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Record results

Exploration and Production

In addition to setting an oil prodution record and getting commercial production underway in the Pre-Salt layer in both Santos (state of São Paulo) and Campos (state of Rio de Janeiro) Basins, Petrobras also made several discoveries in 2010. Important oil and gas accumulations were discovered in Post-Salt and Pre-Salt sections of sedimentary basins in Southern and Southeastern Brazil; furthermore oil was found offshore Sergipe (in the Sergipe-Alagoas Basin), opening a new exploratory frontier in Northeastern Brazil. The progress that Petrobras has made in exploration and production allows the company to maintain its growth in coming years, underpinning its position in the global oil industry.

Petrobras set three oil production records in 2010. The monthly average for December closed at about 2.122 million barrels per day (bpd). On 27 December, oil output reached 2.256 million bpd. In the year, the company attained a production level of upwards of 2 million bpd (2,004,000 bpd), an annual record in Brazil. Total production, meanwhile, including natural gas in Brazil and all overseas operations, closed 2010 at 2.583 million barrels of oil equivalent per day (boed), a historical record.

This performance was the outcome of the greater volumes lifted by existing platforms after they were interconnected with new wells (P-53, P-51, P-34, FPSO Cidade de Vitória, FPSO Espírito Santo, and FPSO Frade) and of operations going on stream at new units, operating both in the Post-Sal and in the Pre-Salt areas. These projects offset the natural production decline and afforded the company a 1.7% increase in the domestic production of oil and natural gas liquids (NGL)⁽²⁾

All production units operate under the most advanced health and safety conditions in the industry. These are industrial complexes fitted with several protection systems designed to limit the effects of any possible untoward events in their daily routines. The operations take place pursuant to procedures that fully meet requirements imposed by regulatory bodies such as the Brazilian Navy, the National Petroleum Agency (ANP), the Brazilian Institute for the Environment and Renewable Resources (IBAMA), the Brazilian Institute of Oil, Gas, and Biofuels (IBP), and rating agencies.

(2) The portion of natural gas that is in its liquid state under a given pressure and temperature at the surface, obtained in field separation processes, in natural gas processing units or in gas pipeline transfer operations.

Commercial production highlights

The extended well tests for the Tiro and Sidon areas started in March with the installation of the SS-11 Atlantic Zephyr semi-submersible platform, which can produce 20,000 bpd of oil and process 475,720 m³/day of gas. The fields are located in exploratory block BM-S-40 (100% Petrobras), in the southern portion of the Santos Basin, at about 210 km off the coast.

Production started at FPSO⁽³⁾ Capixaba, in the field of Cachalote, in May. In July, a Pre- Salt area well nestled in the Baleia Franca field, off the southern coast of Espírito Santo, in the Campos Basin, was connected to this production module. With capacity to process 100,000 bpd of oil and 3.2 million m³/day of gas, the FPSO marked the beginning of commercial production in the Pre-Salt cluster off the coast of Espírito Santo.

In July, FPSO Cidade de Santos went into production to develop the Tambaú and Uruguá fields. This was the first module installed for the definitive development of oil and gas fields in the Santos Basin. The vessel is anchored 160 km off the coast of São Paulo, in a water depth of 1,300 m, and can produce 10 million m³ of natural gas per day and 35,000 bpd of oil.

Vessel platform Cidade de Angra dos Reis was launched in October. The first unit scheduled to produce on the commercial scale in the Pre-Salt, it produces high commercial value light oil, leading the way for the definitive production system to be installed for the Lula field, the new name given to the accumulation previously known as Tupi. Basic technical information will be collected for the development of the large accumulations of oil discovered in this sedimentary basin. With capacity to produce 100,000 bpd, the pilot system will help grow the production curve in the coming years.

In December, through platform P-57, Petrobras started producing in the Jubarte field, in the Campos Basin, 80 km off the coast of Espírito Santo. The platform is anchored at water depths⁽⁴⁾ of 1,260 m and can process 180,000 bpd of oil and 2,000,000 m³ of gas per day.

Also in December 2010, Tupi and Iracema were declared commercial and were renamed, respectively, Lula and Cernambi, marking the beginning of commercial production from both fields. With a recoverable volume of 6.5 billion barrels of oil equivalent (boe), Lula is Brazil's first supergiant oil field, while Cernambi, with 1.8 billion boe, ranks among the top five giant fields in the country. Also in December, the second Santos Basin Pre-Salt area extended well test was started at BM-S-9 (Guará).

