PPSA projects revenues of US$ 157 billion just from the sale of Union oil over the next ten years 

Production sharing contracts will contribute around US$344 billion to public coffers over the next ten years. The projection is from the study “Estimating results in production sharing contracts”, prepared by Pré-Sal Petróleo (PPSA) and released this Tuesday (29), by the company’s CEO, Eduardo Gerk, at the 5th Pre-Salt Oil Technical Forum. Most of this amount will come from the sale of oil that the Union is entitled to in contracts until 2032, which, according to the study, will generate revenues of US$ 157 billion. The other resources will come from royalties’ payments (US$ 100 billion) and taxes collected by the producing companies, totaling another R$ 87 billion.

According to the study, average oil production under a production sharing regime will rise from the current 668,000 barrels per day (bpd) to approximately 2 million bpd in 2027 and reach 2.9 million bpd in 2030, which will represent more than half of the national oil production and about 2/3 of the total produced in the pre-salt that year. If there are no new production sharing contracts, a decline in this volume is expected for the next two years, reaching 2032 with 2.5 million bpd.  From 2023 to 2032, contracts will accumulate a total of 7.7 billion barrels produced.

The share of daily production destined for the Union, calculated based on the supply rate of surplus oil by the Union in each contract and the oil cost recovery limit for each area, will also show continuous growth until 2031, with a slight decline in 2032, for the same reasons. The best year will be 2031, when production will reach 920,000 bpd, more than 40 times the volume of average daily production in the Union in 2022 (22,000 bpd on average from January to September).  The forecast production for the Union in 2031 is comparable to the United Kingdom current production and superior to that of countries such as Colombia, Argentina and Venezuela.

“The study shows that, in ten years, the Union will have accumulated 1.9 billion barrels of oil. This entire amount will be traded by PPSA. We are preparing for the company escalation. By the end of this decade, the PPSA will be raising more than US$ 20 billion per year for the public coffers”, explained Gerk.

To develop these contracts, the industry will invest around US$ 72.5 billion over the period studied. The investment peak is expected for the year 2028, when US$ 11.3 billion will be invested. The study estimates that 21 new FPSOs (Floating Production, Storage and Offloading Units) and 319 wells will be required.

Study premises

The PPSA Strategic Planning team carried out the work using an internally developed economic evaluation model. To estimate the future oil price, the Energy Research Office (EPE) reference scenario of October 2022 was used. To project the first oil, the production curves, investments and costs, the existing Development Plans and estimates of the PPSA technical team were used, eventually having a typical pre-salt project as an analogue.

To calculate the investments, the following assumptions were adopted: for FPSOs – units with a capacity of up to 225 thousand barrels/day, considering their investments made in the three years prior and during the first oil; for wells – 1 exploratory well per project and 1 pair of producer/injector wells for every 24,000 barrels of FPSO capacity.

To learn more, download the e-bookEstimating Results in Production Sharing Contracts 

Galp Energia Brasil was the winner of the direct sale process carried out by Pré-Sal Petróleo (PPSA) this Tuesday, the 17th, to sell the Union’s first oil load, of 500,000 barrels, arising from Atapu’s production sharing contract. The cargo will be available for loading in the second quarter of the year.

Galp was the company that offered the highest price for the Union’s oil, based on the Reference Price established for Atapu’s oil by the National Agency of Petroleum, Natural Gas and Biofuels (ANP). According to PPSA estimates, the commercialization of this load should generate a collection of R$ 210 million, approximately, to the National Treasury at the time of loading, as payment is based on the reference price of the month in which the cargo is delivered to the buyer.

Ten companies that already operate in the pre-salt layer were invited to participate, and four of them were qualified and sent proposals. All price offers were opened in real time in a meeting held by the Teams platform between PPSA and the participating companies, accompanied by Ministry of Mines and Energy representatives.

Galp, through its subsidiary Petrogal Brasil, operates in more than 26 oil and natural gas projects in Brazil. Galp Energia Brasil was also the winner of the process carried out by PPSA, in August 2022, for the sale of the first oil load from Sépia’s Union, also of 500 thousand barrels.

Pré-Sal Petróleo S.A (PPSA), a company linked to the Ministry of Mines and Energy (MME), raised R$ 4.71 billion in 2022 with the sale of the Union’s share of oil and natural gas in production sharing contracts. The record collection is about four times the amount recorded in 2021 (R$ 1.22 billion). The result reflects the increase in production in production sharing contracts and the situation in the international oil price market.

Throughout 2022, 22 Union oil cargoes were delivered, totaling 10.9 million barrels. The amount was divided into ten loads from Campo de Mero, four from Tupi, four from Búzios, three from Entorno de Sapinhoá and one from Sépia. With the exception of the latter, which had a separate commercialization process, won by Galp Energia Brasil, the others were sold in an auction held at B3, in 2021, which was won by Petrobras. During the period, 64.89 million cubic meters of natural gas from Sapinhoá, Tupi, Búzios and Tartaruga Verde fields were also sold to Petrobras.

“In 2021, we sold 3.5 million barrels of Union oil, while in 2022 we reached almost 11 million barrels. Our studies show that growth will continue to accelerate. Today, the daily average of oil in the Union is 40,000 barrels. In five years, it will be 450 thousand barrels and, in ten years, almost 900 thousand. We had an excellent result in the auction held in 2021 to market Union cargo and we are reaping the results. Our next step will be to carry out a new large-scale auction in 2024, for the commercialization of future Union cargo”, explained Eduardo Gerk, the company’s CEO.

Since 2013, when it was instituted, PPSA has raised R$ 8.63 billion for the Union, of which R$ 7.33 billion were with the oil and gas commercialization activity and R$ 1.3 billion with the equalization of expenses and volumes carried out by the company in areas where the Union participates in Production Individualization Agreements (AIPs). All funds raised are directed to the National Treasury.