Petrobras Optimistic about South American Upstream Operations

Brazil's federal energy company Petrobras (NYSE: PBR) is targeting new upstream projects in Colombia, Argentina, Ecuador and Venezuela as part of its continued expansion and integration in South America.

Petrobras is present in almost all Spanish-speaking South American countries except Chile, where it is in talks with local companies to enter the downstream or energy markets, Petrobras Latin America, Africa and Eurasia market executive manager Joao Figueira told BNamericas.

Petrobras announced last month it would invest US$3.3bn in South America from January 2007-December 2011. The company has earmarked US$12bn of the budget for all operations outside Brazil.

Upstream operations will take up most of the company's budget for South America, although this year and last the company concluded acquisitions of downstream assets, he said. Petrobras has not firmly decided where it will invest in upstream operations.

"We're looking at a range of projects and money will be allocated as they develop," he said. "Of course, projects will compete with each other for budget money."

Seventy percent of Petrobras' budget is for upstream operations, 25% is for refining and marketing and the rest for other operations such as downstream, gas and energy markets.

"The division between different areas in South America will be similar," Figueira said.


Petrobras is paying a lot of attention to Colombia, where the company has been operating since the early 1970s. Petrobras has started expanding in the fuel retail business and is eyeing exploration projects it believes to be promising. Onshore, the company is ready to drill the Tierra Negra field in coming weeks, while in the second half of 2007 it plans to drill in the deepwater Tayrona field off the Caribbean shore, he said.

This year the company plans to invest US$150mn in Colombia. The amount could increase if Petrobras successfully bids to expand a refinery in Cartagena owned by Colombia's state oil company Ecopetrol.

"The idea there is to swap investments in capacity expansion for a participation in the future production of the refinery," Figueira said, adding the refinery would process Petrobras oil produced in Colombia and elsewhere.


Next in line is Venezuela, where the company has several agreements with its local counterpart PDVSA. Petrobras is also looking at new gas and oil projects there.

Petrobras is performing studies in the Moruy II gas block awarded in 2005 and could invest in at least three new projects in the country, Figueira said, declining to give details.


In Argentina, the company aims to expand to build up its dwindling oil and gas reserves there. As such, the company is ready to look at new frontier basins.

Although exploration has been unsuccessful in the basins, Petrobras is confident a new approach could yield results.

"We're looking further north in basins using a different prism," Figueira said. The San Julian basin close to the Atlantic Falklands archipelago and the Colorado basin up north are top alternatives.


South American investments outside Brazil are expected to bear fruit in the long term, Figueira said.

The company is forecasting a 147% increase in international production from 2007-11 to some 568,000 barrels of oil equivalent a day (boe/d) from 233,000boe/d. Most of the increase will come from the company's investments in the US-controlled Gulf of Mexico and Nigeria, where output could start in 2008.

Significant production increases in South America will come after 2009 when exploration programs in Colombia are due to wrap up, he said.

"If our expectations are confirmed in South America, the 2011 international output target may even be increased."

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