Brazil’s oil production sees a new growth wave
June 2020

Brazil's oil production sees a new growth wave 



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Despite the steep declines from its mature fields, Brazil’s oil production is expected to grow in the medium term, supported by supply additions from projects currently under development. This article assesses the outlook for Brazil’s E&P industry, illustrated by three key drivers: production, economics of new projects, and capital investments.

Figure 1 shows Brazil’s oil production, split by life cycle, from 2010 to 2025. Key projects under development are also highlighted. As shown, the country’s supply has steadily grown over the past ten years reaching nearly 2.8 million bpd in 2019, a growth secured by the significant investments made before the 2015 oil price collapse (most notably in the Lula project). We expect the supply growth to continue in the short to medium term, with key contributions from projects sanctioned in the last five years, such as Buzios V, Iara and Mero (the pilot phase and Mero 2), as well as Sepia and Lula West (Lula Recovery Factor project). The P-70 platform at the Atapu field (Iara project) is expected to start production as soon as summer of 2020, with the other projects following in 2022-2023.

Figure 2 depicts total recoverable resources and breakeven oil prices from the sanctioning date for the top discoveries expected to start producing within the next ten years in Brazil. The largest unsanctioned field anticipated to come online in 2025 is the Equinor-operated Bacalhau (x-Carcara) Phase 1, holding nearly 1,000 million boe of resources and with a breakeven oil price of around $41 per barrel. However, Petrobras operates most of the top discoveries on the list. Among the largest, fields in the Mero (Libra NW) project are currently anticipated to start producing by 2025-2026, each holding around 950 million boe of resources. These fields are estimated to have a breakeven oil price below $50 per barrel and were earlier expected to be sanctioned for development in 2020-2021. However, given the currently prevailing low oil price environment, the development of these fields has been postponed by more than a year until the price environment improves. In fact, the majority of currently unsanctioned top discoveries have breakeven prices below $50 per barrel, with some showing commerciality below $40 per bbl. Particularly, Buzios VI, which holds nearly 800 million boe, is estimated to have a breakeven oil price of $39 per bbl. Similarly, Itapu, which holds 600 million boe in resources, has a breakeven of $38 per bbl. On the other hand, the most expensive project to develop will be Bacalhau & Bacalhau Norte Phase 2, which has a breakeven oil price of almost $65 per barrel. Despite the reasonable commerciality of the majority of these projects under normal market conditions, we believe most of these fields will not get sanctioned before the mid-20s when the oil price is forecast to improve, making development commercial again.

Figure 3 displays the oil field capital investments in Brazil over the period 2010-2025, split by life cycle. Investments have seen a steady decline from the peak of around $22 billion in 2013-2014, to around $12.5 billion in 2019. With operators delaying sanctioning amid the oil price and Covid-19 crises, investments are expected to fall further this year to around $10 billion. Capital investments in producing fields are also expected to be reduced significantly. However, investments are forecasted to grow over the next five years, increasing to over $15 billion by 2025. The new investment cycle will be spearheaded by new projects under development or expected to be sanctioned in the near term. Key contributions are expected from the Mero, Sepia, Buzios V and the Lula Recovery Factor projects. Post 2021, investments are also expected in the first phase of the Equinor-operated Bacalhau (Carcara) field, Berbigao/ Sururu II, Buzios VI and VII (surplus volumes project) as well as Mero 3 and 4, and the Jubarte pre-salt field.


Oil production in Brazil is set to expand going forward, driven by projects under development. Oil output reached nearly 2.8 million bpd last year and is projected to grow to over 3 million bpd in 2020. In the medium to long term, the country has the potential to expand production to over 3.5 million bpd. Moreover, Brazil holds significant discovered resources waiting to be sanctioned, which could support additional future growth. However, given the current oil market environment, it will take years for operators to reach final investment decisions; thus, production contribution is not expected before the late 2020s.