Regional report: Brazil sees abundant problems and opportunities in 2025

Lead image: The P-57 FPSO is just one example of the many producing facilities offshore Brazil. Image: Petrobras. 

GORDON FELLER, Contributing Editor 

Fig. 1. S&P Rated Brazil oil & gas companies. Source: S&P Global Ratings.

Brazil is Latin America's largest oil and gas producer, with state-owned company Petrobras being the dominant player. According to the data published by S&P Global, “future growth in the Brazilian oil and gas sector is expected to come from new players rather than Petrobras,” with S&P Global Commodity Insights forecasting increased crude production in Brazil, reaching 3.6 MMbpd by the end of 2025 and 3.8 MMbpd by the end of 2026, Fig. 1. 

Brazil owns the largest, recoverable, ultra-deep oil reserves in the world, with 97.6% of Brazil’s oil production produced offshore. The 2022 average oil output was 3.02 MMbpd, 2.47% higher than the previous annual record in 2020, which totaled 1.1 Bbbl and 50.3 Bcmg, according to the primary regulatory body for the country, the Brazilian National Agency for Petroleum, Natural Gas and Biofuels (ANP), Fig. 2. 

Brazil’s deepwater pre-salt fields accounted for 75% of national production. Brazil’s 2022–2032 Energy Expansion Plan forecasts that the country’s oil production will reach 4.9 MMbpd by 2032, with pre-salt fields accounting for nearly 80% of total production. Shallow-water and onshore fields are not expected to exceed 7% of total oil output. However, improvement is expected for these fields’ production, due to the Revitalization Program for the Exploration and Production of Onshore Oil and Natural Gas Areas (REATE 2020) and the Revitalization and Incentive Program for the Production of Maritime Fields (Promar). By 2030, Brazil is expected to become the world’s fifth-largest crude oil exporter.

Fig. 2. Translated and adapted from ANP’s “Encarte de Consolidação da Produção 2022”—yearly bulletin on production. Source: ANP.

Brazil’s 2022 natural gas (NG) production was 138 MMcmd—up 2.98% from 2021. The average NG supply in 2022 was 47.56 MMcmd (considering losses, gas reinjection, burn and E&P consumption). NG domestic production represented approximately 70% of Brazil’s supply, while imports from Bolivia reached 25%, followed by Liquefied Natural Gas (LNG) imports at 9%. The United States was the largest LNG exporter to Brazil in 2022, supplying 5.1 MMcm, representing 76% of the total imports. Big challenges facing the Brazilian gas market include high CO2 content, long distances from the offshore gas fields to the coast, limited gas pipeline infrastructure and the need to boost domestic demand. 

Significant energy reforms, frequent oil field finds and the opening of oil bidding rounds have attracted International Oil Companies (IOCs) from around the world. IOCs have acquired oil field concessions and gas pipeline networks and are developing LNG terminals. 

Expanding production. The EPE 2031 Energy Expansion Plan1 (known as the PDE) forecasts oil and gas E&P investments to range from $428 billion to $474 billion during this period. These figures reflect an evaluation of aggregated investments of all E&P in Brazil, including those from Petrobras, as announced in the company’s “2022–2026 Strategic Business Plan.” 

In line with climate commitments, oil operators are seeking to increase efficiencies while reducing costs and the industry’s carbon footprint. ANP, which oversees oil operators’ mandatory R&D spending, will prioritize projects focused on hydrogen, biofuels, energy storage and digital transformation, among others, in line with a recent Brazilian Energy Policy Council resolution. ANP recently reported that, in the last three years, artificial intelligence, machine learning, smart completion, and CO2 capture have become the top “focus categories” for new R&D projects. 

According to ANP’s numbers, from 2023–2027, Brazil expects investment of approximately $4.3 billion in exploration activities, including 91 new wells—63 onshore and 28 offshore. Thirty-two of these new exploration wells are expected to start drilling in 2023, and 35 are forecast for 2024. 

Pre-salt projects have the most investment from Petrobras, which represents a significant spectrum of opportunities for foreign-based suppliers of offshore equipment and services. Most of the Brazilian oil and gas industry is dedicated to offshore production, working with mature supply chains, and with several international companies that have worked to get established as key suppliers. 

According to Luisa Vilhena, Director at S&P Global Ratings: 

“[I]n 2024, Petrobras achieved record barrels per day in key assets, such as the Campos basin, with close to 90% of its production coming from its pre-salt operations. While the ratings on it continue to be constrained by governance factors and the sovereign rating cap (one notch each), Petrobras continues to report strong credit metrics, with debt to EBITDA below 2x since 2021. Despite discussions about dividend payment changes, Petrobras distributed extraordinary dividends in 2024.” 

