Privatization boosts investments in oil production in the NE

Pablo Vieira Maia, 29, was working as a taxi driver in Mossoró (RN), about 280 kilometers from Natal, when he received a call from a representative of the independent Brazilian oil company Petrorecôncavo in July 2019.

The company had just completed the purchase of oil fields from Petrobras in the municipality and needed people to transfer employees between the city and the nearest airport, in Fortaleza (CE).

Petrorecôncavo took over operations in the fields in December and, at the end of that month, Pablo already had four employees providing services for the company. Today, there are 32 people and a fleet of 24 vehicles, including a truck to test the cargo transportation market.

“I didn’t even have R$20 in my account when I started. And, as companies tend to take a long time to make money, I had to borrow money from friends”, he says. His Pontual Transportes currently earns around R$ 500,000 per month.

Data from the municipality show that Pablo is not the only one who has been benefiting from the resumption of oil activities in the region after years of abandonment by Petrobras, which decided to focus its attention on the giant pre-salt fields and has been getting rid of small operations.

Revenue from oil royalties until November reached BRL 27 million, 50% higher than that recorded in 2021, already discounting the inflation of the period. The expectation of the ANP (National Agency of Petroleum, Gas and Biofuels) is that the value will add R$ 34 million in 2024, the highest since the R$ 37 million of 2014.

According to data from Caged (General Register of Employed and Unemployed), the number of formal jobs in the city grew by almost 10% in 12 months, with the opening of 5,100 new jobs.

The bonanza reflects the resumption of investments in the Riacho da Forquilha complex, whose production has doubled since the acquisition by Petrorecôncavo. For the next five years, the company plans to drill around 400 wells, not only in Rio Grande do Norte, but also in other assets acquired from Petrobras in Bahia.

“Long ago the onshore [termo usado pela indústria para definir a exploração e produção de petróleo em terra] do not see such a large drilling plan”, says the president of Petrorecôncavo, Marcelo Magalhães.

In July, Petrorecôncavo raised BRL 1 billion in a second share offering on B3, the same amount raised in the first offering, in 2021.

It was not the first company of its kind to go to B3: in November 2020, 3R debuted on the Stock Exchange with the sale of BRL 690 million in shares. In two subsequent operations, it raised another R$ 2.8 billion.

The focus of these companies are the so-called “mature fields”, which have been producing oil for decades and need investments to extend their useful life.

At the end of the Dilma Rousseff government, Petrobras decided to start disposing of some projects, which produce less than a single pre-salt well, a movement that was accelerated during the Michel Temer and Jair Bolsonaro administrations.

The transfer of assets to the private sector led to a resumption of activities, reversing a situation of falling investment and employment, mainly in Northeastern states, which no longer received investments.

“In 2013 and 2014, it was impressive, the activity just ended”, recalls Pablo, who worked in a supermarket at the time. “Nobody understood what was going on.”

The resumption has been driven by the opening of the natural gas market, which opened up a new demand for fuel previously seen by the state-owned company as a hindrance.

The state of Alagoas, for example, is now fully supplied by private gas production by Origin Energy, another company that grew in the wake of the sale of Petrobras assets.

“Petrobras never created favorable conditions for the migration of demand from dirtier fuels to gas”, says the company’s president, Luiz Felipe Coutinho.

In February, the company purchased its main production asset from Petrobras, the Alagoas Complex, which comprises seven producing fields and gas treatment flow infrastructure.

Production grew almost three times after the change of operator, with the reopening of wells and the revitalization of infrastructure. “It was Petrobras’ least developed hub, due to its more gas-oriented profile”, says Coutinho.

With the increase in production, Origin already plans to nearly double the capacity of the gas treatment unit and offer the market a fuel storage service.

It also plans a thermal plant to sell energy at government auctions and has a robust plan for interventions in wells to expand production, not only in Alagoas, but also in Bahia, with the hiring of seven rigs.

The segment hopes to gain even more strength with the sale of four other onshore Petrobras production hubs, currently in the final stages of negotiations, located in Bahia, Sergipe, Rio Grande do Norte and Espírito Santo.

Seacrest, for example, signed in February the purchase of the North Capixaba pole, one of the processes not yet concluded. It already operates another pole acquired from the state-owned company in the same state and, with the two assets, foresees investments of US$ 400 million (about R$ 2.1 billion) to triple production.

But there are doubts regarding the change in government, since unions that make up Lula’s support base have always protested against Petrobras’ asset sales – the transition team even asked for the suspension of negotiations until the new management takes office.

The president of Abpip (Brazilian Association of Independent Petroleum Producers), Anabal Santos Jr, argues that these companies already generate around 320,000 direct and indirect jobs today, in an activity that has wages well above the national average.

“I am sure that the transition team will even recognize the contribution that the Northeast made in the election [de Lula] and it will avoid frustrating the population”, he says, suggesting that Petrobras return to the region with investments in renewable energies, one of the plans of the elected government.

Santos Jr adds that these new companies can also contribute to renewing Brazilian reserves, as they will have to invest in new areas to compensate for the natural decline of the fields they bought from Petrobras.

Another group of independent oil companies, with a greater focus on exploration, he says, has also been building a portfolio in the country since the opening process accelerated. “Brazil has explored only 5% of its sedimentary basins. We still have many exploratory frontiers.”

A member of the group that deals with the transition of the energy sector says that there is no willingness to reverse sales of assets that have already been completed, not least because of the lack of justification for the state-owned company to spend money on the purchase of projects of such a small size.

The source heard by Sheet agrees that a solution to keep Petrobras in the Northeast region would be to shift the focus to other activities, such as renewable energies or petrochemicals, for example.