Brazilian state-controlled Petroleo Brasileiro S.A. or Petrobras (PBR) announced the start-up of its offshore Lula-Mexilhao Gas Pipeline in the Santos Basin.
The pipeline –– connecting the Lula field and the Mexilhao platform –– is 134.2 miles long and 18 inches in diameter. It has an operating pressure of 250 bar (pressure unit). Starting at a depth of approximately 7,037 feet below sea level at the Cidade de Angra dos Reis platform, the pipeline has a flow capacity of up to 10 million cubic meters per day.
The newly constructed Lula-Mexilhao pipeline also interlinks other Petrobras units, including the pipeline connecting the Mexilhao field to the Monteiro Lobato Gas Treatment facility in Caraguatatuba, Sao Paulo, and the Caraguatatuba-Taubate pipeline that distributes processed gas to the domestic market.
Petrobras acts as the operator of the field with a 65% interest, while the remaining stake is shared by BG Group (25%) and Petrogal Brasil SA-Galp Energia (10%).
Headquartered in Rio de Janeiro, Petrobras primarily engages in exploration, exploitation and production of oil from reservoir wells, shale and other rocks, in refining, processing, trade and transport of oil and oil products, natural gas and other fluid hydrocarbons as well as in other energy-related activities.
The company produces substantially all of Brazil’s crude oil and natural gas, and accounts for almost all of its refining capacity. Petrobras is setting up the country’s natural gas infrastructure and enjoys strong market share positions in its petroleum product and liquefied petroleum gas marketing businesses.
We remain optimistic on Petrobras’ performance over the next few months, thanks to its encouraging portfolio of investments, particularly in Brazil’s pre-salt reservoirs that lie below the Espírito Santo, Campos and Santos basins in deep and ultra-deep water.
However, our positive outlook is somewhat dampened by the company’s huge investment requirements, operational risks typical to an exploration and production company and tough competition from peers, such as BP Plc (BP) and Royal Dutch Shell plc (RDS.A). Unpredictable energy prices and government regulations also add to the negative sentiment.
Hence, we are maintaining our long-term Neutral recommendation on the stock.
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