Vilhena says that Petrobras’ strategic plan, which was announced in late 2024: 

“[C]ontinues to focus on E&P, but [it] also provides new guidelines, such as the return to the biofuel business (through M&As). The plan also incorporates higher capex and base-case dividends, but we expect continued extraordinary dividends while leverage remains below 2x.” 

After Petrobras' major divestments of its non-strategic assets some years ago, which created growth opportunities for smaller domestic oil companies, Vilhena believes: 

“[T]he market's consolidation will likely continue in 2025. The 2024 merger of 3R Petroleum and Enauta Participações created the second-largest IOC in Brazil, with 2P reserves of over 730 MMboe. The resulting entity, Brava Energia, should bolster production to over 100,000 boe in 2025, from drilling at the Atlanta and Papa Terra fields, and [bolster] continued revitalization at Potiguar.” 

Additionally, Vilhena notes that: 

“PRIO, the largest IOC domestically, acquired a 40% stake [in] the Peregrino field from Sinochem for $1.9 billion. This, along with the development of the Wahoo field, will boost PRIO’s production to about 160,000 bpd this year, from 84,017 in 2024. Given these developments, both PRIO and Brava currently have a positive outlook.” 

With somewhat limited exploratory activities, Vilhena and S&P now: 

“[E]xpect IOCs’ capex to be mostly for drilling and revitalization of mature oil fields acquired from Petrobras, from which IOCs have increased production. The workers' strike at Brazil's environmental protection agency in 2024 delayed the issuance of permits, which affected capex of some companies, such as PRIO's development of the Wahoo field.” 

As a result: 

“PRIO should start producing oil at Wahoo in mid-2025, versus mid-2024, [as] previously estimated. Last year, PRIO shifted capex to other needs, but we estimate about R$500 million slipped to 2025. After the permitting delays in Brava’s investment in Atlanta, the latter started producing oil on Dec. 31, 2024.” 

Production insights. Regarding production, we asked for insights from Luiz Hayum, Upstream Research Principal Analyst, Latin America, at Wood Mackenzie: 

“An above-average number of planned and unplanned production stoppages held back Brazil's production growth in 2024—down 1.6% year-on-year vs. 2023. The start-up of three FPSOs late in the year wasn’t able to offset the 2024 decline but set the scene for 2025 growth. Petrobras-operated Marechal Duque de Caixas (Mero) produced its first oil in October, Maria Quitéria (Novo Campo de Jubarte) started earlier than planned, also in October, and Brava Energia-operated FPSO Atlanta (definitive system) began on 31 December. 

Four large-capacity pre-salt FPSOs will come online in 2025—Mero 4, Buzios 6 and 7, and Bacalhau (Equinor’s first operated pre-salt project). Hayum expects they will “contribute to 400,000-bpd growth in the year. As a highlight, well performance in the pre-salt continues to be stellar, with wells drilled in the last couple of years peaking at over 50,000 bpd and declining less than anticipated.” 

Steady stream of FIDs still needed. Regarding FIDs, Hayum points to the fact that awarding FPSO construction contracts swiftly is critical to keeping the growth momentum into the next decade: 

“In May 2024, Petrobras made the two, single, final investment decisions (FIDs) of the year in Brazil. The NOC awarded the much-anticipated EPCI contracts for the P-84 (Atapu 2) and P-85 (Sepia 2) newbuild FPSOs. Petrobras had to postpone proposal deadlines or even cancel and re-think contract terms in several FPSO tender processes, due to prices above budget or little competition. High global demand for deepwater equipment, challenges to secure financing and project complexity have contributed to increased costs and limited bidders. 

In 2025, several relevant projects will try to overcome the hurdles towards FID, including what Hayum says are “projects that have been on the drawing board for many years: Petrobras’ SEAP-1 and SEAP-2, Shell’s Gato-do-Mato and BW Energy’s Maromba and Karoon’s Neon. And they will continue to face the same challenges as in 2024.” 

Progress in natural gas. Regarding gas in 2024, Petrobras kicked off the 18-MMcmd (635-MMcfd) Rota 3 pipeline and the 21-MMcmd (740-MMcfd) Complexo Boaventura onshore natural gas processing plant (NGPP). Hayum notes that “Rota 3 connects to the Santos basin integrated pipeline system (SIE-BS), which will transport 48 MMcmd of pre-salt gas, when it reaches capacity in 2025. It will reduce gas reinjection rates in the pre-salt in the short term.” 

