Brazilian national oil company Petróleo Brasileiro SA (Petrobras) saw falling natural gas demand and the need for fewer LNG cargoes for the second consecutive quarter as rainfall continued to replenish the nation’s reservoirs.
Natural gas demand dropped to 56 million cubic meters/day (MMm3/d) in the second quarter, compared to 83 MMm3/d in the same period last year and 67 MMm3/d in the first quarter.
Liquefied natural gas imports in the second quarter were 7 MMm3/d, compared to 18 MMm3/d in the year-ago quarter and 10 MMm3/d in 1Q2022. Last year, Brazil was one of the biggest growth markets for global LNG as drought strained the hydro-dependent Latin American nation.
In a recent earnings call, Chief Refining & Natural Gas Officer Rodrigo Costa said water levels are 6-8% better than last year. “And this impacts our needs on importing LNG cargoes.”
Costa said Brazil estimates receiving a total of 40 LNG cargoes this year, compared to 112 in 2021, although “we have a lot of uncertainty for the fourth quarter.”
Petrobras’s own supply of natural gas to the market also fell in the quarter, to 34 MMm3/d, compared to 45 MMm3/d in the year-ago quarter. Executives have said this is due to the termination of contracts Petrobras had with partners and third parties, who began to sell their gas directly to final customers.
Brazil is in the process of deregulating its natural gas market.
CFO Rodrigo Araujo Alves said “natural gas had lower volumes of LNG imports in the quarter” and that “supported our results for the second quarter of 2022.” He added, “We've been working strongly on renewing contracts and changing the contractual dynamics to support better results.”
Record Dividend
The state oil and gas firm had another highly profitable quarter, driven by surging oil prices and better results from the sale of oil products and natural gas. This was offset somewhat by the depreciation of the Brazilian real against the dollar.
Production slipped in the quarter to 2.65 million boe/d, compared to 2.8 million boe/d in the year-ago quarter. Pre-salt production accounted for 1.94 million boe/d of this figure, or 73%. The offshore Búzios platform was a star performer, producing 616,000 boe/d in June.
Long-Term Business Plan
Brazil hasn’t been able to add significant new barrels to the global market since Russia’s invasion of Ukraine. The company aims for investment of $68 billion and production growth of around 20% in its 2022-2026 plan, or about 500,000 boe/d.
The company has also faced political pressure to keep prices at the pump in check. It has had four CEOs this year, and more changes could be ahead with general elections slated for October.
Director of Institutional Relations and Sustainability, Rafael Chaves said “Brent can be volatile, local exchange rates can be volatile, but our business plan is consistent and stable.” He said the focus continues to be on “low carbon, high energy assumptions. We operate with efficiency in our projects and low greenhouse gas emissions.”
Chief Exploration and Production Officer Fernando Borges said that in terms of inflation “the increase in industry costs is not immediately reflected in our operating facilities as we have several different contracts with different durations, which allow us to remove the effects of change in contract on tariffs over time.”
The company sees capital expenditure of around $11.9 billion for the year.
Net income in 2Q2022 was $11 billion ($1.39/share), compared to $8.1 billion in the year-ago quarter ($1.18). The company also announced a record dividend payout to shareholders totaling $17 billion.
