors such as higher personnel costs and the production startup of three new floating production, storage and offloading vessels (FPSOs) in the Campos basin increased Petrobras' first quarter lifting cost to US$5.95/b, a 38% increase from 1Q04, Gabrielli said.
The company's management should announce the increase in the annual E&P budget when it unveils the seven-year 2005-2011 strategic investment plan in June. The previous 2004-2010 plan pegged E&P investments at US$32.1bn, or some 60% of the company's total US$53.6bn budget for the period.
"We are revising more than 400 projects," said Gabrielli, declining to give details.
Petrobras invested a total of 5.28bn reais (US$2.13bn) in 1Q05, of which 54% was in E&P. In 1Q04, the company invested 3.871bn reais, with a similar proportion spent on E&P.
Petrobras is also expected to increase the budget for other areas such as petrochemicals and refining, where the company has been studying several projects. While Brazil's domestic demand for fuels has risen at a rate of 4% a year, consumption of plastic resins is expected to rise 8% in 2005 after climbing 12% in 2004.
Petrobras will continue refinery upgrades to allow for the processing of more locally produced heavy crude.
Behind the plans is the continued development of the offshore deepwater Campos basin, which accounted for 85% of the company's 1.7 million barrels a day (Mb/d) production in the first quarter of 2005.
Petrobras will then move on to develop the Espírito Santo basin to the north and the Santos basin to the south. However, significant production in these two basins is only expected after 2010, the company's domestic E&P general manager José Marcusso told reporters.
"Campos is far from mature, there is a lot to do there and it will be our locomotive for production in the next 5-10 years," he said.
Most of the budget through 2010 will therefore be earmarked for the Campos basin, where Petrobras plans to put in place at least nine new offshore production units through 2008.
Among them is the continued development of the prolific BC-60 block in Campos' northern region, otherwise known as Parque das Baleias - the Whale Park - where Petrobras continues to report finds of heavy oil and associated gas. So far this year the company has reported two finds on the block.
Projects include developing production of the Jubarte and Espadarte fields. Jubarte production is due to begin at year-end with the startup of the 60,000b/d P-34 FPSO, which will be increased when the 180,000b/d P-57 FPSO starts in 2008.
The current production development programs should increase the company's average daily production by some 200,000b/d in 2005 and 2006, Marcusso said.
The increase in production should help reduce lifting cost by the end of the year and allow the country reach oil self-sufficiency, with average daily production of 1.8-2Mb/d in 2006, Gabrielli said.
"We will be able to keep costs down because the platforms are already contracted for a fixed price. The only variable [costs] are the services cost and the leasing of exploration drilling equipment," he said.
Most Popular Articles