Hayum also anticipates that: 

“IOCs and local independents will continue expanding their role in the gas value chain by developing their gas commercialization capacities. The cease-and-desist agreement (2019) between Petrobras and the anti-trust agency (CADE) and the New Gas Law (2021) allowed third-party access to essential Petrobras-owned facilities, including the offshore gas gathering pipeline network and natural gas onshore processing plants.” 

These improvements to the business environment will continue to incentivize greater participation and diversification of the Brazilian gas markets. 

Under new management, Petrobras has done something that Hayum considers notable: it “reinforced its mantra of energy security through oil and gas production growth and reserve replacement—despite a 22% increase in its energy transition budget in its 2025-2029 strategic plan.” Looking ahead into the remainder of 2025, Hayum believes Petrobras “will maintain its exploration focus on the pre-salt, unlocking the Equatorial Margin potential and expanding internationally.” 

Among the local independents, Hayum will watch for Brava Energia's portfolio rationalization and growth strategy: “Brava Energia resulted from the all-share merger of 3R Petroleum and Enauta in May 2024, creating a US$6-billion business. PRIO—the other contender for largest Brazilian independent—completed the $1.9-billion acquisition of a 40% non-operated stake in Peregrino.” The growth projects of both companies were impacted by the strikes of IBAMA in 2024. Hayum expects them “to grow production in 2025, with the delayed start-up of projects like Wahoo and the Atlanta full development. They will join a select group of eight companies producing over 100,000 boed in Brazil.” 

Petrobras spudded three highly anticipated pre-salt wells in the last few days of 2024—two appraisal wells in the Aram Block (Santos basin) and one in the Norte de Brava Block (Campos basin). Hayum thinks “Aram could become the first commercial pre-salt discovery after over a decade—Itapu (2013) was the last. The Norte de Brava well can prove the Campos basin pre-salt play close to existing infrastructure, favoring smaller but faster return projects.” 

Hayum also anticipates a “final decision on the drilling permit for the Morpho well in the Foz do Amazonas basin in 2025. The Equatorial Margin can prove to be an alternative to the pre-salt for high-impact exploration.” 

Hayum fully expects that, 

“[L]icensing will also resume in first-half 2025. The ANP will offer 332 exploration blocks in this concession permanent offer cycle across 11 basins. Guidelines released in December brought important improvements to terms, such as a fixed signature bonus for mature and frontier onshore basins, which should incentivize more competition. In the pre-salt, the ANP has earmarked 24 blocks for the next production sharing contract (PSC) round—the National Energy Policy Council (CNPE) has already approved Petrobras’ preferential rights to be the operator in the Campos basin Jaspe block.” 

Production from independents. PRIO, Brazil's largest independent oil and gas company, is experiencing significant growth and expansion in early 2025. The company's financial outlook for 2025 projects impressive figures, with expected net sales of R$ 17.702 billion ($2.86 billion), EBITDA of R$ 12.982 billion ($2.09 billion) and net income of R$ 5.818 billion ($1.16 billion). 

In terms of production, PRIO's average output reached 70,300 bopd in third-quarter 2024. The company started 2025 with a solid 8% production increase in January, although stock volatility persists. 

PRIO also has diversified its operations by entering the natural gas market. On Jan. 2, 2025, the company began direct sales of natural gas to the domestic market, starting with production of 300,000 cmd and aiming to reach 1 MMcmd by the end of the year. 

Financially, PRIO boosted its capital by R$ 3 billion ($480 million) in late 2024, increasing its share capital to R$ 10.834 billion ($1.75 billion). This strategic move aims to strengthen the company's financial position and support its ambitious growth plans, including redevelopment of existing assets and pursuit of new opportunities. 

As of Feb. 6, 2025, PRIO's market capitalization stands at 35.51 billion BRL, with a price-to-earnings ratio of 6.76[3]. The company's revenue (Trailing Twelve Months, or TTM) is 14.37 billion BRL, and its net income (TTM) is 4.90 billion BRL. PRIO's financial performance shows strong profitability, with a gross margin of 54.75% and a net profit margin of 34.11%. 

Five of the company's operational assets are worth noting, as outlined below. 

