Petrobras to expand domestic oil production by 10 percent in 2019

Dec. 6 (UPI) -- Brazilian state oil company Petrobras will increase its domestic oil output by 10 percent in 2019, with the entry of operation of three new systems and project cost reductions in coming years as it advances in its deep drilling efficiencies to reach Pre-salt formations expected to contribute.

Oil production by Petrobras just within Brazil will expand to 2.3 million barrels next year from 2.1 million barrels this year, the company said Wednesday upon publishing its five-year plan.

Overall production, including both oil and natural gas in Brazil, as well as oil and gas abroad, will rise to 2.8 million barrels from 2.7 million barrels this year.

"For the period between 2020 and 2023, total oil and natural gas production will grow at an average rate of 5 percent per year," it said.

The company said it has gained efficiencies in tapping formations known as Pre-salt -- a term it uses to refer to a technology developed in recent years for extraction in deep-water fields from earth layers below ancient salt formations.

"Continuous cost efficiency and pre-salt lifting costs below $7 per barrel of oil equivalent will drive the average lifting cost to levels under $10 per barrel of oil equivalent from 2020," the company said.

Pre-salt production costs were less than $8 per barrel in the first quarter of 2016, down from $8.3 per barrel in 2015. The Pre-salt discoveries, among the most important in the world over the last decade, have helped Petrobras increase output in recent years by tapping into plentiful, high quality light oil grades.

This Pre-salt production was possible through new technology developments making it possible to increase output from the formations from just 41,000 barrels per day in 2010 to 1 million barrels in mid-2016. The pre-salt formation resulted from the separation of the ancient Continent of Gondwana, 100 million years ago, when what is now eastern Brazil was attached to western Africa.

The company will continue with a divestment plan, as it plans to focus on deep water drilling that could lead to a potential cash entry of $26.9 billion during the period of the plan.

As Petrobras focuses on deep water drilling, which is where it has generated the most value in recent years, it is seeking to continue refining, transportation and trading activities -- but through partnerships. The company has recently announced sales of production assets that are not deepwater, and that have been in operation for a long time.

The projection for next year's production already contemplates 100,000 barrels of output reduction in 2019, compared with this year, due to divestments.

Petrobras estimates cash generation of $114 billion during the period under the plan coming from operations. This will allow the company to reduce debt and carry investments "without incurring new debt."