The results obtained from deeper fields enabled the company to estimate, for 2017, daily production in excess of a million boe in the Pre-Salt areas it operates, a figure that includes the share of production belonging to its partners.

Several production systems are scheduled to go on stream in 2011. A fixed platform has been installed in the Mexilhão field, in the Santos Basin, in water depths of approximately 170 m and with a production capacity of 15 million m³ of gas per day. A 139-km long pipeline has been laid to drain the gas to the shore of Caraguatatuba (coastal São Paulo).

In the Campos Basin, meanwhile, a semisubmersible platform (P-56) with capacity to process 100,000 bpd of oil and compress 6 million cubic meters of gas per day will be installed in water depths of approximately 1,700 m. Extended well tests for Lula Nordeste (BMS-11), Carioca Nordeste (BM-S-09), and Cernambi (BM-S-11) area also scheduled for 2011.

(3) FPSO (Floating, Production, Storage & Offloading): Floating production, storage, and offloading unit built on a vessel.
(4) Distance between the surface of the water and the seabed. Expression established by use which means the water column.

Reserve growth

The exploratory success it achieved in the Pre-Salt layer helped Petrobras close 2010 with proved reserves of 15.283 billion boe (ANP/Society of Petroleum Engineers - SPE criterion), 8% more than in 2009. The increase is the result of the addition of 1.911 billion boe, including both the Pre-Salt and projects deployed in mature fields. The rate of reserve replacement soared 240%, meaning that for each barrel of oil equivalent produced, Petrobras added 1.4 barrels to its reserves.

The reserve-production ratio rose to 19.2 years, above the 18.1 years calculated in 2009. This will enable the company to continue growing in coming years. Petrobras has had positive reserve replacement rates for 18 years in a row. In 2010, the company also was granted the right to produce up to 5 billion boe in Pre-Salt areas by signing the Transfer of Rights Agreement ⁽⁵⁾ with the Federal Government.

The progress Petrobras has made in exploration and production in the Pre-Salt region occurs in a new global era of oil exploration, one which combines increasing demand and the depletion of provinces that are easy of access and low costs.

In 2010, Wood Mackenzie estimated it will be necessary to add 43 to 48 million bpd of new production in the world by 2020. Until 2030, meanwhile, the figure soars to 65 to 78 million bpd. The fields currently in production or that are currently being developed will meet a mere 13% of the oil demand in 2030, i.e. 87% of the demand that year will have to be met by increasing the recovery factor of fields in production and by output coming from new oil fields.

(5) In 2010, the new oil exploration and production model was established for the Pre-Salt layer. Among other measures, the transfer of rights agreement grants Petrobras the right to produce and explore oil and natural gas in certain areas of the Pre-Salt up to a limit of 5 billion barrels. The company was also allowed to carry out the equity issuance. With the proceeds from the offer, Petrobras paid R$74.8 billion to secure the right to explore and produce five billion barrels in six areas of the Santos Basin Pre-Salt layer for 40 years, extendable for another five.

Discoveries

In 2010, 116 wells were drilled, 67 of which onshore and 49 offshore. Among the offshore wells, 31 were targeted at the Post-Salt section, while 18 at the Pre-Salt area. The exploratory success rate reached 57%, well above the 40% set a year earlier. The highlight of these activities was the discovery of a new deepwater oil province containing light oil in the Sergipe-Alagoas Basin. Known as Barra, the well is in 2,341-meter deep waters, at about 58 km away from the coast of the state of Sergipe (Brazil).

At the Urucu oil province, in the Amazon, excellent quality oil (46° API(6)) and associated gas were discovered nestled in Solimões Basin sandstone reservoirs. The discovery was called Igarapé Chibata. Kicked-off in September, the EWT points to a production capacity of 2,500 bpd.

Several discoveries were made in the Santos Basin. At the Franco prospect, 195 km off the coast of Rio de Janeiro, an accumulation of good quality oil (about 30° API) was found in 1889-m deep waters. The discovery was made through the drilling of well 2-ANP-1-RJS, and preliminary estimates based on the seismic response around the borehole show recoverable volumes of around 3 billion barrels of oil. Franco is one of the areas included in the Transfer of Rights agreement signed between Petrobras and the Federal Government. Light oil was also found in 2,200-m deep waters in well 1-SPS-76 (Marujá prospect), about 215 km off the coast of São Paulo.

