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Brazil's ANP reviewing requests to close
29 oil fields
for about 65,000 b/d


The production shutdowns is related to the pandemic -ANP Director Marcelo Castilho

- Oil industry registers 162 confirmed COVID-19 cases
- High stocks, sluggish sales curtail refinery output

By Platts

Petroleumworld 04 20 2020

Brazil's National Petroleum Agency is evaluating requests to shutter 29 oil fields accounting for about 65,000 b/d worth of output because of the impact of the coronavirus pandemic, but expects the review of high-cost, low-production fields to eventually cover up to 200,000 b/d, in line with state-led company Petrobras' planned cuts.

"The primary motivation seen in the requests for these production shutdowns is related to the pandemic, which caused a drop in oil and refined product demand in Brazil and the world," ANP Director Marcelo Castilho said during a webinar late Thursday.

The reviews are part of a concerted effort by Brazil's leading oil, natural gas and biofuels regulator to support the industry as it wades through perhaps its worst crisis ever, with an estimated 20 million-30 million b/d in oil demand destroyed by social distancing measures implemented to avoid the spread of the coronavirus. The ANP focused quick actions in the wake of the crisis aimed at streamlining bureaucracy and extending deadlines to give oil companies more time to complete commitments.

"Companies are trying to adapt to this new normal," ANP Director Felipe Kury said.

In addition to the global and domestic market turmoil, oil companies have also had to directly deal with the coronavirus outbreak.

A total of 162 confirmed coronavirus cases were registered at exploration and production sites across Brazil, with suspected cases at more than 1,000, according to the ANP. Petrobras, which implemented temperature checks and is isolating workers for seven days before departure for offshore vessels, was forced two shutter to floating production, storage and offloading vessels, or FPSOs, so far because of separate outbreaks.

While the regulator created greater flexibility with some of the emergency measures adopted as the crisis evolved, acting ANP Director General Jose Gutman noted that the agency would be unable to make deeper structural changes requested by oil companies, fuel distributors and other entities. Such changes must be conducted under government transparency measures, which include public audiences prohibited by social distancing, or need congressional approval, Gutman added.

The Brazilian Association of Independent Oil Producers, or Abpip, for example, asked the ANP to reduce or suspend royalties on small and medium-size producers, many of which operate marginal fields producing low volumes that aren't economically viable under current market conditions.

"Royalties are a legal question because the law requires a minimum percent," Gutman said. "The ANP has a range in the contracts of 5%-10%."

The regulator, however, would like to expand a program that reduces royalties on incremental production from mature fields in exchange for investments that increase output, directors said. So far, just one company has successfully applied for the program: Petro Rio, which received reduced royalties after a revitalization campaign at the offshore Polvo Field.

Gutman noted that the ANP declined a request to allow fuel distributors to refill 13-kilogram LPG tanks from rival brands for the same reason. Similar requests have also been denied, although many deal with possible changes that are already part of the ANP's regulatory agenda and will be addressed when the economy reopens, Gutman said.


Brazil's refining and distribution sectors were also reeling from the outbreak, with social distancing measures dramatically undercutting demand for diesel, gasoline and jet fuel, Kury said. Petrobras slashed refinery utilization rates to 74% in March, compared to 79% in 2019, with Kury adding that further cuts were implemented in April because of high stock levels.

"What we need is for the market to return to growing so that refineries can offload stocks," Kury said.

Temporary regional shortages of LPG should also be resolved by next week, Kury said. Consumers started panic buying the popular 13-kilogram tanks used to power cooking stoves when stay-at-home orders were issued in March, which combined with maintenance work on a pipeline to cause temporary shortages, Kury noted.

Petrobras increased imports of the fuel to meet demand, with shipments expected to reach 350,000 metric tons in April, according to the company.

By Platts S&PGlobal
04 17 2020



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