Brazilian oil & gas giant changes its mind about selling deepwater field

Brazil’s state-owned oil and gas player Petrobras has decided to end the divestment process for a sale of its entire stake in a Brazilian deepwater field to PRIO, former PetroRio. However, this will not affect the divestment process for another concession, which is currently ongoing with PRIO.

Petrobras disclosed on Thursday that its executive board had approved the end of the competitive process for the sale of the Albacora concession, which would be maintained in its entirety in its portfolio. The Brazilian company was negotiating with PRIO for the sale of the field, but despite the efforts of both players, “it was not possible to converge on conditions that would reflect the valuation of the asset for Petrobras.”

As a result, the Brazilian giant will continue with the Albacora revitalisation project, located in the deep waters of the Campos Basin, which includes the development of production from the Forno reservoir, located in the Albacora pre-salt. According to Petrobras, this project foresees the contracting of a new FPSO-type platform for the field to replace the two production units – P-25 and P-31 – that currently operate at the field.

Furthermore, Petrobras underlines that it “remains fully committed to its active portfolio management programme and reinforces its commitment to broad transparency of the divestment processes.” The company intends to continue periodically reassessing its portfolio of assets to identify ones which should be divested along with ones that should be the focus of its investments.

Petrobras says that this decision to end the Albacora sale process does not affect the ongoing divestment of the Albacora East field for which a sale contract was signed with PRIO on 28 April 2022, as the firm “remains committed to closing this transaction.”

To remind, Petrobras disclosed it had received binding offers from the consortia PetroRio/Cobra and EIG Global Energies Partners/Enauta/3R Petroleum for the acquisition of the Albacora and Albacora Leste fields in late September 2021, saying that such offers could exceed $4 billion for both fields.

The following month, the Brazilian giant informed in a statement addressing the media speculation about the top bidders that it had not reached a decision about the winning proposal for either asset, but this changed in April 2022 when the sale was agreed with PRIO.

In a separate statement, PRIO confirmed that it had received a notice from Petrobras about the termination of the Albacora field divestment process, as no agreement was reached regarding the valuation of the asset.

The company believes a transaction with offered values would not achieve appropriate return rates and risk profile for the project despite Albacora’s potential, thus, the firm reinforced “its commitment to financial discipline and capital allocation at return rates that reflect its goals of generating value to its shareholders.”

Moreover, PRIO also highlights that this decision does not affect the Albacora Leste transaction process, which is still under assessment by the National Petroleum, Natural Gas and Biofuels Agency (ANP), with approval expected in the upcoming months. Petrobras produces hydrocarbons from Albacora Leste via the P-50 FPSO vessel. 

Located in the northern area of the Campos Basin, in water depths ranging from 1,000 to 2,150 m, at a distance of about 120 km from Cabo de São Tomé, the Albacora Leste field covers an area of 511.56 km2. It is also located 23 km from PRIO’s other field, Frade, where the company is now working on a revitalisation campaign.

In addition, the Brazilian player is working on the Wahoo field development, as part of its plans to create a production cluster through the tieback between the Wahoo and Frade fields. To this end, the company drilled two wells on the Frade field and revealed in July 2022 that it had started production from the first one. The following month, the firm also confirmed the start of production at the second well in the Frade revitalisation plan.

When it comes to PRIO’s most recent activities, it is worth noting that the firm entered into a memorandum of understanding (MOU) earlier this month with Prisma Capital for the potential business combination with Dommo Energia.