In the Campos Basin, Petrobras discovered two good-quality oil accumulations (29 °API) in the area of the Caratinga field. The discovery was made with the drilling of well 6-CRT-43-RJS, known as the Carimbé prospect, which is 106 km off the Rio de Janeiro coast in water depths of 1,027 m. One of the accumulations found in Post-Salt reservoirs, is at a depth of 3,950 m. It is estimated there are recoverable volumes of approximately 105 million barrels of oil there. The other, in Pre-Salt reservoirs, is at a depth of 4,275 m and may be related to the accumulation found in the area of the Barracuda field. If the two accumulations are indeed connected, the potential recoverable volume is estimated at 360 million boe. Evidence of hydrocarbon reservoirs was found in well 6-MLL-70-RJS (Tracajá). The well is in the Pre-Salt layer, at a total depth of 4,442 m and in a water depth of 1,366 m, 124 km away from the coast of Rio de Janeiro.

The ANP did not carry out any bidding rounds in 2010. With the acquisitions and returns made during the year, Petrobras' project portfolio now adds up to 198 blocks, covering a total area 130,000 km². Additionally, discoveries are being assessed in 31 other areas. Petrobras' exploratory area totals 105,000 km².

(6) Grau API (American Petroleum Institute): a way to express the relative density of oil or of an oil product. The API scale, measured in degrees, varies inversely with the relative density, i.e. the higher the relative density, the lower the API degree. The API degree is higher when the oil is lighter. Oil with an API degree greater than 30º is considered light; between 22º and 30º API, medium; and below 22º API, heavy. Oil below 10º API is considered extra-heavy. The higher the API degree, the higher the market value.

Performance abroad

In other countries, Petrobras' output reached the milestone of 245,000 boed, up 3% over the previous year, mainly due to increased production at the Apko field, in Nigeria. Total production was 151,000 bpd of oil and 16 million m³/day of natural gas. The company's target is to produce 257,000 boed in 2011.

In March, Petrobras announced an oil discovery in the Balay exploratory block, in Colombia, in which it holds a 45% stake. The formation test operations proved the existence of oil of about 28º API with an initial flow of 1,314 barrels of oil per day at the site. In October, the company made two discoveries in the Cabaça Sudeste-2 well, off the coast of Angola, in which it holds a 5% stake.

Petrobras' proved reserves overseas reached 0.703 billion boe in 2010, about 1% more than the previous year, and the reserve replacement ratio was 110%. The increase was due to the addition of wells located in Block 57, in Peru, and projects underway in the Gulf of Mexico. Foreign reserves represent about 4% of the total of accumulated reserves in 2010.

The year also marked an increasing presence of Petrobras abroad: by acquiring 50% stakes in an exploration block located in the Australian North Carnarvon basin, the company has begun operating in Oceania and is now present on the five continents.

Petrobras invested R$4.8 billion abroad − 88% of the resources were earmarked for exploration and production, 60% of which allocated to production development.

Processing capacity at international refineries slumped to 230,500 bpd, down from 280,500 bpd in 2009, due to the sale of the San Lorenzo refinery, in Argentina, in 2010. The processing capacity utilization level at the international refineries reached 70% in 2010, up from 66% in 2009. In total, 206,800 bpd of oil were processed in four refineries (one in Japan, one in the U.S., and two in Argentina).

Natural Gas

Petrobras' average natural gas production in Brazil and abroad, not including NGL, added up to 69 million m³ per day, 53 million m³/day coming from fields in Brazil and 16 million m³/day from other countries. In Brazil, the average natural gas output rose 5.4% compared to the 2009 average.

The growth is mainly due to the start-up of new projects envisaged under the Gas Production Anticipation Plan (Plangás), such as gas production anticipation from the Canapu field and increased production from the Camarupim field, in Espírito Santo. Continuing the implementation of projects included in the Plangás, the Mexilhão field will go into production and gas will start flowing from the Tambaú and Uruguá fields in 2011. Natural gas produced from the Lula field will also begin to flow in 2011, maintaining the upward gas supply trend aimed to meet market demand.