Brazil’s Production Growth Will Be Driven By the Pre-Salt But We Expect Higher Risks and Higher Production Costs
We think costs in the pre-salt are, and will remain to be, higher than expected. We actually think lifting costs for the pre-salt are 30%-40% higher than as reported. That said, we expect this region to continue to be the focus of Petrobras, and to drive long-term production growth in Brazil.
Brazil’s technical expertise will improve productivity over time, but political risks are extremely high in the country.
Our consultants have worked in the industry for many years and will acknowledge that the wells in Brazil are highly prolific “once you get them going”. We obviously acknowledge the vast reserves in the pre-salt, our key point is that it is very expensive to produce.
Even with the region being comfortable to international oil majors, we think the regulatory overhang of the scandals and the high local content requirements will continue to be a burden. We think there are more event risks regarind the political situation that are yet to surface.
Major construction companies are also quite leery of returning to the country which will delay a wide variety of projects and increase risks for investors. Please contact us about the opportunities in Brazil’s oil and gas sector today. firstname.lastname@example.org.