Petrobras' production cut smaller than expected

Petrobras' April oil production will be higher than the 2.07Mb/d (million barrels per day) it expected and reach 2.26Mb/d, even though the state-run Brazilian firm initially cut output by 200,000b/d amind uncertain international demand.

In a statement late on Monday, the company said demand is higher than expected, despite the turbulence in the sector due to lower oil consumption amid the coronavirus pandemic. Although China is the main destination of Petrobras’ products, the mobility restrictions in the country during the first quarter did not affect the company’s activities too much.

Still, the firm said the output cut and lowering refineries’ utilization factor from 79% to 60% have helped to generate cash and reduce inventories, making it unnecessary to charter storage vessels.

“The environment of uncertainties is reflected in very fluid market dynamics, which requires continuous monitoring to optimize the management of productive capacity,” the statement said.

Between January and March, Petrobras’ average oil, NGL and natural gas production was 2.9Mboe/d (million barrels of oil equivalent per day), a 14.6% rise year-on-year. Growth resulted from the ramp-up at platforms that came online in 2018 and 2019, when the P-74, P-75, P-76, and P-77 units started activities in Búzios field; the P-67 and P-69 in Lula field, and P- 68 in Berbigão and Sururu.

Earlier this month, the firm had to interrupt production at two offshore platforms due to workers' infections with coronavirus. To minimize potential impacts, the company started to test all employees before they could board platforms.

Petrobras is now preparing to start production on its P-70 unit (pictured) at Atapu field, in the pre-salt of Santos basin. Anchoring and interconnection activities at the platform are being completed, with production start expected for end-June.

The firm is also improving its logistics capacity to increase exports, allowing it to better navigate the internal market, considering the reduced demand. Internationally, demand increased for Petrobras' fuels with lower sulfur content because they facilitate compliance with new policies requiring less polluting maritime fuels.

During the first quarter, average output of oil products was nearly 1.84Mb/d, up 5.5% compared with the same period last year. In February the company set a new record for fuel oil exports, reaching 238,000b/d.

“Although there is a drop in global demand, the competitive advantage of our products, the gradual resumption of China, a strong trading partner, and the constant search for new markets for our products, bring the expectation that we will continue to perform well in our exports,” Petrobras said.