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Brazil: A country for new and established E&P players' growth prospect

The upstream competitive landscape in Brazil has significantly shifted where the regionally focused independents and private equity-backed E&P players have actively been acquiring assets, primarily onshore and shallow water, from National Oil Company (NOC) Petrobras's divestment program. With the US$15-25 billion divestment program between 2022 and 2026, Petrobras is focusing on naturally owned deepwater and ultra-deepwater opportunities with higher returns, mainly in the pre-salt area. The divestment program includes its upstream, midstream and downstream assets in Brazil, Colombia, Argentina, Bolivia, and the US Gulf of Mexico.

Petrobras along with international oil companies (IOCs) and national oil companies (NOCs) have overwhelmingly participated in various bid rounds in Brazil. These bid rounds have generated over US$30 billion of signature bonuses between 2017 to 2022 till date. The willingness to pay hefty signature bonuses and investment commitments highlights the prospectivity and attractiveness of Brazil.

Following the announcement of the Albacora Leste field sale to PetroRio S.A. for about US$2 billion in May 2022, the total divestment for Petrobras under the current program has reached about US$6 billion till date.

Other key divestitures in 2022 include,

  • Additional 5% stake to Chinese NOC CNOOC in the Transfer of Rights Surplus PSC Buzios field in pre-salt Santos basin for US$2.1 billion.
  • 100% interest in the Potiguar Cluster to 3R Petroleum for US$1.4 billion.
  • 100% interest in onshore Brazil Polo Norte Capixaba Cluster to Seacrest Exploração e Produção de Petróleo for US$478 million.

Petrobras has a capital budget of $68 billion between 2022 and 2026, with 84% for the E&P segment, primarily in pre-salt areas including Buzios, Tupi, Sepia, Atapu, Itapu, and Sururu etc. CAPEX is focused on exploration, increasing production capacity, development and implementation of new production projects, and low carbon investments.

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Posted 17 June 2022 by Kallol Saha, Associate Director, Transaction Research, S&P Global Commodity Insights and

Padmanav Sahoo, Senior Analyst, Transaction Research, S&P Global Commodity Insights

This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.


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