Polvo field. PRIO's first asset, Polvo field, is in the Campos basin offshore Brazil. Acquired in 2016, this field marked PRIO's entry into the oil and gas sector. It features mature reservoirs, with production supported by the Bravo FPSO, which has a processing capacity of 90,000 bopd and storage for 1.26 MMbbl. In 2021, a tie-back connected Polvo to Tubarão Martelo field, optimizing operations and extending the economic life of both fields. 

Tubarão Martelo field, acquired in stages from 2020–2022, is also located in the Campos basin. It operates with the Bravo FPSO and produces approximately 12,000 bopd. PRIO completed Brazil's first independent tie-back in 2021, linking this field to Polvo. This connection created a cluster that shares infrastructure and enhances efficiency. The field's reserves are estimated at 39 MMbbl as of 2024. 

Frade field. Purchased by PRIO in 2019, Frade field is another significant asset in the Campos basin. It features high-quality oil reserves and is undergoing revitalization to optimize production. The field will play a critical role in supporting future developments like the Wahoo field tie-back project. 

Wahoo field represents PRIO’s first greenfield development and should commence production in 2025. Located in the pre-salt layer of the Campos basin, it boasts reserves of approximately 126 MMbbl of oil and features a subsea tie-back to the Frade FPSO. This project will be Latin America's longest subsea tie-back, at 35 km, and is designed for high efficiency and reduced emissions. 

Albacora Leste field. Acquired from Petrobras in 2022, Albacora Leste field significantly expanded PRIO's reserves, adding over 240 MMbbl, net recoverable. Situated in the deepwater Campos basin, this field has been integrated into PRIO's portfolio, with long-term production potential extending beyond 2050. The acquisition underscores PRIO’s strategic focus on large-scale assets. Though it is the youngest of the company’s assets, it has more than doubled PRIO’s reserves. 

Peregrino field. PRIO acquired a 40% stake in Peregrino field from China's Sinochem in December 2024 for nearly $2 billion, marking a significant addition to its portfolio. Located in the Campos basin offshore Rio de Janeiro, Peregrino field is one of Brazil's largest heavy-oil fields and has been producing since 2011. Operated by Equinor, which retains the remaining 60% stake, the field has produced over 210 MMbbl of oil and is expected to remain productive until at least 2040. This acquisition aligns with PRIO's strategy to expand its offshore production capacity and leverage synergies within the Campos basin. 

Three of the company's exploration assets (all with 100% PRIO interest) are worth noting in the following passages. 

Itaipu. As an oil and associated natural gas discovery in Block C-M-61, Itaipu is an asset with production potential that’s currently under intensive analysis. With exploratory wells already drilled, its development depends on further technical studies. 

FZA-M-254. This exploratory block is in the Foz do Amazonas basin. Studies carried out, thus far, indicate potential oil and associated gas resources. 

FZA-M-539. Also located in the Foz do Amazonas basin, the exploration history in the region of this block shows promising signs of natural gas. The company is still actively focused on conducting a raft of studies. 

Petrobras’ recent divestment program for onshore and shallow-water assets changed the landscape of this segment dramatically. Independent oil companies that acquired onshore fields increased the production of some of these assets by up to 300% during first-half 2023, based on vertical management models that include investments in manpower and drilling rigs. 

More efficient equipment and processes are the top priorities of these companies that are optimizing operations by introducing new technologies and innovative business models to generate profit and sustainable growth. Companies that invested in onshore assets—such as 3R Petroleum, Origem Energia, Petrorecôncavo, Imetame, ENP, Seacrest, Eneva and Carmo Energy—are forecasting significant investments and expect to increase production by four times over the next five years. Such a drastic increase requires investments in interventions and new drillings that increase the productive lives of the fields and extend the use of existing operating assets. Consequently, this cycle is increasing the demand for more services and equipment, particularly in the area of new technologies that reduce costs and increase competitiveness. 

Fig. 3. Estimated New floating production, storage, and offloading (FPSOs) - 2003-2027. Source: Petrobras Strategic Plan 2023-20272.

Petrobras´ current Strategic Plan (2023-2027)2 calls for an investment of $78 billion, of which 83% ($64 billion) will be invested in E&P activities. 

As Fig. 3 shows, between 2023 and 2027, it is estimated that 18 new FPSOs will begin operations. Petrobras anticipates investments of $3.7 billion in decarbonization and $600 million in biofuels over the next five years, with initiatives that include renewable diesel and bio jet fuel projects. 

