Report: Brazil’s Petrobras wading dark waters

LONDON, July 6 (UPI) — British energy consultant Douglas-Westwood said the prospects of turning 16 billion barrels of potential Brazilian barrels of oil into reality may be dubious.

Douglas-Westwood said it was questioning whether Brazilian energy company Petrobras can turn ambition into reality in deepwater prospects.

“Brazil’s huge deepwater potential remains constrained with Petrobras having to revise their production target for 2020, which now forecasts domestic oil output to increase to 2.8 million barrels per day – 40 percent lower than its projection 12 months ago,” a forecast published Monday read.

Petrobras last week published a management plan through 2019 that reflects the downturn in crude oil prices. The Brazilian company cut overall spending plans by 40 percent, but allocated 84 percent of that to exploration and production, a 14 percent increase from the previous year.

Brazil is one of South America’s largest oil producers and for Petrobras, its record in deep water basins has allowed it to build a reserve base of around 16 billion barrels of oil, Douglas-Westwood said.

“Converting these reserves to production, however, is another matter and Petrobras has a history of setting ambitious targets, with a poor record of meeting them,” it said.

In April, the company formally known as Petroleo Brasileiro said in its first audited statement in nearly a year it was writing off around $17 billion, of which $2.1 billion was due to alleged graft. Corruption scandals at the company have presented a roadblock to reform efforts led by Brazilian President Dilma Rousseff, a former Petrobras chairman.

A survey from the World Bank finds gross domestic product in Brazil has slowed from 4.5 percent for the four years ending in 2010 to 0.1 percent in 2014. Inflation, meanwhile, remained high at 6.4 percent at the end of 2014.

Petrobras expects domestic oil production to increase 2.8 million bpd through 2020, a 40 percent decline from last year, Douglas-Westwood said.