Brazil's Petrobras to mothball over 60 offshore platforms

Brazilian NOC Petrobras will mothball 62 offshore platforms in the shallow waters of the Campos, Sergipe, Potiguar and Ceará basins.   

The company announced in March that it would cut 200,000b/d of its production due to the low price of oil and demand reduction amid the coronavirus pandemic.  

The units to be mothballed are not feasible at current oil prices and represent 23,000b/d of the output cut target, Petrobras said in a statement.

They were already part of the company’s existing US$20-30bn assets sale program, it added. 

Petrobas said the mothballing process would not have a major negative impact on workers since most of the units were operated remotely.   

Oil union federation FUP had a very different opinion regarding the labor impact.

“The mothballing of those units will leave hundreds of Petrobras’ employees and outsourced workers without a workplace,” FUP said in a statement.

The offshore decline

Data from Brazilian oil regulator ANP show the country had 103 offshore units operating at the end of February, of which 91 were operated by Petrobras. 

The company has decided to deactivate almost 70% of its units, only keeping those with high productivity, which are mostly located in deepwater fields. 

Brazil has 45 platforms located in pre-salt fields and 42 were expected to be installed by 2029, a projection made by energy planning firm EPE at the end of last year before the COVID-19 crisis.

Preparing for tougher times   

Petrobras CEO Roberto Castello Branco said this week that he is preparing the firm to survive in a price environment of around US$25/b. 

During a webinar held by the FGV Energia think tank on Wednesday, the executive said he does not see a significant price increase from Sunday’s OPEC+ deal to cut global oil production.   

“The deal was celebrated as a historical mark but I, personally, do not believe OPEC can coordinate prices anymore. Most of their agreements are not even followed by Saudi Arabia. The most important issue in the world now is low demand,” he said.

The International Energy Agency (IEA) has also said the deal will not rebalance the market in the short term. 

IEA data for April show global oil demand was estimated to be 29Mb/d (million barrels per day) lower than April 2019 - down to a level last seen in 1995 – with May expected to see a year-on-year demand drop of 26Mb/d.  

"There is no feasible agreement that could cut supply by enough to offset such near-term demand losses. However, the past week’s achievements are a solid start and have the potential to start to reverse the build-up in stocks as we move into the second half of the year,” IEA said regarding its latest data.