Leveraging pre-salt for lower carbon emissions. Deepwater and ultra-deepwater technological advancements have helped make Brazil’s pre-salt oil extraction among the least carbon-intensive in the world, registering around 40% fewer emissions per barrel than the world average, according to Petrobras. 

In December 2021, Petrobras recorded 30 million tons of CO₂ being reinjected into the pre-salt reservoirs, preventing its venting into the atmosphere. Petrobras’ forecast indicates that by 2025, 80 million tons of CO2 will be reinjected, representing one of the largest carbon capture, usage and storage (CCUS) deepwater technology projects in the world. Since 2015, the company recorded a 15% reduction in its total operating emissions—15% short of its goal, a total 30% reduction by 2030. Between 2009 and 2021, Petrobras reduced greenhouse gas emissions per barrel of oil produced by approximately 50%. 

There are five LNG regasification terminals in operation in Brazil. Three of these are owned by Petrobras. Three more are under development; several others are planned for the coming years. Among the new terminals, the Port of Açu LNG-to-power project, developed by GNA, is the largest of its kind in South America. Two natural gas-fired power plants with a combined capacity of 3 GW are fed by the LNG import terminal, with regasification capacity of 21 MMcmd. 

Several new gas-to-power projects under construction in Brazil are anchored to imported LNG. The national Energy Research Office (EPE) notes that LNG will continue to play an important role in Brazil’s market, by ensuring flexibility to the integrated power grid and to fill in the intermittence of non-dispatchable renewable energy sources, seasonality and power peaks.  

Fig. 4. EPE LNG Terminal Plan. Source: EPE.

Additionally, EPE sees an increase in demand for small-scale LNG to places not yet served by natural gas pipelines. Barges and coastal shipping/cabotage will distribute the imported LNG from floating storage units (FSUs) in the Amazon region to locations in northern Brazil, to replace fuel, oil and diesel for industrial and power generation markets. These barges will be equipped with mobile cryogenic tanks. However, the Ukraine-Russia war and the resulting gas scenario are impacting planned LNG projects in Brazil, Fig. 4. 

Looking ahead, Petrobras leadership is interested in expansion opportunities. Late in 2024, it was reported by local media that the company was considering a return to Argentina, attracted by the potential of oil produced from the Vaca Muerta shale formation in the Neuquén basin and by a new energy cooperation agreement between the two nations. The Vaca Muerta formation is one of the world's largest reserves of shale oil and shale gas.  

Repsol-YPF discovered the formation in 2010, and horizontal drilling began in 2011. The area has been the site of significant regional development since 2021. The U.S. EIA estimates that the Vaca Muerta formation contains 16.2 Bbbl of recoverable oil and 308 Tcf of recoverable natural gas. Rystad Energy has modeled that the Vaca Muerta formation could produce over 1 MMbpd by the end of the decade. The fracing process used to extract oil from the Vaca Muerta has caused earthquakes in the region. The process also has released large amounts of greenhouse gases into the atmosphere. The Mapuche indigenous people, who originally inhabited the area, have protested the fracing. 

As a result of private investment and President Lula’s renewed push towards decarbonization, almost half of Brazil’s energy supply—including over 80% of its electricity—already comes from renewables, compared with world averages of between 15% and 27%. This gives the country a competitive advantage in supplying products required for decarbonization, including green minerals, green hydrogen, and green manufactured goods. While renewable options are the most cost-effective for domestic energy needs, Brazil’s offshore oil and associated gas reserves will remain competitive in global markets in the coming decades. Relatively low production costs mean that Brazil’s fossil fuel production and associated revenues are expected to increase over the medium term. 

REFERENCES 

1. https://www.epe.gov.br/sites-en/publicacoes-dados-abertos/publicacoes/Paginas/PDE-2031---English-Version.aspx\ 
2. https://petrobras.com.br/en/quem-somos/estrategia  
3. https://www.slb.com/news-and-insights/newsroom/press-release/2024/slb-awarded-integrated-services-contract-for-all-petrobras%E2%80%99-offshore-fields-in-brazil  
4. https://www.slb.com/news-and-insights/newsroom/press-release/2023/pr-2023-07-06-petrobras-digital-transformation  
5. https://www.slb.com/news-and-insights/newsroom/press-release/2024/slb-awarded-three-completion-contracts-for-petrobras%E2%80%99-buzios-field  
6. https://www.slb.com/news-and-insights/newsroom/press-release/2024/slb-onesubsea-awarded-subsea-boosting-contract-by-petrobras-for-the-b%C3%BAzios-field,-offshore-brazil