Sabrina Valle

HOUSTON (Reuters – Brazil’s crude oil sales will increase by more than doubling this year, and sharply increasing in the next decade as major oil companies deliver more to government through production sharing agreements.

Government-owned volumes, until now nearly irrelevant, are ramping up and will reach 1.127 million barrels per day (bpd) by 2031, according to Eduardo Gerk, head of Pré-Sal Petróleo SA (PPSA), the state-run company that oversees the country’s production-sharing contracts.

He said, “Our magnitude of scale has begun to change,” at the Offshore Technology Conference in Houston.

PPSA was formed in 2013 by Brazil to manage its stake in pre-salt oil deposits off its coast.

Shell Plc, TotalEnergies SA and state-controlled Petrobras account for the state’s portion of oil production. Under the production sharing regulations, which were introduced in last decade, they are now able to deliver higher volumes.

PPSA is now able to sell all the 9.5million barrels of oil it has received through commitments for this year in 19 shipments that were delivered to Petrobras. Gerk explained that as more oil wells come on line, the volume of annual production will increase to 411,000,000 barrels per year by 2031.

Petrobras, which outbid Shell, Total, Portugal’s Galp, and Chinese oil producers, has purchased all of PPSA’s allocated oil via competitive auctions. These contracts last two to three years.

Brazil’s Stock Exchange Operator B3 Gerk indicated that future auctions would likely take place through Brazil. B3 will be handling government-owned production which is expected to average 95,000 bpd by 2024.

Gerk stated that it is possible to hire a trading company to sell the oil.

He said, “We’ll have to examine market conditions there.”

Gerk indicated that Brazil’s next large slug will occur in the middle of 2024 as Petrobras contracts from its vast Buzios- and Mero oil fields begin to expire. Gerk said future production from Sepia’s Atapu, Itapu or Bacalhau areas are still not being marketed.

Brazil currently produces approximately 3 million barrels per day of crude oil. The government share is less than 1 percent. Gerk stated that the government’s share of Brazil’s crude oil production will rise to 20% by 2031. Total country production is more than 5,000,000 barrels per day.

A stake in the Mero deepwater fields is included in government oil volumes. On Monday, consortia from Brazil’s Petrobras and Shell as well as China’s CNOOC and CNPC began production. It is expected to produce up to 180,000 barrels of crude per day.