(Argus, 1.Apr.2020) — Brazil’s state-controlled Petrobras has doubled production cuts to 200,000 b/d in response to the oil price collapse.
The expanded shut-ins are equivalent to just over 9pc of the company’s average domestic oil production of 2.139mn b/d in February, which was down almost 8pc compared with January, according to data from oil regulator ANP.
Last week Petrobras announced initial reductions of around 100,000 b/d, and now says an additional 100,000 b/d will be cut indefinitely, starting today.
Petrobras said today it will consider “market and operational conditions” to determine where it will cut output, and will continuously evaluate potential adjustments.
Of the initial 100,000 b/d b/d, around 23,000 b/d is from cost-intensive shallow-water fields Petrobras had been planning to shut before the crisis hit this month. The remainder is in response to market oversupply, Petrobras executives said last week.
Around 80pc of Petrobras’ production is from pre-salt developments, which the company has said are viable at around $35-$45/bl, but the company is cutting costs to try to slash the breakeven price to around $21/bl of oil equivalent (boe).
Petrobras had set a 2020 domestic output target of 2.2mn b/d under its $75.7bn 2020-24 business plan. Last week company executives said it was too early to tell if the global economic crisis would force a reduction of the target for this year or beyond.
Downstream, Petrobras is reducing refinery throughput in response to waning fuel demand rooted in Brazil’s expanding coronavirus restrictions. Utilization rates at the company’s domestic refineries fell to around 74pc in March from 79pc in February, a downward trend expected to extend through the second quarter.
Petrobras is seeking an additional R700mn ($134mn) in personnel savings by delaying compensation for managers and cutting work hours to six from eight hours for around 21,000 employees. The reduction is part of the $2bn the company is looking to trim from operating costs.
Petrobras last week announced that it reduced 2020 capital expenditures by around $3.5bn to a leaner $8.5bn.
By Nathan Walters
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