Petrobras set to become world’s largest plc oil producer

Brazil’s Petrobras is on track to become the world’s largest oil producer among publicly listed companies by 2030, according to Rystad Energy, and is seeking OPEC membership.

The country’s biggest-ever oil auctions in November 2019 were generally deemed to be disappointing, receiving muted interest from international exploration and production companies. However, national oil company Petrobras could not have asked for a better outcome, reports the market analyst. The world’s fastest growing oil producer gained nearly full control of more than 8bn barrels of oil in the Buzios field, where a sixth floater is being planned. To develop these and other resources off the coast of the South American country, Brazil is set for a huge $70bn offshore capital investment spree between 2020 and 2025, solely on field development. This programme is expected to have a monumental effect on Petrobras.

‘Petrobras can, in a matter of years, become the world’s largest oil producer among publicly listed companies. The significance is huge and symbolic,’ comments Aditya Ravi, Vice President of Rystad Energy’s upstream team. ‘We predict that Petrobras alone can boost its production numbers by more than 1.3mn b/d over the next decade.’

During the course of 2019, Petrobras has evolved from fifth place to become the third-largest oil producer, reaching output of around 2.2mn b/d in the third quarter. As it stands, Rosneft and PetroChina top the list over the world’s largest public E&P companies. Based on Rystad Energy’s latest forecasts, Petrobras could be poised to overtake PetroChina over the next few months, and potentially dethrone the ruling Russian producer Rosneft over the next decade, thanks in no small part to its latest acquisitions.

Brazil’s production could be pushed from 2.8mn b/d in 2019 average to over 5.5mn b/d thanks to Petrobras’ potential peak output of almost 3.8mn b/d* by 2030.

Brazilian officials recently indicated the country wishes to join OPEC, the oil cartel dominated by Saudi Arabia and 13 other oil-producing countries. Brazil’s current output would make it OPEC’s third-largest producer, behind Saudi Arabia and Iraq.

‘Joining OPEC could cause a major disruption for Brazil, bringing the country into the spotlight, with the potential risk of having its wings clipped by the cartel just as production takes off,’ Ravi cautions.

This potential shift in ranking has been spurred on in the aftermath of the three Brazilian licensing rounds organised in recent months by the National Petroleum Agency (ANP), in which 45 blocks were on offer. With only one-third of the blocks receiving bids, the rounds raised concerns that Brazil lacks the luster that in the past ensured active and competitive bid rounds. In the wake of these rounds, the Brazilian Energy Minister remarked that the current legal and tendering structure could warrant a re-think, including a look at Petrobras’ pre-emptive rights on oil blocks. Others have voiced dismay over the steep signature bonuses.

*This number accounts for a commercial discovery at Aram.

Figure 1: Oil production from top oil producers in the world (net volumes), in mn b/d
Source: Rystad Energy