106.546.362.096,00 EuroS

or 110 Billion US$

Brazilian Oil and Gas Exploration

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Amsterdam, 22 november 2024– Brazil’s oil and gas giant, Petrobras plans to spend US$ 111 billion [ or106.546.362.096,00 Euros ] in the next five years between 2025 and 2029, with US$ 77 billion of this total earmarked for oil and gas exploration and production activities, according to a securities filing, and making the country South America’s main oil and gas producer.

The reported$111 billion spending by Brazilian oil and gas giant Petrobras, particularly with its interest in expanding activities intoSuriname, signals a bold and strategic move to consolidate its position as a dominant player in the energy sector of the region. Here’s a detailed analysis:

Major Investment Plan

• Petrobras’s allocation of such a significant budget demonstrates its confidence in the long-term profitability of oil and gas exploration, production, and associated infrastructure.
• Suriname, with its rapidly emerging offshore oil discoveries, presents an attractive opportunity for growth. By expanding operations there, Petrobras is likely aiming to diversify its resource base and capitalize on the untapped potential of the region.

Alignment with Energy Transition

• While Petrobras remains focused on hydrocarbons, the energy landscape is shifting toward renewables. This massive investment raises questions about the company’s readiness for a global transition to cleaner energy sources.

• It will be important to see whether part of this investment will also focus on decarbonizing operations or exploring new technologies to reduce environmental impact.

Suriname’s Role in Regional Strategy

• Suriname’s offshore oil blocks have drawn global attention, as have the situation in Guyana perhaps even more so, with major players like TotalEnergies and ExxonMobil already active in Suriname, Apache Oil and others.
• Petrobras’s entry could strengthen Brazil-Suriname-Guyana energy ties and amplify Brazil’s influence in the geopolitically important Atlantic energy corridor.

Economic and Geo-Political Context

• The Brazilian government, a significant stakeholder in Petrobras, may view this as a geopolitical maneuver to reinforce Brazil’s leadership in South America. Additionally, the investment could generate employment, technological advancements, and economic benefits for both Brazil and Suriname.

Risks and Challenges

• Such a large financial outlay is not without risks, especially in a volatile oil market where prices can swing due to global economic conditions or geopolitical tensions.
• Petrobras has faced criticism in the past for corruption and financial mismanagement. Ensuring transparency and accountability in the allocation of these funds will be critical.

This move is a verycalculated and typical Brazilian risk, reflecting Petrobras’s ambition to secure its future in the oil and gas sector despite the looming challenges of global energy transition. Suriname’s promising reserves offer Petrobras a significant opportunity, but the company must balance this investment with a broader strategy to adapt to the evolving energy market.

The success of this spending will depend on market conditions, operational efficiency, and Petrobras’s ability to navigate regulatory and environmental challenges effectively.

The new spending figure is US$ 10 billion higher than an earlier version of the investment plan, where exploration and production spending was set at US$ 73 billion. That earlier plan, in turn, was an upward revision on an even earlier version of the 2025-2029budget that stood at US$ 102 billion.

Spending for 2025 specifically, however, was revised down in October. Initially pegged at US$ 21 billion, the company’s spending plan for the year now stands at US$ 17 billion, which Petrobras said was a more realistic figure in line with its financial capacity.

The latest revision sees daily production resulting from these investments at 3.2 million barrels of oil equivalent cementing Brazil’s standing as the top oil and gas producer in South America. The plan also contains a US$ 20 billion allocation for refining, transportation, marketing, petrochemicals, and fertilizers.

Petrobras currently produces around 2.7 million barrels of oil equivalent, based on third-quarter numbers.

That daily average represented a 6.5% annual dip in production, with production from the pre-salt zone down by 2.7% in the three-month period. Oil production specifically fell by 8.2% in the third quarter, to 2.13 million barrels daily.

That followed a second-quarter production increase to 2.7 million barrels of oil equivalent daily, up 2.4% on the first quarter, when maintenance work on offshore platforms led to a 25% decline in production.

Going forward, the Brazil state energy major will focus on boosting production from existing fields, the company said earlier in the year, and at the same time seek to diversify its portfolio without losing focus of its profitable assets. Stemming natural depletion at mature fields will be another focus for the company between 2025 and 2029.

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