Mon, Jun 17 2024 17 June, 2024

Brazil’s Petrobras expands carbon capture at offshore fields

Petrobras is setting records for CO2 injection from its pre-salt oil production offshore, but is the Brazilian state-controlled company just rebranding old-fashioned field re-injection to keep the oil flowing?

Oil drilling rig against panorama of Rio De Janeiro, Brazil (Photo credit: Adobe Stock/marchello74)

The new management of Brazil’s state-controlled Petrobras is reaffirming a slow approach to energy transition for now, but a new partnership could accelerate climate action by expanding carbon-capture at giant offshore oil fields.

The exploration and production of oil and gas represent around 83% of the company’s portfolio, and that focus won’t change soon, Petrobras CEO Jean Paul Terra Prates told analysts in a March 2 fourth-quarter 2022 earnings call.

Petrobras “would not in the short term, not even in the midterm, go over 20% to 25%” of total investment for alternatives such as biorefining, biofuels, renewable energy or even the expansion of gas use, he said. Petrobras “should continue doing what we know at best in our core areas. Because this is as essential as the transition.”

Most of Brazil’s rising oil production comes from deepwater Santos basin deposits that lie under thick layers of salt, known as pre-salt fields. In January, Brazil averaged 3.27 million b/d of crude production, up by 8% from a year earlier, according to the latest data from oil regulator ANP. Petrobras accounted for nearly 90% of output, followed by Norway’s Equinor, Brazil’s PRIO, France’s TotalEnergies, Shell and dozens of other local and international producers.

Dating back to the mid-noughties, the pre-salt play was dogged by a high content of CO2. In recent years, Petrobras and its partners have been capturing and reinjecting growing volumes of that CO2 back into the fields. This reinjection, an advanced form of enhanced oil recovery (EOR), results in less carbon-intensive production. But because EOR boosts oil flow, there is ultimately more of it to burn, generating more emissions.

Petrobras now claims the world’s largest offshore carbon-capture, utilization and storage (CCUS) programme. Since 2008, Petrobras has reinjected 40.8 million tons of CO2e, and is targeting an accumulated 80 million tons in 2025. The company reported the reinjection of a record 10.6 million tons of CO2e last year, contributing to an upstream carbon intensity of 15 kgCO2e per barrel equivalent of production, down from 17.3 kgCO2e/boe in 2019. The firm touts even lower carbon intensity at its giant Tupi and Buzios pre-salt fields, at just 9.5 and 9.1 kgCO2e/boe, respectively.

According to the Carnegie Endowment’s Oil-Climate Index (OCI), however, production is just a sliver of total greenhouse gas emissions associated with oil. In the case of Tupi, one of 75 global crude samples in the OCI, most emissions stem from the downstream combustion of refined products like gasoline and diesel.

Because it is strategically focused on growing its oil production and is subject to Brazil’s wider climate goals and investor scrutiny, Petrobras was effectively compelled to develop a CCUS-EOR programme. The unpalatable alternative would have been to systematically flare or vent greenhouse gas into the atmosphere.

“I don’t think Petrobras should get any extra credit that they are somehow helping the climate by not doing something awful,” said Andrew Logan, senior director for oil and gas at Ceres, a Boston-based non-profit that works to accelerate sustainable capital markets. Petrobras is “not a laggard but not a leader” in energy transition, he says.

Moreover, deepwater fields tend to have lower carbon intensities naturally, and younger fields like Tupi require less energy to tap, so Petrobras has a built-in edge, Logan told Gas Outlook. “That advantage will become harder to sustain as the fields age.”

Technological expertise

Petrobras now has an opportunity to leverage the technological expertise it has developed in its CCUS-EOR programme and its extensive pipeline system to pull in emissions from industries onshore Brazil, Logan says. “If they wanted to actually become a leader, they have that potential.”

In an early sign of progress in this direction, Petrobras signed a new five-year Memorandum of Understanding with Shell — one of Brazil’s largest foreign producers — to explore new upstream opportunities and cooperate on environmental and social initiatives. In its March 9 announcement of the MOU, Petrobras said it is “examining other opportunities to develop a new business model on capturing and storing CO2from industry, not just the pre-salt layer. The objective is to help reduce the emissions of not just the company, but other industries too.”

Such an endeavour remains ambitious, because it would require big investments to develop complex supply chains in which CO2 is captured and transformed to make it injectable, says Elena Morettini, global head of sustainable business at New York-based technology consultancy Globant. She points to the path-breaking industrial carbon-capture model of Norway’s Northern Lights project which is scheduled for phase-one launch in 2024. Notably, the Northern Lights partners are Shell, Equinor and TotalEnergies, which all have big footprints in Brazil.

In his recent comments to analysts, Petrobras CEO Prates cited the potential for developing offshore wind power in conjunction with the company’s offshore oil platforms, but he did not mention the possibility of expanding carbon-capture.

In the company’s 2023-2027 strategic plan issued at the end of last year, Petrobras earmarked $4.4 billion, or 6% of total capital expenditures, for low-carbon investments, mostly for decarbonization as well as biorefining, especially bio jet fuel. The company is targeting a 30% reduction in total operational absolute emissions compared to 2015; zero routine flaring by 2030; and cuts in downstream carbon intensity and methane emissions. A new five-year plan to be issued later this year will shed more light on the company’s future climate commitments.

“What we want to see with oil and gas companies is both a long-term strategy that aligns them with low-carbon transition and a strong focus on reducing near-term emissions,” Logan says. “Petrobras has done more on the latter than on the former.”

This mismatch in the company’s short and long-term climate commitments is reflected in the oil legacy of leftist president Luiz Inacio da Silva. Lula, as he is known, returned to power in January for a third term with a pledge to combat Amazon deforestation that had expanded rapidly under his far-right predecessor Jair Bolsonaro. Yet Lula remains a proponent of Brazil’s national oil industry. In his honour, the Tupi oilfield was renamed Lula in 2010 until a local court in 2020 ordered the name changed back to Tupi.